Brewer on Callaway's cuts: Painful but necessary

Chip Brewer, the new chief executive of Callaway Golf, called a 12 percent reduction in the company’s workforce “a lousy part of the process but a necessary one.”

Brewer spoke immediately after Callaway’s announcement Wednesday afternoon of its cost-reduction initiative, which was reported Tuesday on Golfweek.com. “If anybody is surprised that Callaway had to cut costs," Brewer said, "they probably had their head in the sand.”

Callaway, based in Carlsbad, Calif., cut 250 employees from its worldwide workforce of 2,100. The reduction and other initiatives are expected to generate $52 million in gross annualized savings and will cost an estimated $40 million – more than half anticipated non-cash charges – during the next 12 months, according to Callaway.

“It’s painful stuff," said Brewer, the emotion apparent in his voice. "It keeps you up at night. The reality, though, is that we had too many costs and too many people. So we had to make those tough decisions.”

Brewer joined Callaway as president and CEO on March 5 after serving as the head of Adams Golf. He maintained that Callaway would come out of this restructuring “leaner and more agile,” adding that “the Callaway consumer will benefit from all this. That’s why they hired me.”

Looking ahead to 2013, Brewer promised “exciting new products that people will be talking about.” In June, he led a management reorganization that enabled him to become heavily involved in research and development, with Alan Hocknell, senior vice president of research and development, reporting directly to Brewer.

Previously, Hocknell reported to Jeff Colton, the senior vice president of global brand and products. Colton’s job at Callaway was eliminated in June.

“I’m a hands-on guy when it comes to product,” Brewer said. “It’s the thing that gets me excited every day. Having a guy in between (Colton) didn’t make any sense.”

Callaway, which grew from a start-up into one of golf's major players with the development of the Big Bertha line of metalwoods under the late Ely Callaway, has struggled in recent years. The company (stock ticker ELY on the NYSE) reported a net loss of $171.8 million in 2011 after a net loss of $18.8 million in 2010. Callaway recorded net sales of $886.5 million last year, down from $967.7 million in 2010.

Brewer laid down an ultimatum – to himself, if not to Callaway stockholders: “If you look at my track record, you know I’m a product guy. If I don’t feel that we’re world-class – if not the world’s best – then I’m out of here. I’m done. I’m gonna hang up the spikes."

Brewer said much the same thing when he was CEO of Adams Golf, and he oversaw a total revamping and revitalization of the Plano, Texas-based company's product line.

“In the 120 days that I’ve been here at Callaway, we’ve made a lot of changes,” Brewer said. “This first stage (layoffs) had to be completed. Now we move on.

“It will present some near-term challenges. Some people will be asked to expand their responsibilities, but we won’t have to worry about whether we have resources to get the job done. I feel we’ll come out of this stronger than we were before.”

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