Chip Maker Finally Goes All In on Plant Shutdown

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Three years ago, El Segundo chip maker International Rectifier Corp. had slumping sales and announced plans to shut down its manufacturing plant in that city.

Sales rebounded, but that only delayed the inevitable. The company last week again announced plans to shutter the El Segundo production line; the plant will close by March. Executives said the shutdown will save $10 million a year.

The company would not disclose how many employees work at the plant today, but executives told the Business Journal a year ago that the facility had 210 workers.

The announcement came at the same time the company reported annual results for the year ended June 30. It had a loss of $55 million, compared with net income of $167 million the previous year.

International Rectifier makes tiny chips that convert electricity into power for electronics in mobile devices, computers, appliances and cars. Chief Executive Oleg Khaykin told investors during an Aug. 22 conference call that weak demand in Europe and in some Asian markets is hurting sales.

“We saw (manufacturers) focused on burning off inventory and distributors hesitant to restock,” he said. “We expect this environment to persist for several quarters.”

As a result, the company is dusting off parts of the restructuring plan it came up with in 2009. That includes the plant closure and downsizing another facility in Newport, Wales. Production from El Segundo will move to the company’s plant in Temecula.

Last week’s announcement is bad news for workers, but some investors want additional cuts, saying International Rectifier’s margins are lower than those of similar firms.

“While cost reductions are a good first step, they do no go far enough,” Craig Berger, an analyst at FBR Capital Markets & Co. in New York, wrote in an Aug. 23 report.

Most analysts who follow the company maintain a “buy” rating, but shares fell 12 percent to $16.29 the day after the earnings announcement.

Plush Deal

Bentley Prince Street is coming to town. The carpet manufacturer has always been in City of Industry, but corporate headquarters won’t be in Atlanta anymore.

Company management, backed by New York private-equity firm Dominus Capital LP, this month finalized a $35 million cash deal to purchase the 33-year-old company from corporate parent Interface Inc. of Atlanta, taking it private for the first time since 1993.

Interface, which acquired the company that year, reported losing $1.6 million on sales of $104 million at its Bentley segment last year. Bentley makes carpet tiles and rolls, while Interface’s other business makes only tiles.

Bentley President Anthony Minite said Bentley has been and will remain profitable and that the loss was attributable to other parts of Interface.

“The truth is we were making money,” he said. “To me, we’re going to be profitable on day one.”

Bentley’s high-end carpet for homes, and its carpet tiles used in office buildings and schools are all made at its City of Industry plant, where it employs about 400 workers.

Minite said Bentley will now be better able to seek out new customers and continue to expand into emerging markets.

“We’re much more nimble. We have the ability now to make faster decisions and run lean,” he said. “I’m pretty confident we’ve put all the pieces in place to be strong and viable.”

Eye Opening

Lens implant maker Staar Surgical Co. will bring about 50 additional manufacturing jobs to its Monrovia headquarters during the next 18 months as the company shuts down plants in Aliso Viejo, Switzerland and Japan.

Staar, which makes implantable lenses to correct vision problems, announced last week it signed an eight-year lease on a 26,000-square-foot building next door to its headquarters.

“It’s more space than we need, but it offers some very attractive things in terms of the business,” said Staar Chief Executive Barry Caldwell. “The ability for groups to work together, to sit down face to face together – that brings a lot of enhanced productivity.”

Staar now employs 130 workers in Monrovia between its corporate offices and manufacturing plant. That number will grow to 180 by the end of next year as production from other plants moves in. Executives estimate the consolidation will save the company $100 million during the next seven years.


Staff reporter James Rufus Koren can be reached at [email protected] or (323) 549-5225, ext. 225.