A 13-week strike by workers at Dresser-Rand Group's factory in Painted Post led to a 7 percent drop in third-quarter profits from a year earlier -- and company executives warned Wednesday that employment levels at the Southern Tier facility may not return to previous levels.
Dresser-Rand said the ongoing strike by 400 union workers at its Painted Post factory cost the company $20 million during the quarter, with about half of that expense going for the 180 temporary replacement workers it is using at the plant and the remaining $10 million coming from deferred sales.
The strike, which began on Aug. 4, cut Dresser-Rand's profits of $21.3 million, or 25 cents per share, by $12.8 million, or 15 cents per share. Even so, the earnings topped the 20 cents per share expected by analysts surveyed by Thomson Financial/First Call.
Despite several negotiating sessions under the supervision of a federal mediator, little progress has been made in the contract talks since the strike began, said Vincent R. Volpe, the company's president and chief executive officer, during a conference call. Volpe said he believed it is unlikely that a deal will be reached before the end of the year.
In addition to hiring temporary replacement workers, Dresser-Rand said it has hired about 75 permanent replacement workers through a combination of union employees who crossed the picket line and new hires.
The company also has hired subcontractors to do more of the work once done at the Painted Post factory and also has arranged some long-term supply arrangements, Volpe said. While a portion of that subcontracted work could return to the Painted Post factory once the strike ends, it is possible that subcontractors would continue to do some of those functions, he said.
"There is little expectation that all 400 folks who are out are going to come back," said Volpe, who contended that the strike would not have a material impact on the company's results next year. The impact of the strike is expected to be around $15 million during the current quarter as the higher-cost temporary work force is reduced.
Dresser-Rand, which employs 2,300 workers at its plants in Olean, Wellsville and Painted Post, is seeking a reduction in health care benefits and more flexible work rules from its Painted Post work force.
Employees at the company's Wellsville plant accepted wage and benefit cuts in January 2006. Since then, additional work has been shifted into the Wellsville factory, pushing employment up by more than 40 percent from 285 before the agreement to more than 400 today, Volpe said.
Dresser-Rand's sales grew by 25 percent to $389 million from $310 million, as new unit revenues soared by 71 percent, offseting flat sales of replacement equipment.
The company said it expects sales to rise by 15 percent to 20 percent next year, with operating profits jumping by about 40 percent.