Friday, July 11, 2014
Inquirer Daily News

How a Downingtown printing plant failed after 50 years

Big gambles and bad decisions, oil prices and credit crises, even a New Zealand tycoon: All played a role in Downingtown.

Having a beer at Chelsy´s Tavern in Downingtown after turning in their Reynolds ID badges are (from left) Rick Wilson, who worked three years at the plant; Walt Hudson, a 15-year employee; and Corey Dickinson, a 10-year veteran.
Having a beer at Chelsy's Tavern in Downingtown after turning in their Reynolds ID badges are (from left) Rick Wilson, who worked three years at the plant; Walt Hudson, a 15-year employee; and Corey Dickinson, a 10-year veteran.
Having a beer at Chelsy´s Tavern in Downingtown after turning in their Reynolds ID badges are (from left) Rick Wilson, who worked three years at the plant; Walt Hudson, a 15-year employee; and Corey Dickinson, a 10-year veteran. Gallery: In Downingtown, aftermath of a plant closing

The plant's printing presses, which had clattered loudly day and night, sat strangely silent. No forklifts bustled by, beeping, beeping, beeping.

"It was like The Twilight Zone," Sam Smiley recalled.

In between marathon Scrabble games and poker rounds, employees at the soon-to-be-shuttered Reynolds Packaging plant in Downingtown painted walls, cleaned machinery, and watched movies, making plans for a final barbecue in the parking lot - ribs, potato salad, chicken.

"Everybody had a job to do - and then, all of a sudden, nothing," said Smiley, who started at the plant in 1977.

More coverage
  • Jobbing blog by Jane Von Bergen
  • Since it opened about 50 years ago, the Downingtown plant had been printing packages for consumer goods - Marlboro cigarettes, Reese's Peanut Butter Cups, and Whitman's candy.

    "You could go into a store and pick a product off the shelf," said Smiley. "We were proud of our work."

    If you bought a bottle of Nestle's Coffee-Mate anywhere in the country, the printing on the wrapper was done in a nondescript factory on Lincoln Avenue.

    Now, after 31 years, Smiley has no work, and neither do the majority of the other 150 people laid off from the plant earlier this spring. On a beautiful March day, they turned in their employee badges, some gathering at Chelsy's Tavern in Downingtown for one last round with friends.

    There they were, another set of statistics, joining the 13.7 million other Americans who are unemployed and the 456,000 who lost jobs in manufacturing in March.

    But why them?

    The complex stew of decisions that led to their joblessness in March involves New Zealand's richest man, the skyrocketing price of oil, the credit freeze, a botched integration of businesses under their roof, a mothballed printer, and a revolving cast of consultants and managers, evidence of an inconsistent focus on the plant's printing business by a series of owners who saw it as an adjunct.

    "The only reason we were closed is that nobody wanted us," said Kenneth "Mike" Phillips, who worked there since 1982.

    Statisticians can now count Phillips as one of 16,387 people unemployed in Chester County - the county in the Philadelphia suburbs that has seen the biggest increase, by percentage, in the number of jobless.

    Every company that closes has its story. This is one of those stories. But what all the stories have in common are economic currents that ebb and flow as impersonally as water in a creek, washing away lives and dreams and changing the course of life in a community.

    At Chelsy's, for example, there's no longer a need for a morning bartender. There aren't enough thirsty workers coming off overnight shifts to put a bartender to work serving up suds instead of cereal at 7 a.m.

    Even tips aren't the same.

    "It is a trickle-down effect," said bartender Karen Mack as she served beers on March 27, when the Reynolds group gathered for a final round.

    Long before the company, then known as MillPrint, opened its factory in Downingtown, the area attracted a thriving paper business. MillPrint built its plant in an industrial enclave tucked among the farms of rural Chester County.

    The Brandywine Creek, which runs through town, powered so many paper mills that Downingtown was known as Milltown.

    "You could smell the paper before you could see the town," said Gary Smith, president of Chester County's Economic Development Council.

    None of the mills remains open now, although one has a new life as an upscale eatery where patrons can order filet mignon on a charming deck overlooking the creek that once powered its machinery.

    Milltown also benefited from its location. Like Conshohocken today, Milltown grew at the intersection of two major commerce routes - Route 30, which headed west from Philadelphia, and Route 322, which carried freight from Lake Erie to the Jersey Shore.

    "Because of the transportation, because of the way the river flowed through the town," Smith said, "these mills started to sprout."

    They spawned spin-offs - "companies that added value to the raw material," he said, parlaying the skill sets of the workers in the region.

