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Closures Signal Economic Tightening?

Both Freedom Group and Smith & Wesson Holdings broke bad news for employees last week.

Late Friday afternoon, Freedom Group issued a news release announcing the March 31, 2011 closure of the Wyndham, Maine facilities of Bushmaster Firearms International. Simultaneously, Smith & Wesson's announcement of the decision to close Thompson/Center's manufacturing facilities in Rochester, New Hampshire, initially announced in the company's second quarter financial results, was front-page news there. Thompson/Center employees got the news of the closure on Wednesday.

Both closures have been the subject of industry conjecture for some time, but the formal announcements have once again raised the question of the overall economy's recovery.
While the firearms industry ran at a near-frantic pace through the first eighteen months of the current economic downturn, sales numbers seem to indicate that the doldrums of the rest of the nation's businesses has finally arrived.
 
Manufacturers, distributors and retailers report even the most-scarce categories of firearms and ammunition only months ago are sitting on their shelves in a critical retail season. At the same time, new products are being rolled into a marketplace that is said to still be receptive to new gear.

In the Freedom Group's Bushmaster announcement Chairman John Blystone said "We are continuing to adjust our operations in order to remain competitive and continue to grow. Given increasing costs and pricing pressures affecting the entire firearms industry, this action is clearly necessary and responsible."

The explanation offered by Smith & Wesson CEO Michael Golden was similar, describing the Thompson/Center closure as a move to "streamline our firearms manufacturing processes and improve our margins."

No word on the disposition of Bushmaster's Wyndham, Maine facilities, but Smith and Wesson says they're looking for a buyer for the New Hampshire foundry that will be among the T/C facilities shuttered "sometime next year".

Some Thompson employees are being offered relocation packages to Smith and Wesson's headquarters in Springfield, Massachusetts; the remainder will be given severance packages.

Acquired three years ago - at what appears to have been peak profitability- T/C has been hit hard by a change in purchasing by the firearms consumers.
Bushmaster, one of the hard-charging companies during last year's boom in "black rifles" seems to be another smaller facility being phased out by Freedom Group's unrelenting drive to achieve manufacturing and distribution efficiencies.

From a business efficiencies standpoint, absorption of Bushmaster into the Freedom Group's overall manufacturing facilities and Thompson/Center's rolling into Smith's Massachusetts facilities both make sense.
 
That's small consolation, however, for the employees who will find themselves unemployed in what is a tough job market nationwide. That job market is even more challenging in the northeast where high taxes, operating costs and employee compensation packages have already driven other companies to more friendly locales.

Bushmaster joins Marlin Firearms in the ranks of purchased/consolidated brands of the Freedom Group. In March of this year, Freedom Group announced they would close the North Haven, Connecticut facilities that for 140 years had been that brand's home.
The Freedom Group consolidations aren't new. Beginning in 2008 with the closure of the Remington manufacturing facility in Gardner, Massachusetts, the company has continued to consolidate its holdings.

The Smith & Wesson closure of Thompson/Center will also bring product lines to a central facility with sufficient space and capacity to accommodate the additions.

While smaller "boutique" facilities continue in the firearms industry, it is no longer realistic to believe that acquisition targets will remain in their current locations when folded into larger portfolios.

 



Uploaded: 12/18/2010