About 140 workers will be out of a job if Post Foods closes its cereal manufacturing plant located on Whitmore Avenue on the doorstep of Ceres city boundaries.
With less Americans buying ready-to-eat breakfast cereal in the recession, Post wants to close its only cereal plant in California with other North American plants picking up production. The company was recently taken over by Post Holdings, Inc., a publicly traded company.
On Thursday the company announced that its new board of directors voted Tuesday to close the plant if it can come to agreement with the Teamsters union Local 386 which represents plant workers.
In announcing the decision, Post president and COO issued this statement: "We are committed to addressing our excess capacity. This initiative, if we proceed, would provide the increased efficiency necessary to compete in today's environment."
Block also said "If Post decides to close the Modesto plant, we are committed to helping our employees through the transition."
Closure of the local plant - a final decision will come in April -- would mean Post could shift cereal production to Battle Creek, Mich. It also has cereal plants in Jonesboro, Ark., and Niagara Falls, Ontario where collective bargaining agreements have already been hammered out with the union. The union contract with Modesto workers expires in May.
"Anytime you take away 140 jobs, that's a major hit for us," said Bill Bassitt, Stanislaus Economic Development & Workforce Alliance. He said 300 to 400 other jobs could be impacted because of the loss of the payroll earned by workers at the plant. Those jobs include recreation, food, dining out and retail.
"There isn't any silver lining in this cloud. This is very discouraging. And there is nothing that the community did to bring this on."
Bassitt reported that the trend of the consumer is to consume less cereal in the morning with fast-food outlets picking up and kids selecting treats like Pop Tarts. That has resulted in shrinkage of the cereal market.
Since its construction west of Ceres in 1976, the 282,000-square-foot, six-story plant has produced a number of products by various companies. Grape-Nuts, Raisin Bran, Kool-Aid, Tang, Banana Nut Crunch and Honey Comb have been manufactured at the Modesto plant under the changing ownerships of General Foods, Kraft, Philip Morris and Ralcorp Holdings. Worth nearly $43.3 million last year, the plant has buildings for cooking and baking, grain storage and rail access. Post, however, expressed concerns last year about the plant's ability to meeting with governmental environmental compliance, specifically air emissions. Those concerns apparently had no bearing on the financial standing of the operation, however.
At the height of the plant's operation in the 1990s, about 225 employees found good-paying jobs at the facility. Today only half of the plant is being utilized, primarily for the manufacturing of Grape Nuts which finds most of its consumption in Florida where 23 percent of the population is inhabited by those 60 years old or older.
"They ship wheat out to Modesto by train and ship the product back," said Bassitt. "There are a lot of transportation costs."
Corporate officials told Bassitt that all four Post plants have excess capacity and that the plant with production that could most easily be assimilated into other plants is Modesto.
When he asked Post corporate officials if there was anything the community could do to impact the decision Bassitt was told "that it was unlikely. But they will talk to the union about things that might arise that change the scenario. That kind of tells me there must be a bit of wiggle room in there but I could only speculate what those are." He suggested wages or other contract issues associated with union shops.
"For all intents and purposes it seems to be a pretty type of final decision. They're calling it conditional."
Bassitt said about a third of Post's Modesto workforce are older, having been there about 20 years and making an estimated $18 to $22 per hour. "A lot of the employees used to work at Campbell and Hershey, and they closed, so this isn't their first rodeo. Amazon is coming, but not (the) same type of job -- not a manufacturing job."
Bassitt said he does not think the plant could be easily filled by another manufacturer. He said the plant is a "very unique structure" that could be "somewhat problematic" for retooling. "It could sit there for years doing nothing," said Bassitt.
He hopes Post will place the property on the market, with the Alliance helping to search for another company.
Post pays Stanislaus County $525,000 annually in property tax from the 80-acre parcel.
Bassitt said those taxes don't go away completely for county revenue.