Cyclical businesses caught in downdraft food-related companies show strength

September 16, 1990|By Kim Clark

At Maryland's two Esskay Inc. plants, 555 workers are slicing more ham and bacon than ever these days. But at the FMC Corp. chemical plant in Baltimore, a slump in sales and soaring energy costs forced the company to lay off about 5 percent of its more than 300 local employees this summer.

An informal survey of Maryland's manufacturers last week revealed that sales and production are slumping at businesses that rely on cheap oil or serve the construction industry. But many food-related businesses report they are stronger than ever.

"Food companies tend to be pretty stable in recessionary times," said James J. Harrison, Jr., chief financial officer of Hunt Valley-based McCormick & Co.

Spice sales are up from last year, Mr. Harrison said, and McCormick is keeping its 1,900 Maryland-area employees busy.

Executives in more cyclical industries, however, say they are feeling squeezed by higher costs and reduced demand.

A late July survey of some of Maryland's biggest employers by the Federal Reserve Bank of Richmond, Va., found that nearly 40 percent of those surveyed said the region's business climate had worsened over the summer. None said it had improved.

But manufacturers around the state said that though they are beginning to feel a pinch here, they have not been hit as hard as their competitors in other areas of the country.

Matt McGlone, district sales manager at Independent Cement Corp., said his sales to building contractors in Maryland are down a little but that demand from Virginia contractors has plummeted.

"The I-81 corridor has not felt the slump in new housing. It wasn't as hot" as Northern Virginia in the last couple of years, "and where there was no huge boom there has been no big bust," he said.

The Hagerstown-based cement-maker, which is one of the five biggest regional producers, is keeping its 120 workers busy filling government contracts for highway construction supplies, Mr. McGlone said.

Independent, which is owned by a Swiss conglomerate, hasn't had any layoffs yet because the slowdown started only this spring, Mr. McGlone said. "It has been too short to see a trend.... We are just trying to figure what we are going to do next year," he said.

Others have not avoided layoffs.

Frank Solecki, manager of the FMC pesticide plant in Baltimore, said soaring oil prices are eating up his already slim profit margin and have forced him to cut his staff.

"We use a lot of oil," Mr. Solecki said. "We didn't see this coming as deep and as fast as it came."

Arundel Sign Co. in Annapolis laid off four workers and is down to a staff of 20 neon benders and sign painters because sales have fallen by about 15 percent since spring, said salesman Don Tilghman.

"When construction goes down, we go down," he said. "If nobody is constructing anything new, they don't need new signs."

Mr. Tilghman said his company is also feeling pressure to cut prices because of reduced demand and fiercer competition.

Production at other large manufacturers has slumped in 1990, but many area executives expect sales to rebound by next year.

The Federal Reserve's most recent survey found that 50 percent of the manufacturers who responded expected shipments to rise by early next year. Only 9 percent predicted continued declines.

Steel production at Bethlehem Steel Corp.'s Sparrows Point plant, for example, plummeted in 1990 because of equipment breakdowns and planned maintenance shutdowns.

But the 8,000-worker plant, which makes stock for tin cans and other industrial uses, hasn't suffered from the slump in steel sales that has hit plants that serve the automotive industry. In addition, Sparrows Point's sales have been depressed by a two-year, $500 million overhaul and upgrade.

And manufacturers outside the construction and oil-dependent sectors say they don't yet know if they will be affected by the slump.

Sales of Kirk Stieff Co.'s silver and pewter, for example, are down slightly from last year, but executives don't know whether the trend will continue, said company spokesman Robert Barber.

"We certainly see something," he said. But Mr. Barber said he doesn't know exactly what he's seeing. He only knows that it is "not dramatic."

"The retailers we sell to are behaving cautiously. Ordering for the Christmas season is down slightly, about 5 percent. Not bad," he said.

Mr. Barber said he and the nearly 200 workers at the Baltimore plant are waiting to see whether the downturn that hit New England last year spreads nationwide.

"I don't know if it is something real or is undue concern by the people we sell to," Mr. Barber said.

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