U.S. manufacturing jobs at risk as demand slows

Mon Oct 31, 2011 8:57pm GMT

Related Topics

Quotes

   

* Weak consumer demand takes toll on manufacturers

* Growth in emerging markets likely to slow

* Companies considering more job cuts

By Suzi Parker and Scott Malone

FORT SMITH, Ark./BOSTON, Oct 31 (Reuters) - When Whirlpool Corp (WHR.N) closes its refrigerator factory in Fort Smith, Arkansas next year, the plant's 974 workers will lose their jobs. They will not be the only ones who will feel the pain.

The repercussions of the closing will ripple through the state's second-largest city, from the roughly 500 people who work at local plastic companies that supply the factory to Eleanor Roller, who runs a 24-hour restaurant near the plant.

It is the latest blow for Bob & Ellie's Drive-In, which has steadily lost customers as the world's largest appliance maker scaled back operations.

"Whirlpool used to have two and three shifts. But then they only had one, with no lunch break, so we felt that," Roller told Reuters. "It's my regulars I depend on and hopefully they'll keep coming." [ID:nN1E79S093]

The cuts at Fort Smith are a fraction of the 5,000 jobs Whirlpool is shedding as consumers shy away from big-ticket items like dishwashers and refrigerators.

Nagging high unemployment in the United States, which held steady at 9.1 percent in September, has depleted spendable income. Concerns about the country's economic future have further depressed consumer sentiment.

And just as repercussions from Whirlpool's actions can spread across an Arkansas town, analysts have said investors should brace for weakness to spread to other manufacturers in the United States.

So far this earnings season, a number of manufacturers that rely on consumer demand, like Whirlpool, air conditioner maker Ingersoll Rand Plc (IR.N) and 3M Co (MMM.N), which makes components for LCD televisions, have cut their financial forecasts.

Makers of highly engineered industrial equipment, such as United Technologies Corp (UTX.N), Boeing Co (BA.N) and Caterpillar Inc (CAT.N), have fared better because of demand from markets like China, India and Russia. But now, even those economies are slowing down.

Barry Misthal, global industrial manufacturing leader for PricewaterhouseCoopers, said some industrial manufacturers were prepared to do some restructuring in 2012 if demand further erodes.

"I don't think you're going to see the massive layoffs we saw back in 2008 and 2009 because companies are more fit now from a demand standpoint, but certainly they are ... able to pull some levers if demand continues to fall off."

U.S. manufacturing executives' view of the U.S. economy deteriorated sharply in the third quarter, according to a PricewaterhouseCoopers study published last week.

Five percent of 60 industrial executives expressed confidence in the direction of the U.S. economy over the next 12 months, according to the study, and 7 percent were optimistic about the global economy.

"At this point there is evidence that the globe is slowing. China is hanging in there for what looks like a soft landing so far. Other parts of the emerging world, including India and Brazil, are slowing," said Clifford Waldman, an economist for the Manufacturers Alliance/MAPI trade group.

LITTLE HOPE FOR HOUSING

Whirlpool and Ingersoll's fortunes are closely tied to the U.S. housing market, which has not recovered from the recession. When consumers buy houses, they tend to also buy major appliances, air conditioners and other big-ticket items. Investors said they see little reason to expect demand to improve in the near future.

The S&P/Case-Shiller top 20 U.S. cities house price index is down 3.8 percent in the past year and down 31 percent from its peak in August 2006.

Uncertainty about when the housing market will recover prompted Ingersoll Chief Executive Michael Lamach to withdraw the company's long-term goal of earning $5 per share by 2013.

"I don't see a U.S. housing recovery in 2012; maybe '13. I don't see a commercial recovery in the U.S., and I see weakness in Western Europe," Lamach said in an interview earlier this month. "The fundamentals just aren't there for us to achieve those targets."

And Baby Boomers staring down the road at retirement are not coming to the rescue.

"The American consumer is the dead stick, there's no doubt about it," said Keith Springer of Springer Financial Advisors in Sacramento, California. With the U.S. population aging, he added, "People don't need a bigger home any longer, so they're not going to go out and buy a bigger home, and so they're not going to buy the new washing machine, the dryer."

The threat of more job cuts is not limited to the makers of major appliances. Household products maker Newell Rubbermaid Inc (NWL.N), packaging products maker Bemis Co (BMS.N), and blue-chip industrials United Technologies and 3M have said they are considering cutting jobs.

"We have implemented hiring freezes in most developed countries. Replacement will be limited to those key positions that are closest to the customers," 3M's Chief Operating Officer Inge Thulin told investors in October. "We are considering the need for more aggressive actions as we monitor economic growth in 2012."

(Reporting by Suzi Parker in Fort Smith, Arkansas and Scott Malone in Boston; Additional reporting by Phil Wahba and Nick Zieminski in New York; Editing by Tiffany Wu)

((Boston.Newsroom@thomsonreuters.com; +1 617-856-4342; Reuters Messaging: scott.malone.thomsonreuters.com@reuters.net)) Keywords: USA MANUFACTURERS/OUTLOOK Keywords: USA MANUFACTURERS/OUTLOOK

(C) Reuters 2011 All rights reserved. Republication or redistribution of Reuters content, including by caching, framing, or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.

FILED UNDER: