RACINE - Twin Disc announced a broad series of cost-cutting moves Wednesday that the Racine-based company said will slash $25 million in costs in its fiscal year 2010.

The actions, which Twin Disc said were driven by declines in demand for its products, fell across the board on salaried and hourly workers alike. They included:

- Reducing the work force by a total of 36 people through 16 involuntary and 20 voluntary separations.

- Rolling layoffs, expected to total six weeks between this July 1 and next June 30, for production workers - including those in Racine. That will include a production shutdown for all of July.

- A minimum 3.5 percent reduction in base salaries. That is the amount of pay reduction for hourly workers that will be accomplished with the rolling layoffs, officials said.

- Removal of the bonus/incentive plan for fiscal 2010 which starts July 1.

- An across-the-board reduction of marketing, advertising, travel and entertainment expenses.

Company Chairman and Chief Executive Officer Michael Batten said Wednesday, "We will adjust the size of the organization to market demand," which has particularly soft so far this year - after a relatively good second half of 2008.

Among Twin Disc's diversified product lines, Batten said, hardest hit were transmissions for oil and gas-drilling equipment when oil prices plunged. Sales have also been dreadful for transmissions for lower-horsepower pleasure boats and, more recently, megayachts.

In the past year, Twin Disc stock crested at $23.34 last June, scraped bottom at $4.02 in November and has been close to $7 since late April. Batten said the stock price was a consideration but not a large factor in the cost-cutting actions.

He said the cost-slashing spree likely came as no great surprise to employees. "Our feedback was that the organization anticipated that actions were going to be taken."

Widespread pain

The terminated positions came from "all over the organization," Batten said, including marketing, purchasing, manufacturing and engineering.

Asked how Twin Disc will perform those functions, he replied, "We'll just have to pull together. We have had, unfortunately, to do this in the past."

As employees were told they would be let go, they were taken to meet with an outplacement firm and then escorted off the premises, Batten said. All of those employees will get severance packages.

To aim for 20 hourly worker resignations, Twin Disc Wednesday introduced an early retirement package to production workers who may start signing up for it next Tuesday. Batten said workers expressed "a high level of interest."

He said the job cuts leave Twin Disc with 171 salaried and 212 hourly positions here.

During the July shutdown, hourly workers will be eligible for state unemployment benefits and a company-funded unemployment fund, Batten said.

He said Twin Disc elected to idle production workers while keeping their wage rate the same instead of reducing their wages and not have enough work to keep them busy.

"The important thing is for a company to maintain its financial strength through bad and good times," Batten said. "Companies that do so can take advantage of growth opportunities going forward."

Pay cuts

All remaining Twin Disc employees, from top to bottom, will take at least a 3.5 percent pay cut for the 12 months starting in July. From the vice president level upward, the percentage cuts will be as follows, according to a document filed with the Securities and Exchange Commission:

- Michael E. Batten, chairman, CEO: existing base salary, $546,000; new base salary, $475,000; 13 percent reduction

- John H. Batten, president and chief operating officer: existing base salary, $300,000; new base salary, $279,000; 7 percent reduction

- Christopher Eperjesy, vice president - finance, chief financial officer and treasurer: existing base salary, $286,000; new base salary, $269,000; 6 percent reduction

- James E. Feiertag, executive vice president: existing base salary, $286,000; new base salary, $269,000; 6 percent reduction

- H. Claude Fabry, vice president: existing base salary, $264,179; new base salary, $250,970; 5 percent reduction

Four other corporate officers will also take 5 percent cuts.