(May 30, 1005) — Formosa Plastics Corp. USA is facing a tough choice in Illiopolis, Ill.
In the wake of the April 2004 explosion that killed five workers and destroyed most of Formosa's specialty PVC resin plant in that small Midwestern town, Formosa publicly has said it will rebuild. But officials with the Livingston, N.J.-based firm — a unit of Taiwanese conglomerate Formosa Group — now are saying that other sites are being considered for economic reasons.
What's good for Illiopolis and its 920 residents may not be what's best for Formosa, one of the world's largest PVC makers. At 200 million pounds of annual capacity, the Illiopolis plant was on the small side to begin with when Formosa bought it from bankrupt Borden Chemicals and Plastics LP back in 2002. Most modern PVC plants are at least three times that size.
The Illiopolis plant's main product was flooring-grade PVC, supplied to such large customers as Armstrong Holdings. No detailed statistics are available for that sector, but Occidental Chemical Corp. exited the field earlier this year by closing a similar, smaller plant in Pottstown, Pa. At the time, OxyChem said the business no longer was profitable because of the plant's age and competition from foreign firms.
Those same factors may be affecting Formosa's thought process regarding where it will rebuild and how large such a plant would be. For its part, the state of Illinois has tried to retain the plant by expanding an enterprise zone in the area to include the plant site. That decision, made late last year, would allow Formosa to receive sales tax exemptions and tax credits for job creation if it rebuilds.
Emotion may play a role — especially in light of the loss of life — but profitability also will loom large in Formosa's decision. The impact on Illiopolis also will be significant, since the plant employed 135 at the time of the blast. The workforce now is down to 50 — doing cleanup work, mostly — but the plant has been a major employer in the area for more than 50 years, through various owners and incarnations.
At the same time, it's a cold reality that smaller plants don't provide multinational owners with the economies of scale needed to compete in a global market. As a result, such plants often are casualties of the evolving business climate. OxyChem's Pottstown shutdown eliminated 220 jobs, while BASF Corp. cut 80 positions early last year when it closed a similar-sized expanded polystyrene plant in South Brunswick, N.J. In both of those cases as well, the smaller plants had long been a source of good jobs in a small community.
Does Formosa rebuild in Illiopolis and create a less-profitable operation in exchange for positive public relations? Or does it look elsewhere, to maximize profitability? Ultimately, Formosa's decision will come down to one of compassion vs. commerce.