Steve Quayle News Alerts

Feb. 11, 2004
By Thomas Content And Joel Dresang

In another blow to Wisconsin's manufacturing base, almost 500 Milwaukee factory workers are expected to be out of work when Tower Automotive moves production of Dodge Ram frames from its north side plant to Mexico by the middle of next year.

It's just one of the most disgusting and frustrating things that we can experience - to see our jobs being shifted out of this country. - Duane McConville, president of Smith Steel Workers DALU 19806

Almost 80,000 factory jobs have already disappeared from Wisconsin during four consecutive years of industrial retrenchment that only recently has begun to let up. During the downturn, companies seized the opportunity to improve profitability by automating factories or moving jobs to lower-cost nations such as Mexico and China.

Tower announced the move Tuesday after DaimlerChrysler AG selected Tower's joint-venture partner, Metalsa S. de R.L. of Monterrey, Mexico, to make Ram frames beginning in mid-2005.

Once the Ram work ends, all that will be left at Tower's sprawling near-north-side factory will be an assembly line making frames for Ford Ranger trucks. Tower was going to move that business to Ohio this year, but changed its plans. The Ford Ranger line employs about 90 people now, but has employed as many as 250.

Tower spokesman Paul Omodt said he hoped that some of the 500 workers on the Ram line would be able to transfer over to the Ranger line. But the Ranger line is much smaller, with only one production crew, said Duane McConville, president of the Smith Steel Workers DALU 19806, the largest of seven unions at the Milwaukee plant.

"It's just one of the most disgusting and frustrating things that we can experience - to see our jobs being shifted out of this country. It's going to be devastating to the union and its membership."

DaimlerChrysler solicited new bids on the production of Ram frames from Tower and other suppliers, including Metalsa, last year. Metalsa and Tower are joint-venture partners, and Tower has a 40% ownership stake in the Mexican company.

"Like all vehicle manufacturers, we always evaluate on an ongoing basis the cost structure of every program," DaimlerChrysler spokesman David Barnas said.

Workers in Tower's largest union earn more than $18 an hour, although their wages have been frozen at that level for years. And under a contract ratified in October, Tower's local unions agreed to forgo any wage increases, cost-of-living adjustments and incentive pay until 2009.

That same month, however, Tower informed its unions that Metalsa had been awarded a prototype contract for the Dodge Ram work, a signal that Tuesday's announcement was coming.

"Even though the company said they submitted bids to perform the work here after we negotiated and settled our contract, apparently that wasn't enough," McConville said. "We hoped for the best and, unfortunately, we have heard the worst."

The seven Milwaukee Tower unions are evaluating their legal options to determine whether they can challenge the decision to move the assembly line to Mexico, McConville said.
A difficult time ahead

With unemployment already high among factory workers in Wisconsin and the Milwaukee area, the Tower workers face a tough hiring market.

"It's going to be difficult, particularly in a period in which we continue to see a loss of manufacturing jobs in Milwaukee. 2003 was not kind, and it appears 2004 will be more of the same," said Sammis White, director of the Center for Workforce Development at the University of Wisconsin-Milwaukee.

Since a recent peak of nearly 171,000 manufacturing jobs in 1997, the metro Milwaukee area has dropped 35,000, or more than 20%, based on data from the U.S. Department of Labor Statistics.

Besides so many workers getting pushed out of manufacturing, the only industry sectors to show employment gains in the area last year were financial activities, education and health services, and leisure and hospitality.

"It's pretty grim," White said.

"The community is bleeding," said Michael Rosen, a labor economist who teaches at Milwaukee Area Technical College. "Unfortunately, the 500 workers can expect to see a dramatic decline in their living standards."

Most jobs that would be available to the Tower workers would pay a fraction of the wages they've earned, Rosen said, and wouldn't include comparable benefits. The Tower workers probably would qualify for extended unemployment insurance and re-employment training through federal labor relief programs, but even those benefits are limited by the economy, Rosen said.

"Most people who worked at places like Tower don't have the skill sets that easily translate into computer information systems or the medical field," Rosen said.

In a doctoral dissertation he finished nearly six years ago, Rosen presaged the demise of the old A.O. Smith automotive division. He contended that a corporate strategy to avoid the Milwaukee union and move work closer to regional assembly plants would override union efforts to cooperate with management to save Milwaukee jobs.

"The writing has been on the wall for several years," Rosen said.
Pressure on profits

Tower remains an important supplier to DaimlerChrysler, with various Tower factories supplying frames or other components for 2005 model Jeep Grand Cherokee, Dodge Dakota and DaimlerChrysler's minivans.

But none of that work is being done in Milwaukee. The Milwaukee factory had invested heavily in the Dodge Ram a few years ago, installing robotics and a special hydroforming manufacturing cell that uses water pressure to bend steel rather than the traditional cutting of steel done on the Ford Ranger line.

David Leiker, an analyst with Robert W. Baird & Co., estimates that the Ram line generated $175 million to $200 million in annual revenue for Tower, or about 6% to 7% of Tower's $2.8 billion in sales in the 12 months that ended Sept. 30. Novi, Mich.-based Tower will announce fourth quarter and 2003 results on Thursday.

"This decision reflects the need for suppliers like Tower Automotive to have a presence in global markets," said Kathleen Ligocki, who became president and chief executive of Tower last year.

Tower hired Ligocki from Ford Motor Co. last year to help improve profitability in the face of significant launch costs associated with new business with DaimlerChrysler, Ford, Nissan and other automakers.

The Milwaukee-to-Mexico move fits into a strategy to improve profitability, as measured by return on invested capital, Leiker said in a research note Tuesday.

"We believe, while difficult in the near term, decisions to move or exit businesses that cannot generate an adequate return will improve the company's profitability in the long run," Leiker wrote.

http://www.jsonline.com/bym/news/feb04/206417.asp