Callaway Golf - DOWNSIZES

[GolfSpy_X]

Callaway Golf announced today—and on the eve on releasing its second-quarter numbers—that is undertaking a restructuring of its operations over the next 18 months that will include the creation of third-party distribution in Dallas and Toronto as well as the establishment of a new manufacturing facility in Monterrey, Mexico. Manufacturing and distribution capabilities will remain in Carlsbad and Toronto. Additionally, layoffs at each of the company's facilities will take place over the next year and a half. Callaway currently employs some 2,300 people worldwide and will provide transition support to impacted employees.

 

The move is the result of the company's desire to improve its manufacturing processes and supply chains. While some manufacturing will remain in Carlsbad, the majority of North American club manufacturing for Callaway will move to Mexico. When the transition is complete, manufacturing for the company will be relatively evenly split between Mexico and Asia. “This redesign allows us to flex back and forth between manufacturing facilities based on specific needs,” said Tim Buckman, Callaway's senior director of global communications. “Additionally, our customer service will be improved through reduced lead times to at least 65 percent of our North American customers.” The move also provides Callaway more flexibility depending on global economic conditions, similar to what the company has done in Europe, Japan and Southeast Asia. Callaway's international business is expected to account for more than half of the company's future annual revenue.

 

Regarding the layoffs, while the company would not give a specific number on those impacted, Buckman said all those that will be impacted over the next 18 months were notified today and will be given 60 days notice once their end date has been determined.

 

“The redesign of Callaway's global operations creates a stronger, more flexible model that better positions our business for the future,” said George Fellows, president and CEO of Callaway Golf. “This decision was based on an extensive review of our operations structure and supports the gross margin improvements necessary to secure our leadership position in a competitive market.”

[cheymike]

Goodbye Callaway. Its been nice knowing you. Your global aspirations for more $$$ have just killed you.

[SargeDesign]

What little Callaway stuff I did buy will be no more. We have enough layoffs in this country.

[Phana24JG]

What little Callaway stuff I did buy will be no more. We have enough layoffs in this country.

 

I understand your position, but I also have some sympathy for Callaway. They are caught in the squeeze that is hitting every major OEM. The game is not growing in the US, and manufacturing costs in CA are outrageous. I would reserve some of your frustration for federal and (some) state governments which prey upon the private sector.

[cheymike]

The "squeeze" is from CEOs and their "staff" making a mint and the little guy working in the factory making dog turds. The truth is in today's "global" world they want to make a bigger profit. When "global" eyes get set on that goal, if it doesn't make a big enough profit, shutdowns begin and bankruptcy and closings happen next. Doesn't matter that they are already making millions... its never enough. So companys get dissolved, CEOs get parachute deals, and they move on to go do the same thing to other companies.

[JBones]

They have been on a downward decline since Ely passed away back in 2001.

[cheymike]

Kind of goes along with my point JB. The person who built the company, who had some pride in what they did, no longer around to guide and steer it. Now its in the hands of people who's only bottom line is the dollar and to heck with everything else.

[Phana24JG]

The "squeeze" is from CEOs and their "staff" making a mint and the little guy working in the factory making dog turds. The truth is in today's "global" world they want to make a bigger profit. When "global" eyes get set on that goal, if it doesn't make a big enough profit, shutdowns begin and bankruptcy and closings happen next. Doesn't matter that they are already making millions... its never enough. So companys get dissolved, CEOs get parachute deals, and they move on to go do the same thing to other companies.

 

Mike, I don't want this topic to get too political, but I think it does come under the golf umbrella as regarding golf manufacturing in the USA. Your point about CEOs is well-taken, and probably half of them are scum BUT... that does not change basic economic realities. I reside in a state that is very much like CA, and deal with a wide variety of manufacturers, a good number who have begun to leave or at least placed themselves in a position to leave. When a company has to pay a premium wage to attract good employees because of high personal income taxes, then has that wage translated into an outrageous cost because of sky-high medical insurance rates, worker's comp rates 40% above national average, and (where applicable) the highest liability rates in the nation for those employees, a company takes notice.

 

When that company then has to deal with the second highest property tax rates in the nation, utility costs well above national average (and if in Con Ed or LIPA areas some of the highest in the country), regulatory costs second in the nation, and zealous enforcement of many ludicrous regulations, the worst product/corporate liability environment in the nation, etc, etc, ad nauseum, can you seriously blame a company for looking elsewhere?

 

I wish Callaway had opted to move to a more welcome environment in the USA versus Mexico. However, I think if you run the numbers, the CEOs salary, even if grossly inflated is a small percentage of the cost to any company versus the parasite costs listed.

[cheymike]

I don't disagree that it is more expensive to do business in the USA. Its a fact of life. Those costs can and are passed on to the consumer. But wait till they make their moves, then watch and see if the prices of their clubs goes down to keep their bottom line even with what it is now. I'll bet those prices will not go down at the same rate their costs go down. If they do, I'll write an apology to the CEO of Callaway. If they don't my point will be made regardless of what kool aid anyone drinks.

*edit & add* It really doesn't matter WHERE they are moving to me and it actually is not the fact they are moving that makes me feel this way. Its the focus on bottom line, rather than quality products and quality service that bothers me.