Manufacturing companies remain reluctant to hire too many workers too soon

Source: Reuters

Jun 16, 2010

U.S. payroll numbers may be starting to improve, but leaders from a cross-section of manufacturing and transportation companies said they remain reluctant to hire too many workers too soon.

Leaner and meaner operations, and persistent skittishness over global economic woes are factors combating signs of increased demand and optimism for 2011. And even as they acknowledged that an improved employment base is necessary to drive further economic growth, the group of business leaders said this week that any hiring moves they make will be gradual.

"The key to ultimate recovery is job creations here and abroad," Christopher Kearney, chairman and chief executive officer of tool and equipment maker SPX Corp (SPW.N), said at the Reuters Manufacturing and Transportation Summit in Chicago.

He cautioned, however: "We have to see some signs of sustained recovery and sustained demand in some of our key markets going forward."

SPX, which makes products ranging from fluid-handling equipment used in oil and gas production to tools used by car mechanics, cut 15% of its workforce or about 2,500 workers last year, including more than 1,200 in the United States.

Kearney said while he was "enlightened and encouraged" about favorable market dynamics, including expansion at a power facility in Wisconsin, he intended to be cautious about hiring moves.

Similarly, the top executive of Terex Corp (TEX.N), a Westport, Connecticut-based maker of construction, quarrying and shipping machinery, said he was reluctant to hire back workers after laying off 8,000 employees or about a third of its workforce.

"I have nothing against adding workers," said Terex Chairman and CEO Ron DeFeo. "I just want to make sure we don't add them in anticipation, we add them as a result of real pressure to increase production."

Navistar International (NAV.N) CEO Daniel Ustian said that his truck-making company and many others were well-positioned to handle growing demand without adding significantly to the employment ranks.

He echoed other executives in saying the economic downturn forced companies to make cutbacks and do more with less manpower, creating efficiencies that otherwise might not have been developed for many more years.

Navistar announced on Tuesday a five-year deal with J.B. Hunt Transport Services for delivery of more than 5,000 trucks through 2014 at a value of roughly $100,000 a truck.

Yet the company is unlikely to need many new workers as it adds that and other deals, Ustian said.

"Companies have found a way to be more efficient. As the economy comes back, those jobs won't come back at the same pace," Ustian said.

Manufacturing generates less than 12% of U.S. economic output and accounts for less than 9% of the jobs in the country. Yet it accounted for more than 26% of the 8.4 million layoffs in the downturn, according to the U.S. Department of Labor.

There are solid signs that those jobs are starting to come back. Last month, manufacturing payrolls saw their largest gain since 1998 as employers overall added 290,000 jobs, according to the Labor Department.

Still, the unemployment rate rose to 9.9% as discouraged workers started to look for work again.

Johnson Controls Inc (JCI.N) Chairman and CEO Steve Roell said the automotive battery maker would be adding positions back after trimming 15,000 jobs as production dropped in half during the downturn. But he said the pace of hiring will depend on a pickup in production, which still is lagging.

"It will be a gradual recovery," Roell said.

Caution was the watchword across sectors, as company leaders eyed acquisition targets, expansion opportunities and uncertainty about economic turmoil in Europe.

"We look every day at areas where we should be growing and investing more and adding jobs," said John Rice, vice chairman of General Electric Co (GE.N) and chief executive of GE Technology Infrastructure.

"There is a lot of encouragement on our business leaders to invest for growth, but also not to overinvest," Rice said. "We're still in an environment where we're going to be watching and managing our headcount carefully."

(Reporting by Carey Gillam and James Kelleher, editing by Matthew Lewis)