Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, March 25, 1990 TAG: 9003270001
SECTION: CURRENT PAGE: NRV1 EDITION: NEW RIVER
SOURCE: PETER MATHEWS and MADELYN ROSENBERG NEW RIVER VALLEY BUREAU
DATELINE: LENGTH: Long
But one thing is clear: AT&T's scheduled closing of its Fairlawn plant has put the valley's manufacturing base under a spotlight. Layoffs that might have gone little-noticed in another time have been closely watched by elected officials, economic development groups and the media.
"If you took away AT&T, if you suppose it didn't happen - there's nothing really going on," said Virginia Tech associate professor of finance Vittorio Bonomo.
"Corning is expanding. They [Burlington Transportation] shut down a truck terminal. Really, what we're talking about is AT&T. It makes the local economy weak, but is not a sign of a recession."
A slowdown in the automotive industry and anticipated belt-tightening in the Pentagon, however, are two national trends that have affected area businesses.
Since December, companies have announced more than 1,300 job cuts, mostly in Pulaski County and Radford. AT&T, which has nearly 1,000 workers, will begin layoffs at its New River Valley Works plant in July.
Following is an examination of how national economic slowdowns have affected area industries - and how they are coping.\ Autos and trucks\ When the automotive industry is weak - and it has been particularly weak for the past six months - several New River Valley plants feel the effects.
Volvo-GM Heavy Truck Corp. has stopped production twice since Christmas and will do it again for two more weeks, starting this week.
The entire heavy truck industry, which is dominated by American manufacturers, is in a slump, said John Bryant, vice president for manufacturing operations. One of Volvo's competitors, Mack Trucks, lost $185 million last year.
The soft economy makes customers more inclined to delay capital investment, such as buying new trucks, Bryant said. Two other factors hurt sales: trucks' increasing durability, which means they must be replaced less often; and the rise in fuel prices, which created cash-flow problems for many companies.
To avoid permanent layoffs, Volvo-GM shuts down production.
"A lot of people left good jobs to come to us," Bryant said. "It's not really fair to throw them back."
The company employs more than 1,400 people in Dublin, up more than 500 since a second shift was added two years ago. Bryant said about 940 are production workers, but the number idled during production shutdowns varies.
Like most executives interviewed for this story, Bryant is optimistic. He said the plant will benefit, at least in the short term, from new, more stringent emissions standards for diesels built after Jan. 1, 1991. Those standards will drive up the cost of those models, and a lot of people are expected to avoid the increase by buying this year.
Some other auto-related businesses have similar problems - they are maintaining or improving upon their market share, but there are fewer orders to go around. Their response has been to become more competitive by diversifying and improving their productivity.
Wolverine, whose Blacksburg plant makes gaskets for automobiles, has found new foreign markets to make up for a small decline in domestic orders. And it sells raw material to Japanese and European parts manufacturers.
For a while the plant was "running on eggs, waiting for the foundation to fall in," said plant manager Al Guarino. But it hasn't happened, and he said the immediate outlook is for the work force to remain stable. The plant employs 285 to 290 people.
Some automotive-related factories are expanding despite the sluggish economy. The Corning plant in Christiansburg, which makes ceramic components for catalytic converters, will add 15 to 20 people to its force of 168 as it completes its second production line.
Costs of the expansion mean the factory isn't as competitive on price right now, said John Yearick, a plant official. But two things help: Corning's commitment to that expansion and the fact that the plant's customers include Japanese carmakers such as Toyota and Honda, which are outperforming their American counterparts.
Federal Mogul Corp. also is expanding. A $4.5 million project announced in December will allow the Blacksburg plant to make the aluminum alloys it uses to make engine bearings.
The plant, which employs about 600, has recalled 29 of the 75 people it had laid off in recent months. That was made possible by increased orders from such major customers as Caterpillar and Chevrolet, as well as strong sales to parts dealers.
In Radford, Industrial Drives relies on an industry dependent on the auto industry: machine tools. Orders to machine tool makers were down 14 percent in January from 1989 levels; Industrial Drives' business is off about 40 percent.
Skip Griggs, Industrial Drives president, said half of his sales are to machine tool makers and another 7 percent to 8 percent are directly to the auto industry. His company provides the motion control systems for machines.
"We're definitely in a recession, and in our business it began last June," he said.
The company terminated 24 people in January, about 10 percent of its work force. Griggs said he hopes to bring some back in the third or fourth quarter.
Griggs' main competition comes from Japanese and German companies that didn't exist 15 years ago. Their advantage: more help from their governments.
