Jabil plant closure may hurt local economy
Loss of payroll, tax revenue will affect the valley
Chris Butler / The Idaho Statesman / Oct 16, 2002
Jabil Circuit´s decision to abandon its 2-year-old Meridian plant and cut its 500 workers there by the end of the year could take up to $50 million out of the Treasure Valley economy.
In addition to an annual payroll in excess of $23 million, and property taxes of about $1 million, the facility spends a substantial amount each year for services and goods, local economic experts say.
The true value of the loss, however, could be far greater once broader impacts are considered: fewer restaurant meals purchased, day-care services no longer needed, homes put up for sale, furniture purchases delayed, and tightened Christmas shopping budgets.
“There´s a multiplier effect,” area economist John Church said. “You can double the payroll amount as far as an effect overall, and I think that would be a very conservative number.”
Jabil announced last month it would close its Meridian facility because of costs and a realignment of its manufacturing operations. The company announced in August it was purchasing nine overseas manufacturing facilities, and has acknowledged that some local work likely will flow to its foreign facilities.
The impending closure has triggered concern from area merchants and civic leaders, the state Department of Commerce and those trying to find work in the already saturated job market. While the area economy already has absorbed widespread layoffs in 2001 from large technology companies — from MicronPC to MCMS — the total loss of a large employer this year is seen as a greater blow. When a firm leaves the market, there is little hope it will return when the economy improves.
Employees in limbo
Several Jabil employees contacted last week either declined to be interviewed or did not return phone calls. But they were talking to employers at a job fair earlier this week in downtown Boise.
“Half the people I´ve talked to in the past hour were from Jabil,” said Doug Fry, a representative of American Family Insurance who was staffing an employment booth at the job fair.
Jabil workers also were checking out contract position possibilities at the Adecco Technical booth.
“We´ve seen a substantial amount of Jabil applicants,” said Barry Estes, a contract manager for Adecco. Estes agreed the job market is tight, especially for technical workers. “There are jobs, but they get filled very quickly.”
As Jabil phases out operations here, management is helping employees find new jobs. Because the plant closure qualifies employees for additional state assistance, workers are finding a variety of options available to them. Among them:
• An application has been made to the U.S. Dept of Labor that would make employees eligible for extended unemployment benefits because their jobs were moved overseas. Workers going back to school for retraining then could receive unemployment benefits under the Trade Adjustment Assistance Act for an additional year if they are deemed eligible under this program.
• The state Dept of Labor has dispatched what it calls a “rapid response” team to Jabil, offering several training sessions over five weeks on everything from resume writing to how to file for unemployment insurance to what job services are available in the area.
• The federal Workforce Investment Act provides for additional assistance in the case of a plant closure. Workers can receive one-on-one training with a case manager to seek employment, along with expense reimbursement for training, an out-of-the-area job search, or relocation expenses.
“These folks have been hit hard,” said Larry Hertling, dislocated worker coordinator for the state of Idaho, who is working with Jabil employees. “They´re really good people with a lot of skills. I think most will be able to come back into the work force, but this is definitely a setback they need to work through.”
Jobs in Idaho´s high-tech sector are highly valued because they pay more than twice the average salary of non-tech workers: $63,000 versus about $27,000. While Jabil jobs were manufacturing in nature — using lower-paid line workers and assemblers — the average wage at that plant is likely about $43,000, according to a state Dept of Labor wage survey of similar firms. That survey would take into account the $10-an-hour assembly jobs, $19-an-hour mechanics jobs, and $40-an-hour engineering manager jobs.
Jobs, while limited, still are to be found in the area, but workers might need to accept lower salaries.
Sears, Roebuck and Co. continues to hire workers for its large credit card customer service center in West Boise and has had little problem filling those jobs.
“We´ve been hiring 15 to 60 people a month consistently for the last 12 months at least,” said Melissa Hall, a Sears recruiter at the Boise job fair this week.
Jobs at the credit card call center are customer service and collections positions, with pay starting at $9.50 per hour. Hall said out-of-work tech workers are a common sight these days at the center, but that they are often disappointed at the pay level.
“We see some wanting to leave the technology field because it´s so up and down,” said Hall, adding some applicants are obviously looking for a temporary paycheck until the tech industry regains steam.
What’s next?
“We´re focusing on supporting our customers and employees and providing them with information,” Jabil spokeswoman Lisa Allison said. “We will not be making any public comment at this time.”
Allison declined to say whether layoffs had started at the plant. Layoffs are expected to happen on a rolling basis as work is transferred to other facilities.
While a painful situation for Jabil workers, local leaders swing quickly from expressing chagrin to nonchalance to outright optimism when pressed on the broad effects of the Jabil closure.
