Paper goods giant Kimberly-Clark Corp. announced plans Thursday (Dec. 13) to shutter its Conway factory that employs nearly 350 workers as part of a companywide restructuring that will close or sell at least 10 manufacturing facilities globally, and force thousands of workers into unemployment.
According to a statement released by Kimberly-Clark through the Conway Development Corp., the global paper goods conglomerate came to an agreement with the Wisconsin Economic Development Corp. (WEDC) that will enable the company’s sister manufacturing facility in Wisconsin to remain open while the Conway factory will close no later than 2021.
That decision comes nearly five months after Kimberly-Clark surprised Arkansas economic development leaders and local officials in Faulkner County when the company revealed the Conway facility had a “50-50” shot of being closed. Kimberly-Clark’s Conway plant has been in central Arkansas for nearly 50 years and produces feminine hygiene products.
“This difficult decision was made after the company agreed to the terms of an incentive agreement through the Wisconsin Economic Development Corporation that will enable the company’s Cold Spring facility in Wisconsin to remain open,” company officials said in a statement. “We do not take these decisions lightly, and our primary focus at this time is our employees.
“Accomplishing the objectives of our global restructuring program is challenging, and requires us to make tough business choices. Kimberly-Clark and all our operations here, which includes a manufacturing facility in Maumelle and an office in Bentonville, remain committed to the state of Arkansas.”
Arkansas Gov. Asa Hutchinson said the state had worked to keep the company’s doors open in Conway, but felt Wisconsin offered too much to win the battle between the two plants.
“We have all worked very aggressively to retain the Kimberly-Clark Conway facility jobs. I am disappointed for the Conway workers and families that the company made the decision to close the Conway facility. It appears the historic ties of the company with Wisconsin along with union wage cuts and cash incentives from the state tilted the balance in favor of Wisconsin,” he said.
“The central Arkansas labor market has thousands of job openings and I am directing my Department of Workforce Services to provide maximum assistance to Kimberly-Clark employees in any needed training or job location assistance,” Hutchinson added.
Wisconsin is home to a Kimberly-Clark manufacturing plant that makes similar products to Conway’s. It was notified in January it could be closed, and since then Wisconsin leaders have worked on an economic incentive package that potentially includes $101 million to $117 million in wage incentives, state payments for 15% of factory upgrades, and sales tax waivers on equipment upgrades. The Wisconsin plant employs 600 workers.
Earlier in January, Kimberly-Clark first announced a global companywide restructuring initiative that is ultimately expected to generate annual cost savings of $500 to $550 million by the end of 2021, accelerate the company’s return to profitability by streamlining and simplify its manufacturing supply chain and overhead.
“Although we expect market conditions will remain challenging in the near-term, we plan to deliver better results in 2018 while we begin to implement our new restructuring,” Kimberly-Clark Chairman and CEO Thomas Falk said earlier this year. “We expect organic sales to return to growth while improving our margins and delivering double-digit growth in adjusted earnings per share.
“In addition, we will increase investments in our brands, our growth initiatives and the capabilities we need for long-term success. We will also continue to allocate capital in shareholder-friendly ways,” Falk said.
In the third quarter, the Dallas-based consumer goods company reported net income of $62 million on sales of nearly $4.6 billion. In 2017, Kimberly-Clark reported total profits of $3.3 billion on sales of $18.3 billion.
Kimberly-Clark is only three years removed from an earlier job reduction program in 2016 that eliminated thousands of positions worldwide and cut the company’s global workforce by 2%. At the time, when the paper goods giant’s employee count topped 58,000, company officials did not address speculation that dozens of Arkansas production workers were laid off, but noted those job cuts largely impacted salaried hires.
According to Kimberly-Clark officials, the international paper goods giant and its well-known global brands are sold in more than 175 countries. With brands such as Kleenex, Scott, Huggies, Pull-Ups, Kotex and Depend, Kimberly-Clark holds No. 1 or No. 2 market share positions in some 80 countries.
Company officials said the $2 billion global restructuring program will generate annual pre-tax cost savings of $500 million to $550 million through 2021. Those cost savings will be largely driven by job cuts, officials said, which are anticipated to be in a range of 5,000 to 5,500, or 12% to 13% of the company’s employee count of 43,000 in 35 countries.
Other savings will come from manufacturing supply chain efficiencies. The company expects to close or sell 10 manufacturing facilities and expand production capacity at several others to improve overall scale and cost, officials said. As part of the program, Kimberly-Clark expects to exit or divest some low-margin businesses that generate approximately 1% of company net sales concentrated in the consumer tissue business segment.
RECENT MOVES IN ARKANSAS
In the past decade, the company’s plants in Conway and Maumelle have invested millions of dollars to add new jobs and make those facilities more cost-effective and efficient. In July 2010, Kimberly-Clark and the Conway Development Corp. announced the company had planned a three-year investment from $25 million to $65 million at the company’s Conway plant. The expansion project added capacity for products that were not formerly produced by Kimberly-Clark in the U.S.
According to local officials, that expansion project added 100 new jobs at the company’s longtime facility in Conway that at one time employed up to 400 workers. Employees at that location on Exchange Avenue produce a variety of feminine, personal hygiene and adult care products.
Down the road at Kimberly-Clark’s newer manufacturing facility in Maumelle, the company announced a similar $68 expansion of its baby-wipes facility in 2015, bringing that plant’s workforce to nearly 500 workers. That expansion project was largely funded by two locally-approved bond issues that Kimberly-Clark was supposed to pay off later at a low interest rate. According to city officials, that incentive package was expected to add 45 new full-time jobs over a three-year period and expand the company’s sprawling 400,000 square-foot facility by another 40,000 square feet.
Earlier this week, Kimberly-Clark announced a voluntary product recall of its Kotex brand feminine products sold throughout the U.S. and Canada for a quality-related defect that could impact the performance of the product.