UPDATED: Racine's CNH Capital laying off 115 employees

Update: CNH Global Spokesman Tom Witom said Tuesday that CNH Capital was laying off 115 employees in its North American operations. He estimated it amounted to 10 percent of CNH Capital's worldwide operations; he didn't know what percentage of the North American operations the layoffs totaled.

Witom said at least half of the lay offs were occuring in Racine, but did not have an exact number. CNH Capital's office in Racine would stay open.

Witom, head of news and information for CNH Global, added that no press release would be issued on the layoffs.

"When we make an adjustment like this it's not a material event," he said. "If we downsize or hire 50-70 people we wouldn't make an announcement."

"It's still a difficult situation," Witom added.

The layoffs have started and will be occurring throughout the month, he said. They were caused by a downturn in the construction equipment market. They will not affect money available to CNH's dealers and customers, Witom said.

Witom's news differs from a high-ranking source we talked to within CNH Capital. Our source was confident the layoffs were between 125 and 150 employees. He also went into detail about financial dealings within the company that left them vulnerable to the recent market downturn. See our initial report below.

The JT is finally reporting the news here.

Here is our initial report:

Racine's CNH Capital is laying off 60 percent of its workforce this week, according to a company official with detailed knowledge of the decision.

The layoffs began Monday with human resources representatives meeting individually with employees and escorting them out of the building, according to the source. The workforce reduction amounts to between 125 and 150 positions. More than 100 of the lost jobs are in Racine.

A CNH Capital spokesman said Monday evening that a press release was going out Tuesday. He denied the company was laying off as many employees as we quoted, but our source said he was absolutely certain about the numbers. The spokesman declined to even confirm layoffs occurred Monday.

Employees in the inside sales, outside sales, marketing, credit, note processing, wholesale and retail positions were laid off, our source said. They added that no employee was sacred. People with years of experience and people with no experience were let go. They described the scene Monday as "devastating."

"It's so many people," our source said. "You had single moms losing their jobs, young parents with newborns who lost their jobs. The human tragedy in this is horrible."

The irony of the move is that CNH reported record profits of $252 million in its third quarter, and new CNH equipment is basically sold out for the rest of the year. But the roiling finance markets took its toll on CNH Capital, which lends money to equipment dealers and customers.

Here's a description from the company's website:

A global financing powerhouse. Today, CNH Capital delivers a wide array of financial products and services to well over half a million customers in North America, Latin America, Europe, and Australia. CNH Capital markets retail and wholesale financing products directly to customers and through the CNH global network of approximately 12,000 independent dealerships and distributors in 160 countries.

Our source said a complicated type of debt security known as Asset Backed Securitizations forced the layoffs. ABS's are basically debt sold as investments to outside companies. They resulted in instant payment for CNH Capital, but left the company's revenue stream vulnerable to outside companies. Now that market-weary investors aren't interested in buying ABS's, there's no steady stream of income companies like CNH Global.

CNH Global has the same amount of money to lend, it just doesn't have a way of selling those loans to investors for a higher profit, our source said.

They added CNH Global is basically projecting there is little money to be made over the next 1-2 years, and cut its workforce based on that assumption. Our source was left wondering about this "business strategy."

"You've gotta wonder what's wrong with these folks," he said about company leaders who made the decision.

Our source predicted company officials would release a statement Tuesday saying CNH Capital wasn't immune to the economic downturn and was reducing its workforce in the best interests of shareholders. They'll add that economic conditions have deteriorated to the point where we have to react, our source said.

They added the company did not anticipate the downturn well.

"In good times, you can hardly make a bad decision," they said. "In bad times, it's a question of how have you planned for the rainy day?"