Husky and Schad clash, Niigon closes doors

By: Bill Bregar

August 7, 2013

Niigon Technologies Ltd., a molding plant run by the Pottawatomi First Nation reserve on Canada's Georgian Bay, closed Aug. 9 as a legal battle rages between Robert Schad and his former company Husky Injection Molding Systems Ltd.

The legal action charges that Schad used his position at Niigon to access new Husky technology for his startup machinery company, Athena Automation Ltd. Schad strongly denies the accusations.

The shutdown will wipe out 22 factory jobs in the First Nation community, where unemployment soars once the summer tourism season ends.

"Niigon is closing for sure. It's winding up and [the] last day is really today [Aug. 9]. We're going into a period where we're basically going to be just cleaning up and winding the place up," said General Manager Steve Mason.

But Mason is trying to reopen a scaled-down version of the factory with help of customers. Mason said the plant could reopen with about eight or nine employees and five injection molding presses.

Interviewed by phone Aug. 9, Mason said there are five Husky machines in the plant, down from eight when it was at full production. The local First Nation group, the Pottawatomi of Moose Deer Point, owns two of the machines, a customer owns two more and another customer is negotiating with Husky to buy the last one, he said. He declined to identify the customers.

There is no guarantee the plant will reopen.

"There's a chance it could stay open, but in a much different way. The support would be through the customers to keep it going and it would be much smaller," Mason said.

Mason declined to comment on what is shaping up to be a bitter legal fight between Bolton, Ontario-based Husky and the 84-year-old Schad, who sold Husky in 2007 and has since started a competing injection molding press company.

"We're caught in the middle," Mason said. "If it wasn't for all of the goings-on now, I'm sure we wouldn't be shutting down."

Husky filed a lawsuit May 24 in Ontario's Superior Court of Justice, seeking $100 million in damages — $25 million each from Schad, a former corporation he owned called Alberta ULC, Athena Automation and Sipa SpA, an Italian blow molding machinery maker working with Athena.

The lawsuit also names Mason, a former Husky employee who transferred to Niigon, and became a Niigon employee in 2007. Husky is not asking for monetary damages from Mason. Also Niigon is not named as a defendant.

Schad has countersued Husky for $500 million

Schad's charitable Schad Foundation financially supported Niigon when it started up, molding parts in the remote Georgian Bay area, about a 2½-hour drive north of Toronto.

Money from the Schad Foundation helped make the site an environmentally sustainable area, including solar cells and a biofiltration system for wastewater. The federal government and province of Ontario also contributed financial help.

Schad happened upon Moose Point when his car broke down in the mid-1990s and members of the Pottawatomi of Moose Deer Point helped him out. An avid outdoorsman, Schad had a cottage and boat in the area.

Now Schad charges that Husky is "getting back at me" with the lawsuit and taking it out on Niigon, one of his pet projects, because Schad formed Athena Automation to make injection presses.

Niigon's highly automated plant started molding parts in 2001, on Husky machines. Schad was the controlling shareholder of Husky at the time.

In a prepared statement, Schad said his Schad Foundation donated $28 million to Niigon — $8 million from 2000-07, while he was still the controlling shareholder of Husky, and $20 million since he sold his shares in 2007.

Today Husky is owned by private equity company Berkshire Partners LLC.

"The disappointing thing is that the culture in my former company has changed," Schad said by phone.

Schad also issued a prepared statement after the story broke in the Globe and Mail newspaper in Toronto. According to Schad, in 2000, Husky agreed to loan some injection presses to Niigon, and sold the operation some presses "under favorable terms." All but one of the loaned machines were returned to Husky by 2008 and replaced with leased machines.

When Schad announced Athena's partnership with Sipa on Dec. 18, 2012, Schad said Husky two days later demanded the immediate return of the leased and loaned equipment in a meeting with Niigon Chairman Peter Kendall and Niigon GM Mason.

On Jan. 18, 2013, Husky issued a formal letter demanding the equipment back. That is forcing Niigon to close, according to Schad's statement.

Mason confirmed that basic account. "We had said all along that OK, fine [to return the machines], but can we do this in an orderly fashion so we don't put out the customers?" Mason said of the discussions with Husky. He said that, for about two months, Husky officials said they wanted the injection presses back right away, but later they became more flexible so that Niigon could wind down the business.

Husky charges Schad and Sipa violated confidentiality agreements with their new partnership to get confidential information about Husky's prototype injection molding system known as LEAP, with electronically driven motor systems, electronic module controls and related software.

Schad responded that Niigon "had nothing to do with the Sipa/Athena partnership." He did say that Niigon had two beta-test machines from Husky, but he said Athena did not use the technology.

"I do not understand what 'confidential information' that we have used," Schad said.

Husky issued a statement from Michael McKendry, its vice president of corporate services and general counsel: "Every day, people at Husky invest their time, intellect and creativity to develop innovative ways to delivering value to our customers. We are committed to protecting these investments and ensuring that any rewards and customer value that result from our inventions and knowledge stay within the Husky team. Husky is currently in legal proceedings with Robert Schad, Athena, Sipa and others regarding Husky's confidential and proprietary information. That litigation includes the issue of Niigon.

"Husky has provided significant financial and technical support to Niigon over many years and regrets that its relationship with Niigon has ended in these circumstances."

Husky said it would give no further comment since the matter is moving through the court.

Schad thinks Husky has an ulterior motive, to hurt Athena and its partner Sipa, just as they begin to have commercial success. "We see it as a lawsuit just to stop us from getting on the market quick," he said.

At Niigon, he said the Schad Foundation will fund most of the $4 million bill for costs associated with the shutdown, including severance pay for the 22 workers who are losing their jobs.

Mason, at the plant in Georgian Bay, said if the operation survives, Schad will have no involvement in the new business.

Officials of the Pottawatomi First Nation did not return a telephone call for this story.

News of struggles at the plant hit home for Niigon's former general manager, Bob Dickson.

"It's a pretty sad day. This company's been in business for over 10 years and has produced some very good quality products. The customers were all happy," he said.

"These [First Nation] communities struggle, and are criticized often for not being in the business world. And this one was [successful]. It's a sad consequence."

Plant closing. Severance pay. It all gives new meaning to the word "Niigon," which in the native Ojibwa language means "looking to the future."