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Headline blues: BP Solar puts ‘cost reduction’ spin on job cuts as ‘third-party’ deal looms
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Sometimes a headline nails the story in haiku-like clarity, other times its vagueness obscures the "truth" in a fog of verbiage. In the case of one major solar manufacturer's latest press release, the headline fails to communicate the cold, hard facts of the news: "BP Solar lowers cost in drive toward grid-competitive electricity prices." The subhead starts to hint at reality: "Focus on growth through lower cost supplies and manufacturing will lead to phase out of module assembly at Frederick, MD, plant. Silicon casting, wafering, and cell manufacture to continue."
But there's more, and some of it ain't pretty. As it turns out, the venerable U.S. module factory won't be the only part of BP Solar where pink slips will soon be handed out because of "unsettled solar markets," the gloomy "impact of the global economic environment," and the proverbial standbys of an "oversupplied market and increased competition": hundreds of employees at two Spanish module production sites--the vast majority of workers there--will also be let go as BP carries on with "refocusing its manufacturing activities globally."
The company says that in order to "to reduce its unit costs by 25% by the end of 2010," it must access "lower cost supplies" and only increase assets representing "its most competitive manufacturing worldwide." Which means that four months after announcing the closure of its Australian manufacturing operations and laying off that workforce, some 620 U.S. and Spanish workers (140 in Maryland and 480 out of 575 in Madrid) who've been stringing, busing, laminating, framing, trimming, and testing panels at those less competitive BP Solar plants will soon be looking for new employment.
If the layoffs were to take place immediately, BP Solar's global headcount would drop from 2200 to 1580--a 28% whack.
BP spokesman Tom Mueller told me that the module operations at the 40-MW Frederick plant will be phased out by November, but the specifics of the Spanish shuttering have not been negotiated. The various silicon operations as well as the main crystalline-silicon solar-cell lines will continue to operate at the historic Maryland site, whose roots go back to 1982 when the name on the sign outside said Solarex.
He also said there would be "no impact at all on the technical programs and R&D," all of which will continue to be concentrated in Frederick. It also means that BP Solar's various Solar America Initiative and other research programs with universities and the like will not be affected.
With the module assembly line closure, the headcount will shrink to approximately 440 in Maryland. The shutdown will also remove BP's claim to fame as one of the largest vertically integrated solar manufacturing plants in the country.
BP Solar will continue to manufacture modules with its joint venture partners in India and China, Tata and Sun Oasis, according to Mueller. He also mentioned another part of BP Solar's cost-reduction efforts that will soon become apparent.
"We're in negotiations with third-party module assembly operations and anticipate having regional assembly facilities in the Americas, in Europe, and in Asia," he told me, "which would give us high-volume module capacity in or near our major markets." He added that the third-party arrangement is "likely to be one global deal" and would be finalized in the "next couple of weeks."
Even without the added production volumes provided by such a module outsourcing deal, Mueller said that BP Solar's capabilities will increase to 320 MW of global module capacity this year, which is double what the company had online in 2008.
On the cell side of the business, the BP spokesman noted that the traditionally more multicrystalline-side company (they were the first to commercialize the darn things, after all) is "ramping production of monocrystalline cells" and expects to be able to supply the more efficient cells to its module manufacturing partners. The devices made in Frederick don't just end up in Frederick modules, but are sent to the various global links in BP's module value chain.
The company inked several strategic contracts last year, ensuring what it calls a steady supply of high-quality wafers and cells to supplement its own manufacturing capacity. Apparently, this has led to increased sales and lower costs.
One major deal in the works involves the supply of 37 MW of modules to the Long Island Power Authority for two huge installations at the Department of Energy's Brookhaven National Labs. Although Mueller couldn't confirm where the hundreds of thousands of panels for the LIPA projects will come from, he did say it was his "expectation that those would be sourced from existing inventory."
BP Solar's head honcho Reyad Fezzani seems to be as sorry about the "impact of this business decision" as he is bullish on the "long-term prospects" for solar in the USA, which he stated in the press release "has undoubted potential to become the world's largest solar market. We believe that a growing market is the way to create material solar-related jobs--and three in every four of those jobs will be in downstream distribution, construction, installation, financing, and other support services."
