NACCO Industries, Inc. (Mayfield Heights, Ohio) announced that its operating subsidiary, NACCO Materials Handling Group, Inc. (NMHG), will phase out production of current product at its facility in Irvine, Scotland, change the product mix at its Craigavon, Northern Ireland facility and increase production at its Berea, Kentucky and Sulligent, Alabama plants in the U.S. and at its Ramos Arizpe facility in Mexico. NACCO indicated that these actions are being taken to further reduce NMHG's manufacturing, component and other product costs, reduce its manufacturing footprint, significantly reduce working capital requirements and reduce currency exposures through increased manufacture of products in the market of sale. At maturity, benefits from this program are expected to be approximately $20 million in annual cost savings and approximately $11 million in working capital reductions.
The Irvine manufacturing facility, which employs approximately 220 people, is expected to scale down production of current product during 2008 and cease production of current product in early 2009. A new generation of electric counterbalanced lift trucks will replace products currently manufactured in Irvine. This new product range will be manufactured in the Craigavon, Northern Ireland facility. NMHG expects to maintain divisional personnel in the Ayrshire area of Scotland.
The Craigavon manufacturing facility is expected to phase out production of the 2 to 3 ton pneumatic internal combustion engine ("ICE") product line for the Americas market and to focus on meeting the demands of expanding markets in Europe, Africa and the Middle East. The facility will also start producing NMHG's next generation of electric products during 2008, which is expected to utilize the capacity made available as a result of the phase out of production for the U.S. market.
The production of the Americas requirements for the two- to three-ton pneumatic ICE line will move to the Berea, Kentucky manufacturing plant, which will be supported by frames and other major weldments from the Ramos Arizpe, Mexico plant and major components from the Sulligent, Alabama plant. Sulligent will also produce additional major components to support Craigavon production. The transfer of the two- to three-ton ICE pneumatic Americas production volume will occur in phases and is expected to be completed by the end of 2008.
As a result of its decision to implement these programs, NMHG will recognize a restructuring charge of approximately $5.8 million in the third quarter, primarily related to future severance payments to Irvine employees. In addition, NMHG anticipates it will incur additional costs associated with the restructuring of $1.8 million during the third quarter of 2007, $2.0 million during the fourth quarter of 2007, $9.4 million during 2008 and $1.0 million in 2009.
While the company anticipates spending up to $18 million on capital expenditures related to this restructuring program, the total planned capital expenditures of NMHG over the next few years will remain at the previously projected levels as a result of the elimination of future expenditures at the Irvine plant.