In Louisville, Nth/works plant sees few signs of recovery, holds off on hiring

Seven months after Tom Hudson's manufacturing business hit its lowest sales in months, he's starting to see an increase in orders, but he still had to lay off workers, cut salaries and try to operate his shop more efficiently.
By Dana Hedgpeth
Washington Post Staff Writer
Wednesday, November 18, 2009

LOUISVILLE -- Small manufacturers like Tom Hudson keep hearing that the recession is over, and every day they await a sign telling them it's time to gear up and start hiring back some of the workers they have laid off. The news Tuesday was hardly encouraging: Factory production fell in October, the first decline since June.

Hudson was among those feeling the brunt of the decline, as monthly production of appliances and parts slipped in October, even though economists had been expecting some growth. Hudson's company here builds dishwasher doors, refrigerator hinges and oven brackets, and when Americans stopped buying new houses in fall 2007, there was suddenly little demand for the trappings of shiny new kitchens. His factories slowly retreated.

As orders from General Electric and Whirlpool trickled to a halt, Hudson absorbed the pain. First, he laid off 40 of his 400 workers. Now he's down to 251. Eventually, he cut his own pay by 20 percent. He stopped 401(k) contributions. This spring, he ran his two huge factories, each about the size of two football fields, with a skeleton crew, as most of the workers took a week-long furlough. Sales hit a new monthly low -- $2.6 million -- in March, down from an average high of $5.5 million.

Hudson and his wife, Nancy Hudson, who is the company's controller, were up nights worrying about how they were going to make payroll.

"It was devastating," Hudson said. "The orders just stopped."

Tuesday's Federal Reserve report showed sluggish production -- appliances fell 1.9 percent from September to October, and parts production fell 0.2 percent while manufacturing overall was down 0.1 percent. Even as employers like Hudson find ways to squeeze more productivity out of every worker, the nation's economic recovery so far has not been strong enough to bolster the job market. That helps explain why despite a 3.5 percent rate of economic growth, the unemployment rate has risen to 10.2 percent and could well approach 11 percent next year.

"The reality is hitting," said Cliff Waldman, an economist at the Manufacturers Alliance/MAPI. "There's a sluggish nature to the recovery."

If people aren't buying, Hudson and others are wary about hiring and investing. So far, his November and December sales look weaker than expected. Instead of planning how to gear up, he keeps working out ways to achieve small efficiencies, making his operations leaner, not larger.

Waiting for orders

For Hudson, who is president and chief executive of the unusually named Nth/works (motto: precision to the nth degree), everything depends on orders for parts, and right now he has no idea how to predict their volume.

When houses are being built at a steady clip, General Electric and Whirlpool buy plenty of dishwasher doors and refrigerator hinges. But housing starts, a key indicator for Hudson, are weak and probably will not improve soon, economists say.

"It all depends on demand," he said recently, as he toured his factory. "If it comes back, we'll be hiring people. If it doesn't, we won't. It's that simple."

In March, eight of the 15 plants that Hudson ships to had temporary shutdowns. By summer, he was making 500 dishwasher doors a week, compared with just under 4,000 a year ago. Once he made 18,000 refrigerator hinges a week. Now, it's 7,500.

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