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Can Chicago's Factories Hold the Line on Jobs

November 4, 2008
Related Topics: Career Development, Downsizing, Employee Career Development, Workforce Planning, Latest News
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In the face of plunging auto sales, managers at Ford Motor Co.'s Chicago assembly plant cut the workforce there last spring. But the company managed to salvage jobs for 55 workers by redeploying them to assemble instrument panels for the Ford Taurus and new Lincoln MKS sedan—work that previously had been outsourced.

Now with the outlook in the car business even bleaker, Ford is cutting back again, going to one shift from two next month in a move that will claim about 790 jobs, nearly all of them temporary positions. But about 30 full-time workers will be spared by taking over additional work that had been jobbed out to a contractor.

"We have an abundance of employees," said Anthony Hoskins, manager of the Chicago plant. "If we can bring work back in, it makes sense to have our employees do it."

The moves represent a big change from previous downturns, when factories slashed jobs as the economy tanked. This time, Ford, like other Chicago-area manufacturers, appears better positioned to minimize job losses because of less intense competition from overseas, leaner operations and more-flexible union contracts.

Industry observers say the area's manufacturing sector, which employs 476,000 workers, is likely to avoid the 19 percent  workforce reduction it experienced during the most recent recession, in 2000-03.

"Manufacturers are better prepared to weather this downturn than in the past," said Tim Hanley, vice chairman in Milwaukee of Deloitte & Touche's process and industrial products sector group. "Companies have done a good job of managing their inventories. There is more flexibility in some of the labor agreements that give companies the right to do some things other than just reduce the workforce" in a recession.

Even the most efficient shops won't be able to offset an economy dragged down for a prolonged stretch by moribund demand or banks' refusal to extend credit.

But industry consolidation, investments in productivity-enhancing technology and lower costs have fattened up manufacturers' profit margins in recent years and made local companies more competitive with rivals—particularly those in developing countries such as China—that long enjoyed a labor-cost advantage.

In the Hot Seat

Nowhere is this more apparent than in the steel industry, which has staged a remarkable turnaround after collapsing earlier this decade, when the economy turned sour and a deluge of low-cost imported steel flooded the U.S. market.

Now, with orders and prices for steel falling yet again, a reconstituted and consolidated steel industry, dominated by newcomers such as Chicago-based ArcelorMittal USA Inc., will be in the hot seat. ArcelorMittal, which employs more than 10,000 people at mills in suburban Riverdale and Hennepin, Illinois, and in East Chicago and Burns Harbor, Indiana, intends to reduce steel production to stabilize prices. But so far it hasn't ordered the massive layoffs that have coincided with previous production slowdowns. A spokesman described the reduction as "a temporary measure."

Its steelworkers are being deployed on maintenance and repair jobs at plants or enrolled in workplace safety and job-training classes. The company pledged this fall to invest $3 billion in its plants as part of a new, four-year contract with steelworkers.

"Historically, once things slowed down, the company cut the money off and things went to hell," said Tom Hargrove, president of United Steelworkers Local 1010 in East Chicago. "This time, we're trying not to do that."

It Still Takes Humans

Manufacturers that survived the past few decades of contraction have generally also become more productive, using sophisticated methods and equipment. But it still takes humans to operate these high-tech factories, workers who are highly skilled—not the kind of employees a company wants to let go.

"We spend a tremendous amount of money training people," said Peter Anthony, CEO of UGN Inc., a Tinley Park, Illinois-based producer of automotive interior parts with about 1,500 employees. "We don't want to lose that knowledge and skill set."

Anthony, who supplies parts to Toyota and Honda, said he rigorously adheres to Toyota's manufacturing strategy of boosting profits by eliminating material waste and excess inventory from his six factories. Still, he said, escalating raw material costs and fuel surcharges for delivery trucks are putting pressure on profits. But for now, he has no plans to lay off workers.

A few manufacturers will try to innovate their way through a long recession. John Estey, CEO of electrical component maker S&C Electric Co. in Chicago, isn't cutting staff. He is investing in new product lines and expanding in foreign markets. S&C, which employs about 1,700 at its Rogers Park factory, recently began marketing voltage components for wind turbines and back-up power sources to protect computer databases.

"The things that help us are our diversity in customers, diversity in markets and our new products," he said. "Those things all help you keep your nose above the red ink."

Filed by Bob Tita of Crain’s Chicago Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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