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Manufacturers Face Tough Economy

NATIONWIDE -- Some fitness equipment manufacturers across the country are being hit hard by the slowing economy and rising energy and material costs. To reduce costs, some companies are laying off workers and restructuring. Others report they are doing business as usual.

To maximize resources and reduce expenses, FreeMotion Fitness is moving its Colorado Springs, CO, offices to Ogden, Utah. The relocation became official in April and is expected to be completed by early to mid-fall, according to a statement from the company.

The move is accompanied by several layoffs. Customer care, order entry, and shipping and logistics were immediately affected and are now handled by ICON Health & Fitness’ current staff in Logan, UT. ICON purchased FreeMotion in 2000.

“We’re adjusting to the economic conditions by leveraging the strengths of our corporate parent and maximizing the synergies within the businesses,” says Patrick Hald, president of FreeMotion. “The logistical benefits are tremendous. With cutbacks at retail, price increases for steel, fuel, inflation in Asia and a weak dollar, reducing expenses is vital.”

The new location will house research and product development, while the bulk of manufacturing will remain in Logan, UT. FreeMotion will remain a wholly owned, independent subsidiary of ICON, says Kathleen White, director of marketing and education for FreeMotion.

SportsArt Fitness, Woodinville, WA, had minimal manufacturing line layoffs at its Taiwan manufacturing plant and none at its plant in China, according to a source at the company. Seven people were laid off at its headquarters location, mostly in customer service, where improved efficiencies enabled the company’s new customer service manager to re-organize and eliminate some non-essential positions. The residential sales group and credit department re-organized to eliminate one position each.

The layoffs occurred partly for efficiency and partly as a response to the slowdown in residential product sales. Commercial sales remain strong, the source says, adding that they are up in Asia, Europe and North America. SportsArt is looking at enhancing its manufacturing efficiencies and watching sales and marketing expenses to help control costs further.

Despite the layoffs, SportsArt is continuing production on what the source calls “two very significant new cardio pieces.” He says their concept is completely new, and both are scheduled to be rolled out in October at the Club Industry show. No delays in the production of these new products or in delivery of products to the end-user will occur, the source says.

“The end-user facility should not see any changes,” he says.

Nautilus has been experiencing revenue losses for several quarters, and in February, the company announced that it would be transitioning a call center in Winnipeg, Canada, to the company’s headquarters in Vancouver, WA.

Although calls to Nautilus were not returned for this story, in a call with investors and analysts in April, Bill Meadowcroft, Nautilus’ chief financial officer, said that the uncertain consumer environment will continue to affect the company in the second quarter, which he added is usually the company’s weakest quarter. Second quarter financials for the company have not been released.

Other manufacturers report no layoffs despite the economic downturn. Well-publicized layoffs at Brunswick, the parent company of Life Fitness, Schiller Park, IL, have been contained to the organization’s marine division, a spokesperson for Life Fitness says.

Star Trac also has not been affected, according to the company.

“Star Trac has not had layoffs. Our business is strong, and we are still experiencing double-digit growth,” Randy Bergstedt, vice president of marketing for Star Trac, said in an e-mail response to questions about layoffs. “Because we’re growing so fast in Europe and Asia and other international markets, we’re not seeing our overall business challenged by the slowdown in the United States. In addition, we are growing in the vertical markets, which is also limiting any effects of the business climate in the U.S.”

A Precor spokesperson denies rumors of layoffs there, noting that historically, the production workforce at the Woodinville, WA, facility that builds commercial cardio equipment fluctuates seasonally as the company responds to demand.

“The established pattern is that production builds in the third and fourth quarters, and drops off in the quieter times of the first half of the year,” says Jim Zahniser, public relations manager for the company.

Zahniser says the commercial club market is solid, and any seasonal adjustments in the production workforce were due to the soft home market. Precor’s 2008 first quarter net sales were down 13 percent globally. Club equipment lead times will not be affected, he says.

“As with the rest of the country, we’re feeling the impact of a spiraling consumer economy, consumer credit crunch and increased fuel costs,” he says. “At the same time, we’re fortunate to have a healthy commercial business serving clubs and fitness facilities, and a strong track record in helping clubs deliver a superior member experience.”

Technogym has had no layoffs or production problems, says Enrico Manaresi, international PR and media relations manager for the company.

On June 29, Nerio Alessandri, president of Technogym, signed a definitive agreement with Candover, a worldwide buyout specialist. With the agreement, Candover acquired a 40 percent minority stake in Technogym. Manaresi says no layoffs were associated with the agreement.

“The aim of this partnership is to accelerate the company growth in new segments and markets,” according to a statement from the company. “This means that the company is planning to hire new people in order to develop new projects, to launch new products and to increase production volumes.”

Cybex also has not had any layoffs, says Heather Corbitt, spokesperson for Cybex. The company declined to comment any further because its second quarter results have not been released. In the first quarter of 2008, net sales were up 15 percent to $39.8 million ($34.7 million for the corresponding 2007 period). Net income for the first quarter ending March 29 was $1.2 million, or $0.07 per diluted share, compared to a net income for the first quarter of 2007 of $1.1 million, or $0.06 per diluted share.

“Current U.S. and world economic conditions likely will make our corporate goal of double-digit growth in sales and earnings more challenging in the short-term,” John Aglialoro, Cybex chairman and CEO, said in a statement from late April about the company’s first-quarter results. “We will closely monitor sales activity and will respond quickly on the cost side if economic conditions produce a slowing of our rate of growth over the next several quarters. For the longer term, we remain confident that our pipeline of new products and our strategy of developing new markets will continue to be important drivers in promoting strong sales and earnings growth.”

At Hoist Fitness, Jeremy Miller, director of marketing and international sales manager for the company, says he could not comment on the situation nor confirm or deny layoffs.
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