Contec cuts 132 workers, cites slump

PHOTOGRAPHER: Ameerah Cetawayo

Friday marked the last day for 132 workers at Contec Holdings on State Street, as pricing pressures from customers and a drop in orders sparked morning layoffs for the cable box repairer.

The company, which supplies repair services for cable television and broadband operators like Comcast, Time Warner, Rogers, Cablevision, Cox, Shaw and Charter, said the job cuts were a financial decision.

“Economic pressures are causing us to make adjustments to our work force,” said Carroll Foreman, chief operating officer for Contec. “We will cease production operations in this plant.”

Though production will cease at the 50,000-square-foot Schenectady facility, Contec will retain 85 workers, Foreman said, for personnel, information technology, engineering, human resources and other corporate support functions.

The building’s lease runs through the end of 2011. Contec’s Schenectady facility underwent a $3 million expansion in 2001.

“I don’t know what the future will bring,” Foreman said. “We intend to maintain the work force that we have now and the corporate support that we have.”

Production equipment that will no longer be used at the Schenectady facility is set to go to Contec’s other locations in Seattle, Wash., Matamoros, Mexico, and Mexico City, “as we deem it necessary,” Foreman said.

Metroplex Development Authority Chairman Ray Gillen said he was assured the headquarters and related office positions for corporate support would stay in Schenectady.

Foreman said he will work with Metroplex and the state Department of Labor to get workers back into the labor force as soon as possible.

“We will arrange seminars for all our displaced employees and we will provide them the mechanism to get the benefits they need — retraining and job placement,” Foreman said. Affected workers in the meantime will receive incremental severance payments for 60 days.

RULES BROKEN

The Department of Labor requires employers with more than 100 workers to file a WARN notice 90 days before a “triggering event” or mass layoff, according to Karen Williamson, DOL spokeswoman.

Williamson said what Contec did Friday seldom happens — the company filed its WARN notice in the morning not long after laying off employees. Most companies file the notice first, she said.

Williamson said Contec knowingly violated the WARN rules, but has already agreed to pay 60 days of wages and benefits to affected employees, as required for a violation of the act.

The state WARN act has been in effect only since February, but the federal WARN laws go back to 1988. Violations of the WARN act in New York are capped at the federal liability limit of 60 days of wages and benefits, Williamson said.

Though Contec was a company prepared for the technological changes in its industry, Foreman said the company faced challenging market forces.

“It’s a balancing act, but it becomes a financial decision,” Foreman said. “It is more market driven than volume being down, as a result of the economic pressures on our customers.”

The company has cut 400 jobs off its payrolls since February, when Contec said it employed 2,400 people.

When the company began in 1978, the labor-intensive box repair process produced a completed order in six weeks — now a repair order is completed and shipped back within three to four days.

The company now services more than 75 percent of the cable industry’s customer premise equipment, repairing one set-top box every 27 seconds.

LURE OF MEXICO

But to Jim Altfeld, a consultant for small- to medium-sized manufacturers that do $5 million to $20 million in business annually, innovation could only go so far — it was only a matter of time before price pressures would push Contec toward a strategy that focused the company on growing in Mexico and cutting back its operations in Schenectady and Seattle, he said.

“You can’t kill the goose. The company has to survive,” Altfeld said. “It makes sense, just from the outside looking in — what a wonderful thing to have — an option. They used it.”

In February, Contec expanded its 240,000-square-foot Matamoros facility, which it acquired taking over Motorola’s broadband communication sector in Matamoros in 2002.

“Their highly trained and experienced staff brought additional service offerings to the mix,” Contec says on its Web site.

In June 2005, Contec laid off 70 employees at its Seattle plant, opting for cost savings by outsourcing work to the Matamoros facility.

The company previously said it planned to expand the Matamoros plant by an additional 60,000 square feet by doing repairs for Samsung, Pace and Panasonic equipment.

Altfeld said many companies are employing a low-cost strategy similar to Wal-Mart’s, which is putting more pressure on suppliers like Contec to cut costs but not quality.

“The customer is demanding lower and lower pricing. You have to cut somewhere. The highest quality at the lowest price — that’s what they’re asking for — but delivering that is another question,” Altfeld said.

Contec probably decided to keep its headquarters in Schenectady in order to keep its intellectual property and marketing expertise in America, Altfeld added.

“They remain an American company,” Altfeld said. “Manufacturers are in survival mode. It requires planning. You can’t just up and eliminate [jobs] without thinking about it ahead of time. I am under the impression that these guys did think about it. Their facility in Mexico leads me to believe they have been strategizing.”