Saturday, July 12, 2008

Tax Incentives Causing Plant Shutdowns


Hundreds of job seekers at the Liberty Center in Lancaster, Ohio (population 35,353) lined up to apply for several dozen jobs that will be opening when U.S. Corrugated opens it new cardboard manufacturing plant in November.

Ironically on the same day U.S. Corrugated with 20 full service manufacturing facilities in 14 states and 1,000 employees gave notice to its 75 employees at it’s Greensboro, North Carolina corrugated sheet plant that it will be closing down six days later with no reason according to the Greensboro News Record. Like pawns on a chessboard assets are moved around yet in this game the local economy suffers.

The Greensboro plant was established in 1981 and was one of three sheet feeder plants that were owned by the LINPAC Group a U.K-based company. In 2003 the LINPAC Group became a portfolio company of Montagu Private Equity through a debt and mezzanine package from Deutsche Bank.

Private equity transactions through their leveraged buyouts of manufacturing plants has it’s advantages and disadvantages. Lately over the past year many plants owned by private equity have been closing due to sour economic conditions with reasons given such as, “ realignment of capacity in order to streamline processes and be competitive in a global marketplace.”

Six months earlier, in January 2008, prior to the recent Greensboro plant shutdown, LINPAC Inc. a business unit of UK-based LINPAC Group Limited was acquired by Four M Holdings LLC (Four M), an investment vehicle controlled by Dennis Mehiel, also a super delegate in the 2008 Democratic presidential nomination Additionally, in 2004, Mr. Mehiel was New York State Chairman for the Democratic Presidential ticket of Massachusetts Sen. John Kerry and North Carolina Sen. John Edwards.

After the acquisition LINPAC INC. changed its name to U.S. Corrugated, the same private company that acquired Box USA, Solo Cup and The Sweetheart Cup Company. Four M Holdings LLC (Four M ) has completed more than 25 North American transactions in the past two decades.

The economy is very favorable in Lancaster, Ohio, especially when the city is providing U.S Corrugated with a 15 year 100 percent tax abatement, which includes $1 million in incentives. At the state level, are over $500,000 of grants and job-creation tax credits according to news report from the Columbus News Dispatch.

Greensboro, North Carolina is not so lucky as the workers become casualties mired in the investment vehicles sold, traded and acquired as in the recent acquisition that U.S Corrugated completed in March 2008 with the purchase of Anderson Packaging Inc. (API), a Kentucky-based corrugated packaging manufacturer.

2008 Plant Shutdowns Google Map

Photo Credit: Draco2008 @ Flickr









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