Job gains, job losses, hail, wind and fire were the big stories in 2008

story by Michael Tilley

At The City Wire, we’d like to think one of the top stories of 2008 was the Nov. 3 launch of The City Wire. But that would be historically presumptuous, if not mildly arrogant.

Certainly, the economy, both the good and the bad, has to be the top story of the year for people in the Fort Smith region. Storm damage, housing market declines, leadership changes, corporate happenings and high gas prices also were important regional stories in 2008.

The following are top regional stories of 2008, according to The City Wire.

It’s the economy, dangit!
The economy is a factor in any year, but in 2008, it became the story in the Fort Smith region.

The year started with good news on the job development front when Whirlpool Corp. announced it would move 275 jobs from its various plants in the U.S. to its Fort Smith plant.

Three projects were announced in Fort Smith in one July day.

• Pradco, a major manufacturer of fishing lures, said it would invest $21 million in a new 300,000-square-foot plant at Fort Chaffee. Pradco occupies three buildings in Fort Smith and employs 150 people.

• QualServ, a manufacturer of cabinetry for restaurants and retail outlets, announced plans to move its corporate headquarters to Fort Smith from Kansas City, Mo.  The move of the company headquarters will result in 40 new corporate jobs, and 75 new manufacturing jobs will also be added in Fort Smith.

• Umarex USA, the fourth largest airgun manufacturer in the world, will expand its operations in Fort Smith by moving its manufacturing facility to Fort Chaffee. Umarex employs 22 people in Fort Smith, but planned to increase its workforce by 60 to 120 within the next three years.

Gov. Mike Beebe was busy attending new job announcements for much of the year, including the news that Hewlett-Packard had selected Conway in which to expand its operations. H-P, one of the world’s leading information technology companies, agreed to operate in Conway a new $28 million customer service and technical support center that will employ up to 1,200 workers with an estimated annual payroll of $50 million. Based on state incentive data, average starting salaries will likely be in the low-$40,000 range, but some sales jobs could pay six-figure incomes.

Projects estimated to create more than 6,000 jobs were announced by Beebe and the Arkansas Economic Development Commission in the first 10 months of 2008.

But the wheels began to come off in the last fiscal quarter of 2008.

While the Fort Smith region has been fortunate to land several new manufacturing operations in 2008, the recent flurry of plant closings and layoffs ended the year on a off note.

Jarden Plastics Solutions announced in early December it would close its Fort Smith plant in January, eliminating 93 jobs. The Greenville, S.C.-based company cited “declining demand” from its largest customer — Whirlpool Corp. — as a reason for the closing. The plant opened in Fort Smith in 1976.

Whirlpool has reduced employment at its Fort Smith plant from about 4,500 in early 2006 to between 1,500-1,000 today.

Other late 2008 job cuts include:
• 250 jobs cut by Riverside Furniture announced 250 job cuts by mid-January. Most of those cuts are at the company’s Fort Smith operations.

• The employment count at Rheem has dropped from about 1,500 to about 800.

• Trane announced Dec. 3 a layoff of 100 employees at its Fort Smith plant. Jerianne Thomas, vice president of communications for Trane, said the layoffs are effective Jan. 5, and are related to effects of the recession.

• The Times Record, a Fort Smith newspaper owned by Las Vegas-based Stephens Media, has cut between 25-30 jobs and/or positions in the past six months.

• Fort Smith-based Arkansas Best Corp. has laid off between 25-50 at its corporate headquarters.

• Riverbend Industries, a supplier to Whirlpool, has seen its temporary employment count drop from 120 to about 60. The company employs about 120 full-time workers.

• Westlake Chemical company confirmed Dec. 2 the closing of its Van Buren pipe plant — North American Pipe — sometime in January, resulting in 64 lost jobs.

It’s the economy, Part II: a caveat
Sales tax collections in the Fort Smith region (Crawford, Franklin, Logan and Sebastian counties) indicate that consumer spending remained strong in the January-September 2008 period.

The only decline in the top 10 largest cities (ranked by sales tax collections) and the four counties came from Van Buren, and that was because the city’s sales tax rate dropped by 1 percent in April 2008.

Logan County posted the biggest gain (40 percent) in sales tax collections between January and September. Alma and Barling posted the biggest year-to-date sales tax collections with 20 percent and 27.2 percent respectively.

Sales tax collections on October transactions in Fort Smith were $1.68 million, up an impressive 11.18% over the same period in 2007.

