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Second round of job cuts masks Gamesa's US expansion

US: Spanish turbine maker Gamesa claims that its second round of US layoffs within 12 months is not a retrenchment, but a minor pause while it enhances its presence in Pennsylvania, a nacelle plant near Philadelphia and a blade plant to the west in Cambria County.

A Gamesa G88 2MW turbine. The company's Philadelphia plant will be manufacturing the new 2MW blade
A Gamesa G88 2MW turbine. The company's Philadelphia plant will be manufacturing the new 2MW blade

The global economic crisis led to a drop in orders, says the company, prompting over 180 layoffs last January for workers at the nacelle plant and over 140 more this month at the blade factory. A year ago Gamesa had more than 1200 employees in Pennsylvania.

But while some work pauses, the groundwork for growth ramps up. A second bay was recently added at the nacelle plant, along with a second production line at the blade factory. The latter was recently fitted with moulds for Gamesa’s next generation of bigger, lighter blades for its 2 MW machines. The company’s overall US training budget has been upped by a factor of ten and all the layoffs are referred to as temporary.

"We look at it as one step back on the road to two steps forward," says Michael Peck, director of external affairs for Gamesa USA. "There is not a door we’re not knocking on to fill up our order book. The wind industry is no different from other industries in terms of what’s happened to the economy. But we expect to grow. We believe that we will be at full production sooner rather than later."

At full tilt, the factories can churn out 900MW per year, and drawing-board plans already call for an increase, says Peck. "Obviously we wouldn’t do that if we didn’t believe the best is yet to come," he says. "But the industry is still taking a lot of hits. There are things out there that are sort of bigger than life that we’re dealing with." Peck particularly laments the low price of carbon emissions and diminished consumer demand for electricity, which have meant reduced electricity prices.

"When you have lower electricity prices and uncertainty as to what regulation is going to be, then utilities don’t sign power purchase agreements, he says. If utilities don’t sign power purchase agreements, then it’s very hard to get project financiers and lending banks to monetize the projects that are on the books."

Gamesa entered the US in 2001, set up its Philadelphia headquarters in 2004 and opened the factories two years later. The company, which views itself among the most vertically integrated in the industry, has invested $200 million in Pennsylvania and built or sold nearly 2000MW in the US. Company strategy includes using union labour, not common in the American wind component-making sector. Peck calls Gamesa’s relationship with the Steelworkers Local one of his favourite subjects.

"We are a rarity," Peck says. "But we believe we have the most progressive, collaborative and useful relationship with labour of any industry. The union was instrumental in devising really important policies for our people in the temporary layoff situation."

Peck dismisses the notion that union shops mean higher labour and product prices and believes Gamesa’s wages are in the middle of the spectrum. "The idea that the union makes you more expensive, that’s yesterday’s story, not today’s," he says. "It’s about the quality of the production and that’s based on the qualitative functioning of the turbine, not how much it costs to make that turbine.That creates a whole different race to the top in the wind industry."

When Gamesa first came to the area, Ron Budash was executive director of the Cambria County Industrial Development Corp. "It was a big deal in the state of Pennsylvania," Budash says. "They were looking at sites all over the United States, but governor Ed Rendell stepped to the plate with quite a few incentives and tax abatements that go out there almost ten years. And then, of course, Gamesa made a tremendous investment in this community."

Now a semi-retired local business consultant, Budash agrees with the company’s view of the layoffs, noting that Gamesa recently bought land for staging blade shipments near a rail yard. "I don’t think they’re pulling back," he says. "I think this is all a blip in the radar screen with regard to the economy."

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