General Mills Inc. is closing its 430-employee cereal plant in Lodi as it struggles with overcapacity and declining sales.
The food giant said Thursday it expects to close the plant by the end of next year, although the final decision on shutdown remains subject to negotiation with union leaders.
General Mills is one of the leading employers in Lodi, and the closure figures to be devastating. Economist Jeff Michael said more than 1,200 jobs could be erased in total, including nearly 800 jobs out in the community that depend on the factory in some way.
“It’s a big facility right in the middle of town,” said Michael, of the University of the Pacific. “When you add up all the ripple effects, it could be 3 percent of the jobs in the community.”
Lodi’s unemployment rate was estimated at 8.3 percent in July, according to the state Employment Development Department.
The plant pays an average wage of $24 an hour, plus benefits. The region is losing very good middle-class jobs, said Antonio Castro, president of Local 59G of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union.
General Mills has been reviewing its manufacturing operations for the past three months. The shutdown at Lodi is part of an effort “to optimize operations and reduce excess capacity,” said company spokeswoman Bridget Christenson. She said the company, based in Minneapolis, would consolidate manufacturing at other plants. She wouldn’t say which ones.
Castro said geography appeared to work against the Lodi plant, which opened in 1947.
“Being on the West Coast … we’re the furthest out from the Midwest, which is where they get a lot of their materials from, their raw materials,” Castro said. He said company officials have been “talking about overproduction at their facilities for over a year.”
Earlier this week, the company reported a 25 percent drop in quarterly profits. Sales fell 2 percent, and U.S. sales fell 5 percent. The company said Project Century, its formal review of manufacturing operations, is expected to generate cost savings of $40 million in the current fiscal year.
Although the company is obligated to negotiate the shutdown with the union, Castro said it wasn’t immediately clear what the union could do to prevent the closure. He said a meeting with the company is set for next week.
It’s the second major cereal plant to close in the San Joaquin Valley in the past year. Post announced in March 2013 it was closing its 140-employee Modesto plant.