"I can't make the investment they can. They can underprice me if they decide to, and in many areas they have."
Griggs also blames American manufacturers, in part, for emphasizing short-term profits over long-term investment. And he hopes that Washington gets some commitments for business in exchange for aid it gives emerging democracies in Eastern Europe.\ Defense
These are bad times in the war industry.
Inland Motor President Joe Colvin illustrated what can happen when peace breaks out. His company's contract to provide a motor used in the Sparrow missile once meant jobs for 45 workers. Now production of that missile has been cut, and its successor is not yet in full production.
Colvin would not say what percentage of his Radford company's business is defense-related, but he did say his company is diversified enough to withstand a few major reductions in programs.
Inland laid off 40 people in January, less than 10 percent of its force. Colvin said he is "cautiously optimistic" about the future.
At Bondcote, which makes a roofing product, truck tarpaulins and some military products in Pulaski County, production was down to four days a week in January, said plant manager Irvin Thomas. "In February we ran two weeks and stopped two. Now we're up to full production.
"We're keeping our fingers crossed" that five-day-a-week production schedules can be maintained, he said.
Litton-PolyScientific in Blacksburg laid off 15 people this month to cut costs, said Davis Walker, industrial relations vice president. The plant makes, among other things, electromechanical and fiberoptic products for military and commercial use.
Walker and others in defense-related industries said it was too early to tell what would happen with the defense budget.
But layoffs already have begun at the Radford Army Ammunition Plant, which let 70 workers go in mid-February. Arsenal spokeswoman Nicole LaMarr said 300 jobs originally were to be eliminated through attrition, but workers were not leaving at the usual rate.
"I think it's related to the overall economic situation," LaMarr said last week. "The people who have jobs are hanging on to them. . . . That's why Hercules had to lay off those 70 workers."
That is true of many other plants in the valley, managers say.\ Other manufacturers\ The picture at other plants is mixed. The Hubbell Lighting plant in Christiansburg has hired workers this year, and business is good because of the company's service record, said personnel manager Ed Zamer. The plant, which employs nearly 500, makes lighting for a variety of businesses and industries.
At hosiery-maker Renfro Corp. in Pulaski, the company has been running four days some weeks during what is customarily a slow time of the year but is proceeding with an expansion that will create 250 jobs, said plant manager James Reagan.
Dublin Garment Co. laid off 10 to 20 people for brief periods last year. The cause, said plant manager Robert Bruns: "Imports, imports, imports. We've got to beat them somehow."
Bruns, whose plant makes women's clothing, believes he can do that. " . . . the market looks good to us again. . . . What we have to do is put out as good quality as the foreign competition at good prices."\ The outlook
Unemployment always fluctuates in areas with a substantial manufacturing base, and the New River Valley is no exception.
Bonomo of Tech said AT&T's closing was not related to other problems in the economy.
"They would have closed in the most prosperous of times," he said. "The plant was not needed."
Because of that, he said, he believes bad economic news is being overemphasized. "I don't feel we're feeling the effects of a recession. What's happening locally is special case stuff . . . just a lot of accidents at the same time."
Moreover, AT&T's closing may mean more reasonably priced houses, less congested roads - and a plant that could be a good deal for a new industry, Bonomo said.
"It is a major loss, but it will be overcome," agreed Jim Stewart, director of economic and technological development at New River Community College. "Much has been said about Pulaski County losing this and losing that, but in the past, we've gained the jobs back."
But the county is losing people, and has been for 15 or 20 years. Ray McGrath of the Center for Public Service at the University of Virginia, said the county lost 2,000 people from 1980 to 1988. So has the valley as a whole, with losses in Radford and Giles County offsetting increases in Montgomery and Floyd counties.
McGrath said most industries like expanding markets, not stagnant or declining ones. The key to migration is economic development.
"The whole problem with economic development in the Southwest area is that historically we have not been able to keep education in the county," said Pulaski County School Superintendent James Burns. "That leaves us with some people who are not skilled. Then how do you attract industry?
"You wonder why 53 percent of our population has dropped out of high school? Those who got the education and wanted to make a good living left the county."
That may be why several business people urged Montgomery County supervisors last week to fully fund the school budget. Or why business and government leaders in Pulaski County are offering $100 incentives to encourage adults to get their equivalency degrees.
Despite the recent problems, they are still optimistic.
"We have the opportunities, we have the ingenuity to not just survive, but find ways to prosper," said Industrial Drives' Grigg. "We will continue to be driven by that."
by CNB