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Gentex Corporation: Gentex Announces Revised Guidance for the Fourth Quarter and a Reduction in Its Workforce
ZEELAND, MI--(Marketwire - December 5, 2008) - Gentex Corporation (
Gentex Senior Vice President Enoch Jen said that global light vehicle production has continued to decline since the Company provided guidance for the fourth quarter of 2008 in a news release dated October 21, 2008. At that time, based on CSM Worldwide's mid-October automotive light vehicle production forecast, the Company estimated that revenues in the fourth quarter of 2008 would decline by approximately 15 percent compared with the fourth quarter of 2007. Jen also stated at that time that it seemed that the automotive environment would get worse before it gets better, and that the Company believed there was more downside than upside to that forecast. Since that date and according to CSM's final November 2008 forecast, light vehicle production in North America for the fourth quarter of 2008 has declined by another two percent (3.0 million light vehicle units in October compared with 2.9 million in the November forecast), Europe has declined by another 13 percent (5.0 million light vehicle units in October compared with 4.3 million in the November forecast) and Japan and Korea have declined by another two percent (3.8 million light vehicle units in October compared with 3.7 million in the November forecast).
"In response to the steep declines in vehicle sales and high inventory levels during October and November, many automakers had extended shutdowns over the Thanksgiving holiday and are also planning for extended shutdowns over the Christmas holiday," said Jen. "Some automakers are even planning to shut down for the entire month of December, with others adding additional weeks into January of 2009.
"In addition, it's obvious, given the vehicle production information above, that the production environment in Europe, Japan and Korea also are worsening. Given those changes since we provided our revenue guidance on October 21, we now currently expect that our revenues will decline by more than 25 percent in the fourth quarter of 2008 compared with the fourth quarter last year," said Jen.
"This significant decline in the Company's revenues will negatively impact the Company's ability to leverage its fixed overhead costs and will place further downward pressure on our gross margin," Jen continued. "We continue to experience production inefficiencies as orders are pulled from our release schedules at the last minute. Additionally, there continues to be a vehicle mix shift from the full-size truck/SUV market to smaller, more fuel-efficient vehicles. While Gentex is well-positioned on those smaller vehicles, such as the crossovers, mid- to full-size sedans and smaller SUVs, in the short term the larger vehicles tend to have more dollar content per vehicle."
CSM Worldwide currently is estimating that light vehicle production for the fourth quarter of 2008 will be 2.9 million light vehicle units in North America compared with 3.7 million units in the fourth quarter of 2007 (down 22 percent year-over-year); 4.3 million light vehicle units in Europe compared with 5.6 million units in the fourth quarter of 2007 (down 23 percent year-over-year); and 3.7 million light vehicle units in Japan and Korea compared with 4.1 million units in the fourth quarter of 2007 (down ten percent year-over-year).
Jen said that the Company has been responding to the weakness in the automotive market throughout the year. He said that the Company previously had eliminated its entire contract workforce, which was followed by the elimination of a third shift, voluntary layoffs and shutdowns the week of the Thanksgiving holiday. In addition, the Company will have extended shutdowns to match the Company's customers' planned shutdowns over the Christmas and New Year holidays.
"Unfortunately, these actions are not enough, as automotive production schedules have continued to decline and are now forecasted to continue on this downward slope through most of calendar year 2009," stated Jen. "To adjust for this protracted period of production declines, effective immediately the Company has permanently laid off approximately 350-400 hourly and salaried workers, which will help to reduce the Company's overhead and operating expenses to a level that is more in line with current and planned sales and production levels in the automotive and fire protection industries.
"We are saddened that we've had to resort to layoffs, but the three major automotive markets in the world are all now in a recession. We have responded during the year, trying to react rapidly to match our customers' production plans, but it has reached the point where we have no choice and have to do more. The majority of the hourly and salaried layoffs will impact the Company's overhead expenses. However, some of the changes also include taking steps to streamline and integrate our engineering, research and development functions in an effort to gain higher productivity, which should help to slow down the future rate of increase in our operating expenses."
