MOUNT GILEAD, OHIO — At the Cornerstone Cafe, owner Teresa Mann pondered the future of HPM Corp., as a local investor group works to purchase the machinery maker within the next two months.
Mann ran a lathe at HPM during the 1970s. "My whole family has worked there. My grandpa retired from there. My dad retired there. He worked there 47 years," she said.
Mann, like other residents and political leaders, is troubled by recent layoffs that cut employment to about 300, from more than 500 last year.
Some people in town have even speculated that HPM might shut down.
"Yes, we had some real serious thoughts about that," said Donald Patten, vice president of the union representing HPM workers.
HPM and Mount Gilead have been joined at the hip since 1877, when the company was founded to make apple presses. Now all eyes are on the sprawling main factory, the largest employer in this village of 3,300 residents.
After months of rumors, Mount Gilead finally got some answers March 28, when employees met with William Flickinger, president and chief operating officer. Flickinger told employees that the group signed a letter of intent to buy HPM from investors, including Los Angeles businessman Parviz Nazarian.
The Flickinger team wants to return local control to HPM after five years in the hands of out-of-town ownership through a holding company, HPM Stadco Inc.
At the Cornerstone Cafe, Mann poured another cup of coffee. "We're hoping it will stay open. That's the biggie, because it will affect the community," she said. Meanwhile, over at the factory, Flickinger was meeting with potential investors and working the phones to line up financing.
Flickinger said in an April 3 interview that he plans to move fast.
"I want to have a bank lined up. That won't mean a full commitment of `Here's exactly what we'll fund.' But I want to have a bank ready to come in doing their due diligence by the end of April. And certainly my plan is that, by the end of May, we could be doing the final closing," he said.
Flickinger said he already owns 10 percent of HPM. Nazarian's group owns the other 90 percent. Neil Kadisha, Nazarian's son-in-law and a major shareholder and director of wireless technology giant Qualcomm Inc., used to be active in managing HPM but sold his stake of the machinery company more than a year ago.
Purchase takes shape
Flickinger, a 33-year HPM veteran, said he has seven investors lined up. That number could grow.
"There is a core group of investors that is sufficient to do the transaction today, but I am not against adding some additional investors to provide a larger pool of money," he said. He declined to identify them or get into any details about the financing.
Several employees have asked if they can buy shares, but Flickinger said there isn't enough time to include employees in the current buyout group.
"But I would certainly be interested, over the next six to 12 months, that we could make an arrangement where employees could also buy stock," he said.
Flickinger said the investors want to buy all three HPM businesses — injection molding machines, sheet extrusion lines and die-casting machines.
"That's our plan and that would probably be [Nazarian's] preference, not to retain a small share, but to sell it all now," Flickinger said.
Nazarian did not return calls seeking comment.
According to industry sources, in the past six months, several potential buyers considered buying parts of HPM. Husky Injection Molding Systems Ltd. reportedly looked at the die-casting press business. Davis-Standard Corp. checked out the sheet line operation.
Those two companies declined to comment. Flickinger would not confirm any specifics, except to say that during their tenure at HPM, Nazarian and Kadisha looked at buying related businesses and divesting some HPM products.
"All I can really say is nothing ever materialized from any of these discussions," he said.
Hopes and fears
"My goal is to provide stable ownership to the company, with people who are knowledgeable in the operation of the company," said Flickinger, an engineer who likes to spend time on the shop floor.
In 1993, Flickinger became HPM's top executive after the death of Richard Studer, who had led a group of executives that bought the company from Koehring Corp. in 1976.
In 1996, HPM was acquired by Stadco Inc., a company in Los Angeles that does high-precision machining for aerospace and defense customers. At the time, Flickinger retained his minority stake.
Just a few months after buying the Mount Gilead company, the new owners surprised the plastics machinery industry by acquiring a company in Schwerin, Germany, called Hemscheidt Maschinentechnik Schwerin GmbH & Co. Kadisha boldly declared the new owners would triple HPM sales, from $100 million to $300 million annually. They made a splash with a big, exotic booth at the NPE 1997 show in Chicago.
"Both Mr. Kadisha and Mr. Nazarian have put large sums of money into the company for certain programs and things that they wanted to see done," Flickinger said. "And in no way have they ever taken any money out of the company. It's literally always been coming into the company. I think they probably are more reluctant today to put money in than they were a couple of years ago."
Last summer, the German operation filed for bankruptcy. Since then it has shut down. Speculation heated up that the same thing would happen in Mount Gilead. But rumors about HPM are nothing new.
"There's always been these rumors of a buyout, and this and that. But here recently, it seems like people were more saying, `OK, is it gonna close?'|" said Mann, the restaurant owner.
That would hurt the Cornerstone Cafe and other local businesses. Mann said HPM employees stop by for breakfast, and sometimes the union leaders meet there. At the courthouse, all three Morrow County commissioners called the health of HPM a high priority.
"It's crucial that it stays open," said Commissioner Jean McClintock. Commissioner Don Staley, who owns a barbershop in town, said: "Yes, it's been a concern. Definitely, we've been quite concerned."
Commissioner Olen Jackson said local officials would be more comfortable with local ownership of HPM than with Nazarian. "I think Bill Flickinger has expressed more concern for Morrow County and the community than obviously Mr. Nazarian has," he said.
Mount Gilead Mayor Tom Whiston is more charitable toward Nazarian. "Parviz Nazarian has infused some capital and has tried to do some things differently, and now apparently Bill is trying to buy it and infuse local ownership into it," he said.
The employment situation seems to have stabilized, according to Patten, vice president of Local 1319 of the International Association of Machinists. He said in early April that nobody had been laid off in recent weeks, although the company had not recalled any laid-off workers, either.
The union supports Flickinger, Patten said. "I think it's a positive thing. For a long time we didn't know anything. All we'd hear is rumors."
Mayor Whiston said local ownership would help: "In most cases, when you have someone there on a day-to-day basis, that facilitates making decisions."
Whiston, a pharmacist, said village government has not made any contingency plans on how to deal with the loss of HPM. "I try and deal with the reality of things rather than speculation," he said.
The mayor said Mount Gilead is trying to diversify its industrial base. The village also is growing as people from Columbus, the exploding state capital just two counties south, seek the refuge of small-town life.
Even so, after 124 years, the loss of home-grown HPM would hurt.
"It's a lot of people's lives and it's a lot of people's history," the mayor said.