Smithfield Foods to close local plant, cut 340 jobs

SMITHFIELD

Smithfield Foods Inc. said Tuesday it will close its original Smithfield Packing Co. plant on North Church Street, resulting in a loss of 630 jobs in Hampton Roads.

The plant will close in December as part of a cost-cutting plan that will shutter six plants and eliminate 1,800 jobs but save the company tens of millions of dollars a year.

Smithfield Foods, which became the world's largest pork processor by acquiring dozens of meatpacking plants and streamlining their operations, has been under pressure from high corn prices and turmoil in the financial markets.

The fresh-pork operations at its Smithfield Packing South plant, which employs 1,375 workers, will be transferred to its other plant in town and to facilities in North Carolina.

Slightly more than half of the work force at the plant being closed - 745 employees - will be offered transfers to the nearby plant, Smithfield said. An additional 290 will be offered transfers to Smithfield plants in North Carolina, but the remaining 340 employees will be laid off.

Carl Duck, a Smithfield employee, said he'd heard rumors of the restructuring but that the news still stung. The 50-year-old Smithfield resident said he and his wife have worked at the plant for about 30 years. Neither knows yet whether they will be offered a transfer, said Duck, who works in maintenance.

"It's a bad time," he said. "I've been here for a while. I hate to go."

Robert W. "Bo" Manly IV, the company's executive vice president and chief financial officer, described the restructuring as "the largest single cost-savings effort that Smithfield has ever put together."

The plant consolidations, Smithfield said, are expected to generate $55 million in annual savings by next year and $125 million in savings in 2011.

In a speech to a gathering of securities analysts in Boca Raton, Fla., Smithfield President and Chief Executive C. Larry Pope said the restructuring was part of Smithfield's shift away from less-profitable lines of business.

"We would rather be a smaller, more profitable company than a larger, less profitable company, and this demonstrates that," he said.

Smithfield, whose headquarters is within sight of the plant being closed, employs more than 3,500 in the Smithfield area, including 1,600 at the Smithfield Packing North plant that will remain open.

It said it expected to take a pre tax charge of $85 million against its earnings for the quarter ended Feb. 1 to write down assets. In addition, the company said it plans to take charges amounting to $30 million over the next three quarters as the restructuring is put in place.

Smithfield's announcement comes in the wake of USAA's announcement last week that the San Antonio-based insurance provider will shift slightly more than half of the 850 jobs at its Norfolk office to regional offices elsewhere in the country.

"Obviously, the recession is beginning to have an impact on the local economy," said Vinod Agarwal, an economist at Old Dominion University in Norfolk. However, "it's too early to say" whether Hampton Roads will witness job losses for the full year, he said. That's because the stimulus package signed Tuesday by President Barack Obama "is going to have some positive impact" on the region, he said.

The Smithfield meatpacking company, founded by J.W. Luter and his son J.W. Luter Jr. in 1936, fell on hard times in the 1970s after it was sold to a Washington, D.C., conglomerate. Joseph W. Luter III, whose father and grandfather started the company, became its president during the 1960s and sold it. He returned in 1975 and restored its financial health.

Luter also embarked on an aggressive expansion drive in the early 1980s by taking over ailing, inefficient plants and slashing costs. Luter's first big acquisition was Gwaltney, whose plant on Church Street became the Smithfield Packing North plant.

In addition to expanding its pork operations, Smithfield entered the beef and poultry businesses during the past decade. However, Smithfield sold its beef subsidiary for $580 million in cash to a Brazilian company last year and paid down some of its debt.

In his remarks to securities analysts Tuesday, Pope discounted rumors that Smithfield's plant closings and job cuts were caused by pressure from its banks.

"This is not true," he said. "We started this process last February."

As part of its drive to cut costs and streamline operations, Smithfield said it will close five other plants. Those include a ham production plant in Elon, N.C., with 160 employees, and a packaged-meats plant in Plant City, Fla., with 760 employees. The other plants are in Great Bend, Kan.; New Riegel, Ohio; and Hastings, Neb.

Smithfield said it also will consolidate seven of its independent operating companies into three companies: Smithfield Packing, John Morrell & Co. and Farmland Inc.

Smithfield's shares fell 70 cents Tuesday to close at $8.87 each on the New York Stock Exchange.

Staff writer Hattie Brown Garrow contributed to this report.

Tom Shean, (757) 446-2379, tom.shean@pilotonline.com

Philip Walzer, (757) 222-3864, phil.walzer@pilotonline.com