Though still small, plastics business thrives

One of the great symbolic moments of intergenerational clashes of the '60s came in the movie "The Graduate," when an executive took the college graduate protagonist of the movie aside at a party and confided to him a one-word prescription for success in the future: "Plastic."

Plastic as in plasticity, the ability to be shaped into things that had no natural reason for looking as the they did. Plastic as in synthetic, a way of making stuff on the cheap rather than with quality, longer-lasting natural materials. A word that came to mean all that was false, hypocritical and trivial in American life.

"They think in terms of hula hoops and pink flamingoes," said Robert Krebs, director of state and local communications for the American Plastics Council, in a recent interview. He was speaking of the many people who still don't associate plastic with kevlar shields that save police lives, being stronger than steel, or key medical parts that help keep bodies alive and functioning, or vital components in the electronics industry, and so on.

As it turned out, the advice to go into the plastics field was sound, at least for business majors. Plastics chemistry has advanced steadily, and with developments in the understanding of how substances work at the molecular level, the field has much the same kind of potential as biogenetics, Krebs said.

In this decade, the plastic industry "has just taken off," he said, showing 4-6 percent growth annually. For Krebs, it's no accident that two of the biggest industrial developments in Vermont in recent years, Mack Group in Arlington and now Husky Injection Molding Systems in Milton, are part of that industry, because it's moved ahead at double the percent rate of the economy as a whole.

People may think of Vermont in terms of cows and ski slopes, but it's worth considering that there are 34 plastic facilities in the state as of 1996, according to a study called Contributions of Plastics to the US Economy (Probe Economics of Milwood, NY, prepared for the Society of the Plastics Industry, Inc). Employment in 1996 was 2.900, up 11 percent From 1994, with the annual payroll at $82 million ($28275 per job). The year's shipments were valued at $516 million.

To some that may seem like a sizable contingent of companies, but not to Don Kendall, owner of Mack Molding. Compared to other states, "if anything, Vermont is under-represented," he said. That may well be the case. The same SPI study showed 136 plastics facilities in New Hampshire generating $1.5 billion in shipments and providing 10,500 jobs. Rhode Island had 116 plants, $1.3 billion in shipment and 8,900 jobs.

But it may not be realistic to think of the plastics industry as a jobs provider, given the degree to which production has become high-tech and automated. Again by calculation, those 2,900 plastics employees in 1996 generated $177,931 worth of product apiece on average, the kind of productivity that has allowed US plastics plants to survive international challenges.

Husky, which appears likely to become a huge addition to the economy of northwestern Vermont, in fact makes the machines that make plastic products, not the products themselves. For those who think of a "machine" as something that might fit in one comer of a garage, the "machines" in plastics plants are more likely to be bigger than the house and to costs millions of dollars.

No, this is not your father's plastics industry. And chances are that more plants may appear in Vermont, with the CIT Group's annual study of the plastics industry forecasting growth in domestic demand rising between 2.5 and 3 percent through the year 2,000, and a "minimal impact" From the Asian financial meltdown

Michael Paslawskyj, CIT's vice president of economic research, told Plastics News for July 20, "Plastics is still a very dynamic, evolving industry. I don't see any maturity setting in ... for some time."

To get past the pink flamingoes, Vermont Business Magazine will check in on the state's two largest plastics firms, then look at some of the lesser-known contributors to this important sector. Finally, we will update one aspect of plastics that a generation ago aroused environmental concern: Their supposed potential for creating massive amounts of long-lasting solid waste.

BIG MACK AND BIG HUSKY

There was a time not long ago when a string of large defense-related plants represented a major source of western Vermont's economy -- a dependency little acknowledged until several of the companies underwent major restructuring and downsizing. Whatever else may be said about plastics, Mack and Husky have changed the mix of larger enterprises (along with IDX doubling in size in South Burlington) to something less vulnerable to geopolitical shifts.

"Business is good," said Kendall at Mack's headquarters facility in Arlington. "We're adding people. We're tripling the size of our local plant," a project that if all goes well could have them into the new building in January.

In all, Mack has about 1570 employees, 960 of them in Vermont as of December 1, Kendall said. Other plants operate in South Carolina, North Carolina, Boston, Rochester, New York, and Larbert, Scotland. "Our business is pretty much tied to the computer business, and the computer business is still doing well."

"We find Vermont generally to be a good place to do business," Kendall said. The big exception is electricity, which costs about twice as much as at their other plants. Balancing that out, the lifestyle and quality-of-life advantages "allow us to attract a really high quality of person to work here," he said.

