Federal-Mogul Closing St. Johns Plant

Federal-Mogul Corp. (USA; OTC BB: FDMLQ; operating under Chapter 11 bankruptcy protection since October 2001) announced it will be closing its St. Johns, Michigan engine bearing plant. The closing is part of a new, three-year, global manufacturing restructuring plan announced earlier this year. The plan will result in approximately 4,500 jobs lost and 25 plants closed. The first layoffs at St. Johns are due to come in July of this year, while the plant will be phased down and largely closed by the end of 2006. Apparently to meet the letter of its obligations, F-M said it will then keep a skeleton staff on until October 2008, when the current UAW contract expires. Built in 1945, St. Johns produces engine and transmission bearings, bushings and washers, primarily for the North American auto industry. Saddled with excess plain bearing manufacturing capacity, F-M said St. Johns' work will be split among plants in Greenville, Michigan; Blacksburg, Virginia; Puebla, Mexico; and Shanghai, China. By the end of 2006, approximately 300 of St. Johns' 420 workers will be laid off. Another 100 will be let go by the end of 2007, and the final crew will be out no later than October 2008. Reports indicate as many as 100 workers may be given the option to transfer to Greenville. Many workers at the plant said they knew long ago it was closing, despite several efforts since 2004 by state and local officials to give Federal-Mogul tax breaks and a cornucopia of other incentives to keep St. Johns open and critical auto industry jobs in Michigan. St. Johns has reportedly been building to inventory for some time, fueling expectations there would be a closing announcement coming soon. One worker told eBearing, "Everyone knows you don't build to inventory these days unless you're expecting a strike, a lockout or a shutdown." In 2004, F-M wrested a long series of abatements and concessions by threatening to close St. Johns. Among them are a six-year tax abatement from St. Johns, based on a promised F-M investment of at least $5 million in new equipment, worth $225,000 the first year. The state of Michigan set up a package of more then $65 million in tax benefits to keep F-M jobs in the state. Three of the tax cuts were Public Act 79, Public Act 80, and Public Act 81. Seeking that government aid and union concessions in 2004, F-M said sales of products produced at St. Johns dropped by $20 million between 2000 and 2003, even as direct labor costs and overhead increased. In August 2004, F-M said St. Johns earned just $66,000 on sales of over $6 million. Cost controls are needed, said Federal-Mogul, to offset the higher costs of raw materials and yearly price reductions demanded by its automotive OEM contracts. The United Auto Workers hammered out an agreement with F-M for a wage and benefits concession package worth $9 million over the course of the contract through November 2008. Despite the programs and concessions, in early 2005, Federal-Mogul began moving some production from St. Johns to Puebla. A spokesman for the Michigan Economic Development Corporation said F-M stands to lose the tax advantages and credits, and the state will be reviewing the programs involved. In a statement, Federal-Mogul said, "The action today is a result of the difficult business challenges and the need to improve global competitiveness. This is in no way a reflection on the commitment of the St. Johns employees."