(Sales taxes are remitted by the state on a two-month cycle. For example, sales taxes paid in October are collected by the state in November and returned to counties and municipalities in December.)

Year-to-date, the city of Fort Smith has collected $18.96 million on its 1-cent street tax program and the same amount for the 1-cent tax to pay the 2001/2006 series bonds.

Fort Smith’s portion of the sales tax collections on October transactions in Sebastian County totaled $1.35 million, up 11.33% from the same period in 2007.

“For the eleven months ended November 30, 2008, the actual revenue in 2008 compared to actual for 2007 increased 9.19% and compared to the 2008 budget projections has increased 6.44%,” noted a memo from Kara Bushkuhl, Fort Smith’s director of finance.

Easter fire in Booneville
More than 800 jobs were lost in Booneville when a March 2008 fire consumed most of the 150,000-square-foot meat processing facility. Cargill officials said in May they would not rebuild the plant, citing that it would take too long — 15 to 22 months — to get a new plant up and running. That time, according to Cargill officials, would allow competitors to capture customers.

An analysis by the University of Arkansas Center for Business and Economic Research in Fayetteville estimated the payroll loss at $18.3 million, with the loss of 800 jobs having a potential multiplier affect of 1,806 jobs lost in Logan County.

Cargill has purchased a Carneco Foods plant in Columbus, Neb., to house the operations once conducted in Booneville, according to a Dec. 14 report in the Columbus Telegram.

Despite what Cargill officials told the people of Booneville when explaining why they would not rebuild in Booneville, a Cargill official is quoted in the Columbus Telegram as saying the company had planned to build a new plant in Texas.

The economic impact of storm damage
Mother Nature hit the Fort Smith/Van Buren area hard with a hail storm in April and damaging winds in June.

While the hail and wind storms did extensive damage to homes, commercial structures and vehicles, there were no reported fatalities. Which makes it easy to note that the repair work resulting from the storms have helped boost the regional building sector. (Photo at left: Worker repair roof damage at Immaculate Conception property.)

“It’s been great for the industry,” Dave Hughes, executive director of the Greater Fort Smith Association of Home Builders, said of the repair work. “Our (building) supply (members) have really benefited from it.”

According to permit figures from the city of Fort Smith, there were more than $32 million in just residential repair permits issued in 2008. There were also significant commercial repair projects resulting from the storms, including $660,000 for roof repair at Kimmons Junior High School and $987,000 for roof repair work at First United Methodist Church.

Leadership Changes
A simmering feud between Fort Smith police officials, City Administrator Randy Reed and members of the city board culminated in the resignation of Reed, and two city directors — although one director would rescind his own resignation.

In mid-February Reed placed Fort Smith Police Chief Kevin Lindsey on administrative leave with the recommendation to the board the Lindsey be fired. But before the board vote, Reed resigned. City Director Cole Goodman resigned, but decided later to return to the board. City Director Velvet Medlock, who, along with her husband and former assistant police chief Jeff Barrows, was at the center of the controversy, also resigned.

Deputy City Administrators Ray Gosack and Dean Kruitfhof managed city affairs beginning in February with Reed’s resignation. However, Kruithof was selected in May as the new Branson, Mo., city administrator. He began that job in late June.

In August, the city board hired Dennis Kelly (left) as the new city administrator. Kelly, who has extensive military and city government experience, began the job in late October.

On the economic development front, Michelle Stockman, the popular and first director of the Innovation and Entrepreneurship Center-Fort Smith, resigned in November to accept a entrepreneurship development job with Little Rock-based Arkansas Capital Corporation. Paul Beran, chancellor of the University of Arkansas at Fort Smith, launched a search for a new director, saying the IEC serves an important function for the area.

Tom Manskey, president of the Fort Smith Regional Chamber of Commerce, announced Dec. 18 his resignation effective Jan. 30, 2009.

Housing market decline
Although not hit as hard as some areas in the state or nation, home sales in the Fort Smith region did slow in 2008

Regional real estate sales for the first 11 months of the year show a 12% decline in the number of homes sold in Sebastian County and a 19.8% decline in Crawford County, according to a report released Dec. 30 by the Arkansas Realtors Association.

Kevin King, owner and principal broker of King Realty Group, said the Fort Smith regional numbers reflect a supply and demand issue in the various price ranges of homes. He said homes that sell for $150,000 and less are “moving well” because that price range “is a well-balanced market in terms of supply and demand.” (Photo at right: Workers put the finishing brick touches on a home in a new moderately-priced subdivision at Chaffee Crossing.) Homes priced between $150,000-$250,000 sell at a slower pace.

