Cummins Filtration in Lake Mills, Iowa, announced plans to cut about 400 jobs at the Lake Mills plant and shift them to San Luis Potosi, Mexico.

The cuts will occur in shifts between November 2009 and March 2010, the company announced Tuesday.

“This was an extremely difficult decision, and we realize the job reductions in Lake Mills will have a significant impact on our employees and the community,” said Cummins Filtration President Joseph Saoud in a statement. “We had hoped to avoid this kind of job loss, but after exhausting all our initial options for reducing costs, it is clear that further significant action is necessary to remain competitive.”

According to the statement, the move was made to “keep the business competitive in this region.”

Cummins is commonly called “Fleetguard” by locals, in reference to the company’s former name.

Darlene Gregor, an assembler with Cummins for 25 years, said there had been rumors about part of the plant closing, but she didn’t expect Tuesday’s news: “What they gave us today was the worst.”

The president of Cummins held a meeting with employees at 7 a.m. Tuesday to share the news. After the meeting, employees were given the day off to be with their families.

Mark Land, executive director of corporate communications for Cummins Inc., said the intent of company executives was to give people as much notice as possible. Currently, about 510 people work at Cummins in Lake Mills. The fabrication and media operations will remain in Lake Mills, employing about 110 people.

Cummins is a manufacturer of oil and fuel filters for heavy-duty diesel powered equipment. Cummins has owned the Lake Mills plant since 1980.

“All the assembly work is going to go. It’s kind of an all or nothing kind of thing. You can’t leave half an assembly line,” Land said.

All employees will receive a severance package with salary and health care benefits of at least a month, depending on how long employees have been with Cummins.

Employees

David Linquist, an operator at the plant for more than 22 years, said he wasn’t completely surprised to hear the news today.

“The past few months when they shut this down and that down, the plant manager — every time we had an employee meeting — they would always give us the lowdown on how we were losing money and not making money. It seems to me like they were kind of hinting around of bad things to come,” Linquist said.

Gregor was offered retirement earlier in the yea but didn’t take it because she was not ready to retire.

“With the recession, anything can happen, but I was hurt. I’ve been having a hard day, and I’m sure that’s the feeling of everybody there who cares about their job. You wouldn’t be there 25 years if you didn’t,” Gregor said.

Linquist said a handful of employees were angrily asking questions, but he said most people were calm and quiet. After the 15-minute meeting, Linquist said some people gathered to talk outside, but he went home to be with his family.

Gregor said many people also cried at the meetings.

“He said it was hard for him to tell us that. Well, it’s harder for us to hear it. There was a lot of upset people,” Gregor said.

Gregor said she’s enjoyed going to work each day at Cummins, and she’ll work as long as she still has a job there.

Additional meetings in smaller groups will be held Wednesday for employees to ask more questions. Cummins hopes to learn more at that meeting about the order of the job cuts. Gregor wants to ask about the retirement benefits and other things she’s earned during her years at Cummins.

Land said more information about severance packages and the how the consolidation process will work will be given out starting Wednesday.

Linquist described the situation as a double-whammy, because his wife, Alyson, has also worked at the plant for 22 years. Linquist, 54, is diabetic and has other health concerns, and he said he won’t be able to get health insurance for those preexisting conditions.

Many Cummins employees didn’t wish to talk about the situation. One Cummins employee of 20 years said she’s putting a positive spin on the news: When one door closes, two more open, the employee said.

Cummins

This is both a short-term and long-term issue, Land said. He said the recession has been hard on the filtration plants.

Cummins Filtration’s headquarters are in Nashville, Tenn., and there are three main plants in North America: Lake Mills, Cookeville, Tenn., and San Luis Potosi in Mexico.

This year’s second quarter component sales at Cummins were down 41 percent from last year, the company stated. That segment reported a $10 million loss before interest and taxes during the quarter.

“The current recession has led to the steepest drop in sales in the 52-year history of Cummins Filtration,” Saoud said. “Sales have fallen more than 30 percent since November 2008, and we do not expect any meaningful recovery in demand until 2011.”

To be a competitive long term, Land said the company needed to improve cost structure.

“It wasn’t going to work for us long term to have our assembly scattered around various places — to have multiple places basically doing the same sorts of things,” he said.

While the decision was more based on the long-term growth of the company, Land said the recession affected the timing of the decision.

He said the jobs will be shifted to the San Luis Potosi plant because it’s the newest, most efficient plant. That plant also has space to grow, which he said would not be the case in Lake Mills.

The plant in San Luis Potosi has been open for more than 20 years, and Land said they would not have just opened a new plant.

Before the decision to cut the 400 positions in Lake Mills, Land said there had been other steps to cut costs, such as layoffs, salary freezes and a 10 percent pay cut for top executives.

“We’ve basically turned over every rock we can to get through the recession,” Land said.

These changes will position Cummins to make money once the current economic conditions turn around. Land said the consolidation to the San Luis Potosi plant could save Cummins Inc. $20 million or more a year.

Land described the oil and fuel filter industry as price-driven because he said there’s little to separate one filter from another.

The company could also shift addition positions from the Filtration plant in Cookeville, but that decision has not been made yet. That plant is currently has about 700 employees. The San Luis Potosi plant has about 330 employees in filtration, and there are other operations going on there. Land said many positions will be added to that site in the coming months.

Lake Mills

One Lake Mills resident said it looked like a weekend or holiday, as a light rain fell on the nearly empty Cummins Filtration parking lots Tuesday.

Dean Holdstad, owner of Dean’s Barbershop, said he was shocked to see all the cars on Main Street when he arrived at his shop around 8 a.m. Tuesday.

“It’s going to affect all of us — big time. It’s devastating for this town,” Dean Holstad said.

Gregor said these cuts will also hurt the local schools.

The day care, health care and fitness centers on the site will remain open, Land said.

“We understand the significance of this in Lake Mills, and we’ve been there long enough to understand how important we are to that community. We know it’s a small community, and this was not something that was done lightly. We spent quite some time looking through every alternative,” he said.

“We’re going to do whatever we can to help folks get through this and help the community as much as possible,” Land added.

The Lake Mills population in 2008 was estimated at 1,977, according to the U.S. Census Bureau.

“It’s going to be hard because everybody in Lake Mills is somehow connected to Fleetguard, I think,” Lindquist said. “They either work there or know family or friends there. Four-hundred less jobs in a small town, it’s bound to have a financial effect on everybody.”