Zeta Consumer Products Corp. is closing the doors on its four factories — wiping out the jobs of 800 workers who make Tucker Housewares products and Zeta's Renew-brand trash bags. Zeta's acting president, Alfred Teo, blames brutal pricing by mass retailers, resin price hikes, GE Capital's move to pull out financing and a union organizing drive that disrupted production.
He said "the last straw that broke the camel's back" was Tucker's inability to pass along higher resin costs to mass retailers such as Wal-Mart and Kmart.
Tucker is believed to be the third-largest U.S. plastic housewares manufacturer that sells through mass retailers, behind Newell Rubbermaid Inc. and Sterilite Corp. But Tucker was losing $50,000 a day, Teo said. Now the company owes more than $100 million and faces a breakup as a going concern.
Teo said GE Capital is handling the liquidation, including the sale of plants in Leominster, Mass.; Kingman, Ariz.; Arlington, Texas; and Macomb, Ill. Tucker Housewares is based in Leominster, while Zeta's trash bag business is centered in Macomb.
Zeta has been the consumer products division of Sigma Plastics Group of Lyndhurst, N.J., a large manufacturer of industrial and commercial films owned by Teo. He said Zeta's financial problems have had no impact on Sigma, which reported 1999 sales of $680 million.
"The rumor in the marketplace right now is that Alfred's other businesses are being impacted. But that's not true. Absolutely not true," Teo said. "Zeta Consumer Products is the one that's running into trouble right now. All the other ones are doing very well."
Teo, who is accustomed to dealing with industrial customers, said he got a rude awakening to the world of retailing after Zeta bought Tucker in 1996 from Mobil Chemical Co. Problems mounted in the past year as prices climbed for polyethylene and polypropylene, the two main resins used in housewares. Since early 1999, PE prices have skyrocketed by 50 percent. PP is up nearly 40 percent.
"I've never seen a business like this," Teo said, adding that retailers are very hard to deal with. "When the resin price goes up, they don't want to hear about it. But if the resin price goes down they want a [price] reduction.
"You cannot run a business where an item that costs you $4.50 to make, and the big retailers — the Kmarts and Wal-Marts — want you to pay $3.75. You can't do it," he said.
Former Zeta President Raj Bal had hoped to capitalize on Sigma's greater resin-buying clout and markets for "green" housewares with recycled plastic. But Teo said Bal was not able to turn Tucker around.
"Zeta was doing very well until 1996, when we bought Tucker," Teo said. "The bag business was doing well. Then we bought Tucker, and Tucker was losing over $1 million every month. Mobil was losing $14 million a year" on Tucker before the sale, he said.
Toward the end, Teo said, Tucker still was losing between $750,000 and $1 million a month.
"Now with the [resin] increase and the inability to pass it through to customers, we would end up losing $2 million a month."
Under Mobil, several key Tucker managers and technical people were laid off or left the company, according to housewares industry sources.
Bal left Zeta in mid-1999, and Teo, who had been chairman of Zeta's board of directors, became the acting president. Bal could not be reached for comment.
Teo said he pumped in an additional $10 million to keep Tucker afloat, but the bleeding continued. In August, Zeta also brought in more financing by selling a "substantial" equity interest in Zeta to Equity Ventures Inc. of Leominster. Equity is owned by Chubby Celli — who was a past Tucker president — and his son, John Celli. After Bal was removed, the Cellis took management positions in Tucker.
Chubby Celli did not return a telephone call seeking comment.
Teo said he wanted to keep Tucker Housewares running and sell it as a going concern. But that effort ended, according to Teo, when GE Capital yanked out financing on April 3.
"That came as a surprise to me," he said.
GE Capital officials had no comment.
Teo said he was talking with several potential buyers before GE Capital shut off the money.
"We'll probably have to sell [the factories] separately," he said.
Leominster Mayor Dean J. Mazzarella said on April 13 that has had at least a dozen calls from companies interested in the local Tucker building. He estimated that the 500,000-square-foot building is 10-15 years old. It has rail accommodations, as well as a motorized cart system inside.
Even so, the apparent demise of Tucker hit hard in Leominster, the center of the U.S. plastics housewares industry. Tucker was founded in 1957 by Felo Tocci and Ray Morse.
Felo's son, Leonard Tocci, understands the economics. Cutthroat retail pricing "has caused a lot of pain for a lot of people in the plastics industry."
Philip Brandl, president of the National Housewares Manufacturers Association in Rosemont, Ill., said manufacturers are working in a "very challenging" environment of low consumer-good inflation and higher costs for raw materials and labor.
"It's very difficult to maneuver around that, if the breadth of your product line doesn't go outside of those plastic commoditized products," he said.
Teo said Tucker and Zeta employed a total of 800 people, but he could not break out employment for each unit company.
Teo said the two businesses had annual sales of about $125 million — $90 million from Tucker Housewares and $35 million from the bag business.
Teo wanted to keep the company open, but he said GE Capital was not very sympathetic — and he can't really blame them, based on the current state of plastics housewares.
"I told them to let me try to do an orderly liquidation and find a buyer for the business while it was still running, but GE said, `Why do you want to do that? Every day you run it you lose $50,000.' And that makes sense to me," Teo said.
GE Capital recently went through the wringer as the main lender of another housewares company — Euro United Corp. in Oakville, Ontario, which filed for reorganization in December.
Teo does not think a bankruptcy is likely at Zeta. Early indications are that debtors will get paid, "if we don't have to go to a fire sale — if we have an orderly liquidation."
He said Zeta owes GE Capital $20 million for inventory, such as finished goods and resin, and accounts-receivable financing. The company also owes $65 million to bond holders for equipment and real estate. Zeta also owes Teo a total of $28 million.
A union campaign at some Zeta plants did not help matters, Teo said.
The Union of Needletrades, Industrial and Textile Employees won representation of workers at the Illinois plant and tried to organize the Texas plant, a UNITE spokeswoman said.
Teo said the union picketed in front of some Dollar General stores and during the International Housewares Show.
"It cost me a lot of money to fight them off. There was so much disruption," he said.
But even with the union tension, Teo said he feels bad for laid-off employees. "I am sick for the hard-working, good people," he said.
Leonard Tocci, the Leominster plastics veteran, said closing a bedrock company like Tucker will disrupt workers' lives.
"Fortunately, it's a strong labor market today. There are jobs available, but you still hate to lose a job you've had for 15 or 20 years," he said.
Mazzarella called the news "a sad thing to happen" and said the local impact is broader than just Tucker.
"A lot of local vendors have been doing business with them and they fear not getting paid. It will be devastating for the small companies and devastating for the families [of the workers at Tucker]," he said.
Mazzarella said about 190 people worked at Tucker in Leominster. The city is working with other local companies to put on a Job Fair for the displaced workers. A survey by the North Central Massachusetts Chamber of Commerce showed 60-80 plastics jobs open in the Leominster area.
Plastics News correspondent Frank Antosiewicz contributed to this story.