    Papermaking begat box building, and also printing, which begat printing on materials other than paper - laminates that attached, for example, foil to paper to create packaging for pouch tobacco.

    MillPrint was one of the companies in that mold, created by consolidating the work of two older plants - one at 51st Street and Woodland Avenue in Philadelphia and another in Lancaster County.

    MillPrint was owned by the tobacco company Philip Morris at a time when many companies integrated their operations, from growing tobacco in the fields to printing labels for Marlboro cigarettes.

    It was a great time - company picnics and Christmas parties, the era when the factory's now-lost culture of conviviality was born.

    Philip Morris then became the first to sing what turned into a sorry refrain. "MillPrint closed in 1980," Smiley said. "They wanted out of the printing business."

    Smiley was out of a job.

    But R.J. Reynolds, another tobacco company, wanted in - and bought the factory. The company called workers back and expanded, becoming one of the few places hiring in the devastating recession of the early 1980s.

    "People were lined up around the building to get work," Mark Phillips recalled. As many as 350 landed jobs.

    Reynolds created Reynolds Packaging to "make foil for the cigarette company," said stock analyst Charles Bradford, who covers aluminum firms for his company, Bradford Research in New York.

    The company, an adjunct to a tobacco business, created Reynolds Wrap, which became a famous brand in its own right. Once again, the Downingtown printing business was riding on another product's coattails.

    By 1999, Reynolds was the third-biggest aluminum-maker in the world, behind Alcoa Inc. of Pittsburgh and its number-two rival, Canada's AlCan Aluminum Ltd. Alcoa initiated a hostile takeover of Reynolds.

    Alcoa agreed to pay nearly $4.4 billion in stock for Reynolds, landing a company with $5.9 billion in revenue and 18,000 employees, including the Reynolds packaging division and the printing crew in Downingtown.

    "My thought was that these are consumer products and Alcoa is not a consumer-product company," Bradford said. "They are a heavy industrial company."

    Once Alcoa took over Reynolds in 2000, it quickly shed some non-metal businesses - among them a snack-food packaging company in Boyertown, Berks County.

    In Downingtown, workers and longtime managers endured an ever-changing cast of plant managers and consultants. Alcoa's whole packaging division had at least four chief executives in nine years.

    "Many of the facilities in that division needed improvement," said consultant Elizabeth "Liz" Fessenden, a longtime Alcoa veteran who led the division until 2005.

    Her successor, Bimal Kalvani, who was gone the following year, said much the same, talking about presses at the Downingtown plant that dated to the 1960s.

    "The factory wasn't doing well," said Kalvani, now a consultant. But it did have one asset - enough room to accommodate more presses. Installing more machines, Kalvani said, would spread out the cost of overhead. "I thought there was a fighting chance if I could bring in more volume."

    Kalvani set two major initiatives in motion for the plant.

    He ordered a $4 million state-of-the-art press from Germany, and he launched a new business at the plant.

    The new business, thermoforming, tapped into a medical trend - the growth in single-use instrumentation. Medical devices and surgical kits, for example, would come one to a pack, and the pack would be covered by a hard-shelled molded piece of plastic formed in Downingtown.

    "Anything that is medically related, there is a lot more margin in that," said Barry Miller, president of Delaware Valley Industrial Resource Center, a nonprofit consulting group. "They can weather commodity prices a lot better than consumer products."

    Kalvani decided to close Alcoa's thermoform businesses in Illinois and Rhode Island, moving the work here. "Downingtown was big enough to take in the business. The other factories weren't," he said.

    On Jan. 10, 2006, workers jammed into the plant's conference room. Gov. Rendell visited to thank Kalvani for bringing 140 jobs and a new industry to Downingtown.

    In return for promising to hire 140 workers, retain 181 employees, and invest $10 million in the plant and set up a clean room for pharmaceutical packaging, the state provided an array of low-interest loans, grants, and tax credits worth nearly $4.6 million.

    "Alcoa could have gone elsewhere - they picked Pennsylvania," Rendell said, describing the move as a "significant economic development" for Chester County.

    "I thought we were safe," said Sharon Dazio, of Parkesburg, a film finisher who started at Reynolds in 1993. "Who would put all that money into a plant that was going down? I thought that was a good thing, and I'm sure everyone thought the same way."

    Not Jimmie "Tommy" Nolan, the union rep from United Steelworkers Local 286, which represented the workers.

    To Nolan, who worked at the Downingtown factory before he moved into union leadership, the thermoform business looked like a disaster in the making - and he turned out to be right. "I always thought that would be the beginning of the end," he said.

