Uncovering Layoffs and Plant Closings in Manufacturers' WARN Notifications
The most overlooked technology for raising productivity might be ‘good management.' Worker Adjustment and Retraining Notifications (WARN) foreshadow management intent to control costs.
Last week, we surfaced headlines of recent layoffs across industrial companies. We connected the headlines to current research on their relationship to manufacturers’ market value. In addition to Wall Street Journal headlines, the authors used Worker Adjustment and Retraining Notification (WARN) notices within their data set. This week, we pulled together some context about WARN notices and data from 2022 and 2023 to uncover any patterns in plant closures.
What is the Worker Adjustment and Retraining Notifications Act (WARN)?
The Worker Adjustment and Retraining Notification Act (WARN) was enacted in 1988 in the United States with the goal of protecting “workers, their families, and communities by requiring employers with 100 or more employees to provide at least 60 calendar days advance written notice of a plant closing and mass layoff affecting 50 or more employees at a single site of employment.” The US Department of Labor’s Employment and Training Administration “administers WARN but has no enforcement role in seeking damages for workers who did not receive adequate notice of a layoff or received no notice at all.”
A WARN fact sheet and compliance assistance are available for further reading.
Where Can I Find WARN Notices?
Each U.S. state maintains its own filing system and data administration. The data schema for historical WARN data varies by state. I’ve provided links to the data for the ten most populous states below:
What Does a WARN Notice Look Like?
A WARN notice is commonly submitted in the form of a letter. The letter describes when the layoff will occur, the number of employees affected, and any additional business context for the reason for the layoff. A typical notice is similar to a recent Magna Seating notice in Ohio:
Regrettably, due to our current business circumstances, Magna Seating Cam-Slide South, will cease production on September 30, 2022, and has found it necessary to layoff employees from their positions located at 19911 County Road T, Ridgeville Comers, Ohio 43555.
The exact date of the layoffs has not been determined, but they will commence on or about August 1, 2022. At present, the total number of potential affected employees is believed to be 141. These employees may have the opportunity to move to new positions at other locations, but based on the information of which we are currently aware the layoffs are expected to be permanent.
Due to the number of employees affected and that the facility will cease production, this may be a "plant closing" as defined under the Worker Adjustment and Retraining Notification Act.
To the extent that notice is required under the Worker Adjustment and Retraining Notification Act, this letter is intended to fulfill the Act's requirements. By providing this letter, Magna Seating Cam-Slide South, does not concede that the Act applies or that the notices are otherwise required.
Manufacturers’ WARN Filings in 2022 and 2023
Due to the high variation of the data, the table below aggregates data from only the top ten most populous states listed above. These ten states account for over 50% of the U.S. population and are among the most manufacturing-heavy states.
In contrast with our survey of WSJ headlines last week, many layoffs at big-name companies like Intel, Jabil, and Honeywell barely made it into local news:
Intel warns officials it plans 343 layoffs at its Folsom campus
Jabil calls holiday plant closings and layoffs 'normal course of business'
Also of note in the data, a few of the companies listed share interdependencies such as Fiat Chrysler and Faurecia. Faurecia is a supplier to Fiat Chrysler. More automotive industry suppliers are listed and are likely interconnected, but we did not investigate further.
Another observation was the role of being private in determining whether to layoff personnel or permanently close a facility. Pace Industries, owned by Cerberus Capital Management and TCW Asset Management, is a good example. We noticed private companies seemed to opt to close facilities permanently rather than pursue layoffs.
Lastly, even a World Economic Forum Lighthouse Factory was not immune to layoffs. Zymergen’s facility in Emeryville, California was impacted by permanent layoffs after encountering issues in its commercial product pipeline.
Analyzing Manufacturers’ Return Through the Lens of WARN Notices
The Wall Street Journal headlines miss quite a bit of the action happening within industrial value chains. This post required a few hours of data wrangling to generate a couple of hypotheses that could be analyzed further to generate alpha. The ability of management to identify when business conditions have changed and re-evaluate the need for a facility is important despite impacting workers. WARN notices help surface where key industrial companies are cutting back to in order to redeploy capital to more productive pursuits. As Wharton professor Ethan Mollick puts it, “The most overlooked technology for raising productivity might be ‘good management’.”
WARN notices may also indicate when management isn’t willing to cut enough to put the firm on solid footing to re-ignite growth or increase cash flow. Overall, WARN notices foreshadow management’s cost-cutting strategy in hopes of growing shareholder wealth.