Vacuum Maker Hailed as Savior Quits Gulf Town

By Leslie Eaton
The New York Times

Monday 15 January 2007

Long Beach, Mississippi - Ten days after Hurricane Katrina tore through town, the Oreck Corporation reopened the storm-damaged plant where it assembled its widely advertised vacuum cleaners. It hauled in generators to make electricity, imported trailers to house its workers and was hailed as a local hero for putting people back to work so fast.

But now, 16 months later, Oreck - which had employed almost 500 people at the factory - is throwing in the towel and moving its manufacturing to Tennessee. The company says it cannot get enough insurance to cover its plant here, and cannot hire enough skilled workers to replace those who never returned after the storm, mostly because they had nowhere to live.

"The decision to move this plant was a very difficult one, a very painful one," said Thomas A. Oreck, the company president. Late last year, Mr. Oreck said, "we came to realize that conditions on the Gulf Coast had changed in ways that made doing business here very difficult."

The move has caused an uproar in Mississippi, where the company has been criticized in the local newspaper and by government officials, including Senator Trent Lott. State officials say Oreck is the only major business they know of that has decided to leave the state in the wake of Hurricane Katrina. But they concede that the problems Mr. Oreck described are hurting other businesses.

Finding workers is a challenge now along the Mississippi coast. In Hancock County, to the west of here, employers have booked all of the recruitment booths at a job fair scheduled for Jan. 25, seeking workers for jobs in casinos, factories or power companies. In Biloxi, to the east, the Gulf Coast Medical Center says it is struggling to find workers, and so are insurance companies, restaurants and trucking companies.

Signal International, which makes and repairs offshore drilling rigs, just announced that it had brought 200 welders and other craftsmen here from India to work in its shipyard in Pascagoula, on the eastern end of the coast. In a statement, the company cited "chronic labor shortages" after the hurricane.

Workers who are available are more expensive. "The cost of labor is a problem for everyone," said Jim Craig, who directs local programs for the Mississippi Development Authority. "It doesn't matter if it's a convenience store or a shipbuilder."

High-paying jobs - first in federal recovery programs and now in construction and rebuilding efforts - have lured many workers from longtime employers, Mr. Craig said, at least temporarily. And even fast-food restaurants have abandoned the minimum wage ($5.15 an hour) and are offering $7.50 an hour, said Mark J. Landry, branch director of the state job center in Gulfport, another nearby coastal city.

The job market is probably good news for Oreck workers. "We anticipate we'll have a lot of area employers chomping at the bit to get those folks," Mr. Landry said.

And though Oreck employees say they are angry at the company, and sad, and scared, they do not seem to think they will have a hard time finding new jobs. "I hope not," said Willette Crawford, a molder, adding that she hoped another manufacturer would buy the plant, where she has worked for 19 years, since well before Oreck bought it.

Finding a buyer is also the goal of the Harrison County Development Commission, which wants to find a way to replace Oreck and at least some of the $300,000 in taxes it pays that make up a big chunk of the budget of the Long Beach school system.

But recruiting a new company may be difficult in the face of the soaring cost of commercial insurance. Earlier this week, the Mississippi House passed a bill to limit rate increases for businesses to 100 percent, which had been projected to rise by about 270 percent.

But while legislators struggle with the arcana of insurance regulation in Jackson, the capital, Mayor William D. G. Skellie Jr. deals with the effects on the ground in Long Beach, which he said lost 40 percent of its businesses in the storm. Stores are not reopening in part because they cannot get insurance, he said; just three gap-toothed blocks remain of the commercial strip that was once at least twice as long, running from the railroad tracks down to the beach.

Oreck's plant, in an industrial park well north of the tracks, did not flood, but it suffered damage, Mr. Oreck said. "We lost millions of dollars of inventory - and we were lucky."

The company's survival, he said, would have been threatened by the destruction of the plant, where workers made most of Oreck's products: carpet cleaners, air purifiers and the eight-pound vacuums sold on television by David Oreck (Thomas Oreck's father), the company's founder and pitchman.

The company is owned by private investors and the Oreck family, and is reluctant to disclose any numbers. But it has revenues of well over $200 million a year, and is growing, Mr. Oreck said. When Oreck, which has its headquarters in New Orleans, decided it needed to diversify out of the hurricane zone, it began looking for a site for what Mr. Oreck said was meant to be a second plant. In October, it opened the new plant in Cookeville, Tenn., about 80 miles east of Nashville, where it also moved some of the jobs for people who answer calls from customers.

Then the insurance bill arrived, on top of the hiring troubles, Mr. Oreck said. So the Long Beach jobs will go to Cookeville, and the plant here is scheduled to close by October.

Mr. Oreck said he was grateful to his workers who had helped save the business by getting the plant up and running so quickly; he said repeatedly that he intended to treat them well and to help them find new jobs before the company leaves.

That does not appease some government officials, who suspect Mr. Oreck had planned to move ever since the storm, perhaps because some tax breaks on the plant were due to expire soon. (Mr. Oreck denies that.) They argue that the labor situation is improving and that the insurance problem will be solved soon.

"We bent over backwards to work with them," said Richard Bennett, chairman of the development commission and an alderman here. "For them to pull up and leave is very dispiriting, to say the least, at the time when we need it most."

Some say it might have been better had the company not reopened at all. "I think it would have been easier on everybody if they had stayed closed rather than put everyone through this and use them up while they got their deal done," Mr. Skellie said. "It's a bigger punch in the nose."

-------