I hope many of those 160 Frederick workers (y tambien los trabajadores de Madrid) facing the shorter-term prospects of the unemployment line eventually end up back in one of those downstream solar-support positions or even return to BP Solar when PV demand takes off again. For now though, the much-ballyhooed "strong longer-term fundamentals for solar power" are small consolation.
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Here in Australia BP turned its back on a market that supported it for 30 years, blaming the factory landlord. Historically, installers chose BP even though it had a higher price; it consequently had the largest market share and no real excuse to cry about costs. After the closure announcement, previous orders made in good faith based on the local product supply were filled with Chinese, and worse, Indian supply. The Chinese panels appear to be of comparable quality, but even the logos don't look right on the Indian gear... I say if they're going to make the product in some Chinese factory that doesn't belong to them, why wouldn't the average solar distributor just buy from the factory directly.
Continuing with the previous comment. BP Solar's decision to layoff a large number of Americans at this particular moment is baffling given the more than likely extreme negative reaction from the Obama Admin. that could impact possible (and significant) near term stimulus funds. Seems to be a short sighted decision that will make the books look a little better for just a few quarters - but with the downside of missing out on a very possible big payoff later this year or early next year. Even more baffling, BP Solar appears to have passed up a chance for a great public relations exercise where they could have hired a handful of laid off US auto workers for actual green jobs - which is exactly what Obama is pushing. Imagine the PR benefits of tearful and photogenic laid off auto workers thanking BP for both their new jobs and the opportunity to help save the planet. Local Frederick, MD residents could then welcome the new employees in a very high profile event that just happens to have quite a few members of the local and national press. Talk about a great and not too expensive PR stunt for both BP Solar and BP corporate. Instead, the best BP can hope for is that the Obama admin forgets about the layoffs later this year when BP comes begging for stimulus funds.
Again, why should the US Government provide subsidies to a company that lays off US workers and replaces them with foreign workers as soon as business slows down? Once BP Solar outsources module assembly - those jobs are more than likely gone forever if you use the outsourcing (to Asia) of IC packaging as an example. Once US manufacturers moved labor intensive IC packaging to Asia - those US jobs never came back. Besides, BP is a large company - couldn't they find a few of their own facilities to electrify with internally produced solar panels to absorb any excess inventory until business picks back up in a few quarters. Something else BP Solar doesn't seem to understand is that Obama likely (IMHO) wants the Green industry to absorb displaced workers from other industries that are having a tough time getting jobs - such as assembly line workers. Isn't the skill set of auto assembly line workers somewhat similar to module assembly. Sure, BP Solar is more than willing to hire a few Phd's from MIT or Caltech once business picks back up. But that's only a small mumber of 'green workers'. Plus, an MIT grad can get a non 'green' job if he or she is so inclined. It's the lower wage/lower skilled workers that need jobs (in the USA) and that seems to be what the green portion of the stimulus package as well as future green funding is meant to address - instead of hiring one or two cheap H1B new Phd grads. Another point, how do we even know that BP Solar is committed to expanding US operations once business picks back up. Could part of any offshoring deal involve wafer (cell) manufactuting tech transfer and BP is in the process of qualifying off-shore foundries that would be available for any excess or increased future demand?
Mark Osborne, News Editor. Response: It would seem that BP is reacting to the current oversupply and ASP decline of c-Si modules, rather than shooting itself in the foot on future expansion plans in the U.S. When the stimulus packages take hold (some analysts suggest 4Q09 onwards) then we could expect announcements from BP in 2010 to build new plants in the U.S. With only three ‘major’ c-Si module producers in the U.S. currently and a market that could grow significantly over the next 5 years, I doubt BP and many others will not take advantage of meeting that demand and gain from incentives to build plants and create jobs.
So after these layoffs - is BP Solar still eligible for stimulus package funds? One might think that outsourcing American jobs to offshore manufacturers would immediately disqualify BP Solar.