Home » NEWS » Oreck cites insurance, labor availability as reasons for leaving

Oreck cites insurance, labor availability as reasons for leaving

LONG BEACH — Ten years ago Oreck Corp. left New Orleans for a better business climate in Mississippi. After Hurricane Katrina, Oreck was one of the first major businesses on the Coast to get back up and running after the storm despite being only six blocks away from some of the worst devastation from the storm.

“Our intention was to stay,” said Tom Oreck, president and CEO of Oreck Corp.

“A lot of businesses will continue to flourish on the Mississippi Gulf Coast. But there are a number of factors that made it not good for our particular business. After Katrina, we realized we were significantly at risk. We realized if the storm had been slightly different than it was, we would have been out of business. If the building had been flattened, we would have been out of business. The decision saddened us and everyone, but I think as a business decision, it was correct.”

Oreck cited problems with labor availability related to the lack of affordable housing and the cost and availability of insurance as key reasons for the decision to move manufacturing operations to Cookeville, Tenn. The 43-year-old company’s corporate headquarters will remain in New Orleans.

Oreck Corp. currently employs 450 people at its plant at the Long Beach Industrial Park making vacuum cleaners and air purifiers. Employees will start receiving layoff notices starting in February and running through October. Oreck said employees are being given a 60-day notice, and will also have company assistance in finding a new job with job fairs and getting training on résumé writing and how to interview.
“We want to help each individual understand how to prepare for the next job and move seamlessly into another job,” Oreck said.

Cost of business

Insurance costs were a big factor in the company’s decision.
“The cost of business has gone up dramatically,” Oreck said. “Insurance costs have gone through the roof to an extent it is not even available. We have a lot of extensive assets such as molding and test equipment that we weren’t able to get sufficient insurance for. And the insurance we got was a significantly higher cost than pre-Katrina.”

Brian Sanderson, president of Gulf Coast Business Council, said the news that Oreck is leaving is very disappointing, but it illustrates in a very real way the insurance crisis of business on the Coast.

“With the Gulf Coast Business Council, one of our top priorities in the legislative session is to work with legislators to craft some short- and long-term solutions to the Wind Pool crisis,” Sanderson said. “When you start to see companies pull out, it shows there are some real current consequences to these skyrocketing rates.”

Oreck also cited problems with available labor. Oreck said less than 50% of people with the company pre-Katrina are still with it.

“They just didn’t come back,” Oreck said. “They left the area or went to other jobs. On the Coast there are more jobs available than people to fill those jobs. Housing costs and availability are a big factor. Things just cost more. The skilled labor we need is hard to come by. Between labor availability, the cost of doing business issues, as well as the overriding need to mitigate risk, we just were really not going to be able to continue to operate on the Coast.”

Great 10 years in Mississippi

Oreck said for 10 years people in Mississippi couldn’t have been better to the company. State and local economic development officials were very helpful. Now Oreck intends to help the economic development officials find another tenant for the 350,000-square-foot facility that suffered wind damage but did not flood during Hurricane Katrina.

While some current employees are expected to relocate to Cookeville, most aren’t expected to leave the Coast. Oreck said after the storm the company provided care to its employees providing food, water, shelter and emergency needs.

“We did what companies should do, take care of their people,” Oreck said. “Now we want to do the right thing to help people get situated in a new position. That is why we gave lots of notice and have stayed transparent about our relocation because our commitment always is first and foremost to our people.”

Like other Coast residents, Oreck employees have found that housing availability is a problem. The cost of housing has gone up. The cost of living overall on the Coast is higher.

“I think a lot of people have moved because of that,” Oreck said. “We heard consistently from people the cost of their living has gone up. It has settled down some, but that is the way it is.”

Oreck has already closed its call center at Long Beach that previously employed about 100 people. Call center activities were split up and moved to three different locations.

Oreck’s father, David Oreck, the founder of the company, has been described as one of America’s best salesmen. But his son said breaking the news about the plant closing didn’t feel like a sales job.

“I had to come and make the announcement at the plant,” Oreck said. “It is really a matter of being open, honest and frankly trying to be as empathetic as possible in understanding how we can help people get on with their lives. It was a very difficult decision and difficult for everyone there. There is no way to sell people on the idea they should feel good about it except that we are doing the right thing in terms of helping them move forward with their lives. It isn’t anyone’s fault. The need to make this change is a business reality.”

Oreck employees may have good job prospects. Manpower Employment has done a recent survey that reported the outlook for the Gulfport area is the third best in the nation. About 57 percent of employers in Gulfport plan to hire in the first quarter of 2007.

Oreck said during their time in Mississippi, the Governor’s Office, state and local officials were always extremely helpful and good partners.

“They worked very hard to get us there, and have worked very hard since Katrina,” he said. “They deserve tremendous credit in working hard to get things right.”

‘Confident’ in a stronger Coast

Oreck doesn’t want to send a larger message that the Gulf Coast is not a good place for business investment and manufacturing.

“Mississippi is a forward looking, vibrant state,” Oreck said. “Many, many things make it attractive. Many businesses will flourish there. Good work is being done, and I am confident folks will recover and the Coast will be stronger than it was. It is just no longer a good fit for our particular business.”

Oreck could have decided to send its manufacturing overseas as so many businesses have done in recent years. But Oreck said the company is committed to U.S. manufacturing.

“There are some things we have to buy overseas, but we manufacture in the U.S. as much as possible,” he said. “Some people used Katrina as an excuse to move overseas. As much as we are saddened by jobs lost in Mississippi, at least they were not lost overseas but are going elsewhere in the U.S. I have tremendous confidence in the people in Mississippi and America in general. Americans proved after Katrina they are capable of doing amazing and heroic things. I would urge companies to carefully consider keeping their workforce in production and call centers in the U.S. rather than go overseas.”

Oreck said as long as U.S. manufacturers are making better products, U.S. consumers should be supporting those companies to keep jobs in the U.S. He said he has confidence in the future of U.S. manufacturing.

“We are never going to be the cheapest, but we can certainly be the best,” he said.

Contact MBJ contributing writer Becky Gillette at bgillette@bellsouth.net.


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