Friday, October 29, 2010

Am I too cynical?

This is a very local issue so to my readers outside of NNY, I'll apologize in advance.

Yesterday there was a bright spot highlighted for the local economy as a Canadian paper company announced plans to re-open a shuttered paper plant in the North Country creating up to 75 new jobs.

I'm hopeful that this works out but before everyone goes around celebrating this success I have some questions...

1) Who or what is Florelle Tissue? They have no website and there is no information on the web about this company that isn't related to their purchase of the local plant. Admittedly, many companies fly under the radar but when the only mention of your company seems to be related to a purchase of a plant it raises a red flag. There was an old Canadian tissue brand called Florelle from about 20 years ago that offered a low-end two-ply tissue. Is this the same company or is it a new company that just bought the old tradename?

2) What background does the company have in the paper industry? This is a difficult industry occupied by huge corporations and there are reasons why small operators can't compete. In particular, I'd love to see more on the top management team. Again, just google "Minas" (their CEO) and "Florelle Tissue" and the only results on the web are related to the purchase of the plant in Brownville. It may not mean anything but in this age of shameless self-promotion it's hard to imagine a CEO not being on the web somewhere.

3) How does the US dollar/Canadian dollar exchange rate effect this deal? I suspect that the driving force behind a Canadian firm investing in a plant near the border is to take advantage of the weak US dollar. Build it in cheap greenbacks and sell your products for valuable Canadian monopoly money, that seems to be the model. What happens if that trend reverses? Can they still be profitable at an exchange rate of $.85 to Can $1?

4) Why do they need all of these government supports? In my past life, I helped fund start-ups at a venture capital firm. During my 2 years with the firm we invested nearly $100 million in a variety of start-ups most of which were utter failures. However, the one thing I've learned is that if a business plan is well designed there are plenty of investors willing to take a chance on new firm (I'm assuming that Florelle's US operations are like a start-up). However, in order to be talked into this deal NYS had to offer:

* a $250,000 loan from the Jefferson County Industrial Development Authority

* $250,000 in financing from the State Office of Community Renewal through the Community Development Block Grant program;

* a $200,000 loan from the Development Authority of the North Country

* a $100,000 grant from the Jefferson County Local Development Corporation.

* 75% property tax rebates

* Empire State Development will provide the paper manufacturer with a $250,000 grant toward reimbursement for a portion of the cost of new machinery and equipment.

* New York Power Authority (NYPA), announced the Canadian producer of paper products will allocate 1,300 kilowatts of hydroelectric power “in return for the investment and maintaining job commitments.”

source

5) Finally, I found it interesting that the number of jobs proposed suddenly grew by 50% as we're approaching the election next week. As recently as September, the news articles discussing this project said that it could bring "up to 50 jobs". Yesterday, the number of jobs suddenly jumped to "up to 75 jobs".

I really hope this group delivers on their plans to bring quality manufacturing jobs back to the North Country and taking advantage of the US/Canadian exchange rate could really prove to be a model for growth in NNY. Stay tuned.

Cheers!

Oh, GDP number was pretty weak. Mostly inventory building, weak final sales. It doesn't matter to the stock market because the market is focused entirely on the Fed's announcement next week.

5 comments:

Anonymous said...

It is conceivable that it could be legit, and I guess if the bennies are out there for the taking, and actually even "pushed" by the various agencies in an attempt to justify their existence, then one would porbably be foolish not to partake :)

SMTF

Anonymous said...

Nope ... he is a fly by night one man start up with no plan (business or physical building), but lots of dreams, and no money to pay for them. Local contractors have already been burned working on his fiasco.

The Artful Blogger said...

Not sure if these comments are current or old - for some reason they showed up in my inbox today.

If the second commenter would care to talk offline, I'd really be interested in hearing your take.

There was a great article in the NY Times this past weekend on government handouts to businesses and how poorly most of those investments turn out. Governments are very bad at projecting employment levels and there is never any clawback of the giveaways.

You can reach me at Brian at nnymath.com

Anonymous said...

Do a current search on this operation.... currently closed, facing foreclosure from Chase. The maximum employment was only 13 full time workers.

Still owes contractors that worked on repairing/installing the equipment and facilities.

Irish said...

My husband was one of the full time employees and at the time of hire I told him I did not feel comfortable with him working there,there were too many red flags after he been working there for a month,when they paid him in cash instead of a legitimate payroll check was a start,on pay days there were times Harry Minas didnt have the money to pay the employees and would go get a loan to do so,Harry had gone to China with $1,000.000.00 to buy old machines and once installed they kept breaking down,on the last day my husband was there it was payday when 5PM rolled around after he clocked out he went to the office to get his pay and was told by the secretary that the money wasnt there and he asked if he was getting paid that day and the secretary (Harry Minas girlfriend)said she thought so and my husband replied back (I hope so),during this exchange my husband did not know that one of the Florelle partners from Canada was in another office and heard the conversation and after my husband left the office the partner told Harry Minas after he got back to fire my husband because he said it was disrespectful wot my husband said,really,all he wanted to know was when he was getting paid so the next my husband came to my work which he never did before and informed me he had to been let go,I believe in Karma and I'm glad Florelle floundered and i had warned my husband it would and I was correct!