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Diebold Announces Multi-Year Realignment Plan

Stocks in this article: DBD

NORTH CANTON, Ohio, April 30, 2013 /PRNewswire/ -- To help stabilize its financial position and better enable an ability to invest in key growth initiatives, Diebold, Incorporated (NYSE: DBD) today announced a multi-year global realignment plan entailing near-term and long-term actions aimed at reducing its cost structure by $100 million to $150 million.

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The company expects to reinvest a portion of the savings in research, development and the systems and infrastructure necessary to drive long-term growth and execute on electronic security and financial self-service strategies.  In addition, some of the savings should offset price erosion, wage inflation in emerging markets and volatile commodity prices in the company's core business.  Given these factors, the company anticipates that approximately 50 percent of the savings will positively impact operating profit. 

The substantial portion of the actions necessary to achieve the targeted savings should be completed by the end of 2014, and the total savings are expected to be fully realized by the end of 2015.  The company has incurred first quarter 2013 restructuring charges of approximately $10 million resulting from this realignment plan.  While the company is in the process of finalizing specific details regarding the initiatives within the realignment plan, it estimates additional future restructuring costs of $15 million to $30 million related to the plan.

Late in the fourth quarter 2012, Diebold began to take several actions to realign and streamline various aspects of its organization.  The actions the company has taken to date are expected to account for approximately $60 million of the overall savings plan.  This savings figure is included in the company's 2013 outlook.  The near-term actions include:

  • The reduction of approximately 700 full-time job positions, primarily in North America and corporate operations. The majority of these job reductions have already taken place;
  • Rationalization of manufacturing facilities by selling operations in Lynchburg, Va., and Lexington, N.C., to a long-time materials supplier;
  • Institution of stricter policies to control discretionary spend across numerous areas to include restricting non-essential travel, reducing the number of company vehicles, canceling non-critical consulting engagements, and reducing spend on all non-core marketing activities and other initiatives.

In addition, Diebold is moving toward a more centralized management structure in order to drive swift action and clear accountability across its global operations. As part of the new structure, four long-term transformation initiatives have been identified to deliver savings during the multi-year realignment program and ensure an improved long-term cost foundation. These include:

  • Globalizing the company's service organization and processes to align with the increasingly global and more complex nature of the business. This is expected to enhance efficiencies, improve customer response times and reduce the company's cost to provide service;
  • Creating a unified, center-led global organization for research and development. This is expected to eliminate duplication of effort, leverage solutions developed regionally across the globe, increase speed to market and ultimately drive down product costs;
  • Transforming the company's general and administrative cost structure by increasing utilization of our existing shared services centers in low-cost regions, instituting common processes and leveraging industry best practices across the enterprise; and
  • Focusing on commercial effectiveness. This includes re-evaluating pricing strategies, reducing fixed costs within the sales organization, improving time to market and better managing product-life cycle.

The necessary structural reduction of the company's costs is ultimately expected to improve cash flow and generate the investment capacity required to execute on its growth strategies. Additional investments from savings will also be made in R&D — to speed new solutions to market — as well as infrastructure improvements such as information technology systems, in order to accelerate transformation, improve capabilities and reduce costs.

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