Pilkington's chief executive Paolo Scaroni said "The action we are taking follows a strategic review of our North American automotive business by Warren Knowlton - president Automotive worldwide and an executive director of Pilkington. Our aim is to eliminate excess capacity and bottlenecks and to create a more cost-effective operation. The changes we are proposing will help bring productivity in our North American plants to the high levels achieved by our plant at San Salvo, Italy."

Original Equipment

Pilkington's OE operations in North America produce windscreens, side windows and back windows, as well as modular components that include value-added moulded and encapsulated features.

The OE restructuring programme is designed to eliminate excess capacity, rationalise the product range and reduce manufacturing and overhead costs throughout the business. This follows a similar move last autumn, when Pilkington closed a plant in Lindsay, Ontario, and consolidated its production of encapsulated glass components at two plants in Michigan.

The programme will involve the closure of the Sherman (Texas) plant, with production of laminated and toughened parts being transferred to Collingwood (Ontario, Canada) and Shelbyville (Indiana) respectively. This will reduce the number of Pilkington OE automotive fabrication plants in North America from 5 to 4. The number of affected employees at Sherman will be 400.

The move will begin in the summer and is expected to be completed by the end of 2000. The transition will be managed to ensure that customer deliveries are maintained and quality expectations are met. The programme is expected to involve exceptional restructuring costs of approximately £30 million of which half will be cash costs.

In addition, new investment will be made in Collingwood, Ontario, and Shelbyville, Indiana to optimise capacity by upgrading equipment and lines. The Collingwood plant produces windshields, and the Shelbyville facility produces toughened glass parts such as side windows, back windows and sunroofs. The planned process improvements will boost productivity in North America to world-class levels already achieved by Pilkington plants elsewhere.

Automotive Glass Replacement

The Pilkington Libbey-Owens-Ford AGR business, which supplies the automotive aftermarket glazing business, accounts for approximately 40% of Pilkington's automotive sales in North America.

In January 1999, a major reorganisation of the marketing and sales organisation in the AGR business was initiated, with profit centre accountability placed into separate distribution and wholesale arms. An aggressive refocusing of the AGR wholesale business is now underway. This involves a significant facility right-sizing effort, and optimisation of the distribution and warehouse network. Over the past year, six wholesale centres have been closed.

The AGR restructuring programme is designed to reduce costs throughout the wholesale/distribution chain. Its objective is to achieve savings in inventory and part costs and to increase cash flow. Cash and non-cash costs of the programme will be approximately £6 million.

Notes to editors

1. The Automotive business accounted for 44% of Group sales and 41% of Group profits in Pilkington's 1997/98 Accounts. In North America, the automotive business is made up of 60% OE and 40% AGR.
2. The OE automotive fabrication operations in North America consist of the following plants:
   
   
3. 1. Sherman, Texas, USA - production of laminated and toughened glass. Closure will result in the transfer of laminated glass to Collingwood and toughened glass to Shelbyville.
   2. Collingwood, Ontario, Canada - production of laminated glass. Following transfer of production from Sherman and investment to optimise capacity, productivity at Collingwood will be at similar levels to our plant at San Salvo, Italy.
   3. Shelbyville, Indiana, USA - production of toughened glass. As above, the restructuring programme will result in levels of production similar to those at San Salvo, Italy.
   4. United LN Glass Inc. (ULNG), Kentucky, USA - 50:50 joint venture with Nippon Sheet Glass of Japan, producing both laminated and toughened glass. Serves primarily Japanese transplants.
   5. Lathrop, California, USA - production of primarily toughened glass but also laminated glass. Situated in California, the plant is a smaller facility, adjacent to the float plant, and serves the joint venture between Toyota and General Motors.
      
      
4. In addition, there are two modular facilities located in Michigan, at Clinton and Niles, which add value to fabricated parts. A third facility in Lindsay, Ontario, was closed in Autumn 1998, as described above.
5. 4. The AGR operations in North America produce laminated and toughened glass for the automotive glass replacement market. The ratio of laminated to toughened glass is approximately 2:1. The operations consist of two manufacturing facilities - Mexicali in Mexico and Rossford in Ohio. Products are transferred from these facilities to a 400,000-sq. ft. distribution centre in Columbus, Ohio from where they are distributed to external retailers and wholesale customers. In addition, the business has 93 company-owned wholesale service centres. Approximately 50% of the units available at these centres come from internal operations with the balance obtained from external operations.