Manufacturing Plant Closure Selections within Firms

This research focuses on the influence of location on the decision to close a manufacturing facility. Case studies of closures in the Cincinnati region, 1980–88, reveal that most closures are little affected directly by location, with corporate difficulties and plant characteristics being more significant. Approximately two-thirds of the closures were forced on the firm by severely inadequate profits. Analyses of selective closures within multiplant firms show that the most vulnerable are inappropriately sized and less technologically sophisticated plants. Regional variables such as taxes, business climate, and declines in local market demand or access to supplies are not often important. Relative location within the firm or within the metropolitan area also are not significant. The one regional exception is labor; plants deemed to be in areas of poorer labor relations and/or higher labor costs are more likely to be selected for closure. The appropriate locational model for plant closure is not the simple inverse of the new plant model because closure decisions are more spatially restricted. Closure decisions are firm specific but not irrational, so predictive models may be possible. The policy implication is that there is little an affected region can do to prevent closures.