Help for Ashtabula County’s economy is coming from north of the border.
Earlier this month, Growth Partnership (GP) for Ashtabula County announced that Pickens Plastics, which has factories in Ashtabula and Jefferson, was purchased by Sigma Industries of Quebec City, Quebec, Canada, for an undisclosed amount. Pickens has 60 employees whose jobs have been secured by the sale, which has the potential of adding more jobs in the years to come, according to Growth Partnership.
The following day, GP announced the pending sale of NEO Plastics in Austinburg to RTS Cos. (U.S.) Inc. NEO, which filed for Chapter 11 bankruptcy Feb. 21, 2007, was a supplier for RTS, based in Waterloo, Ontario, Canada. According to a GP news release, RTS has been producing items at Austinburg for the last month.
The sale is expected to retain 19 existing jobs at the former NEO site. Joseph Mayernick, executive director of GP, said in a news release that RTS will be creating new positions and expanding the footprint of the former NEO plastics building.
“If all goes according to plan RTS will move ahead quickly with its expansion plans, thus adding more dollars to our economy,” Mayernick says. “This entire process represents another save for Ashtabula County, but more importantly, a new investment from a Canadian company which is well respected with substantial abilities to add to the plant and to the county over the years.”
The Canadians’ interest in Ashtabula County reflects a trend in the global marketplace driven primarily by a weak U.S. dollar. American assets traditionally were priced beyond the reach of the Canadian dollar, which once traded as low as 62 cents.
“The price of the assets being purchased (in the U.S.) have come down very considerably,” says Bernie Wolf, director of the International MBA program at Schulich School of Business, York University, Toronto.
The more favorable exchange rate means Canadian investors get more for their money, both in the initial purchase and operating costs.
“They can produce at a lower cost in terms of the exchange rate here,” says Jay Foran, vice president of business attraction for Team NEO in Cleveland, in explaining the imminent factor in the Canadians’ interest in northeast Ohio industry.
Foran says another factor is that the United States is typically the largest market for these Canadian firms and setting up shop here places them closer to their customers.
According to the Society of the Plastics Industry, Canada tied Mexico as the top export destination for U.S. plastics, 24 percent. However, 33 percent of imported plastics came from Canada that year.
Foran says the capable workforce in northeast Ohio is another actor and one cited by Mike Panayi, a partner with RTS.
In the GP news release, Mayernick quotes Panayi as saying “We have come to realize Ashtabula County offers a quality workforce. We believe that our acquisition of the assets at 2900 Industrial Road will be a win-win situation for all involved – the region, the workers and RTS Companies (U.S.) Inc.”
Wolf feels this cross-border investment, which has been going on for years in the opposite direction, is “most likely beneficial” to both economies.
Not everyone views foreign investment as win-win, however. Alan Tonelson, a research fellow with the U.S. Business and Industry Council Educational Foundation in Washington, D.C., says the sales illustrate the weakness of the American economy.
“That means U.S. companies are on sale and Canadian companies clearly think that even those U.S. companies that have gone broke now look so cheap that they are a good bet,” he says of the RTS situation.
From banks and record companies to plastics manufacturers and wineries and distilleries, much of America’s industries are being offered at a tag sale in an effort to attract outside investment. According to the research firm Thomson Financial, foreign investors spent a record $414 billion acquiring American companies, factories and other properties in 2007.
Tonelson says that while these sales look good for the short term because they save jobs, they point out that a fundamental flaw in American trade policy is going uncorrected.
“The U.S. dollar is so weak because the U.S. has mismanaged its trade policies in recent years and foreign creditors are losing faith in our national currency,” he says.
These investors are choosing to make direct investments in hard assets rather than buy stocks and cash. While economic development directors welcome these purchases because they save jobs, Tonelson says it does not bode well for the long-term security of the nation. He compares it to a family that is heavily in debt choosing to sell off their assets rather than tighten their belt and work harder.
