These steps will allow the company to focus on enhancing the competitiveness and growth of its service offerings in the U.S., Canada, Mexico, the U.K. and Asia.
Ryder is eliminating approximately 700 positions, primarily in the U.S. The company believes deteriorating global economic and financial conditions will continue to negatively impact commercial rental performance, used vehicles sales, the automotive sector, and pension plan returns in 2009. The planned workforce reduction is expected to result in cost savings of approximately $36 million in 2009. Ryder will also be significantly reducing the use of contractors and temporary employees, where appropriate, throughout its operations.
Company officials anticipate that the workforce reduction will result in a pre-tax restructuring charge of approximately $11 million (approximately $7 million, after-tax) in the fourth quarter of 2008.
Due to the severity of recently announced downturns in automotive production in North America, the company will be issuing temporary layoffs, primarily in the U.S., to approximately 1,300 drivers and warehouse workers, and approximately 125 salaried employees as a result of reduced service levels required to support greatly reduced production activity related to certain automotive customer accounts.
As part of longer-term strategy changes, Ryder will discontinue current Supply Chain Solutions (SCS) operations during 2009 in Brazil, Argentina, and Chile, and transition out of SCS customer contracts in Europe. These operations and contracts accounted for gross revenue of approximately $200 million and operating revenue of approximately $120 million, or roughly 3 percent of consolidated revenue in 2007.
The company anticipates that discontinuing these operations will result in a pre-tax restructuring charge of approximately $38 million to $45 million (approximately $35 million to $42 million, after-tax) in the fourth quarter of 2008.
These measures will enable Ryder to expand its service offerings, further diversify its mix of industries served, and continue its pursuit of "tuck-in" and strategic acquisitions that create synergies and/or expand capabilities. In the U.S., Canada, and Mexico, emphasis will be placed on elevating Ryder's strong market position as a leading provider of transportation and logistics solutions. In the U.K., Ryder will focus on delivering profitable growth in the Fleet Management Solutions and Dedicated Contract Carriage product lines. Ryder will also continue to develop its Asia capabilities, including strengthening its role as a facilitator of commerce and production between companies and resources in the North American and Asia regions.
In total, Ryder expects the fourth quarter 2008 pre-tax charges to be approximately $60 million to $67 million (approximately $53 million to $60 million, after-tax).