Owens-Illinois

The Owens-Illinois glass plant on Beverly Drive announced it is closing one of its three furnaces. The furnace was dedicated exclusively to producing beer bottles, and demand for the product has declined domestically, according to the company.

Citing less demand for beer bottles, Waco’s Owens-Illinois plant on Beverly Drive will deactivate a furnace used in production, a move a local industry recruiter said would lead to layoffs among the 350 employees.

Kris Collins, the Greater Waco Chamber of Commerce’s senior vice president for economic development, confirmed Friday she is investigating whether the announcement, and accompanying job losses, would jeopardize an $805,000 economic development grant to Owens-Illinois in 2012. The company that year announced it was continuing a $74 million upgrade of the facility built in 1944.

Terms of the grant awarded through the Waco-McLennan County Economic Development Corp. required Owens Illinois to retain 280 positions and create 70 others, Collins said. The contract with the company expires early next year, and audits to date show compliance, she said.

“We understand they are idling a furnace due to lower demand for beer bottles,” Collins said. “That will have an impact on employment, but we have not heard exact numbers. It is my impression they are still attempting to arrive at those. Employment levels do impact our incentive agreement with Owens-Illinois, so we will be having discussions.”

Collins and Melett Harrison, who coordinates economic development efforts for the city of Waco, said they were aware of reporting by a local television station that 75 positions would be placed in jeopardy.

Owens-Illinois spokeswoman Leslie Orozco issued a statement but did not respond to messages seeking comment on layoff totals.

“With continued softer demand in the U.S. across the beer category, O-I plans to idle one of the furnaces it uses to manufacture glass containers at its Waco facility for an indefinite duration,” Orozco said in her message. “This particular furnace is dedicated 100% to producing beer bottles. The remaining furnaces will continue to produce some beer as well as spirit and food glass packaging.”

Chris Manuel, who works in the Ohio-based company’s investor relations office, also said he has no specifics to share about layoffs. He said it was his impression the decision to mothball one of the plant’s three furnaces could be overturned if market conditions, and beer demand, change.

“That’s written right here in a statement I’m looking at,” he said by phone.

Bart Watson, chief economist for the Brewers Association, representing more than 7,000 primarily craft brewers and affiliated retailers and suppliers, confirmed in an email response to questions beer sales have flattened.

“There are two separate things going on, both of which are reducing beer bottle sales,” he wrote. “The first is an overall decline in domestic beer sales. Total beer sales in the U.S. have been static to slightly down in recent years. Underneath that, domestic production has declined, and imports have gone up, primarily driven by Mexican imports.”

Domestic production of both bottle and can containers was down 1% to 2% in 2018, probably closer to 2%, Watson said.

“The parts of the domestic beer market that are growing aren’t growing in bottles,” he said. “We’ve already mentioned imports, which probably are growing bottle sales, but they aren’t being made in the U.S., but other parts of the beer industry that are growing are either shifting toward cans or almost exclusively in cans. The two I’d point our are craft, which used to be almost exclusively in bottles, but is approaching 50-50 in cans and bottles, and number two, seltzer, which so far is 99%-plus in cans.”

So bottles are getting hit with a double-whammy, Watson said.

Owens-Illinois, which has a presence in 23 countries, is enjoying sales increases in markets outside the United States, according to second quarter financial results for 2019 posted on its website.

A summary prepared by CEO Andres Lopez states the $1.8 billion in net sales were “essentially flat” during the April-June time frame, while earnings fell short of management expectations and profits slipped.

“Sales volume growth was strong in the markets where O-I recently added new capacity, including Brazil, Colombia and China,” said Lopez, while “softer demand continued in the U.S. across the beer category.”

Lopez said the company completed its acquisition of Nueva Fanal, a one-plant operation near Mexico City with four furnaces “to produce and supply approximately 300,000 tons of glass containers annually for Grupo Modelo brands serving the local and global export markets.”

Jose Loya, of Baytown, a Texas representative for United Steelworkers, said the jobs of 12 mold-making union employees at the Waco plant are secure. He said he does not know the status of members of other unions working there.

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