To keep Demag Plastics Group from uprooting its injection press assembly plant in Strongsville, Ohio, and moving to South Carolina, the state of Ohio is providing $650,000 in grants - and the machinery maker also is seeking foreign trade status that would make its inventory tax-exempt.
The Strongsville factory is the latest injection molding machinery maker in Ohio to get government help, as the plastics machinery industry suffers through a withering U.S. economic downturn that began in mid-2000. In other moves from Ohio:
* Last year, government loans helped the HPM Division of Taylor's Industrial Services LLC to purchase its factory in Mount Gilead, Ohio, and add metalworking equipment.
* In 2002, Milacron sold its Batavia, Ohio, machinery factory to the county, which then leased it back to Milacron at a low interest rate.
A local official said Strongsville took the threat seriously that DPG would close the former Van Dorn plant, which opened in 1970.
``They actually came to us and said, `Look, we are thinking about relocating our operation to South Carolina, and what will the city do for us?' '' said Eugene Magocky, Strongsville's economic development director.
The decision by Demag Plastics Group to close its spare parts and service facility - also in Strongsville and just a few miles away from the main plant - also affected the decision, Magocky said. The operation is being moved into the main assembly plant.
``It brought the realities closer to home,'' he said. ``When a company starts consolidating operations, obviously, they're trying to reduce costs.''
Demag Plastics Group now plans to move two machining operations from South Carolina to the Strongsville plant, which will be its only U.S. facility. The company announced Nov. 7 that it would invest several million dollars to upgrade the building, but has not given out many details.
Of the total $650,000 from the Ohio Department of Development, $500,000 will go toward business development, and could help with the capital improvements. The remaining $150,000 will pay for employee training, said Rachel Caldwell, spokeswoman for the department. She said the Ohio Controlling Board is to vote on approving the money Feb. 23.
The foreign trade zone status is a separate issue. If approved by the Cleveland Port Authority and the federal government, DPG could save about $600,000 in inventory taxes a year.
The local school board issued a letter Dec. 11 saying it does not object to the trade zone, according to Dave Mattingly, treasurer of Strongsville schools. He said losing the tax revenue ``is not life or death, but the impact is going to be felt.''
Magocky said the Strongsville economic development office sent its request to the Cleveland Port Authority on Dec. 16. The Port Authority did not return a telephone call for this story. Bill Carteaux, DPG co-executive managing director and the person in charge of the Strongsville operation, did not return calls.
Exactly how many jobs are at stake in Strongsville is not clear. Magocky is using the number of 335 jobs. But in a Jan. 20 news conference, Carteaux said 410 people work there.
The jobs are important for Strongsville, a Cleveland suburb with nearly 44,000 residents, Magocky said. He expects that Demag Plastics Group will ask for more help, through a personal property tax abatement on equipment, but the company has not requested that formally.
``The issue was whether they would move down there because the tax incentives were better and the land was cheaper and so forth,'' Magocky said.
Clare Morris, communications director of the South Carolina Department of Commerce, said her state ``put together a compelling package'' to court the company. ``It was more than just idle chit-chat.'' She declined to provide details of the offer.
Demag Plastics Group has joint headquarters in Strongsville and Schwaig, Germany. The company formed in late 2002 when sister machinery makers Demag Ergotech GmbH and Van Dorn Demag Corp. merged. On Jan. 20, company executives said they no longer would use the 59-year-old Van Dorn name and instead would use just the Demag brand name.
Ohio is the center of U.S. injection press manufacturing, with Demag Plastics Group, HPM in Mount Gilead and Milacron in Cincinnati.
Milacron raised $11.5 million in 2002 when it sold its main Batavia factory to Hamilton County Development Co. Inc., which is leasing it back to the company for 10 years. Milacron then will buy the building for $1.
In Mount Gilead, Taylor's Industrial Services of Tinton Falls, N.J., bought the assets of HPM in mid-2001, just before the machinery maker filed for Chapter 7 liquidation. Taylor's leased the plant. But last October the company got loans of about $1.5 million to buy the building and land, according to Kevin Carney, the county's development director.
Carney said the HPM Division also got loans from the Small Business Administration and the Ohio Department of Development to add equipment.
He said government officials worked with the company for a year to put together the loan package.