Forced 'furloughs' cut business costs

Here's the vacation no one wants, courtesy of the recession: forced time off without pay.

Nashville resident Mike Thomas was forced to take a 12-day unpaid leave as a production laborer on a car assembly line when Bowling Green Metalforming temporarily shut down because of weaker demand for its auto parts last month just across the state line in Kentucky.

Thomas, 38, a nonunion worker who makes just over $13 an hour, says it's stressful knowing "another layoff could come at any time."

Financially struggling businesses with workers across Middle Tennessee are requiring employees to take unpaid "furloughs" — temporary layoffs that amount to one-time pay cuts for workers and a cost saving for employers.

In the past year, the number of temporarily laid-off workers nationwide hit a 17-year high. Of 10.3 million unemployed workers in November, roughly 12 percent were unemployed because of temporary layoffs, according to data from the Bureau of Labor Statistics.

The last time this many workers fell into the category was February 1991, when 1.4 million workers were unemployed because of temporary layoffs. As a proportion of the total work force, workers on temporary layoff are roughly 1 percent, nearly the same now as then.

Meanwhile, other companies are taking different cost-cutting steps. Memphis-based FedEx, for example, recently said it is implementing base salary decreases and suspending the company's 401(k) match contributions for a minimum of a year.

"Our financial performance is increasingly being challenged by some of the worst economic conditions in the company's 35-year operating history," said Frederick W. Smith, FedEx chairman, president and CEO. The additional actions are "necessary to help offset weak demand, protect our business and minimize the loss of jobs."

More companies nationwide are enacting a wide range of measures to cut costs and save some jobs, analysts said. About two-thirds of companies surveyed recently have taken five or more of the 18 listed cost-cutting measures ranging from hiring freezes to reduced workweeks, according to the study by Watson Wyatt, a global consulting firm.

"By looking at ways of cutting those costs, whether it be pay freezes or pay reductions, it really protects their important assets, which is people," said Laurie Bienstock, U.S. practice director for Strategic Rewards, part of Watson Wyatt.

Hotel workers, others feel pinch

At the Union Station and Hilton Nashville Downtown hotels, employees were told in the fall that there would be a hiring freeze and a freeze on pay raises to avoid job cuts, said Ray Waters, regional director for hospitality for Turnberry Associates, which owns stakes in both hotels.

The hotels' last hiring freeze was more than 10 years ago, Waters said.

"We felt it was the right thing to do (rather) than to have any layoffs," Waters said. "Sometimes it's better to have a job than to give some people raises and let other people go."

For factory workers, unpaid time is coming in the form of extended shutdowns as manufacturers try to reduce inventory of everything from aluminum to fertilizer.

RV maker Winnebago Industries Inc. said all its workers, including Chief Executive Bob Olson, would take an unpaid week off this quarter, along with a two-week production shutdown during the holidays. 3M Co. said it had ordered some workers to take vacation or unpaid time the last two weeks of the year.

Shutdowns extended

Chrysler, General Motors Corp., Tennessee's Bridgestone plants and Ford Motor Co. have extended annual holiday shutdowns in production to cut costs and adjust to weak consumer demand.

Van Tenpenny, who works at Warren County's Bridgestone Firestone plant, said the temporary plant shutdown caused him to buy less-expensive Christmas gifts.

"With the situation, it's better than the alternative of not having a job," said Tenpenny, financial secretary of the union local that represents many workers at the plant. "The alternative is unemployment and (with) the current job market there is not much out there to go to."

At some companies, though, workers fear furloughs will be a prelude to more permanent layoffs.

Trinh Nguyen, 23, was called into a conference room with four other workers at the 50-person Baltimore architecture and design firm where he works. They were told that they were on a 30-day furlough, starting Dec. 10. "They tried to lighten (it) up as not a termination," Nguyen said.

As he sees it, most of his co-workers will spend their time off hunting for new jobs. Those who succeed won't qualify for severance payments they would have gotten had they been laid off. That would make the furloughs a way for the company to save money on paychecks and severance.

"It's just a harsh situation," Nguyen said.

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