Timber troubles hurt northern economy
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Tim O'Brien worked for Ainsworth Lumber in Bemidji for more than 15 years. He made pretty good money there. Now he's out of a job.
O'Brien says at first he was devastated, but he's been getting help from job counselors at the local Minnesota Workforce Center. Now, he's enrolled at Bemidji State University and plans to be a teacher. O'Brien says many of his former Ainsworth co-workers aren't so lucky.
"A lot of the workers there basically had the rug pulled from underneath them," said O'Brien. "They are just scrambling and they are starving for some direction."
Job counselors at the Workforce Center say they're expecting more than just former Ainsworth employees coming in for help. Wanda Melgaard is a team leader at the center. She expects a ripple effect from the timber industry slowdown. Melgaard says lots of people in northern Minnesota depend on timber for their livelihood.
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"We are hearing things like there are retailers that are suffering because of this," said Melgaard. "The people that sell the tires and the oil and gas and whatnot for the industry itself. (We haven't had) anybody actually coming in the door saying 'I was laid off' or 'I had lost my business as a result,' but we think it's probably going to happen."
Observers say the ripple effect of the Ainsworth cuts in Bemidji could have a $25 million drain on the local economy. Similar impacts are expected from the temporary lay-offs in Cook and Grand Rapids.
It's a disaster. These people... have no market. It's bad. Really bad.
Ainsworth's troubles stem from a downturn in the housing market. That, plus the fact that Minnesota has some of the highest raw timber prices in the country, make it difficult to turn a profit.
Among the hardest hit so far by the slowdown are the people who cut and haul the timber. Logging companies have already laid off workers, and some people expect things to get worse. Dick Walsh runs a lumber and trucking company in Park Rapids.
"I hope it's not terminal, but it's critical," said Walsh. "It's a disaster. These people are, they have no market. It's bad, really bad."
Walsh is a former president of the Minnesota Timber Producers Association. Last year his company hauled thousands of cords of wood to the Ainsworth plant in Bemidji. Now Ainsworth isn't buying wood.
Walsh says he hasn't laid off any loggers yet. But because of the uncertainly, he'll scale back plans to upgrade and purchase new logging equipment. Walsh expects the number of smaller logging operations in Minnesota will dwindle.
"They're going to be forced to get out of it, you know, because you can't stay in business and support those high equipment costs and not have a market," said Walsh. "Not for very long. I haven't heard of anybody going out of business from it yet, but it will happen, you know. It will. It's inevitable."
Regional bankers are bracing for the timber industry crisis to deepen. Randy Frisk is a commercial loan officer at First National Bank in Bemidji. He says it's not unusual for a logger to borrow nearly half a million dollars to purchase just a single piece of equipment. Frisk says he expects there will be an increase in foreclosures and bankruptcies.
"We're looking at strategy to see what we're going to do three months down the road, because, really, logging doesn't hit full force in this area until about the first of December after the ground is frozen," said Frisk. "And at that time we'll know whether or not these plants are viable and going to be purchasing wood. The issue revolves around getting the price of stumpage back down to a profit-making product."
Frisk and other observers say Minnesota's raw timber prices are high because there's not enough timber on the market. They say it will stay that way until more state and federal forest lands are opened for harvest.
Ainsworth officials, meanwhile say they will keep their plants in Cook and Grand Rapids closed until market conditions improve. No one expects that will happen any time soon.
