The layoff of 45 plant workers at GSW in Fergus is part of a major, worldwide economic slowdown, but the company is hoping the job loss is only temporary.
Mark Petrarca, senior vice president of human resources for A.O. Smith Corporation, of Wisconsin, which owns GSW, said in an interview on Dec. 19 the move came about because of reduced orders for the company’s primary product, water heaters.
“The housing market in general has been slow,” said Petrarca.
Actually, the American market has been devastated with the fallout from the below-prime mortgage collapse. With fewer houses being built, the demand for water heaters was also collapsing.
Petrarca said “The replacement market was keeping us going.” He added that, too, slowed down as recession hit the United States.
But Petrarca said, “It is our hope that the orders will pick up again very shortly, and we’ll bring these folks back to work.”
Smith Corporation had given some warning that there was some stress in its operations. On Dec. 10, it announced on its website that it expected its fourth quarter results would be weaker than expected due to sluggish demand in both its water heater and electric motor businesses.
As a result, an earlier 2008 forecast of $2.80 to $2.90 per share would likely not be achieved.
The company then cited a decline in global construction and consumer spending, intensified by inventory reductions by the company’s customers, resulting in a significant drop in order volumes during the fourth quarter. The company responded with a decision to slow its inventory throughout the quarter and curtail production.
In a press release on Dec. 10, chairman and chief executive officer, Paul Jones said, “The speed with which the market downturn confronted us is unprecedented. However, with current orders less than historical replacement demand levels, we expect inventories will likely be replenished in early 2009.”
Petrarca said he, too, expects demand to pick up again, and soon. He noted that some people might have been putting off the purchase of a new water heater for a while, but, “People aren’t going to be taking too many cold showers. The replacement market has been strong.”
He believes with the economic incentives that are coming in the United States, demand will soon return. He said the company’s customers have simply cut back on their inventory for now, and, “We’ll have to watch that closely.”
Smith Corporation is “a global leader applying innovative technology and energy-efficient solutions to products marketed worldwide,” and has a work force of over 18,000. Petrarca said there were close to 480 workers at the Fergus plant before the 45 layoffs occurred.
He noted the company has a major share of the American and Canadian market when it comes to water heaters, and it also has a big market share in China. He said the company expects to soon return to prosperity.
“We’ve got employees [in Fergus] who can do the jobs. If we bring them back, that means things are picking up.
“They [the employees] are good.”
