A gray, overcast and rainy Thursday (Oct. 27) seemed made-to-order on a day when it was confirmed that Whirlpool Corp. would cease operations at its Fort Smith refrigerator manufacturing plant.
The closure, expected by mid-2012, will mark the end of more than 45 years of Whirlpool operations in Fort Smith. The Norge Company opened in 1961 a factory for the manufacture of refrigerators, freezers, and air conditioners. It was purchased by Whirlpool in 1966 and expanded.
According to the Whirlpool statement, production of trash compactors now at Fort Smith will move to Ottawa, Ohio, and production of built-in refrigerators will move to Amana, Iowa. Production of the side-by-side refrigerators, once the bread-and-butter of Whirlpool’s Fort Smith plant, will move to Ramos Arizpe, Mexico. (See Whirlpool's corporate statement at th end of this post.)
The loss of the about 1,000 Whirlpool jobs in Fort Smith will result in the overall loss of 1,550 jobs and a labor income reduction of $56.9 million, according to an economic impact model prepared by Gregory Hamilton, senior research economist at the University of Arkansas at Little Rock, for The City Wire.
Of the 1,550 estimated jobs lost, 472 are indirect — Whirlpool vendors, companies that do business with Whirlpool vendors, etc. — job losses and 80 are Arkansas jobs lost outside of the Fort Smith region. (The City Wire will post a story later today or Friday morning with more detail about the economic impact of Whirlpool job losses.)
Fred Denney, 61, a 34-year veteran with the plant, says he is less worried about himself than he is the community.
“I knew it was coming. I could see the handwriting on the wall ... so I was ready for it. I’m sad for everybody around here that depends on Whirlpool,” Denney said.
Denney doubts he will enter a job retraining program.
“I’m going to draw my unemployment for a year ... and then sit back and try to take it easy. I’ve still got three kids to raise.”
Kenny Thompson, division vice president for Whirlpool and manager of the Fort Smith plant issued the following statement to employees:
“With much sadness, today we hear the decision to close our Division. We knew there was a good possibility this could happen. But, this is a day we've all hoped would never come. It is devastating news for us, our families, and the community. This Division has always had a special sense of "family". Now, more than ever, we need to support each other in the weeks and months ahead.
As I said recently in Plantwide Meetings, we have done nothing wrong. We've done a great job on the things we can control ... quality and flexibility are two great examples. But, our world has changed. And no matter how hard we try, we are not competitive on cost. I feel we've done everything we can do, and I sincerely thank you for that. I also want to thank our Union leadership for doing everything possible to help the Division.
The move of product will occur in phases, and conclude in mid-20l2. We will immediately begin working on a plan to provide assistance for all employees. As soon as management and the Union are ready, we will begin discussions regarding the effects of this announcement. We will also begin immediately to partner with State and Local officials to market our facility and our workforce, with the goal to attract business prospects that can create new jobs in our plant. Please assist every way possible with this effort.
There will be many opportunities for you to ask questions and share your concerns in the weeks ahead. We will provide timely communication to everyone throughout the transition. This is an organization I have always been extremely proud to be a part of, and humbled to lead. I could not imagine a better workforce ... anywhere. I am very proud of all of you and thank you for everything you have done to contribute to our accomplishments over the years.”
EMPLOYMENT, DEMAND DECLINE
The future of Whirlpool’s Fort Smith refrigerator-production plant has been a cause for concern following the November 2003 announcement by Whirlpool of a global reorganization plan. The news since November 2003 has been troubling, with Whirlpool announcing numerous production cuts and layoffs that has seen employment in Fort Smith drop from about 4,600 in early 2006 to around 1,000 today.
David MacGregor, an analyst with Independence, Ohio-based Longbow Research who covers Whirlpool, doubts the move is simply a choice by Whirlpool to move production to other U.S. locations or to operations in Mexico. He said Whirlpool and other domestic and international appliances makers “are under a lot of pressure” following five consecutive years of declining consumer demand.
It was thought at some point the appliance cycle would bottom out and consumers would begin to replace appliances. But that “pent-up consumer demand” has yet to appear.
“And I don’t believe that (demand surge) is coming anytime soon. ... And my guess is that they’ve (Whirlpool management) reached a similar conclusion,” MacGregor said.
Decline in production in Fort Smith also has resulted in the closure of other operations.
Southern Steel & Wire, which made wire baskets and other refrigerator components for Whirlpool, closed its Fort Smith plant at the end of 2010. That closure resulted in the loss of 117 jobs.
Fortis Plastics recently informed the city of Fort Smith it would close its plant sometime between Nov. 4 and Nov. 18. The plant employed about 100 in recent months, but at one time employed as many as 230 in Fort Smith.
