Graham Packaging Co. LP will close three blow molding plants early this year, including two of 31 it acquired in October from rival Owens-Illinois Inc.
York, Pa.-based Graham will close operations in La Mirada and Rancho Cucamonga, Calif., and St. Louis. Layoffs spread over the next several months will affect 400 employees, said spokeswoman Dianna Wills. All three facilities make blow molded containers from high density polyethylene and PET, focusing on the food, beverage and consumer products markets.
Graham had expanded capacity at the 143,000-square-foot Rancho Cucamonga plant as recently as 2001. The site primarily makes bottles for Tropicana Beverages North America. The La Mirada plant has about 130 workers, according to a layoff notice from the state of California. Graham also has a California plant in Santa Ana.
The St. Louis plant employs about 135, most of whom will be laid off by mid-March, according to that state's Department of Workforce Development in Jefferson City, Mo.
Graham more than doubled its size with the $1.2 billion acquisition of the 31 plants from Toledo, Ohio-based O-I. Graham's majority owner, New York-based equity firm Blackstone Group, engineered the acquisition, which gave Graham a total of 9,000 employees and 88 plants.
Since the purchase, Graham said it has been reviewing operations with an eye toward cutting costs and meeting customer needs in its regional markets.
The company is integrating the new plants into existing facilities and preserving its traditionally high profit margins for the rigid packaging sector, said Liley Mehta, packaging analyst for New York credit rating firm Standard & Poor's. That could lead to additional consolidation of Graham's operations, she said. The work is just beginning.
``The blow molded plastic container business of [O-I] had margins considerably lower than Graham's operating margins,'' Mehta said. ``A key focus area for them through the integration process is in plant rationalizations or improved O-I operations to help margins and levels of borrowing.
``Clearly, consolidation is expected, and Graham talked about it all along when they bought O-I.''
Graham was fourth on Plastics News' ranking of North American blow molders, with $809.6 million in relevant 2003 sales. Those figures do not include close to $1 billion in sales from the O-I units.