Husky hopes not only to do well and add jobs, but also to add to that quality of life, according to Brad Ferland, a Vermont writer who was hired as a spokesperson. "Husky values and Vermont values are very similar." he said.

High levels of environmental concern run throughout the company, Ferland said. A typical example: They maintain a 500-foot buffer between any buildings and Arrowhead Lake, though the Town of Milton only requires a 200-foot separation. Honesty is such a part of their mission that in the cafeteria, there may not even be a cashier, just an open cash drawer into which employees can put their money and make their own change. "It's real." said Kendall of Husky's professed ethos. "It's not phony. They really believe in it."

Ferland said their first building is complete, and their master plan is before the District Environmental Commission. Husky envisions creating four more buildings and a bridge -- the famous bridge crossing part of Arrowhead Lake to Route 7 that caused twinges of envy around Vermont when the state initially agreed to help finance it.

The employee level is closing in on 200, Ferland said. Ultimately, They anticipate about 800, but that will be after a decade, during which the new personnel are phased in at about 80 a year.

Environmental integrity and personal honesty go along with a third value that helps explain Husky's presence in Vermont, Ferland said: work ethic. That's encouraged not only through pay and benefits, but by an environment that gives every work space access to natural light, and a cafeteria run by the New England Culinary Institute, offering much healthier food that is usually the case, and a place where employees can exercise. "It's a different world," Ferland said. "It's a role model company."

Investors seem to appreciate the difference as well. When Husky made a stock offering through the Toronto Exchange in November, the price moved to $12.70 from the $10.50 initially suggested, and 3 million shares were traded.

It was a daring move because Husky's was the first such offering following the recent late summer stock market correction, which not only saw a sharp drop in many stock prices, but brought fears that a true bear market might have begun. A business news report said, "Traders attributed the (Husky offering price) rise to the return of buying to the stock market as well as Husky's solid corporate reputation."

PREDICTABLY UNPREDICTABLE

It's hard to judge from the outside what might be happening inside a plastics plant, especially one that does custom work. But with very little alternation to the outside environment -- Vermont is not home to any of the 20 or so major resin manufacturers who are the members of the American Plastics Council -- many people never bother to wonder much over what might be going on.

Himolene in Rutland is a classic example of a company that quietly goes about its business, serving a particular niche (in this case the institutional and commercial cleaning market) and producing good jobs in the process (in this case about 50).

Jeff Douglass, their plant manager, said Himolene came to downtown, railside Rutland City in 1982, occupying the former Patch Wegner plant. Theirs is one of four Himolene plants scattered across the company to be in proximity to customers, the others being West Chicago, IL; Tupelo, MS; and Bell, CA.

If passenger rail comes to the western side of Vermont, Himolene will have been one of the freight customers of Vermont Railway helping to maintain and upgrade the tracks for at other purpose. Each year, they bring in about 1.5 million pounds of plastic pellets, and send out about 1.5 million pounds of plastic bags.

Trash bags. Not a glamorous business, one might think, but the plant is actually as high-tech as anyone could wish. Some aspects of the process are proprietary and help Himolene maintain a competitive edge, Douglass said.

As is often the case with Vermont plastics plants, the Rutland facility is part of a larger corporate entity: in this case, First Brands Corporation. Among the brands involved are Glad bags, Scoop Away and Jonny Cat litter, Handi Wipes, and Wash 'n' Dri products. "They have extensive research and development facilities that we use," Douglass said.

First quarter (October 27, 1998) earnings per share for First Brands stock were 36 cents, up 20 percent from the previous year's 30 cents. Sales were up 8 percent, to $291.5 million.

Numbers like that were good enough for larger Clorox ($11.58 billion versus $1.47 billion market cap for First Brands), the nation's second-largest cleaning products company, to take over $400 million in First Brand's indebtedness as part of an acquisition plan. Vermont believers in Himolene's parent company saw their holdings go up 20 percent in value with the announcement, and Clorox, as of early December, had ratings of strong buy (4), buy (4) and hold (4) from research analysts, with no one saying to sell.

Acquisitions don't necessarily change the nature of a company, as can be seen in the history of GW Plastics of Bethal. Founded in 1955 by plastics pioneers John Galvin and Wes Westgaard (G and W), the precision custom injection molder has since 1973 done the little fish/big fish routine with Carborundum, Kennecott, Standard Oil of Ohio, and British Petroleum, only to have a group of inside managers and outside investors buy back GW in 1983. Frederic Riehl, who led that group of buyers, remains as chairman of the privately held company, and Brenan Riehl is president.

