Siemens to lay off 146 at Hutchinson plant, citing tax credit, natural gas prices and economic slowdown

09/18/2012 6:15 PM

08/05/2014 9:32 PM

Citing a “perfect storm of factors,” Siemens Wind Energy said Tuesday that it will cut 146 workers at its Hutchinson turbine manufacturing plant, and more than 450 staff in Iowa and Florida.

The company will retain 152 workers in Hutchinson. The laid-off workers will be paid until Nov. 19, said company spokeswoman Melanie Forbrick. They also will receive an additional four weeks of pay, job search counseling and up to $5,000 toward retraining.

The cuts come after months of warnings by executives in the wind industry that the likely expiration of the federal production tax credit on Jan. 1 would mean a plunge in demand that would likely force layoffs.

As wind farm developers rushed to get projects built under the tax credit this year, Kansas saw its single biggest year for new wind turbines, as capacity nearly doubled to 2,600 megawatts.

The tax credit provides 2.2 cents per kilowatt hour of subsidy and has become a high-profile political point of contention between fiscal conservatives and wind power supporters in Congress and in the Obama administration.

Utilities are also moving toward natural gas, which has dropped in price because of the oversupply created as horizontal drilling and fracking led to the recovery of more gas.

The wind-energy industry projects that demand will fall about 90 percent from an artificially high 6,000 turbines installed in 2012 over the next two or three years, Forbrick said.

“The PTC (tax credit) brought this artificial peak, and on top of that, gas prices, which are traditionally projected at $4 to $5 per million BTUs, have stabilized at about $2 per million BTU and, of course, the economy is still lagging,” Forbrick said. “So it’s a perfect storm of events beyond our control.”

But Forbrick said Siemens believes in the long-term future of wind power. The industry expects construction to rebound later in the decade to a more normal level of about 2,000 turbines per year, not including the tax credit and with only slightly higher natural gas prices.

The company has spent $100 million in recent years building manufacturing capacity in the United States, Forbrick said, and thinks the business remains a good one in the longer term.

The company overall is cutting about 615 of its wind energy workforce of roughly 1,600. The turbine blade plant in Fort Madison, Iowa, will lose about 400 workers, and the headquarters in Orlando, Fla., will lost about 60 workers, Forbrick said.

“These decisions are never easy, but the adjustments are necessary,” Forbrick said. “We are committed to the business and committed to wind power and think the industry will rebound in the long term.”

Rep. Tim Huelskamp, R-Fowler, who represents Hutchinson, didn’t back down Tuesday from his opposition to the production tax credit. He blamed the layoffs in part on gas prices and the economy.

“Job losses are a heart-wrenching and all-too-common occurrence in this weak Obama economy,” he wrote.

As far as the production tax credit, he said, long-term prosperity would be best served with an even-handed tax policy, rather than having one form subsidized.

Dave Kerr, who as president of the Hutchinson/Reno County Chamber of Commerce played a big role in recruiting the plant, said Huelskamp and others who argue that any subsidy is harmful and creates unfair competitive advantages aren’t being completely forthcoming.

“They say they want to level the playing field,” Kerr said, “but they have tax breaks for oil and gas drilling that have been in place for 90 years that they are not even willing to acknowledge are tax breaks.”

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