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EXCLUSIVE: Post cuts, Brewer sees a "more aggressive, authentic and relevant" Callaway

One of the game's equipment giants shed itself of some size as Callaway Golf announced layoffs impacting some 250 employees worldwide (out of a total of 2,100 employees for an approximately 12-percent drop) across a wide swath of divisions. The workforce reduction was accompanied by an announcement of $52 million in cost-reduction initiatives.
 
In an exclusive interview with GolfDigest.com, Callaway CEO Chip Brewer said the changes were personally trying but necessary.

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 "If this surprised anybody, they weren't paying attention," Brewer said. "Before I came to Callaway, I knew, and everyone in the industry knew, that there was some level of cost-cutting to be done. It's very unpleasant but necessary. It keeps you up at night, but you have to do it.
 
"I didn't think it was going to be this extensive, to be candid. You have to assess the situation, and as you get further into it, you learn more. If you come in with those ideas predetermined, you're doing a disservice to the organization. But I wouldn't say we're excessively skinny. There's not a lack of resources here by any means."
 
Brewer said the layoffs affect workers across all levels of the organization, but with greater cuts coming domestically than internationally. While corporate support positions were among the most affected areas, research and development was among the least affected.
 
"I don't like to cut R&D," Brewer said. "I'm a big fan of the resources we have there. Relative to where we've been, we're going to do more with less. But we're very adequately staffed, the resources are strong, the brand is strong, and product-wise, the changes that we're making are directionally correct, and I'm very optimistic on that front."

The moves come about a year after Callaway CEO George Fellows resigned and interim CEO Tony Thornley announced a $50 million operating reduction. A year before that, in July 2010, Callaway laid off approximately 200 workers.

Brewer, who took over as CEO on March 5 of this year, inherited a company that reported a net loss of $171.8 million last year on sales that dipped more than $81 million, from $967.7 million to $886.5 million. The company said it expects second-quarter sales of $280 million, a 3 percent increase over the same period a year ago. Callaway's second quarter results are scheduled to be released July 26.
 
Among the more notable departures are Joe Urzetta, senior vice president of Americas, who had been at Callaway since 2000, and Dan Chumbler, senior director of U.S. sales. Glenn Hickey, current vice president of sales, has been named the interim head of sales. 
 
Brewer sees the cuts as prologue to a newly energized company. "We faced up to the reality, and the business will come out more focused," he said. "We're changing the business, we're changing the culture and how we approach the business here. We're going to be more aggressive. We're going to be faster. We're going to be stronger."
 
Those who have followed Brewer's career will not be surprised by the move. Upon taking over a struggling business at Adams, Brewer implemented drastic cuts at a company that only had a few months cash on hand left. Although unpleasant, the swiftness and extent of that decision was later seen by many as the turning point for the company--one that became attractive enough to recently be acquired by Callaway rival TaylorMade. At Callaway Brewer inherits a similar situation, albeit with a stronger brand name and balance sheet. The flip side is Callaway is a larger ship to turn around and Brewer is trying to do so in a stagnant economy while his main competitors are faring well.
 
But Brewer's plan for Callaway appears to be anything but complex. He says the company will place a heavy emphasis on its club and ball business and being more responsive to the marketplace.
 
"It's a new day now," he said. "The golf club and golf ball business is what gets our excitement levels up. Clearly, we're very grounded in reality and we're going to come out with more aggressive, authentic and relevant programs, and that's going to extend from sales to marketing to product. In the past, they've claimed to be authentic and they haven't always been authentic, in my opinion. They've been high quality but they haven't always driven innovation and been as responsive as they could.  We're changing all that and the team is excited as hell about that.
 
"That's the fun part. It's basic stuff. The brand is so good and the resources are so good. But when you really get down to it, it's more about culture and approach than it is anything else. That's what's going to make all the difference." 
 
Brewer talked about how that change in attitude can pay off in the golf market's current competitive landscape. "The team here is really passionate and has a lot of commitment to this company and the business," he said. "They have hated losing. They are smart people. Getting your ass kicked in the golf business is no fun.
 
"Getting this behind us and getting focused on kicking a little ass of our own is going to be energizing, and that's the next step for us."

--E. Michael Johnson and Mike Stachura
Follow us on Twitter @EMichaelGW and @MikeStachura
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