LITTLE ROCK — Nordex USA announced Friday that it is closing its Jonesboro wind turbine factory because of overcapacity and cuts in government tax benefits, a decision Gov. Mike Beebe blamed on Congress.
The plant, lured to Arkansas with millions of dollars in state incentives, will cease production after it fills current orders. Production will be moved to a factory in Rostock, Germany, officials said. The training academy, the central parts storage and repair facility in Jonesboro will remain in operation in support service and operations.
About 40 employees both in Jonesboro and at offices in Chicago, are expected to be laid off starting this fall, said Naomi Lovinger, spokeswoman for Nordex USA, a subsidiary of the German firm Nordex SE. She did not know how many of those employees would be from Arkansas.
"This is a sad day for all of us," Ralf Sigrist, president and CEO of Nordex USA, said in a news release. "We will lose valued colleagues who have done their very best for us, but the decision was inevitable considering the underutilization of our plant."
The company said Nordex’s service activities for all existing U.S. wind farms are not affected by the closure of the Jonesboro plant.
When Nordex officials and the Jonesboro Regional Chamber of Commerce announced plans to build the $100 million facility in the Craighead Technology Park in 2008, they said the wind turbine manufacturer would employ at least 700 workers with average wages of $17 an hour.
Lovinger said Friday that 50 people currently work at the Jonesboro plant. Joe Holmes, spokesman for the Arkansas Economic Development Commission, said the plant had no more than 100 workers at the height of production.
The state’s relationship with the wind energy industry began in 2007 when LM Glasfiber, now LM Windpower, announced plans to build a $150 million plant at the Port of Little Rock. The plant is now operational. Other wind industry companies soon followed to supply LM Windpower, including Nordex and Beckman Volmer, which last year opened in Osceola and provides steel parts to Nordex.
Congress had been approving the tax credit annually, but it expired in January when federal lawmakers failed to agree on a budget. The tax credit was revived for one more year when the fiscal cliff deal was reached.
Last year, during a speech in Atlanta at the WindPower convention, Beebe called opponents of an extension of the wind production tax credit "unAmerican."
The governor said Friday said that Congress’ failure to approve a long-term extension of the wind production tax credit led to Nordex’s decision to shut down production in Arkansas.
"This is directly related to Congress’ inability and dysfunctionality to be able to follow through on a policy they started, and now they can’t get together and come to an agreement, "Beebe said in an interview with the Arkansas News Bureau.
U.S. Rep. Rick Crawford, R-Jonesboro, said Friday he supports a long-term extension of the wind power tax credit as long as the nation’s debt also is considered.
"The Nordex announcement is another wake-up call for Congress to take action instead of dwadling," Crawford said in a statement released by his office. "Our nation is in a huge financial mess due to decades of borrow-and-spend policies implemented by both political parties, which make it extremely difficult to provide certainty for most sectors, including energy, agriculture, health care and small businesses."
U.S. Sen. John Boozman, R-Ark., said he supports a long-term extension of the tax credit and the certainty it would bring to businesses about their tax burden. But he said major tax reform also must occur.
"Until we tackle major tax reform in Washington, this problem will exist. It is all the more motivation for Congress and President Obama to come to the table and talk tax reform," Boozman said in a statement.
Holmes said AEDC officials were not surprised by Nordex’s announcement because the wind industry as a whole has been struggling.
"The wind industry, the last three or four years, it’s been in real flux, primarily because of the production tax credit, the uncertainty of it from year to year to year," he said.
AEDC offered $8 million in economic incentives from the Governor’s Quick Action Closing Fund to attract Nordex to the state, he said, including $6 million allocated to Nordex for training and sight preparation. The company has spent about $2.5 million of the funds.
The city of Jonesboro received the other $2 million for road and rail improvements, and spent about $1.3 million, Holmes said.
The AEDC and the Arkansas Development Finance Authority gave Nordex an $11 million bond guaranty, Holmes said, adding that the company still owed about $9.3 million and has been making payments.
Nordex also was offered a cash rebate for 10 years at 5 percent of total payroll for new jobs. Holmes said Nordex received one check for $263,275 last year, which it returned to the state.
"They gave it back because things were in flux," he said. "Things weren’t growing as planned. They thought, we thought, back in 2008 and 09 that the wind energy and alternative energy development in the United States was catching fire. That hasn’t happened, certainly not the way everybody anticipated."
Holmes said the state is working with Nordex to recoup the unspent incentive money.