The real problem is with excess supply versus demand for homes priced above $250,000, King said.

“Those folks that can buy those ($250,000-plus) homes, we’ve got a lot more of those people leaving the market than are entering,” King said. “We’re losing those executives that buy in that (price) range.”

According to the Arkansas Realtors Association, 23,400 homes were sold January-November, down 18.96% from the same period of 2007. The value of those homes in that period totaled $3.48 billion, down 20.34% from the 2007 period.

Corporate Happenings
The first nine months of business was tough but survivable for Fort Smith-based ABF Freight System, a nationwide less-than-truckload carrier. Net income for the nine months was $40.14 million, down slightly from the $43.36 million for the same period in 2007.

“In the first half of the year, ABF’s freight tonnage seemed to stabilize compared to 2007,” Bob Davidson, president and CEO of Arkansas Best Corp., said in an earnings statement. “However, during this year’s third quarter, tonnage levels decelerated for each month of the quarter as the freight environment weakened further.”

It was a similar picture of relative stability at Van Buren-based USA Truck Inc. The truckload carrier’s net income for the first nine months of 2008 was $2.5 million, up 48 percent from the same period in 2007. The once struggling company has cut expenses and diversified its business model with more brokerage work to stay profitable during the recession. The company received a pat on the back in early November from TheStreet.com for being a well-managed “tough small cap” stock.

“Freight availability declined throughout the quarter from its highs in June. Although lower diesel fuel prices certainly helped our third quarter earnings, the diesel price decrease prevented some weak carriers from failing or encouraged them to bring on capacity that had been idled, both of which contributed to more competition for less
freight,” according to USA Truck President and CEO Clifton Beckham.

Arkansas’ trucking companies shouldn’t expect easier conditions in 2009. A JPMorgan analyst recently lowered 2009 trucking sector estimates, citing growing weakness among companies already battered by a sour economy.

The normally recession-proof Fort Smith-based Baldor Electric Co. was forced to reduce its workforce.

During a Dec. 15 presentation to stock market analysts, Baldor officials said they face “a much tougher environment” with a “single digit decline in recent incoming orders.” To keep costs in check, the company is reducing its workforce by 475 jobs by December 2008 and 425 by June 2009. With other cuts in “discretionary spending,” Baldor officials estimate total cost savings during fiscal year 2009 of about $80 million.

John McFarland, chairman and CEO, said Baldor is not laying off workers, and that the reductions will come from normal attrition.

“Since July 1, as people retire or quit, we don’t replace them,” he explained. “We haven’t had a layoff in Fort Smith since 1961. … And we don’t expect to have a layoff through this recession either. We just don’t have layoffs.”

The company, which manufactures electric motors, drives, generators and power transmission products, expects to save $30 million from the workforce reduction and another $30 million from a reduction in overtime pay.

“With 8,300 employees around the world, we have a fair amount of people leaving” so it’s not hard to reduce the employment count by 900 in one year, McFarland said.

Baldor employed 8,300 as of June 2008, in 28 plants in five countries.

The company also is struggling with rising material costs, paying $100 million more in 2008 for about the same amount of raw materials it purchased in 2007. However, a 15 percent decline in sales — a “worst-case scenario” according to McFarland — would improve cash flow by $105 million, according to company figures.

“In my career at Baldor, this is the most difficult time to forecast what might happen in the coming year,” said McFarland, who started at Baldor in January 1970. “So I’ve been through a few of these (recessions), and (Baldor) came out of every single one of them stronger than when we went in.”

The Summer of high gas
In one tumultuous summer, the price of a barrel of oil hit a $147-per-barrel high (July) with gas prices at the pump hitting highs in Arkansas of $4 a gallon. But by September, the per barrel price of oil was racing to $60, and eventually fell below $40 a gallon in late December on concerns the global economy would reduce demand for world energy consumption.

The price drop at the pump proved to be a welcome stimulus for consumers, especially as the national economy fell into recession and an estimated 2 million Americans lost their jobs in 2008.

Little Rock-based Delta Trust & Bank CEO French Hill explained that the decline of gas prices since July equals a more than $200 billion economic stimulus for consumers. He estimates that for each $1 price drop at the gas pump, Americans save $125 billion.