    In 2006, when the thermoform initiative began, Chester County had the region's highest wages and lowest unemployment rate. The $9- or $10-an-hour wages offered for bottom-rung workers were a tough sell.

    Worse, the plant transition was badly botched, workers said. Machines delivered from Rhode Island and Illinois sat in the rain before being loaded into the building.

    The Downingtown crew was stunned when Alcoa closed its other plants before serious production problems were fixed in Downingtown.

    "The first year we lost $40 million [of business] in Downingtown," said Tim Drake, a lead operator.

    To manage, Alcoa farmed out some thermoform work to Custom-Pack Inc. in Exton.

    "The real crux of what they needed was machinery knowledge," said Frank Menichini, Custom-Pack president. Menichini said Alcoa's thermoform experts weren't willing to relocate to Downingtown.

    The troubled thermoform integration, along with other issues, meant there was insufficient management capacity for what should have been a priority - getting the necessary government permitting to install the high-output press Kalvani had ordered from Germany.

    Instead of spitting out enough product to beef up the plant profits, the press sat in storage in Baltimore. Meanwhile, further affecting its results, the plant was paying big sums to Alcoa headquarters to sustain corporate overhead, managers said.

    In the wider world, oil prices were soaring - meaning that the cost of petroleum, a key ingredient in the plastic labeling used in Downingtown, was also skyrocketing.

    By the time Alcoa sold its 10,000-employee consumer product and packaging division, oil had topped $100 a barrel.

    For $2.7 billion, the company was sold to the Rank Group of New Zealand. The new owner was the reclusive Graeme Hart.

    It had been a busy year for the spiky-haired high school dropout, whose worth was estimated at $4.5 billion by Forbes magazine. The former tow-truck operator was on a worldwide shopping spree buying big packaging companies, including International Paper's beverage-packaging unit in Memphis.

    Some of Sam Smiley's coworkers Googled Hart.

    "We found out that he was notorious for buying things up and selling them, and he wasn't very union-friendly," Smiley said.

    "But he also had a track record for buying things up and turning them around. We just didn't know which track he would pick."

    Hart might not have known that the Downingtown crew had won seven prizes in 12 months for its work, including Best of Show in one major industry contest. That award was for a shrink-sleeve using seven colors in a label that appeared drenched in chocolate milk.

    It takes skill to print a flat image that looks coherent when shrunk around a bottle. Done wrong, luscious chocolate milk could become an unappetizing brown blob.

    In March 2008, Rank took over the Downingtown plant.

    The workers don't know exactly what prompted Rank to close it a year later. And Rank's people aren't saying.

    "Thank you for the opportunity, but Rank Group does not wish to comment," Rank spokeswoman Linda Scott wrote in an e-mail from New Zealand.

    In deciding the plant's fate, Rank's finance people would have seen the rise in oil prices coupled with Downingtown's lackluster numbers - the result of high corporate overhead, the botched thermoform integration, and production delays from the new press.

    As word got out that the facility might be sold, clients dwindled and a key customer, Nestle, hustled to find another supplier. Outsiders jockeyed to scoop up either the plant's thermoforming or its plastic-printing businesses.

    Brentwood Industries Inc., of Reading, snagged the thermoform business. That deal, for an undisclosed amount, closed in December 2008. Brentwood is now moving the machines to Reading and has hired most of the remaining 25 workers.

    "I'm definitely going to go - the way the job market is now," said Kenny Dorsey, of Atglen, as he joked with coworkers at a barbecue earlier this month. Some thermoform workers are closing up in Downingtown; others are already driving to Reading.

    From March 2008 to January, Sam Smiley, Sharon Dazio, Mike Phillips, and the other 110 workers on the print side still held out hope.

    For one thing, installation on the new German press was completed by February 2008, and it was finally moving product. Workers printed so much they earned bonuses.

    One in an occasional series.

    They watched potential buyers tour the plant. But the frozen credit environment made a purchase impossible.

    Late in January, the company notified workers by letter that the plant would close.

    On March 27, Greg Jordan, 50, of East Fallowfield, a 13-year employee, drove to the plant to turn in his badge and pick up his paperwork.

    Like the others, Jordan hoped for a miracle, someone to "buy the company and turn it around."

    But Jordan didn't sound like a man expecting a miracle:

    "We were a great workforce. We just hit bad times. Nobody's got money. The banks aren't lending.

    "This is a tragedy."


    Find additional photos and stories in this series, and a blog on the job scene: http://go.philly.com/jobbing


    Contact staff writer Jane M. Von Bergen at 215-854-2769 or jvonbergen@phillynews.com.

    Jane M. Von Bergen Inquirer Staff Writer
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