TORONTO (CP) – Increased foreign competition and industry overcapacity are forcing appliance maker Camco Inc. to close a Hamilton stove and refrigerator plant in December 2004, putting 800 people out of work.
Canada’s largest appliance firm, 51 per cent owned by U.S. industrial giant General Electric, made the announcement Friday as it reported a $600,000 profit in the third quarter, down from $1.9 million a year earlier. With the closure, Camco will take an after-tax charge of $64 million in the fourth quarter.
“This was not the announcement we wanted to make today and it has been a very difficult decision to reach,” CEO James Fleck said in a release.
Shares in Camco (TSX:COC) plummeted after the announcement, to a low of $1.15, down nearly 48 per cent, in afternoon trading on the Toronto stock market. Its shares recovered somewhat late in the day, closing at $1.75, down 45 cents or 20 per cent.
The closure continues the shrinkage of Canada’s appliance industry, which has declined dramatically over the last four decades with consolidation and competition from overseas manufacturers.
In 1964, three dozen Canadian companies made washing machines, stoves and refrigerators, employing 10,000 people. Now there are four firms with about 2,500 workers.
Well-known brands such as Inglis, Westinghouse, Kenmore, Beaumark, Admiral, Frigidaire, Moffat and McClary are either gone or made by contract manufacturers.
Camco, which is 20 per cent owned by GSW Inc. of Toronto, builds dryers and dishwashers in Montreal and stoves and fridges in Hamilton under the General Electric, Westinghouse, Moffat, McClary and Hotpoint names.
The company warned in February that the Hamilton plant could be closed or sold as the company braced for a huge drop in production.
“I’m very upset, I’m in shock,” Shirley Milne, a 25-year Camco employee, told Hamilton TV station CHCH. “I knew something was up, but when you hear it . . . I’ve been here 25 years, it’s like, ‘now what am I going to do?’ It’s affected a lot of people.”
“It’s very viable for its location and I just thought I’d be there until I retired,” added Ed Lindsay, a 20-year employee.
The factory produces electric ranges and 12-cubic-foot refrigerators. Production of 18-cubic-foot bottom mount refrigerators ceased last year.
In February, the company said GE had agreed to buy 12-cubic-foot refrigerators from China. Those fridges made up for 17 per cent of last year’s output in Hamilton.
An agreement to supply a new generation of electric ranges is already in place, and the company is working on an agreement with GE’s consumer products division for the supply of bottom-mount refrigerators, possibly from a South Korean manufacturer named Goldstar.
“We’re importing more and more from offshore,” said Steve Farkas, a Canadian Auto Workers representative for the unionized Hamilton workers.
Farkas said free trade and globalization allow appliances made cheaper offshore to flood the North American market, putting Canadian manufacturing plants in peril.
Minority shareholder GSW is still in litigation with GE over Camco, said GSW’s chief financial officer, Jamie Hyde. GSW is alleging “shareholder oppression,” which suggests a minority shareholder is disadvantaged by a majority shareholder that takes some actions that favour itself, but not minority stakeholders.
Hyde was not allowed to elaborate on the current dispute with GE, though GSW has in the past decade criticized GE’s presence as both majority owner of Camco and a competitor, allowing GE to adjust Camco’s operations to suit its larger needs.
Camco said it will save $20 million annually in fixed costs at the plant, where employment peaked at about 1,500 in the mid-1980s and was still strong at 1,200 in 1999.
Camco’s other Canadian operations – a Montreal dryer-making factory and a Moncton, N.B., customer call centre – are unaffected by the moves announced Friday.
The 850-worker Montreal plant, in fact, is expanding. Camco committed in April to a $14.9-million investment at that plant to meet increased demand for GE dryers.
It appears Camco is becoming more of a distributor than a manufacturer. Just last month it signed a deal with the Canadian arm of South Korea’s Samsung Electronics to distribute that firm’s refrigerators, washers and dryers.
But chief financial officer Neil Gartshore says seeking out distribution deals that complement Camco’s current product line is nothing new.
“We certainly have a very strong distribution and sales team across Canada and to be able to leverage and maximize those resources is something we’re always trying to do,” he said in an interview.
Anna Cvecich, Camco’s vice-president for human resources, said the CAW has agreed to help provide retraining and financial aid for displaced workers.
CAW’s Farkas was less than optimistic about being able to find new work for the Hamilton workers, whose average age is just under 50.
“Hopefully, the economy will pick up a little bit so we can place people,” Farkas said.
“We’re talking about a hell of a lot of people to place here.”
Camco reported quarterly net income of three cents a share on sales of $148 million, compared with $1.9 million or 10 cents a share on sales of $171 million for the same period last year.
>From Canada.com