After downsizing, builder to employ only 300 in Mich.
May 30, 2007
Pulte Homes Inc., in the latest major downsizing by a Michigan-based company, announced late Tuesday that it was cutting about 16 percent of its work force, or nearly 1,900 jobs.
The Bloomfield Hills-based company, one of the nation's largest and most successful homebuilders, has been hit hard by the nation's slumping housing market.
"The homebuilding environment remains difficult, and our current overhead levels are structured for a business that is larger than the market presently allows," Richard J. Dugas Jr., president and chief executive, said in a news release.
Michigan appears to be taking a heavy dose of the cuts. Company spokesman Mark Marymee said Pulte would employ just 300 workers in Michigan -- including its headquarters in Bloomfield Hills and offices in Royal Oak -- after the reorganization. But he would not disclose the size of Pulte's current work force in the state.
Pulte will employ about 10,000 workers nationwide after the cuts, down from 11,900, most of which will occur by the end of June. In 2006, Pulte had about 12,400 employees, down from 13,400 in 2005.
"All of our divisions are dealing with their own issues, but Michigan's have been harsher, obviously due to the economy," Marymee said.
Affected workers will receive one week's severance pay for every year worked at Pulte in addition to medical benefits for a limited period, Marymee said.
Pulte said the restructuring will save an estimated $200 million a year before taxes. The company expects to take pretax charges of $40 million to $50 million for the restructuring, mostly in the second quarter of 2007.
Pulte earned $687 million in 2006, a 54 percent drop from the previous year. First-quarter 2007 losses were $85.7 million, or 33 cents a share, compared with net income of $262.6 million for the same period last year, or $1.01 per share. Pulte's stock closed Tuesday at $27.45 and has dropped 17 percent so far this year.
Founded by William Pulte in 1950, Pulte Homes rode the post-World War II housing boom to solid profits and stellar investor returns. Pulte operates in 50 markets in 26 states.
In recent years, Pulte has pursued a fast-growth strategy, buying land and smaller competitors like Pratt Building System and DiVosta Homes. The company has branched out to building homes and "active adult" communities for mostly retirees under its Del Webb brand, which it acquired for $1.7 billion in 2001.
Pulte has two active adult communities in Michigan and had planned to build 100 of them in 24 states by 2008. The Del Webb brand made up nearly 40 percent of its sales in 2005.
In 2006, the company delivered 41,487 homes in the United States and generated consolidated revenues of $14.3 billion. During its 57-year history, the company has constructed nearly 500,000 homes.
But in recent weeks, Pulte has begun warning investors that the nation's weak housing market was taking a toll.
"We're not projecting anything to bounce off the bottom at this point," Chief Financial Officer Roger Cregg said at a UBS conference in London earlier this month. "There's been a lot of buyers that have moved to the sidelines."
The crisis in the subprime lending market has contributed to the downslide. Investors are concerned that tightening lending standards will reduce the number of buyers for houses and keep the housing market weak.
Through mid-March, a Standard & Poor's measure of home construction companies tumbled 16 percent from Jan. 1, erasing all of the gains achieved after rebounding late in 2006 from a July low.
One worker who left Pulte earlier this year and requested anonymity said the company began laying off workers at its headquarters in September and trimmed more employees earlier this year. The worker said there were 450 to 500 workers at the headquarters last year.
Detroit News wire services contributed to this report.
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