“I think it´s more a blow to the ego than a blow to the economy,” Church said. “It´s a blow to our idea of being a technology community. But overall? I don´t think I´d be overly concerned.”
The economy is still growing here, although much slower than in recent years, Church said.
Bob Corrie, who was mayor when Jabil first moved to the area and selected Meridian for its plant, bridges concern and optimism in one statement.
“I think we´ll feel the crunch in Meridian, but luckily we don´t have everything riding on one electronics company,” he said. “I hate to see Jabil go, but somebody else will come in. I´m not worried at this point.”
Even Gary Mahn, director of the state Dept of Commerce, conceded that while science and technology firms make up a third of the state´s economy, the layoffs and closures in that segment here still do not compare to that industry´s suffering in Seattle or the Silicon Valley.
But he is careful not to discount the situation.
“This is a really big wake-up call for us in Idaho,” Mahn said. “We thought we were going to ride this horse forever. And if we don´t create environments to make sure high-tech companies can stay here, we´re in trouble.”
Jabil’s relationship with Hewlett-Packard
The link between the Treasure Valley facilities of Jabil Circuit and Hewlett-Packard has weakened over the past two years. While HP still purchases circuit boards for its LaserJet printers from Jabil, those circuit boards are now made in China, not Meridian.
“That shift started a couple of years ago, and about 95 percent of that business moved over the past year,” said Doug Moy, HP LaserJet manufacturing manager, based in Boise.
The Meridian Jabil plant still does prototyping work as HP invents new products, and that work will move to Jabil´s San Jose, Calif., plant, Moy said.
“For cost reasons, we want to make sure we get the most competitive cost out of Jabil,” Moy said. “It was convenient having that plant here in Meridian. But they are a critical supplier for us, and we respect their decision.”
Jabil’s short history in the Treasure Valley
• 1998: Jabil, headquartered in Florida, pays $80 million for Hewlett-Packard´s printed circuit board manufacturing operations and hires 415 employees connected with that enterprise in the Treasure Valley. The company initially is inside HP´s Boise campus, making the circuit boards for HP´s LaserJet printers.
• 2000: Jabil builds and moves into a 170,000-square-foot plant in Meridian, with management saying the plant ultimately could employ up to 2,000 people. The company adds more than 100,000 square feet in late 2000 and boosts employment beyond 700 workers.
• 2001: The company starts reducing its work force as the tech industry begins to slide.
• September 2002: Jabil management announces the Meridian plant will be closed and its remaining 500 workers laid off by the end of the year.
Jabil: Cuts strengthen company
As the electronics company reports lower yearly earnings, it says its job reductions prepare it for growth.
By KRIS HUNDLEY, St. Petersburg Times Sept 20, 2002
ST. PETERSBURG -- After a year spent cutting jobs, closing high-cost locations and diversifying its customer base, executives at Jabil Circuit Inc. of St. Petersburg said the company is better positioned for the future.
"Jabil's risk profile has been reduced," said Tim Main, the company's president and chief executive. "Our opportunities for growth have expanded, and we'll be able to approach the market from a position of strength."
In a release after the close of the market Thursday, the electronics component manufacturer reported that revenues for its fiscal year ended Aug. 31 declined 18 percent to $3.5-billion, compared with $4.3-billion a year ago.
Net income was $34.7-million or 17 cents a share compared with $118.5-million and 59 cents a share a year ago.
For the quarter, the company's revenues were $988-million, up 5 percent from the same period a year ago. It is also the second consecutive quarter of sequential revenue growth, signaling stabilization, the company said.
Earnings for the quarter were $1.8-million or 1 cent a share compared with $11.2-million or 6 cents a year ago. During the fourth quarter, Jabil took a restructuring charge of $27.6-million in connection with the consolidation of operations acquired from Marconi Communications.
Since the beginning of September, Jabil has said it plans to close plants in Texas and Idaho, resulting in the elimination of up to 650 jobs. The company said it expects to take restructuring charges of up to $80-million in fiscal 2003 for reducing its capacity at high-cost production facilities around the world. Beth Walters, Jabil's vice president of investor relations, declined to say whether additional plants will be closed, saying the company has not yet finalized its plans for the coming year.
In the coming year, about 20 percent of Jabil's production will be in the United States, 22 percent in Asia, 23 percent in Mexico and Latin America and 35 percent in Europe, with an increase in concentration in primarily lower-cost, central European locations, Main said.
In 2003, Jabil's three biggest customers will be Cisco Systems Inc., Hewlett-Packard Co. and Royal Philips Electronics NV.
Though the telecom business continues to suffer, Main said Jabil will post $1.04-billion in sales in the first quarter of fiscal 2003 due to growth in consumer electronics, automotive, computing and storage, and medical and instrumentation.
Jabil's shares closed Thursday at $16.67, down 16 cents. |
