2 plants in LR announce layoffs

LITTLE ROCK — LM Windpower will lay off more than half of its Little Rock work force within the next few months as wind-energy companies await the fate of a tax credit that’s essential to the industry.

The Denmark-based company, the largest manufacturer of wind-turbine blades in the world, employs 300 full time people in Little Rock and has another 140 temporary jobs. It is laying off 80 hourly employees, 14 salaried employees and all of the 140 temporary workers, said Adam Ruple, the company’s human-resources director for the Americas.

The layoffs are because of a decrease in demand, attributed to the nonrenewal thus far of the federal production tax credit, which is an incentive for renewable energy and is to expire Dec. 31.

It was a bleak day for Little Rock’s employment situation as Hawker Beechcraft, a Wichita, Kan.-based plane-maker, also announced that it will lay off 170 people in its plant at the Little Rock airport.

Michael Pakko, chief economist at the Institute for Economic Advancement at the University of Arkansas at Little Rock, said the job losses are setbacks but will not have a lasting effect on the region’s economy.

“From one month to the next, there’s an awful lot of turnovers in the job market,” he said. “It’s not going to have a huge ripple effect that we’ll be seeing for months to come in the unemployment statistics,” Pakko said.

He said that in June the Little Rock metropolitan area had total employment of 327,000. The area had an unemployment rate of 6.6 percent that month, down from 7.5 percent for the same month last year, according to the U.S. Bureau of Labor Statistics.

Little Rock Mayor Mark Stodola said that although the double hit in layoffs hurt the city, he remains optimistic that when demand picks up, the companies will rebuild.

“Both have made major investments in our community in terms of a presence, and that presence is not going away,” he said. “Both of those are going to come back, in my opinion. I’m hoping this is a short-term issue and not a long-term issue.”

As for LM Windpower, “We’ve communicated to our work force that we’re going to be resizing our business for 2013, and some of that will start in [the fourth quarter],” Ruple said. “We brought the temporary workers on to help offset the uncertainty we were dealing with, tried to create some flexibility to where we can expand and contract to this volatile market so temps at least know the situation.

“We try to protect our core nucleus of employees. This hits hard enough where we definitely get into our full time employees.”

The layoffs will start this month and continue until October in a staggered process, Ruple said.

The federal Worker Adjustment and Retraining Notification Act requires employers with more than 100 full-time employees to give notifications 60 days before mass layoffs. An LM Windpower employee, who asked to remain anonymous, said he was notified Wednesday, along with the other employees, of their impending terminations.

“We had been hearing the rumors for a while that because of the [nonrenewal of the] windmill energy tax credit, we had not been getting the orders that we want, but my supervisor said we were in good shape,” he said, adding that he was told that his several years of experience with the company would protect him. “It’s a lot of shock, disbelief.”

Steve Patterson, executive director of the Arkansas Advanced Energy Association, a nonprofit group that works to advance energy development in Arkansas, said the production tax credit had created jobs across the state. But Congress has allowed it to expire three times already, which has delayed wind-energy development, he said.

Most wind-energy companies agree that they need about four more years of the tax credit before they can become self-sufficient, Patterson said.

“This is not unlike any other energy sector that had its beginning from support from some kind of government policy,” he said. “Unfortunately, the partisan rancor in Washington has allowed this one to reach its eleventh hour, and all this uncertainty has led to a dramatic slowdown in orders and in wind-field developments, and our manufacturers in Arkansas are definitely being affected.”

The U.S. Senate Finance Committee approved the extension of the tax credit Thursday, and Patterson said he expects Congress to approve the extension after the November election. The credit is tied up in legislation with other tax issues, which has complicated efforts to pass it.

“Our biggest concern is that they renew it for one year, because that’s not going to really help the industry,” he said. “Not too many people are going to go forward with that investment on a tax credit that could possibly expire in another year.”

While countries like Brazil and Canada are continuing to develop wind energy, it is not enough to sustain LM Windpower’s level of production, Patterson said.

Ruple agreed that the tax credit is a key issue.

“There’s no doubt this is a U.S. issue, and we’re just going to have to continue to monitor our plants and customer demand until the industry can stabilize,” Ruple said. “The key to stabilizing the industry is getting the production tax credit renewed. As long as that’s an outstanding issue, then our market and our demand will continue to have uncertainty.”

Ruple said the Little Rock plant’s five production lines will drop to two by October.

According to a statement from LM Windpower, U.S. demand for additional wind power installation is likely to decline 70 percent from 2012-13. That number assumes that the production tax credit resumes in early 2013.

“Demand is falling off starting as early as August, and that trickles through the next couple of months through October,” Ruple said. “We’ll be a different-looking operation in the back half of [the fourth quarter] this year and into next year.”

Joe Holmes, spokesman for the Arkansas Economic Development Commission, said LM Windpower received several state initiatives when it opened its Little Rock plant in 2007 and promised to create between 1,000 and 1,100 jobs.

The company received $6.9 million from the Governor’s Quick Action Closing Fund, and $8.04 million from the Economic Infrastructure Fund, for infrastructure costs. LM Windpower also received a corporate income tax exemption for 25 years, sales-tax refunds on building materials, taxable machinery and other equipment associated with the expansion project, and a 5 percent rebate on new payroll for 10 years, starting in July 2007.The rebate is performance based, meaning the company receives the incentives only on the basis of payrolls for newly created jobs, Holmes said.

But Holmes said the layoffs will not affect the state incentives that LM Windpower receives.

“They’ve got until 2014 to create the jobs,” he said. “But it’s been a tough economic time, so we’ll just have to wait until 2014 to see where that ends up.”

Ruple said the number of jobs LM Windpower can create depends on the production tax credit’s renewal.

“No one has a crystal ball, so its very tough to predict two years out from now what we’ll look like, but we’re very aware of our goals, and we’re here to grow this business,” he said. “We’re here to stay and committed to trying to grow the business, but we need Congress’ help.”

Arkansas is home to two other plants in the wind energy business: wind-turbine manufacturer Nordex in Jonesboro, and its supplier Beckmann Volmer in Osceola.

Mitsubishi Power Systems Americas Inc. has delayed the start of operations at a completed wind-turbine plant in Fort Smith, with the initial reason being an ongoing patent dispute with General Electric Co. Patterson said the production tax credit issue has also been a problem for Mitsubishi, which was set to employ 300 people.