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Smith & Wesson Suffers New Setback in Midst of Soft Handgun Market

January 17, 1985

SPRINGFIELD, Mass. (AP) _ The Army’s decision to purchase pistols from Italian-based Beretta is the latest in a string of setbacks for Smith & Wesson Co., beset by a soft handgun market that caused the recent layoffs of 140 workers.

The Army announced Monday that 9mm Beretta pistols, compatible with those used by other NATO forces, would replace the .45-caliber Colt, the standard sidearm for the U.S. armed forces for the past 73 years.

The loss of the $50 million, five-year contract comes on top of an industry wide slump in gun sales that forced Smith & Wesson to furlough 140 workers last week.

Smith & Wesson officials had no comment on the decision, except for a terse statement from the office of president Lee J. Deeters saying that it was ″vigorously pursuing its legal remedies.″

Late last year, the company filed complaints about the Army’s testing procedures with the federal General Accounting Office and has a suit pending in federal court to stop the contract award.

Company officials, at an Atlanta convention, could not be reached to comment on the industry slump, but a spokesman for Colt Industries Inc. in Hartford, Conn., said the market for guns - particularly handguns - has been soft lately despite the nation’s recovery from the 1982-83 recession.

″Following the recession, I think, we’ve been relegated to the second pier of purchasing,″ said public information director Peter Williamson. ″Consumers start by buying appliances, TVs, stereos. They put firearms on the back burner.″

Another industry expert said the storm over federal handgun legislation has eased, possibly adding to the industry doldrums.

″There’s not much threat of handgun legislation on the horizon,″ said William Ruger Jr., vice president of Sturm-Ruger & Co. of Southport, Conn. ″Sometimes debate will tend to stimulate sales. People are afraid that if they don’t buy now, they won’t be able to later.″

Ruger, who said his company is No. 2 in domestic handgun sales behind Smith & Wesson, had no explanation for the weak handgun market.

When it laid off 140 of 1,850 workers at its Springfield plant, Smith & Wesson cited foreign competition, the high price of the dollar overseas and soft gun sales both domestically and overseas.

The company, with sales of $150 million in 1983, is the nation’s largest supplier of law enforcement equipment.

″Normally we are a fairly stable employer,″ said personnel manager George C. Colclough. ″Prior to 1983, we had only had one minor layoff, and that was 50 years ago.″

In 1983, blaming a glut of weapons on the overseas market and local government belt-tightening that slowed domestic sales, the company laid off 300 workers. Most have been recalled, Colclough said.

Ruger said that Sturm-Ruger laid off about 120 of its 1,500 workers at Connecticut and New Hampshire plants last March and switched emphasis from handguns to more profitable shoulder guns.

Colt laid off about 700 workers - a quarter of its workforce - in 1982. Williamson said the company has since dropped unprofitable handgun products from its line and concentrated on more profitable shoulder guns.

The Army contract loss is the second time Smith & Wesson, a lynchpin of the Connecticut Valley gun trade since the Civil War, has been outmaneuvered by Beretta on its home ground. In 1982, the Connecticut State Police exchanged their Smith & Wesson revolvers for 9mm pistols provided by Beretta at no charge in exchange for advertising endorsements.

Rep. Edward Boland, D-Mass., called Monday’s announcement ″ill advised and premature″ and angrily vowed to press Smith & Wesson’s case.

Boland, ranking member of the House Appropriations Committee, said Secretary of Defense Caspar Weinberger had assured him the contract award would not be made until resolution of legal challenges filed by Smith & Wesson, the only major U.S. firm to make a 9mm pistol.

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