Closures sting, but region hasn't lost manufacturing base

The International Paper mill outside Franklin - gone by next spring, shredding 1,100 jobs.

Also closing next year: the Smithfield Foods Packing Co. South Plant in Smithfield and the CooperVision contact-lens plant in Norfolk.

Combined, the three shutdowns will cost the region at least 2,300 jobs.

Two years ago, Ford Motor Co. closed its Norfolk Assembly Plant, which at its peak employed 2,500 people to produce F-150 trucks.

Will anything be made anymore in Hampton Roads?

Definitely - from power tools to auto parts to Navy warships.

Reports of the death of American manufacturing are greatly exaggerated, say economists and companies.

Yes, manufacturing has taken a huge hit from the recession, compounding decades of employment losses triggered by automation and global competition.

Last month, the federal government reported that employment in manufacturing had fallen by 2.1 million since the recession began. That's about 30 percent of all U.S. jobs lost, said Dave Huether, chief economist for the National Association of Manufacturers.

Yet manufacturing's share of the U.S. gross domestic product, Huether said, has held between 13 and 14 percent for most of the past two decades. That amounts to $1.6 trillion a year.

In September, U.S. industrial production rose 0.7 percent, leading analysts to put manufacturing at the forefront of the recovery.

"It's not the death of manufacturing; it's the restructuring," said Peter Shaw, a professor of business and economics at Tidewater Community College.

Huether called it "a change in composition of manufacturing."

Consumers can't help but notice the declines - in areas such as apparel and cars. Less obvious, he said, are the areas where U.S. manufacturing has grown, including chemical products, pharmaceuticals and computer chips.

Hampton Roads, with its substantial military influence, doesn't rely heavily on manufacturing. Yet as a percentage of "non-farm employment," the region's 7 percent rate for manufacturing exceeds the state's 6.5 percent, said Bill Mezger, an economist with the Virginia Employment Commission.

Despite the future closings, the region shows healthy manufacturing signs.

In contrast with the nation, which lost 51,000 manufacturing jobs from August to September, Hampton Roads gained 700, growing from 53,700 to 54,400, the state announced last week.

Mezger said the growth probably occurred in the auto parts sector, driven in part by the Cash for Clunkers program.

Also promising: More than 40 percent of the local manufacturing jobs - about 23,000 - are in shipbuilding.

"Shipbuilding largely operates by government contracts," Mezger said. "That industry in Hampton Roads seems to be very healthy."

Northrop Grumman Newport News accounts for the lion's share of that number, with a work force of about 19,000, spokeswoman Lauren Green said in an e-mail.

"Our employment has been stable," said Green, who noted that the shipyard has openings for welders, pipefitters and sheet-metal workers. "We are not significantly impacted by the economic downturn, as our contracts span many years."

Last year, the shipyard was awarded federal contracts totaling $11.5 billion, Green said. It is the nation's only builder of aircraft carriers and one of two submarine makers.

Stihl Inc., which makes power tools, is one of the largest manufacturers in South Hampton Roads, with 2,150 employees at its Virginia Beach site and branches, said its president, Fred Whyte. Although it furloughed some workers this year, he said, it didn't lay anyone off and it plans holiday bonuses.

Last week, Stihl announced a new line of 36 lithium-ion-battery-powered products, including hedge trimmers and blowers, to be introduced in the second quarter of 2010. The company has enjoyed 17 straight years of U.S. sales increases. This won't be the 18th, Whyte said, though the company did not experience significant U.S. losses. "Domestic sales are basically on a par with last year," he said.

The German-owned company has invested more than $200 million over the past five years, including the opening of a $25 million guide-bar plant in 2007.

"We are there for the long term," Whyte said, "and the testimony is in bricks and mortar."

United States Gypsum Co. spent more than $130 million to renovate its wallboard plant in Norfolk two years ago. It had to lay off six people in the summer, reducing its work force to about 85. But it has no intention of closing, said Robert Williams, a spokesman in Chicago for the parent company, USG Corp.

"That would not be a logical thing - to take one of your newest and most efficient plants and close it," Williams said.

International Paper's announcement last month was the most recent local casualty for manufacturers.

The company, based in Memphis, said it would close three mills, including the one near Franklin, with 1,100 workers, because the flagging economy had depressed demand for paper. International Paper had previously announced the layoffs of 360 workers at the Franklin mill and other local operations.

Other losses include:

• Smithfield Foods. The Smithfield plant will close early next year to help cut costs for the struggling pork processor. Of its 1,375 workers, 745 will be transferred to the nearby Smithfield Packing North Plant, 290 will be given transfers to North Carolina plants, and 340 will be laid off, the company said.
• CooperVision. The Norfolk plant, which produces 60 million soft contact lenses a year, has 570 workers. It is scheduled to close in December 2010. The jobs will be transferred to less costly plants in England and Puerto Rico, company officials said in August.
• Franklin Equipment Co. In business for nearly a half-century, the maker of logging equipment closed in January. It employed about 50 people.

Although they won't come close to counteracting those losses, other manufacturers plan to expand and open in Hampton Roads. Among them:

• Sparta Composite Products. In March, the weapons-parts manufacturer, now known as Cobham Composite Products, said it would spend $13 million to build a plant in Suffolk employing nearly 200 people by 2014. The city's Economic Development Authority last month approved an $824,400 incentive grant to help kick-start the delayed project.
• Continental AG. In December, the manufacturer of fuel-injection vehicle parts said it would close a South Carolina plant and transfer its diesel-manufacturing operations to its Newport News site. That, it said, would add nearly 320 jobs over the next three years to the Peninsula plant, which had employed 576.
• Areva Newport News. In October 2008, the Paris-based international energy giant Areva announced that it would build a $363 million plant in Newport News to make large components for nuclear reactors in partnership with Northrop Grumman Shipbuilding. When it opens in 2012, the plant will employ 340 people, growing to 500.

Vinod Agarwal, an economist with Old Dominion University, foresees employment in manufacturing continuing to decline nationwide. But he, too, won't write off the industry: "We have the most creative economy in the world. If we set our minds to being more competitive and innovative, we can and we will."

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