Jen said that the salaried workforce reductions will result in a decrease of approximately $6 million in the Company's overhead and operating expenses on an annualized basis. Approximately 60 percent of that $6 million expense reduction will impact the Company's overhead expenses, and the other 40 percent will impact the Company's operating expenses, primarily in the engineering, research and development areas.
"We believe that this layoff will align our resources with the production requirements of our customers in the coming year, without risking the Company's future product development efforts that are important to the long-term success of the Company."
"As managers of our shareholders' investment in the Company, we believe that this is the right decision for Gentex in the near and long term. The Company remains in a very strong financial position, as we continue to have no debt and sufficient cash to weather this storm," Jen concluded.
CSM Worldwide's forecast for light vehicle production in calendar year 2009 continues to worsen on a monthly basis. CSM's mid-October automotive light vehicle production forecast for calendar year 2009 declined significantly when the CSM final November forecast was released. Following are the regional changes in light vehicle production when comparing CSM's mid-October forecast to its final November forecast: Light vehicle production in North America is expected to decline by another four percent (11.8 million light vehicle units in October compared with 11.3 million in November); Europe is expected to decline by another nine percent (20.7 million light vehicle units in October compared with 18.8 million in November); and Japan and Korea are expected to decline by another one percent (15.2 million light vehicle units in October compared with 15.0 million in November).
Based on its final November light vehicle production forecast, for calendar year 2009, CSM is now estimating that light vehicle production will be 11.3 million units in the North America versus 12.8 million estimated units in calendar year 2008 (down 12 percent year-over year), 18.8 million units in Europe versus 20.9 million estimated units in calendar year 2008 (down ten percent year-over-year) and 15.0 million units in the Japan and Korea versus 14.7 million estimated units in calendar year 2008 (up two percent year-over-year). The first time that CSM now expects to see a year-over-year increase in light vehicle production for the North American market is in the first quarter of 2010. CSM currently expects to see a year-over-year increase in European light vehicle production in the fourth quarter of 2009 and in the third quarter of 2009 for Japan and Korea.
The Company will announce its final fourth quarter financial results on January 29, 2009, and currently intends to provide top-line revenue guidance for the first quarter of 2009 and calendar year 2009 at that time.
Safe Harbor Statement
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act, as amended, that are based on management's belief, assumptions, current expectations, estimates and projections about the global automotive industry, the economy, the impact of stock option expense, the ability to leverage fixed manufacturing overhead costs, unit shipment and revenue growth rates, the ability to control E,R&D and S,G&A expenses, gross margins, and the Company itself. Words like "anticipates," "believes," "confident," "estimates," "expects," "forecast," "likely," "plans," "projects," and "should," and variations of such words and similar expressions identify forward-looking statements. These statements do not guarantee future performance and involve certain risks, uncertainties, and assumptions that are difficult to predict with regard to timing, expense, likelihood and degree of occurrence. These risks include, without limitation, employment and general economic conditions, the pace of automotive production worldwide, the maintenance of the Company's market share, competitive pricing pressures, the ability to achieve purchasing cost reductions, currency fluctuations, interest rates, equity prices, the financial strength of the Company's customers, supply chain disruptions, potential sale of OEM business segments or suppliers, the mix of products purchased by customers, the ability to continue to make product innovations, the success of certain newer products (e.g. SmartBeam®, Z-Nav and Rear Camera Display Mirror), and other risks identified in the Company's filings with the Securities and Exchange Commission. Therefore, actual results and outcomes may materially differ from what is expressed or forecasted. Furthermore, the Company undertakes no obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events, or otherwise.
Fourth Quarter Conference Call
A conference call related to the Company's fourth quarter financial results will be held on January 29, 2009, and will be simulcast live on the Internet beginning at 10:30 a.m. Eastern Standard Time on that day. To access that call, go to [ www.gentex.com ] and select the "Audio Webcast" icon in the lower right-hand corner of the page. Other conference calls hosted by the Company will also be available at that site in the future.
About the Company
Founded in 1974, Gentex Corporation (