The Loop

Callaway restructuring, will add Mexico facility

July 27, 2010

Callaway Golf announced today--and on the eve of releasing its second-quarter numbers--that it is undertaking a restructuring of its operations over the next 18 months that will include the creation of third-party distribution in Dallas and Toronto as well as the establishment of a new manufacturing facility in Monterrey, Mexico. Manufacturing and distribution capabilities will remain in Carlsbad and Toronto. Additionally, layoffs at each of these facilities will take place over the next year and a half. Callaway currently employs some 2,300 people worldwide and will provide transition support to impacted employees.

The move is the result of the company's desire to improve its manufacturing processes and supply chains. While some manufacturing will remain in Carlsbad, the majority of North American club manufacturing for Callaway will move to Mexico. When the transition is complete, manufacturing for the company will be relatively evenly split between Mexico and Asia.

"This redesign allows us to flex back and forth between manufacturing facilities based on specific needs," said Tim Buckman, Callaway's senior director of global communications. "Additionally, our customer service will be improved through reduced lead times to at least 65 percent of our North American customers." The move also provides Callaway more flexibility depending on global economic conditions, similar to what the company has done in Europe, Japan and Southeast Asia. Callaway's international business is expected to account for more than half of the company's future annual revenue.

Regarding the layoffs, while the company would not give a specific number on those impacted, Buckman said all those that will be impacted over the next 18 months were notified today and will be given 60 days notice once their end date has been determined.

"The redesign of Callaway's global operations creates a stronger, more flexible model that better positions our business for the future," said George Fellows, president and CEO of Callaway Golf. "This decision was based on an extensive review of our operations structure and supports the gross margin improvements necessary to secure our leadership position in a competitive market."

-- E. Michael Johnson