story by Aric Mitchell
Editor’s note: The following story is an overall wrap up on Fort Smith metro economic conditions in 2012 and outlook for 2013.
Umarex and Walther Arms, Inc., recently announced they would share a campus in Fort Smith, housing both the expansion of Umarex operations and North American headquarters for Walther, makers of the iconic James Bond pistol.
Arkansas Gov. Mike Beebe was onsite for the Nov. 29, 2012, announcement. In a conversation prior to the event, Beebe commented to Fort Smith Regional Chamber of Commerce President Paul Harvel on the “resilience” of the community.
“I made the comment about the resilience of this community and the whole Fort Smith metro region,” Beebe said. “And Paul was talking about the fact that most of the people who recently got laid off from Whirlpool have been absorbed and found jobs in other manufacturing facilities and how so many of the companies in this region work together to try and help each other, which is an amazing, amazing statistic to talk about because there are so many communities where that doesn't happen. This place knows how to continue to fight and keep their chins up.”
Fort Smith’s recent struggles began in 2006 when Whirlpool, its biggest employer, commenced layoffs. The layoffs continued into 2007, expanding in September 2008 when the manufacturer cut 700 employees. This event marked the beginning of the end. In a six-year span from 2006 to 2012, the company shed some 4,500 jobs and closed the Fort Smith facility, moving operations to Mexico.
As the national economy moved closer to and then entered Recession, Fort Smith unemployment climbed from 4.9% in 2006 to a high of 9.4% in January 2011.
Along the way there were other disappointments. Among them, employment declines at Rheem and Trane, two of the city’s other major manufacturing hubs, and an increase in actual unemployed from 6,227 in January 2006 to 12,643 in January 2011.
Meanwhile, population growth was stubborn from 1990 to 2011 moving from 72,798 to 87,152 (16.5%), respectively. Compare that to Fort Smith’s neighbor-to-the-northwest Fayetteville, which exploded from 43,013 to 75,102 (42.7%) during the same time period.
Amid these disappointments Fort Smith had hope in Mitsubishi.
On Oct. 16, 2009, the international conglomerate announced plans to build a $100 million, 200,000-square foot wind-turbine manufacturing plant on 90 acres at the city’s Chaffee Crossing development, eventually finishing construction.
The plant could employ up to 400 once fully operational, and Mitsubishi officials indicated full production and the 400 jobs could be in place within the first quarter of 2012.
Instead in April 2012, Mitsubishi—faced with a stagnant outlook for wind turbines in North America and an ongoing legal battle with General Electric related to patent claims on wind-turbine equipment—made the decision to “mothball” the plant.
Adding to Fort Smith’s struggles is the threat of sequestration that could jeopardize the 188th Fighter Wing mission of 20 A-10 Thunderbolt fighter planes and result in the loss of 245 full-time jobs, cutting deeply into the estimated 700 part-time personnel positions as well. (That threat was realized when a Jan. 18 visit to the 188th by Chief of Staff of the Air Force General Mark Welsh III. The general said the A-10s at Fort Smith are slated for removal.)
While Democrats and Republicans have indicated a desire to avoid sequestration, the so-called “fiscal cliff,” the Air Force indicated in November that Michigan and Indiana would keep their A-10 aircraft and Fort Smith would move to an unmanned Predator drone. Drones and intelligence specialists needed to analyze drone-driven data would not be based in Fort Smith.
But as Beebe said to Harvel, setbacks for Fort Smith have done more to prove the city’s resilience than cause it to give up.
With healthcare services expected to increase through full implementation of the Patient Protection and Affordable Care Act in 2014, Fort Smith’s healthcare industry, which is bolstered by Mercy Fort Smith and Sparks Regional Medical Center hospitals, is poised for growth.
Tourism is also a target as the planned Fort Smith Marshals Museum undergoes fundraising efforts and the city beefs up infrastructure along the riverfront in its historic downtown district—birthplace to the Charles Portis western novel True Grit.
And manufacturing may be down, but it’s not out.
Harvel pointed to “the $110 million investment that Gerber has done” as a “huge capital expansion” for the city. Likewise, Kraft Foods and Planters Peanuts, 35-year partners with the community, have sunk millions into expanding their existing facility during the last year.
The deep commitment these and other companies have made to what Beebe calls “an excellent workforce” in Fort Smith have highlighted the need for the city’s manufacturing sector to evolve rather than leave.
“Training will be critical, and it won’t be like training used to be. The sophistication changes so much. I go to some plants where no one touches anything. The employees are educated back into an area, where they make more money, and there is more sophistication, in what they do,” Harvel said.
There to aid the city in redefining its manufacturing base is the University of Arkansas at Fort Smith (UAFS), which has “only been giving four-year degrees out for four years,” Harvel said, adding that UAFS is “the only university in the nation right now that has robotics training.”
As for Umarex and Walther, ground broke on the new campus in 2008. At that time, the site employed 22. Once the companies add planned positions associated with the expansion, the staff will grow to around 190, an increase of 700% in less than 10 years.
(As of 2012, staff has more than tripled.)
And that 9.4% unemployment high since January 2011, it has recovered to 7.9%.
To seek more positive momentum, Harvel, who joined the Fort Smith chamber in April 2009, helped organize a regional CEO council to replicate improvements made by Fifty for the Future in Little Rock and the Northwest Arkansas Council.
“These people are all private. And for them to say, ‘I’m going to spend some time doing this,’ is a major statement,” Harvel said. “It’s one thing for the head of the Chamber to call up and say something to the Governor or a Congressman. But it's another thing when the CEO of a company that employs 13,000 people calls. Then, you've got them engaged.”
Sam Sicard, president and CEO for First National Bank of Fort Smith and chairman of the council, said major goals of the group will include developing partnerships with other CEO groups, strengthening the educational opportunities for the Fort Smith regional workforce and creating an environment for economic development, more specifically the deepening of the McClellan-Kerr Arkansas River Navigation System (MKARNS) to 12 feet.
“It is extremely important to the companies in this city that we have a 12-foot channel on the (Arkansas) River,” Harvel added. “The Fort Smith region has so many companies that ship to Houston, that won't bring it all the way up here because it's not 12-foot certified. But I know of companies right now that I feel would do major expansion. … I don't think it’s a 10-year deal (before 12-foot certification is achieved).”
One of those people is Melissa Hanesworth, managing director at Pernod Ricard (formerly Hiram Walker) and a CEO council member. Pernod Ricard is a spirits bottler and distributor in Fort Smith.
Hanesworth said the difference between the present depth and a 12-foot channel was “about 47% of additional payload” and that transit time and costs would be cheaper with a deepened channel.
“The estimated river transit time is seven days from New Orleans to Fort Smith. As a comparative it takes me 14 days just to get movement from Indiana to Fort Smith by rail. … So it can potentially have a very large effect.”
Hanesworth commended workforce and operations in the area, but said that freight was “very expensive coming out of Fort Smith,” adding that the 12-foot channel would be “a huge benefit for us.”
Marty Shell, owner of Five Rivers Distribution and operator of port facilities in Fort Smith and Van Buren, agrees. “We have a liquid highway. Interstates 40 and 49 will all converge from the east, west, north and south. We have three Class 1 railroads. We have a lot of assets already coming through. When you can offer all these running lanes, this brings economic development to the area.”