Smith International to Lay Off 700

Smith International Inc., the troubled oil services firm, plans to lay off about 700 workers next month from its Irvine-based tool division, a company spokesman confirmed late Thursday.

“All or nearly all” of the layoffs, which will be effective Feb. 8, will be at the company’s Smith Tool division headquarters in Irvine, said the spokesman, who asked not to be identified. He said the cutbacks would involve employees in assembly operations and “certain white-collar functions.”

A worldwide slump in the oil- and gas-drilling business has hurt Newport Beach-based Smith and, according to the spokesman, triggered the layoffs at the tool division, the company’s largest subsidiary and the nation’s largest manufacturer of drill bits.

“It’s the first division to be affected by changes in drilling activity,” he said. The layoffs are a direct result of a “downturn in drilling activity, which reduces the demand for our product.”

The spokesman said domestic drilling has dropped off 15% within the past month, and “we anticipate it heading lower before it bottoms out.” Drilling activity serves as a reliable gauge of demand for drill bits, he added.

Despite the need for a work-force reduction, the division remains profitable, he said.

The spokesman said the layoffs are not expected to spread to the company’s other divisions, which employ about 9,000 workers worldwide. He said the company had only recently begun calling back workers laid off during the fall of 1983.

“We hope it’s a temporary thing,” he said of the new layoffs, adding that he could not say when the laid-off employees might be recalled.

The slump in the oil industry only adds to the company’s recent financial woes. Since last April, it has been embroiled in a hostile and costly battle to take control of Gearhart Industries Inc., a Fort Worth-based company providing high technology for the oil industry.

Smith said in December that it expected to report a loss for the year as a result of the nine-month battle. The company bought 5.3 million Gearhart shares for $159 million before its April tender offer becamed mired in a still-unresolved federal court battle.

Gearhart’s stock has plummeted in price since the takeover attempt began, and Smith said recently that it would take a one-time charge against earnings in the fourth quarter to reflect that decline.