Propex cuts work force at plants amid uncertainty about fiscal cliff

Propex cuts work force at plants amid uncertainty about fiscal cliff

December 9th, 2012 by Ellis Smith in Business Around the Region

Mike Gorey

Photo by Contributed Photo/Times Free Press.

Propex has slashed 30 jobs at its Chattanooga headquarters and another 10 workers at its geotextile plants due to shrinking government spending worldwide.

"We have reduced our corporate headcount, and all of the plants have adjusted their hourly headcount for a new, more focused company," said Randy Powell, executive vice president of operations for Propex.

The cuts come as the U.S. president and Congress haggle over the depth and nature of tax increases and spending cuts due to hit the economy in January if a budget agreement is not reached to avoid the so-called "fiscal cliff."

Mike Gorey, president and CEO of Propex, attributed the company's job losses directly to cuts in government spending.

"We believe a lot of the uncertainty around the roads bill and the fiscal cliff has had a lot of impact on demand from public sector," said Gorey, who projects that 2013 will look a lot like 2012.

Gorey argued that Propex's cuts are preemptive and will protect the 2,000 remaining workers worldwide and 850 workers in the U.S. from further layoffs.

"It's nothing like what the company experienced in 2008," he said. "This is a little under 5 percent of our U.S. employment base."

Propex in recent years has attempted to shift to geotextile production from its more traditional carpet backing business, thought it remains the largest American-made carpet-backing supplier.

Geotextile products typically consist of heavy-duty fabrics used for erosion control and concrete reinforcement. The fabric is especially popular in road construction because it reduces potholes and cuts back on the need for long-term maintenance.

Still, Propex estimates that it is only reaching a fraction of its market, leaving the door open to sales increases through increased marketing. Neither Tennessee nor Georgia uses geotextiles in highway construction, nor do many of the states' local governments, Powell added.

"Part of this restructuring is to go after the municipalities, and we've hired additional people to sell to them," Powell said.

Carpet backing was a bright spot during year, with sales up 10 percent over the prior year. Carpet backing represents about one-third of the company's sales, company officials said.

"There's been a rebound in housing, which is helpful," Powell said. "It's not going to take us to big growth, but it's solid and stable."

Solid and stable is good for Propex, which can profit from the same sales gains being enjoyed throughout the carpet industry, said Kemp Harr, publisher of Floor Focus Magazine. Unlike geotextiles, the carpet business isn't dependent on government spending to keep it afloat.

"The recovery of the housing market has been a long cycle that's started to turn back around," Harr said. "I don't think the fiscal cliff is going to derail it."