Giro, a division of Bell Sports, will transfer its helmet manufacturing out of Santa Cruz and into the Bell helmet plant in Rantoul, Illinois. Manufacturing is becoming too expensive in Santa Cruz. The money Giro saves in production costs will be invested in marketing, sales and research and development.

In the last few years, Lipton tea and Wrigley gum factories have done the same, moving factories to cities where it is more economical to set up shop.

"This is not the right community for manufacturing. We have a land crunch and that's an issue for companies that want to expand. Water is a critical issue and the cost of living and construction are extremely high," said Michael Schmidt, chief executive officer of the Santa Cruz Chamber of Commerce.

As Giro moves production to Illinois over the next 11 months, the company will lay off 139 Santa Cruz employees in manufacturing, manufacturing support and distribution jobs.

Giro announced the layoffs on Jan. 29, giving employees notice and offering them assistance in finding new jobs. Blair Clark, Giro's president, thanked the employees for their hard work and told them that the layoffs are necessary to insure Giro's long-term viability.

"This is by far the most difficult task I have had to do. If the restructuring eliminates your job, I want you to know that I care about how you feel and I apologize for this disruption to your life. I want to thank you for your hard work and I wish you well in the future," Clark said in a speech to employees.

The Santa Cruz office will remain open for Giro's research and development, marketing, credit and sales employees. To preserve the brand, Giro will continue to operate these departments separately from Bell Sports as Bell officials promised when Bell acquired Giro three years ago.

In addition, two other divisions will move into the Santa Cruz office. They include a test facility and an advanced helmet research group supported by a government grant to research new helmet materials. Giro also will add additional equipment to test ski and bike helmets to meet worldwide standards.

Clark said market conditions for helmet manufacturing have changed since 1989, when prices were stable and growth continued at 50 to 100 percent a year. When Bell bought its main rival, Giro, in 1995, competition was expected to decrease, causing an upward effect on helmet prices. This never happened.

"Market growth is flat, prices are declining, helmets are more complex and more difficult to manufacture. A helmet that sold for $125 five years ago sells for $60 today and yet our manufacturing costs have increased," he said.

The move will end Giro's high production costs in Santa Cruz, allowing its parent company to produce its helmets in Rantoul where overhead is lower and production capabilities are greater. Although Giro expanded its factory by 10,000 feet last year, the company continues to run at capacity and struggles to meet demand.

"We are spending the same amount on our marketing department budget today as we did in 1994, yet our sales are twice as high today. In order to give marketing and R & D greater budgets, we chose to move manufacturing to Rantoul," Clark said.

Clark declined to reveal how much the move would cut production and distribution costs, but he said overlapping production with Bell also will give Giro higher profit margins making the company more competitive.

Copyright 1999 by Miller Freeman, Inc, Santa Fe, New Mexico. All rights reserved.