Hutchinson Technology cuts hundreds of jobs

Hutchinson Technology Inc., a maker of disk drive components, said Tuesday it plans to cut hundreds of jobs at its plant in central Minnesota and consolidate some of its manufacturing operations into a newer plant in Eau Claire, Wis.

The company said it will reduce its U.S. workforce of about 2,275 people by 30 percent to 40 percent in the next 12 months. The layoffs and other cost-cutting moves were expected to save the company $45 million to $60 million a year.

Within Hutchinson, a town of about 12,000 an hour west of Minneapolis, about 600 of the company's 1,125 employees will be directly affected, said company spokesman Connie Pautz. She said there will also be some layoffs in Eau Claire, Wis., but not as many as in Hutchinson.

She said the company will start presenting employees with written notifications starting the week of March 21. They will be offered severance packages. She said the company will ask the state for assistance in helping the employees find new jobs.

Mayor Steve Cook said, "While this is difficult for everybody, the employees, the families, the community, from a company aspect it was something they needed to do."

Just a year ago, the company cut 300 jobs, mostly from its Hutchinson plant, because of falling demand due to the recession and after the loss of its biggest client, disk drive maker Seagate Technology. "We've been through this before, and we'll continue to move forward with the city," Cook said.

Cook said rumors had been swirling for weeks that another round of layoffs was coming, fed in part by the company's opening of a new assembly plant in Thailand.

Jill Jacobson, an industrial engineer, told WCCO-AM the layoffs will be hard on the community. "This is going to be extremely painful, I think, because of the multiple layoffs; it's reduced a lot of jobs in the area," she said.

Hutchinson Technology Chief Executive Office Wayne Fortun acknowledged as much Tuesday, but said the changes were needed to lower the company's operating costs. Progress at the new plant in Thailand was making it possible to move more manufacturing there, he said.

The company said it would keep its corporate headquarters, research and development and other specialized operations in Hutchinson.

Hutchinson Technology's primary products are suspension assemblies for computer disk drives, which position the recording head above the disk and provide the electrical connection to the disk drive's circuitry.

In January, the company reported a net loss of $17 million on sales of $68.2 million for the quarter ending Dec. 26. That was an improvement from the previous quarter, which saw a net loss of $27.1 million in sales of $74 million.

Hutchinson Technology said that due to recent reductions in orders, it expects shipments of its assemblies to fall up to 5 percent in the second quarter from the first. At the same time, the company's cash and investment balance fell from $101.2 million at the end of the first quarter, to $66.3 million eight weeks into the second quarter.

Mark Miller, a tech analyst with Florida-based Noble Financial, sees two factors driving the layoffs: The company has a new assembly plant in Thailand and also has a new disk drive suspension product that requires less human capital to make.

"That's a more automated process. And as some of these new suspensions get ramped, they're going to need fewer employees," Miller said.

Miller had projected that Hutchinson Technology would need two more years to reach profitability, but he said Tuesday's announcement might bring profits a few quarters earlier.

(MPR reporter Annie Baxter contributed to this report.)