Feature – Oshkosh layoffs to flood market with skilled workers

Posted on Jun 3, 2013 :: Features
Sean P. Johnson
Posted by , Insight on Business Staff Writer

Jobs are out there – but not necessarily the ones employees want

When Oshkosh Defense had trucks to build, the workers came. But what happens when the work is done?

It was just two years ago, as the company ramped up production to fill a $3 billion military vehicle contract, that as many as 2,000 people lined up for a company job fair seeking one of 700 new positions. Now, as that contract nears completion, the U.S. government disengages from the conflicts in Iraq and Afghanistan, and military spending is returning to pre-war levels, Oshkosh Defense has announced it will lay off nearly 900 workers beginning this month.

An expected 700 hourly employees will lose their jobs this month, with another 200 salaried employees to follow in July. In all, Oshkosh Defense will reduce its local workforce to 2,800, about 25 percent smaller than it was during peak production.

The job losses pose both a personal and regional challenge to the economy of Northeast Wisconsin: If they come to build it, where do they go when the work is done?

“That is really going to depend on their occupation and skill set,” says Benjamin Artz, an assistant professor of economics at the University of Wisconsin who follows labor economics and industrial relations.

“These workers are skilled, but they may have to settle for jobs with lower wages and benefits. The regional economy may be able to absorb these workers, but not necessarily in the jobs they would prefer,” Artz says.

Oshkosh Defense announced the job cuts in early April, citing a decline in U.S. military vehicle production primarily because of reductions in Department of Defense spending. The company’s daily production volume is expected to drop by 30 percent this summer and contracts such as the Family of Medium Tactical Vehicles, won in 2010, are completed.

At one point, that production line was running seven days a week, 14 hours a day to reach full production capacity for the contract.

While Oshkosh Defense is seeing a decrease in activity, many of Oshkosh’s other divisions are seeing increased demand for their products. However, that demand may not be enough to absorb the employees let go from Oshkosh Defense.

Oshkosh President and CEO Charles L. Szews says employees will be offered similar positions within other company divisions if available and where it makes sense, but he also acknowledges that could mean relocation, which is not practical for some.

The company has also offered early-retirement packages to soften the overall blow.

“We have a highly skilled workforce and we pay in the 95th percentile for wages,” Szews says. “We were able to keep at high levels of employment during the recession. There’s never a good time, but there are better opportunities now.”

Oshkosh will continue to aggressively pursue other opportunities for all its divisions in an effort to grow the company, create more jobs and minimize the impact of the reduced defense spending.

Other parts of the region, such as the shipbuilding industries along the shores of Lake Michigan, have experienced increased demand that could absorb some employees who are willing to relocate.

United Auto Workers Local 578, which represents some of the workers at Oshkosh Defense, is assisting the employees with efforts to find new positions, says local president Joe Preisler. But, these layoffs come on the heels of 450 jobs eliminated in January.

Given union support, some of the employees may be able to bide their time until they know if they will be hired back when a new contract is won, Artz says. Those who take positions elsewhere may be looking at wages that are 15 to 20 percent lower than the union positions at Oshkosh Defense.

Preisler says the loss of jobs and income will affect the entire region, even those who are still employed.

The cuts are not linked to the recent federal sequestration, though that may affect future contracts. Oshkosh is currently competing for the Joint Light Tactical Vehicle contract, but even if it is awarded the work, full production is several years away.

In perhaps a positive sign, the company has secured a contract for the engineering and development of the new vehicle, which will replace many of the U.S. military’s aged Humvees.

As the economy in Northeast Wisconsin has rebounded from the recession, there has been an increased demand for skilled manufacturing and assembly workers. Unemployment rates peaked in 2009, but in Oshkosh the unemployment rate has hovered around 6.4 percent for the past year, after reaching a high of 8.1 percent, and other communities in the New North region have seen a similar trend.

Artz says Wisconsin’s manufacturing economy has not seen the same expansion as other areas of the country, which may make absorbing these workers more of a challenge.

“We did not fall as hard as some other areas of the country did when the recession hit,” Artz says. “But we are also not seeing the growth that other regions are experiencing.”