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Continued: With ax poised to fall, Hutchinson is on edge

  • Article by: CHRIS SERRES , Star Tribune
  • Last update: December 13, 2008 - 9:37 PM

HUTCHINSON, MINN.

When Steve Cook became mayor here in 2004, things had never looked better for this city of 14,000 people.

Long considered an economic jewel of central Minnesota, Hutchinson had just begun a downtown revitalization project that generated $13 million in new investments. Both Menards and Target opened stores just outside downtown.

The local economy was doing so well that mayors and economic development officials from across Minnesota would tour Hutchinson's Main Street just to get ideas on how this small city amid the cornfields an hour west of Minneapolis managed to remain so vibrant.

But last week, the city that had been largely insulated from the manufacturing slowdown of the past two decades was slapped with it. Hutchinson's largest employer, Hutchinson Technology Inc., will eliminate up to 1,100 of its 4,500 employees nationwide. And there is mounting speculation that large layoffs also are coming at 3M Co., the city's second-biggest employer, with 1,400 workers.

Just the anticipation of layoffs, which have been rumored for months at Hutchinson Tech, hit the town like a bomb. Downtown shop owners are seeing weak Christmas sales, patronage at once-busy restaurants has slowed and even the bowling alley is losing league members.

Problems that have been felling the rest of the economy since last year, including declining home values and rising unemployment, also sneaked in this summer. The city's unemployment rate hit 6.9 percent in October, up from 5.2 percent a year earlier. And that's before the impending layoffs at Hutch Tech, details of which won't be announced until mid-January.

Many of Hutchinson Technology's 2,300 employees here are living in trepidation, fearing they will end up jobless when few local employers are hiring and the nation may be heading toward its worst recession in nearly 30 years. Many are already preparing for the worst, putting houses up for sale and, in some cases, even returning Christmas presents to generate extra cash before the layoffs come.

"It's hard on everyone, not knowing what's going to happen," said Cook, who added that Tuesday, when the layoffs were announced, was the only night in his four years as mayor that he couldn't sleep. "There is the state's problem, the nation's problem, the world's problem, the whole housing slump and now this, all at once."

What sharpens the pain here is that while hundreds of other industrial cities and towns across America were shrinking under job cuts, Hutchinson was still growing. To many, Hutchinson came to represent a past-and-future America, a place where blue-collar employees who worked hard could afford the middle-class dream: a home, a car and college for the children.

And while other downtowns across rural Minnesota were struggling, Hutchinson continued to attract new businesses. In the late 1990s, for instance, the city gutted four city blocks -- including a dilapidated grain elevator and a gas station-- and brought in a Shopko, an Econo Foods store and Wells Fargo.

"We've been a world unto ourselves," said Miles Seppelt, the city's economic development director. "We've been largely insulated from larger economic forces."

When Red and Linda McMonagle were looking for a site to open a new theater, after closing their feed business in Minnetonka, they chose Hutchinson because "it was the only place between Minneapolis and the South Dakota border that was expanding instead of contracting," said Red, as he walked through his newly renovated State Theatre, which includes nearly a mile of neon lights. "We bet the whole farm on this place."

It started in a chicken coop

Hutchinson Technology played a pivotal role in the city's success. Founded in 1965 by two young entrepreneurs, Jon Geiss and Jeff Green, the company started in an old chicken coop just northeast of downtown. Their first product was a printed circuit board, but the company expanded aggressively and now is the world's largest maker of suspension assemblies, which hold the recording heads that read data from computer disks. Last year it earned $7.3 million on sales of $716 million.

Today, one out of eight workers in the city is employed at Hutch Tech. Almost everyone has a friend or relative who works there, while many more have bought stock in the company out of local pride. The stock, now $3.05 a share, was worth more than $27 a year ago.

Workers learned of the layoffs at 3:05 p.m. on Tuesday. That's when an e-mail from CEO Wayne Fortun announcing the layoffs went out to all the staff. But many workers at the production plant don't have access to e-mail, so they relied on co-workers to spread the news. The company has not said how many of the up to 1,100 layoffs will occur in Hutchinson, though some workers think it could be as many as 500.

To cut costs, the company had already planned to shut down for two weeks over the holidays, only adding to the tension on Main Street. Many workers said they would prefer receiving their pink slips now rather than after the holidays.

Chad Czmowski, 28, owner of the Outdoor Motion Bike Shop on Main Street, moved to town in 1988 after his father got a job as a machinist at Hutch Tech. Now his wife works there as a trainer for $13 an hour. They have come to rely on the company's generous health care plan. "You've got a lot of people who put their roots down here because of Hutchinson Tech," he said.

At Hutch Bowl, a 16-lane bowling center just west of downtown, Hutch Tech workers have three leagues, including two morning leagues that start after the night shift ends. But several workers already have canceled their league memberships, out of fear they won't be able to afford the $11 a week fee, said co-owner Gail Plaisance.

"It's not just the bowling we're worried about," he said. "They'll come in here and buy a hamburger or a pop or a beer. Now they'll grab something to eat before they come down here. It's all lost business that will be difficult to get back."

City officials also are worried: About a fifth of the city's revenue comes from the state, and Gov. Tim Pawlenty may soon cut local government aid to help balance the state budget.

A round of manufacturing layoffs could mean more home foreclosures and reduced property tax revenue, city officials warn. The city has about 50 houses in foreclosure, up from 13 two years ago.

And fear of layoffs at 3M persist. The industrial conglomerate, which makes Scotch tape in Hutchinson, said last week that it was cutting about 2,300 jobs, or about 3 percent of its global workforce. A spokeswoman said 3M plans no layoffs "at this point in time" in Hutchinson.

At the Hutchinson Cafe on Main Street Thursday evening, nearly every table was empty.

"People we used to see once a day are only coming in once a week," said owner Angie Jergens, whose son works at Hutch Tech. "It may take a year or two before people feel comfortable spending again."

At one of the few occupied seats, Todd Roethemeier, 41, was trying to look beyond the fact that both he and his wife work at Hutchinson Tech. He was busy practicing card tricks he learned as child. With a quick wave of his hands, Roethemeier could make a card move anywhere in the deck.

"Whaddya think? With a top hat and a sports coat, I could make a few extra bucks with some sleight of hand," he said, in all seriousness. "It's all about optimism."

Chris Serres • 612-673-4308

  • about this series

  • The Star Tribune's coverage of the housing crisis, the credit crunch and their effect on Minnesotans.
  • related content

  • Miles Seppelt

  • Tiffany Haag and Blake Barnard

  • Tom Daggett

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