Paul Harvel, president and CEO of the Fort Smith Regional Chamber of Commerce, said state and local officials “did all they could in terms of incentives and other things” to encourage Whirlpool execs to keep the plant open.
“I can tell you that we also talked with them about what we could do to bring production here,” Harvel said.
Gov. Mike Beebe and top staffers with the Arkansas Economic Development Commission met with Whirlpool execs in late September to talk about the future of the Fort Smith plant. Also attending the meeting were Fort Smith Mayor Sandy Sanders and Fort Smith City Administrator Ray Gosack.
Prior to the Whirlpool announcement, Harvel noted: “Any type of a closing or job loss at Whirlpool would be a very, very significant loss in our economy. It effects more than just Whirlpool and their employees. ... There are a lot of people in Fort Smith that sell to Whirlpool directly.”
‘PICK YOURSELF UP’
Riverbend Industries is one of those companies.
“It’s not totally unexpected, but still you have to pick yourself up off the floor when you hear it become official,” said Ron Embree, president of Fort Smith-based Riverbend Industries, a company that makes plastic parts for Whirlpool.
Riverbend employs 118 in Fort Smith, and the Whirlpool business is about 60% of the work in Fort Smith. Riverbend also operates a plant near Newton, Iowa, that employs about 200 and supplies parts to Whirlpool (formerly Maytag) operations in that area.
Embree said his company has worked to diversify its client base in the event Whirlpool did pull out of Fort Smith. He said the company has “several new projects” in the pipeline that should deliver the diversity.
“We have every intention of keeping our doors open and keeping people employed and being a manufacturing operation in Fort Smith,” Embree said Thursday. “We’ll get by. It will be tough for a little while, but we’ll get by. ... It will be tough, a lot tougher, for a lot of smaller companies.”
TRADE LAW NEWS
Coincidentally, the Whirlpool news also came on the same day the U.S. Commerce Department issued a preliminary determination finding that South Korean and Mexican manufacturers — including Samsung and LG Electronics — violated trade laws by dumping bottom-mount refrigerators in the United States.
"The Commerce Department's preliminary finding of dumping validates the legal actions we are taking to protect our 23,000 employees in the United States and the communities in which they work," Whirlpool Spokeswoman Kristine Vernier said in a statement. "When foreign companies like Samsung and LG violate trade laws, they destroy the ability of United States producers to invest, innovate and create jobs here in America. Whirlpool Corporation spends $7.4 billion each year in the United States to offer innovative products consumers are seeking. Of the products we make, more than 80 percent of what we sell in America is built in America. Maintaining jobs in the United States requires restoring fair competition through the strong enforcement of United States and International trade laws."
In listing itself as the petitioner in the case, Whirlpool specifically included the corporation and its plants in Iowa and Arkansas.
According to the Whirlpool statement, the Commerce Department is 50% complete with its investigation. Today’s ruling requires the foreign manufacturers to post bonds to cover future payment if anti-dumping duties are assessed.
Whirlpool Corporation (NYSE: WHR) today announced changes to its North American manufacturing operations. After a thorough study of its Global Operating Platform announced in August, the company will close its manufacturing facility in Fort Smith, Arkansas by mid-2012. The closure will impact approximately 1000 active employees (90 salaried and 884 hourly). In addition, there are approximately 800 employees on layoff from this facility.
This difficult but necessary announcement is being driven by a decrease in demand for the side-by-side refrigerator platforms that has resulted from the continued weakness in the global economy, and the aggressive pricing actions of global competitors – some of whose trade practices are currently under investigation by the U.S. government.
The decision to close this facility follows a comprehensive review of alternatives for product consolidation within the three product categories currently produced at the plant.
“The employees at our Ft. Smith location are among the best you will find anywhere. While Fort Smith certainly has produced top quality products consistent with our longstanding strategy, we have not been cost competitive due to the extremely low production volumes at the facility,” said Al Holaday, vice president of integrated supply chain and quality.
All Fort Smith production will shift to existing North American sites to leverage the resources and excess capacity at those facilities.
· Production of trash compactors will shift to Ottawa, Ohio
· Production of built-in refrigerators will shift to Amana, Iowa
· Production of the reduced, declining volumes of side-by-side refrigerators will be accommodated within current excess capacity in Ramos Arizpe, Mexico where employment levels will remain flat to negative
Whirlpool is committed to helping the impacted employees and their families with the transition during the next several months. Conversations regarding transition assistance will begin immediately. The company is also working with local and state officials to help ensure that all available training resources are made available to affected employees.