Caterpillar Inc. responded to the struggling timber industry this week with news that it will shut its tree harvester plant in Owatonna to cut costs and consolidate operations in Georgia and Wisconsin.
The move will cut 100 of the factory's 119 workers, company managers told employees on site Thursday.
Most employees are expected to be gone by January even though the plant won't officially close until March. Nineteen engineers will stay in Owatonna permanently and work on various projects for the construction, mining and logging machine giant, said spokeswoman Rachel Potts.
Laid-off workers will receive severance packages with health insurance, and will be offered job search assistance from the Minnesota Dislocated Workers Program.
Potts said Caterpillar will do what it can to mitigate the impact of its decision to consolidate operations. It will hold an employee job fair with Owatonna employers and recruiters from Caterpillar's Brooklyn Park factory, which makes road paving machines. "We are interested in helping all those employees impacted find gainful employment after these jobs go away," Potts said.
Caterpillar's layoffs are just the latest in a string of timber-related shut downs around the state, including Georgia-Pacific's decision to close a wood-for-automobiles plant in Duluth and Verso's decision to not reopen its mill that burned down in Sartell. Minnesota's annual tree harvest has plummeted about 40 percent in the past six years as plants across the state fell victim to sagging housing starts, low paper sales and soaring fuel prices. Mills and plants have felt the pain.
Still, the news of Caterpillar's shutdown shocked many in Owatonna.
"We were surprised, of course, and disappointed," said Brad Meier, president of the Owatonna Chamber of Commerce. "Your natural inclination is to want to know why or what we could do to change it. At that point it's a done deal, so we are not in a position to keep the plant here. It's a blow."
Owatonna has about 25,000 residents, and about a third of its economy is composed of manufacturers like Caterpillar. Just last year, all employees in the factory posed for pictures to celebrate the manufacturing of their 10,000th forestry machine.
Mayor Thomas Kuntz said he learned about the plant's fate Thursday morning and immediately got Meier and a team of city and economic development leaders over to the plant to find out more.
Caterpillar sits 2 miles outside of town and ranks as Owatonna's 21st-largest employer. It purchases auto supplies and other goods locally.
"So there will be a loss. You bet," Kuntz said. "Hopefully we can minimize the loss and find employment for these employees so they stay in town [and] we don't have houses on the market."
Potts said the closing was due to a drop in demand for its tree harvesting equipment. Owatonna bought the plant from Blount Inc. in 2007 and has made log bunching machines and log transportation trucks there ever since. Most are sold in North America.
But with the dragging global economy, weak demand for paper and packaging goods, and sagging housing construction, machine orders have been affected across the company, Potts said.
"It's the turbulent economy," she said. "As you drill down, it is impacting the forestry industry. So we've had to make some tough decisions."
Caterpillar scheduled rolling layoffs in June and July in Owatonna and at several other plants in an effort to boost earnings after a lackluster third quarter.
But it wasn't enough. Now the 1973 plant will close and be put up for sale or rent.
Meier, from the Chamber, said he's not sure how long it might take to find a new tenant. "Some large buildings like this sit for months and other move quickly. It's hard to know."
Dee DePass • 612-673-7725