Falling oil prices cause some Treasure Valley manufacturers to lose business, cut jobs

Two postings on the wall of Mobile Components Distributors, a steel chassis manufacturer on Amity Road off Federal Way, sum up why business was suddenly in the tank.

The first is a framed certificate, celebrating a 40-year partnership with Nashua Homes of Idaho, a modular homebuilder also on Federal Way. Mobile Components Distributors had sold 60,000 chassis to Nashua over that time. Today that’s closer to 66,000, owner Jerry McDaniel said. In recent years, most of those units were built into living quarters and shipped to tar fields on the Canadian side of the Bakken formation — the same mass that made North Dakota a major U.S. crude oil producer.

The second posting is a neatly drawn bar chart, showing the company’s monthly sales compared with 2014. For the first three months of 2014, sales totaled $1.5 million. For 2015, they were $448,000.

In December, McDaniel said, Bakken tar-field rigs shut down — and his company’s sales to Nashua did too.

“It didn’t slow down. It just stopped,” he said. “It dropped to nothing.”

The collapse of oil prices, hailed by most consumers and businesses, has had a little-noticed side effect in the Treasure Valley. Dozens, perhaps hundreds, of local workers have had their hours cut or have lost their jobs altogether because their employers have lost business to oil-field suppliers.

The decline has rippled from one company to the next. When exploration companies in the Bakken fields stopped drilling, they stopped needing modular homes from businesses like Nashua. Nashua stopped needing axles from companies such as McDaniel’s. And so on.

Work has slowed at Nashua and more than a dozen Treasure Valley companies that make or deliver products to oil camps, including modular homebuilders, steel wholesalers, truckers and a mattress store, McDaniel said.

Reliable layoff data are unavailable, as some companies won’t discuss their cuts and no large-scale layoff notices have been filed with the state.

Statesman phone messages with nine Southwest Idaho businesses that seem likely to be affected were not returned. The silent companies include modular homebuilders, steel companies, a welder and a maker of wood mats that form makeshift roads on undrivable surfaces common in Bakken oil fields.

McDaniel talked only reluctantly. He cut Mobile Components Distributors’ workforce from 18 to five in December. His remaining employees work two days a week.

Nashua General Sales Manager Don Kiehl returned a call but declined to say whether sales had fallen or Nashua had laid off workers. “Certainly, if I were to tell you that the price of oil didn’t affect our business, it would be tomfoolery on my part,” Kiehl said.


The price of U.S. crude oil plunged from a peak of $107 a barrel in June to the low $40s in January. The price now hovers around $55 a week, suppressed by a million-barrel-a-day oversupply in the global market.

Oil companies have responded by cutting expenditures by about a third over the past year. The global rig count has dropped more than 50 percent in the last six months as companies try to keep spending below cash flow.

The cuts include layoffs of more than 100,000 oil field workers, Bloomberg News reported. Oil rigs, including those in North Dakota and Canada that bought products from Idaho companies, are sitting idle.

Companies such as Halliburton Co. and Baker Hughes, which are working to merge with a headquarters in Houston, have announced a combined 19,500 layoffs. Oil field services giant Schlumberger plans to lay off 20,000 workers.

Oil executives are bracing for a long period of lower prices. “You’ve got to be ready to survive at $60-a-barrel oil, maybe less,” Steven Chaze, CEO of Houston-based Occidental Petroleum Corp., told the Houston Chronicle.

McDaniel said he expected most local companies in industries supporting oil camps have lost sales or laid off employees. “That’s just it. Nobody really knows how deep this thing goes,” he said.


One Boise company that isn’t cutting back — and is willing to talk is Guerdon Enterprises. The company is near Nashua on Federal Way and makes units designed to become mobile living quarters for large camps, including gyms, recreation areas, kitchens and dining rooms as well as worker sleeping quarters.

In recent years, about a third of Guerdon’s business came from selling mobile living quarters to oil companies, CEO Lad Dawson said. Guerdon tripled its employees to more than 300 from 2009 to 2012 thanks to the North American oil boom. It shipped units to North Dakota, Alaska, Texas and Canada.

Business remains strong for Guerdon because it sells modular buildings to an array of industries over 12 Western states, Dawson said. The company is hiring.

“The oil and gas business has taken a recess,” Dawson said. “But, in our case, business is not only up but growing, primarily because we have such a diversified customer base and geography to serve.”

Diversified sales have also protected Leisure Mattress Factory on Federal Way. The manufacturer used to sell mattresses to Nashua for oil-field living quarters, President Mike Hackwell said. The company was forced to lay off one of its six employees when Nashua stopped ordering mattresses, but it has fallen back on the retail showroom business that carried the company before the oil boom.

Hackwell declined to disclose sales or say how large a part wholesale business played. But the wholesale business was “a nice boost,” he said.

“We’ve been here a long time, and we have a pretty good retail,” Hackwell said. “But we do miss Nashua.”

Another company still going strong is Superior Steel Products in Caldwell, which makes metal tanks that hold fluid, including oil. About 30 percent of the company’s business came from oil companies in North Dakota during 2011 and 2012, owner P.L. Questad said.

The company now does no business in North Dakota. But that loss has been offset by increased orders from fertilizer companies, he said.

Questad said the price of steel usually falls when oil prices drop, so he’s spending less for materials. “We buy a lot of steel, and the steel business is good,” Questad said. “We’re back to about 2003 steel prices right now.”

Though the oil boom brought profits, Questad said he doesn’t miss the hectic business atmosphere. “It was the Wild West,” he said. “Everybody wants stuff fast. Nobody does any planning. It’s not a very enjoyable experience.”

McDaniel was considering retirement in 2010 before the oil boom jump-started his company’s sales. The next year, sales jumped 121 percent to $4.2 million. The company set a sales record in 2014 at $4.8 million. Now it is on pace for its worst year in recent memory.

McDaniel keeps his skeleton crew busy making chassis for portable classrooms that will be shipped to Salt Lake City. They’ve also started making fireplaces.

“We’re doing more fireplaces, but that doesn’t hire many people, and it doesn’t make good use of our equipment,” he said.


One industry change could result in hiring a lot of people, McDaniel said: building the Keystone XL Pipeline. The proposed pipeline would carry 830,000 barrels of petroleum per day from western Canada to oil refineries and ports on the Gulf Coast. About half of a proposed pipeline network is already built, including a pipeline that runs east from Alberta and south through North Dakota, South Dakota and Nebraska.

Congress approved Keystone XL, but President Barack Obama vetoed the bill in March, saying the pipeline would damage the environment. Because extracting oil from shale requires more energy than other methods, Obama said the pipeline would contribute to global warming. He also said that the estimated 42,000 jobs that would be created by building the pipeline would almost entirely end after completion of the project. Proponents hope that Obama will eventually allow the project or that a successor will.

McDaniel said he always knew the oil boom had an expiration date. “We knew it wouldn’t last forever,” he said. “But it could continue if we could get this doggone Keystone going.”

Guerdon’s Dawson said most oil market slowdowns recover in six to 18 months, and he expects the current slump to end as well. Rising oil prices would help, especially if the Keystone pipeline were approved, he said.

“A lot of these projects will move forward again in the not-too-distant future,” Dawson said. “But nobody I’m talking to thinks that will happen this year.”