According to information from Jim Symonds, their director of customer service, "Since that time, GW has grown by 15-20 percent a year, focusing on close tolerance precision molding and assembly serving the automotive, health care, telecommunications, computer, and filtration markets. GW Plastics expects sales revenues of $50 million in 1998."

"We rank in the top 100 injection molders in North America," serving Fortune 500 companies like GE, GM, IBM, ITT, TRW and Johnson & Johnson, the release went on. "We have doubled our size in the last five years. GW is profitable and has never shown an operating loss in the history of the company."

It's highly technical, precision work, with the results measured by such tough objective standards as Six Sigma Quality Discipline, statistical process capability studies with a CPK value of 2 or greater, and ISO 9002 registration with a QS 9000 endorsement. Reflecting the technological growth of the plastics industry, the statement observes that, here are over 50 generic families of engineered and commodity plastics today with hundreds of variations. The company has molded nearly all of them."

Plants now exist in San Antonio, TX, and Tucson, AZ, as well as Royalton and Bethel in Vermont. "We now have over 400 employees," and the growth prospects are "terrific," Symonds said

On the other hand, a plastics company can be small and remain small and still be effective. Gary Stearns of North Ferrisburgh has owned and operated New England Coating Concepts for 25 years, using plastic coatings to shield sensitive components from electromagnetic and radio frequency interference, for a variety of contractual clients.

T & M Enterprises of Shaftsbury came recommended by Joseph Mancini, the owner of a tiny Shaftsbury startup named Hope Manufacturing. Mancini has invented and patented a tool for scratching off the coatings on lottery tickets, something he had found gave older people in particular a good deal of trouble, and he hired T & M to make his device from hard plastic. Though Mancini had a litany of horror stories to tell about not being able to interest a distributor despite positive reports from pilot stores, he had nothing but good words for Tom and Martha (T and M) Paquin's neighboring business.

Tom Paquin said their custom injection molding business goes back to 1984. They have found markets in the electronic, medical, plumbing and other businesses, he said, with electronics and medical supplies predominating.

There are eight employees, Paquin said, but in a sense, there are no people employed making plastics. "We have extremely automated machinery," he said, so the added hires are in accessory roles, such as packaging, shipping, receiving, and office work.

Though small, T & M is by no means standing still. Paquin said their market position is in "a controlled growth situation," in which they are carefully building up about 10 to 15 percent per year. ;

As with most of other plastics manufacturers, Paquin has no special beef with Vermont's transportation system. His products generally fall into the LTL category -- lighter than truckload and there are plenty of truckers headed in or out of the state looking for such amounts to fill their trucks. And Shaftsbury, being in the southwest corner of Vermont, has fairly ready access to both the New York Thruway and the Mass Pike, he said.

Overall, the last revised figures from the Department of Employment and Training show the plastics and rubber group of goods-producing manufacturers growing from 2,000 employees in October of 1997 to 2,350 in September of 1998, with the unrevised estimate for October of 1998 at 2,250. Even the latter figure would represent an impressive 11 percent growth in one year.

TURNAROUND

Though dump-digging anthropologists of some later age may marvel at the number of disposable diapers the 20th century considered essential to its well-being, plastics recycling has made strides, as well as plastics manufacturing, to reduce the waste stream.

Krebs said the American Plastics Council alone has spent $1 billion since 1989 in furthering ways to put plastic back into circulation, or to cut the amount of product used at the source.

Today's plastic soda bottles, for instance, are 27 percent thinner than those of 1990, yet have the same strength, Krebs said. In many cases, the plastic packaging that some consumers think wasteful actually represents a several-fold decrease in the amount of packaging that would be necessary if other materials were being used.

Krebs shared a press release about a typical APC project, this one in Brattleboro. It involved showing schoolchildren how a plastics shredder mounted on a 45-foot rolloff container could help save money for the waste district by turning redemption center bottles back into pieces, eliminating the need to pay for hauling air.

"Hands-on, educational, golly gee whiz plastic experiments are also scheduled to entertain and educate the children about plastics, recycling, and resource conservation," the October account said. "The 50, 10-to 13-year-olds will hold plastic bubbles that do not pop even when lanced with a wooden skewer demonstrating the stretch-ability of polymers. In another experiment, two chemicals mix in a beaker and (voila!) nylon string emerges. The PlastiVan, visiting from the National Plastics Museum in Leominster, MA, will be at the facility conducting the demonstrations."

Krebs said, "Plastic recycling can be effective in rural areas."

Copyright Lake Iroquois Publishing, Inc. d/b/a Vermont Business Magazine Jan 01, 1999
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