After a 14-year run, Larry Pursel is closing his corrugated pipe company, Cervell Drainage Products - a victim, he says, of skyrocketing resin prices, highway standards that prohibit the use of recycled polyethylene and a 300-pound gorilla called Advanced Drainage Systems Inc.
Cervell Drainage will shut down at the end of July. The company, or its assets, will be sold and the proceeds distributed to Cervell's creditors.
Cervell Drainage could be a good opportunity for a steel or concrete pipe company to get into corrugated high density polyethylene pipe, Pursel said. A company already in plastic pipe could pick up the equipment to add complementary products such as smooth-wall pipe. But if possible, Pursel would like to sell to someone who would continue operating the Lordstown plant, located in 43,000 square feet of space in an industrial park.
The drainage pipe factory is not far from General Motors Corp.'s sprawling Lordstown plant, where several thousand workers assemble the Chevrolet Cobalt.
Cervell Drainage is at the other end of the spectrum. At peak production, Pursel's company employed 20 and generated $2 million in sales. During a July 18 interview in Lordstown, he said employment was down to nine or 10 people. Those numbers mean Cervell Drainage was one of the smallest makers of corrugated HDPE polyethylene pipe - an industry dominated by Advanced Drainage Systems.
ADS, based in Columbus, Ohio, in mid-2005, bought Hancor Inc., the other mega corrugated pipe maker and its main competitor. The result is a dominant force with sales of roughly $930 million from 35 plants across the country, running an estimated 140 extrusion lines, according to Plastics News data.
Cervell Drainage has two lines.
``My code word for ADS is `Wal-Mart of the tubing industry.' It's very hard for a small company to compete against them,'' Pursel said.
Pursel, a 38-year veteran of corrugated HDPE pipe, plans to retire after he closes Cervell Drainage, which he owns with four other investors. He could remain active in the company to help a new owner. His forte is in engineering and process and product development, he said.
Pursel got into the pipe business in 1968, when Ronald Martin, one of the founders of corrugated plastic pipe in the United States, hired him to work at ADS, which was then a fledgling company with one plant, in Middletown, Del.
Pursel later helped develop dual-wall corrugated HDPE pipe at ADS.
In 1992, Pursel left ADS and started Cervell Drainage. He picked Lordstown, near Youngstown in northeast Ohio, because it was the center of a large population area of Pittsburgh and the cities of Akron and Columbus. The closest corrugate plastic pipe makers are in western Ohio.
Cervell Drainage makes drainage pipe in diameters of 4, 6 and 8 inches, for highway and agricultural uses and vacuum piping for industrial cleaning. The factory has two production lines, a Reifenhauser extruder tied to an underwater pelletizer to reprocess recycled plastic and in-plant regrind, and an Ashland Tech-brand extruder to produce the corrugated pipe.
Pursel wanted to expand into large-diameter culvert, a more profitable product line, but it never happened.
Even though the company had low-volume production and a narrow product line, Cervell Drainage became a solid, well-established company, Pursel said.
Then the problems hit.
First came PE price hikes that started in 2004 then accelerated in late 2005 after Hurricanes Katrina and Rita. This year, business was unusually soft in April, the month that normally kicks off the company's busy season.
Pursel blames government highway regulations for dealing the final blow - plus what he said were inconsistent inspections of his plant. Corrugated pipe makers must use virgin HDPE, under the M252 standard of the American Association of State and Highway Transportation Officials, or AASHTO. They cannot use recycled material.
That caused problems for Cervell Drainage, which generated 30 percent of its business from highway pipe. Pursel said he could compete against ADS if Cervell was able to use post-industrial PE - mainly ground-up scrap bottles from packaging factories.
There's no way the small player could compete on virgin resin-buying with ADS, which can negotiate a far better deal from the resin companies, he said.
The post-industrial recycled material is clean, and the pipe meets performance demands of highway drainage, Pursel contends. Pursel also said that past inspectors approved his pipe for highway, even though it contained some recycled materials.
But that changed with recent inspections at Cervell Drainage by the Eastern States Consortium, a group of 14 states and five pipe makers. Member states agree to follow the same quality systems and pipe regulations - including AASHTO's rules for virgin pipe.
ESC was started a few years ago to cover the states of Connecticut, Delaware, the District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, Vermont and Virginia.
Cervell Drainage still has not complied with ESC's virgin-only requirement. Being forced to use premium-grade virgin resin would force Cervell to boost its selling price too high, Pursel said.
``Even with wide-spec [resin], I had to raise my prices,'' he said.
But an ESC spokesman defended the organization's standards and once-a-year inspections of every pipe plant.
``[ESC] has provided a level playing field for us, so all plants that meet ESC follow AASHTO,'' said Alan Rawson, ESC's lead state coordinator. He is the administrator of the Bureau of Materials and Research at the New Hampshire Department of Transportation.
Rawson, who has talked to Pursel, said apparently earlier inspections that passed his pipe were by individual state DOTs, done before the formation of the Eastern States Consortium.
``You hate to see a little guy not make it,'' he said. But government transportation departments can't take chances, not when an unforeseen problem could mean ripping up a newly paved highway.
``The bottom line is the states want to be assured that the product they're buying meets the specification,'' Rawson said.
Pursel is blaming state governments for the regulations. He also blames the federal government, for refusing to deal with U.S. energy needs.