O-I Glass has approved a severance program related to cost-cutting, primarily in its Americas segment, the company said in a securities filing late Wednesday. It’s part of the company’s optimization plan detailed in July, dubbed Fit to Win, which aims to reduce redundant capacity in O-I’s network.
The glass container maker anticipates an associated $21 million charge in the third quarter, though most cash severance expenditures will be paid in the fourth quarter.
The severance program is “expected to reduce future selling, general and administrative costs in the Americas segment, as well as reduce retained corporate and other costs not allocable to the Company’s reportable segments,” according to the filing.
An O-I spokesperson did not comment on whether this severance program is related to O-I’s disclosure in September that it approved the closure of four furnaces in the Americas segment, including a single-furnace plant, as part of the optimization program. At the time, O-I also declined to provide additional details on the whereabouts of those furnaces.
Those were expected to close within the next six months, impacting approximately 200 people. O-I said existing customers of the impacted plants would be served by the same plant or other plants in O-I’s network. The company said those closures would likely prompt a $20 million charge in Q3: $14 million related to impairment of plant-related assets like furnaces and machinery and $6 million for one-time employee separation benefits and other costs related to the closings.
O-I also said in the September filing that more furnace closures and other restructuring actions were expected later in 2024.
O-I’s new CEO Gordon Hardie discussed the Fit to Win “competitiveness” initiative on the company’s most recent earnings call in July, which he said involved conducting an “end-to-end supply chain review.”
“Fit to Win is not just another cost-out initiative,” he said at the time. “It will fundamentally reshape our company.” Hardie said O-I would close at least six furnaces, or 4% of its overall capacity, over the subsequent three quarters.
O-I is scheduled to release third-quarter results on Oct. 29 and host its earnings call on Oct. 30. RBC Capital Markets analysts said they “expect an inline report from OI and while glass volumes remain weak (esp. in Spirits, with destocking), we believe earnings are at trough levels,” per a Q3 packaging sector earnings preview on Thursday.
“After meeting with OI in September, we gained confidence in its Fit To Win strategy that OI thinks could contribute $300M of non-volume dependent SG&A and footprint savings resulting in 2027 EBITDA of $1.45B from $1.15B in 2024,” RBC analysts wrote.
In the past two years, other areas where O-I has cut jobs include Portland, Oregon, and Waco, Texas.