“To maintain our living standard, our jobs, we are selling off assets,” Tonelson says of the nation.
Thomas Heffner, a Dublin, Ohio, entrepreneur who runs the Web site economyincrisis.org, describes these deals in a word: “stupid.”
“We’re heading full speed and head first into becoming a colonial state, owned, managed and controlled by foreigners,” he said in a telephone interview.
Tonelson points out that the statistics show 90 percent of the foreign direct investment made in this country has not produced real growth.
“The overwhelming share of foreign direct investment is in existing companies, existing workforces and not in setting up new companies and hiring new employees.”
Foran, however, sees this investment as a good thing for northeast Ohio. He says it not only retains jobs but also offers opportunity for expanding employment. Foran says he has no insight on how the Canadian acquisitions could affect salaries here, but said those are factors the investors take into consideration when deciding on the feasibility of conducting a profitable business in the U.S.
Tonelson says foreign buyers often re-negotiate wages when they move into a distressed market, especially in Ohio and the Midwest, where jobs are scarce.
“The new owners are always looking for new opportunities for new efficiencies,” Tonelson says. “If there are not a lot of attractive job opportunities, the new owners will realize they are in a seller’s market for labor.”
Even if the tables are turned and the U.S. dollar becomes stronger and the local labor market tighter, Foran does not see that as boding poorly for foreign-owned interests in the U.S. “Many international types are learning to hedge their businesses by having operations in both countries,” he says. “It’s sort of like building a portfolio.”
A stronger U.S. economy would also benefit the Canadian owners by placing their product closer to the consumer, he says.
It is likely the local economy will see additional acquisitions by Canadian firms. According to Foran and the Growth Partnership news release, Team NEO and GP will visit Canada in April “to bring dialogue with other Canadian firms looking to relocate.”
“This visit is directly related to the relationship we have developed with RTS,” Mayernick stated in the news release.
Help for Ashtabula County’s economy is coming from north of the border.
- Reality Check
- Why are we hurting so? It’s time for a reality check.: Main story, Day one
- Beyond wineries and covered bridges … An introduction to reality check
What it is, how it’s calculated
Determining per capita income is a complex exercise that — at best — is a mathematical expression of a moving target.
In its simplest terms, per capita income is, according to the Ohio Department of Development, “the income of a given area divided by the resident population of that area.” Sounds simple enough, but arriving at the figure is not.
- Bad vibes: Lack of opportunities, progress make for sour attitudes Eavesdrop on conversations at the lunch counter, in the aisles of Wal-Mart on a Friday evening or around the sports bar on a Sunday afternoon, and you’re likely to hear some pretty disparaging remarks about the old hometown.
- Finding work after prison nearly impossible A portion of Ashtabula County’s unemployed can’t find a job because of their prior address – a prison cell.
- County part of Team NEO marketing efforts Ashtabula County is part of a 16-county alliance aimed at marketing the Northeast Ohio region to employers and business investors, many of have never heard of Ashtabula, let alone Mentor, Akron or Youngstown.
- Some people just don’t want a job Ashtabula County Commissioner Deborah Newcomb talks to a lot of employers, and they all express the same concern: finding people reliable people with basic skills is a problem.
- POOR BUT WORKING A winter wind blew across the parking lot of the Neighbor to Neighbor Food Pantry next to St. Joseph’s Church in Ashtabula; the six adults lined up at the door turned their faces from the wind, toward the metaphoric concrete wall of the building.
- County's largest hospital feels the Medicaid pain Perhaps no one in Ashtabula County feels the pinch of subsidizing unemployed or underemployed individuals more than Philip E. Pawlowski.
- Crime & Drugs Inc. always hiring Some “unemployed” residents find crime to be their best source of steady income. Judge Richard Stevens of Western County Court says he noticed a 50-percent increase in the number of criminal cases handled by his court between 2005 and last year.
- More Reality Check Headlines