Renewable-energy misery spreads to Vestas, as the Danish wind turbine maker slashes jobs, some in Portland
Turbulence in the renewable-energy industry buffeted Vestas on Thursday, as the Danish wind-turbine maker announced plans for 2,335 layoffs, including some at its U.S. headquarters in Portland.
Vestas Wind Systems will cut about a tenth of its worldwide work force, slashing costs by $190 million before year’s end. Layoffs will include 182 in the United States and Canada, including an undetermined number in Portland, where Vestas is a subsidized star in the city’s green galaxy. Managers said another 1,600 Colorado factory jobs could be axed later this year if a federal tax credit for renewable energy is not extended.
Like SolarWorld, the German company with 1,000 workers in Hillsboro, Vestas is caught between low-cost competition from China and declining European subsidies for alternative energy. Europe’s financial crisis compounds pressure, curbing power demand and raising the cost of credit.
The extent of the cuts appeared to catch Vestas’ Portland office by surprise. On Tuesday, Vestas-American Wind Technology Inc., which employs nearly 400 in Portland, had issued an update reporting a strong 2011 sales year and describing plans to hire 150 for U.S. and Canadian sales and service.
“I can certainly understand if employees as well as people outside Vestas consider us to be in a state of crisis,” said Chief Executive Ditlev Engel, who spoke at a news conference in Copenhagen. But he said Vestas should “come out stronger after the elimination race, which is currently taking place within the renewable-energy sector.”
Worldwide, renewable-energy companies are reeling from overcapacity and plunging prices caused by an explosion in manufacturing and competition from low-cost producers in China and other countries. Some big U.S. and European solar companies have gone bankrupt, with more failures expected.
SolarWorld is seeking U.S. tariffs on Chinese panels, prompting Beijing to threaten retaliation on renewable-energy goods, including wind products.
Vestas America is more insulated from China than SolarWorld, which accuses China of illegally subsidizing manufacturers that export cheap panels. Huge turbine components are less easily traded worldwide than solar panels, and Vestas America doesn’t export to China, making it less vulnerable to Chinese retaliation.
The oncoming cuts leave the Portland office in suspense until Feb. 8, when specifics will be announced. The 182 jobs to be cut in the United States and Canada represent 5 percent of the work force. Most will probably be front or back office positions that support sales and service, manufacturing, research and development, and supply chain operations, said Andrew Longeteig, a Vestas spokesman in Portland.
“We anticipate our construction, service and technology business will be largely unaffected,” Longeteig said. He added that the plans to hire 150 sales and service workers in North America will go ahead.
Also unaffected will be Vestas Americas’ move this spring to a headquarters building being renovated in Portland’s Pearl District, he said.
The main pain will be in Denmark, where 1,300 employees will go. Helle Thorning-Schmidt, the Danish prime minister, called the scale of the layoffs “an enormous setback” for the industry in Europe. “This is one of the businesses that we thought would be the new way of doing things,” she said.
After the layoffs, Vestas will employ about 20,400 people globally, company officials said, including 5,300 in Denmark. CEO Engel, who is reorganizing his management team, cut the company’s 2011 revenue forecast by 400 million euros to 6 billion euros.
Vestas shares have fallen more than 90 percent since peaking at 692 kroner in 2008. On Thursday, they closed at 58.50 kroner in Copenhagen, down 7 percent.
The North American market was strong in 2011, as Vestas announced orders of 812 wind turbines – enough to power about 500,000 homes. Vestas hired nearly 700 people in the United States and Canada during the past eight months, many for manufacturing positions.
But in November, Engel said U.S. sales could “fall off a cliff” unless the federal government extended a tax credit beyond this year. The renewable-electricity production tax credit gives an incentive of 2.2 cents a kilowatt-hour of power for the first 10 years of a project’s operation.
On Thursday, managers said they might lay off an additional 1,600 workers at U.S. plants if the tax credit expires as scheduled Dec. 31. The credit has been extended seven times since 1999, sometimes retroactively, creating uncertainty in the industry.
Vestas sales last year evidently benefited from customers rushing to launch projects that could be completed before Dec. 31, 2012. The company hasn’t announced any firm and unconditional orders for this year. Managers can’t speculate on this year’s sales amounts, Longeteig said.
U.S. Rep. Earl Blumenauer, D-Ore., is co-sponsoring a bill with U.S. Rep. Dave Reichert, R.-Wa., to extend the tax credit through 2016. They say renewable energy creates jobs and curbs dependence on foreign oil.
Denise Bode, chief executive of the American Wind Energy Association, said Thursday that extension of the credit is urgent.
“Today’s Vestas announcement shows the danger to U.S. manufacturing jobs if Congress waits any longer to extend the production tax credit,” Bode said. “We have to provide this industry with stable tax policy and a predictable business climate.”
Budget hawks say the credit costs roughly $1 billion a year that must be offset by cutting other spending. Other critics say the market should decide whether renewable energy is viable.
Supporters respond that the tax credit is necessary so renewable energy can begin to compete with conventional fuels, which are subsidized.
As it pushes for the tax-credit renewal, Vestas America is expanding foreign sales, exporting U.S.-made components to Mexico, Brazil and Nicaragua. The company is building a research and development center in Massachusetts that will open this summer.
“We are reorganizing globally,” Longeteig said, “to make Vestas a more profitable, customer-centered organization.”
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