Less than a year after announcing plans to invest $26.1 million in a Portage, Mich., plant and getting approved for a city tax break and state grant, manufacturing activities have come to a surprising halt at Mueller Plastics Corp.
Memphis, Tenn.-based Mueller Industries Inc. has agreed to sell its pressure plastic fittings product line and some of its drain, waste and vent fittings manufacturing assets to Boat Equipment LLC for $66.2 million, according to an SEC filing.
Mueller also entered into a lease agreement with the purchaser, which is a private, closely held company, to continue making and distributing pressure plastic fittings through a transition period that may extend into 2014, the SEC filing says.
Mueller officials could not be reached for comment, but they issued a statement that says: “The company remains in the DWV fittings business and will continue manufacturing these products at another existing location.”
Mueller is a global producer of tubes and fitting made from a variety of metals and plastics. Mueller's net sales in 2012 totaled $2.19 billion, down 10 percent compared to $2.42 billion in 2011. The decrease was attributed to a drop in base metal prices and lower unit volumes for many core products.
The decision to idle manufacturing at the Portage facility was made after the company received “an attractive and unsolicited offer to sell” some of the assets, the statement says. It also says the offer was “coupled with an opportunity allowing the company to purchase certain of its plastic products for resale under favorable terms.”
“The combination of these factors led to the conclusion that this action was in the best long-term interests of the Company,” the statement says.
Portage city officials are pressing the company for more information. Last fall, they were welcoming Mueller back to the city — the company got its start there 97 years ago — and reviewing plans to construct a railroad spur and relocate two silos to the 18-acre site at 6700 S. Sprinkle Road.
The corporate about-face stunned local officials, said Vicki Georgeau, Portage's community development director.
“It was quite surprising to us,” she said. “It seems a significant investment was made and it's hard to understand the business terms that made this favorable. But that's a decision that Mueller analyzed and apparently it made good financial sense to proceed in this manner.”
The company had done injection molding in Portage until 2010, when it consolidated operations at a plant in Wynne, Ark. However, a fire destroyed the Wynne facility in September 2011. Mueller considered several locations then decided to return to the Portage plant, which it had been trying to sell.
Georgeau said a lot of time and effort went into bringing Mueller back to Portage.
“The city and state provided incentives,” she said, referring to a 50 percent, five-year tax break on real and personal property from Portage and a $700,000 grant from the Michigan Business Development and Community Revitalization program.
Mueller followed up with significant investments, Georgeau added. The railroad spur was built and silos moved from Wynne to store PVC and ABS for injection molding operations. She was impressed with the modern facility she toured at a ribbon-cutting ceremony in late January.
“They were up and running 24 hours a day, seven days a week,” Georgeau said. “At the opening they indicated because of the cost of the equipment they need to be running all the time to get their return on the investment.”
Thirty-six full-time employees and possibly as many temporary workers kept the plant going day and night. It is not clear how many have been laid off and how many will work through the transition.
The company statement says all employees who lost their jobs received a severance package regardless of their tenure.
“It's a devastating loss for the community,” said Jennifer Owens, vice president of Southwest Michigan First, who helped lure Mueller back.
She said all workers on the production side of the business have been laid off and those in shipping, warehousing and distribution are dealing with remaining inventory.
“Local businesses are contacting me to connect with Mueller employees,” Owens added. “They recognize it is a talented workforce they would like to employ.”
Portage officials are evaluating what to do about the tax abatement agreement, which reportedly gave the company a tax break worth almost $23,000 to date.
“We'll probably be requesting that they pay back the abatement they received for this calendar year,” Georgeau said.
The plant has not been open long enough to get a $700,000 performance-based state grant. That incentive required the company to create about 70 jobs and maintain them for two years.
Owens is trying to reach someone with Boat Equipment LLC about their plans for the Mueller assets.
“We'd love to talk to the buyer about keeping the equipment and bringing the facility back to life and encourage them to rethink any decision to move assets out,” she said. “Unfortunately I don't know who they are.”
In its statement, Mueller Plastics thanked Southwest Michigan First and Portage and state officials for their support. Owens said Mueller officials also told her if they had known the purchase offer would be made they would not have sought all the incentives.