Top Ten 2009

0110MERCSIGN

Year in review

By Sean Fitzgerald, Publisher New North B2B

THE CHALLENGES IN THE NATIONAL AND GLOBAL ECONOMY occurring in 2009 lead to a variety of big-impact local business news stories throughout the year in the Fox Valley region, perhaps marking some of the most profound drama we’ve seen in the eight years that B2B has assembled its annual Top Ten list.

And despite the almost entirely negative headlines spinning off of the economy’s performance during the past year, many of the potentially troubling local business stories of 2009 resulted in much more rosy outcomes.

With that in mind, we’ve captured those local topics our readers discussed often, those topics that ultimately drove the bottom line for many local companies during the past year, and those topics that create the most opportunity for future success. Here’s our list of the Top Ten business stories in the B2B coverage area for 2009.

1 Mercury Marine

Among the most dramatic roller coaster rides of the year, Mercury Marine decided to maintain production in Fond du Lac as well as add jobs over the next three years compared to threats of altogether leaving the community that gave the world-renown outboard engine manufacturer its start more than 70 years ago.

In mid-July, Mercury officials said they would make a decision by the end of summer whether or not to move manufacturing operations to Oklahoma – which would eliminate about 2,000 jobs in Fond du Lac – as a result of the steep decline in the boating industry during the past 18 months. At the time, the president of the labor union said the union would not re-open 1-year-old contract negations and accused the company of attempting to bust the union and take advantage of workers in a bad economy.

In late August, union officials voted to turn down an amended contract from the company, which prompted Mercury officials to announce plans to gradually consolidate Fond du Lac manufacturing operations with those at an existing Oklahoma facility.

In early September, members of the International Association of Machinists union at Mercury took a second vote and ultimately accepted a new contract proposal that would allow the company to maintain production in Fond du Lac, and prompted company officials to reverse course and announce plans to close its Oklahoma production facility during the next two years and move nearly 300 additional jobs to Fond du Lac.

To aid Mercury’s decision, the Fond du Lac County Board of Supervisors approved a one-half percent sales tax to help fund a $50 million, publicly financed loan for Mercury. Under terms of the agreement, Mercury could be forgiven about $9 million of the loan if it maintains its current local workforce for 12 years, and could be forgiven even more as it adds jobs in the community. In addition, the City of Fond du Lac provided $3 million to Mercury through a tax incremental financing package.

In November, the state revealed it would also provide a $55 million incentive package to Mercury based upon its ability to maintain production jobs in Fond du Lac during the next 12 years, as well as another $15 million in low interest loans for projects to lower Mercury’s energy costs.

2 Oshkosh Truck

In one of the most celebrated success stories of 2009, Oshkosh Corp. received several billion dollars in defense contracts from the U.S. Department of Defense to aid military efforts in the Middle East, adding thousands of jobs to the region and securing the sustainability of the company for years to come.

In January, Oshkosh Corp. received a contract for replacement parts for military trucks that could provide $1.12 billion over 10 years. The one-year deal for more than $100 million has the potential to be renewed annually for up to 10 years.

In late February, the company received a $477 million contract to provide 1,350 new and rebuilt Heavy Expanded Mobility Tactical Trucks and more than 1,000 Palletized Load System trailers. Good news continued in April when the company received a $122 million order under an existing contract to improve the off-road mobility of Mine Resistant Ambush Protected vehicles.

In late June, Oshkosh Corp. was awarded a $1.05 billion contract to build at least 2,244 of its mine-resistant all-terrain vehicles for the U.S. Army and Marine Corps. In early July, more than 2,000 people attended a job fair to apply for one of the 500 positions the company created to help fulfill the new contracts. The positions pay $25,000 to $32,000 annually.

In late August, the company received a five-year contract to produce up to 23,000 medium tactical vehicles and trailers, as well as provide support services and engineering. But by early September, the U.S. Army had instructed Oshkosh Corp. to stop production on its initial $281 million order under the contract while two of the losing bidders protest the award. In mid-December, the federal government ruled it would re-evaluate the bidding process for the contract, and asked Oshkosh Corp. to pause production of vehicles ordered under the contract until the matter is resolved.

During the last four months of 2009, Oshkosh Corp. would receive five additional orders totaling more than $3.5 billion under the MRAP contract it was awarded in late June.

3 Layoff trends

Each year the layoffs occurring at key employers across the region find some place on our list. This year, those layoffs are more profound and more pronounced than ever.

In January, Quad/Graphics said it would cut 130 positions at its Lomira plant. In mid-February, Miller Electric Manufacturing Co. in Appleton laid off 165 employees, and additionally required all remaining employees to take two weeks of unpaid leave during 2009. Just a few days later, Appleton Coated in Combined Locks laid off 63 employees and cut production down from a 7-day cycle to a 5-day weekly cycle.

In late March, Thilmany Papers announced plans to shut down one of its Kaukauna paper machines indefinitely, effectively eliminating 30 jobs. In April, Carter’s Inc., the parent company of OshKosh B’Gosh operations, announced plans to close down the former B’Gosh headquarters and eliminate nearly 100 jobs, leaving less than 20 employees remaining in Oshkosh.

In July, M&I Bank announced plans to consolidate its processing operations in Brookfield, eliminating 170 jobs at its Appleton processing center. That same month, Jeld-Wen Premium Doors closed its own door in Oshkosh, leaving 87 employees out of work. In early August, Saputo Cheese USA said it would close its Fond du Lac plant, laying off 39 employees.

In early December, Miller Electric would again lay off another 35 jobs from its Fox Cities-based welding equipment manufacturing operations.

4 Menasha Utilities steam plant

The saga of the Menasha Utilities steam plant had been up and down throughout 2009, but may be exiting the year with a bit more promise heading into 2010.

The $41 million plant was closed in early October following the late April recommendation from the St. Louis-based consulting firm Stern Brothers & Co., which was hired to improve the financial performance of the municipal energy facility. Due to nearly $13 million in unforeseen start-up costs and less-than-profitable contracts with customers, the plant had struggled to land in the black since beginning operations just four years earlier.

On Sept. 1, the city defaulted on $24 million in bonds, marking the first ever municipal bond default in Wisconsin and only the seventh local or state government to default on a municipal bond nationwide since 1970. As a result, three investors in the steam generating facility filed a lawsuit in Indiana in late September, accusing city officials of misrepresenting the plant’s potential customer base, the terms of the city’s agreements with steam users, and the status of environmental permits.

By November, the city received an offer from WPPI Energy in which it would receive $18.2 million to help pay settlement claims to investors, while in return WPPI would earn a 6.5 percent return through monthly lease payments by continuing to operate. As of late December, the arrangement is under review by the state Public Service Commission for approval.

5 School budgeting woes

The landscape of public school financing in Wisconsin is changing altogether, not just as a result of the recessionary economy.

With state-mandated revenue caps in place, school districts are finding it increasingly difficult to deliver required services while providing compensation increases to faculty and staff. And while public referenda are the only tool available for districts to generate additional tax revenue, voters haven’t wanted to open their wallets any further. Districts across the Fox Valley illustrated this trend throughout 2009.

In early February, the Kaukauna Board of Education made a decision to lay off 29 teachers for the coming year to help stem the tide of a projected $2.7 million deficit for the 2009-10 school year. That same week, the Neenah Board of Education eliminated 16 positions for the coming year, helping reduce the school district’s budget by nearly $1 million.

In an effort to keep operational budgetary concerns at bay, the Appleton Area School District pitched a mid-February referendum which would have allowed school officials to levy an additional $3.5 million above state revenue limits for 2009-10 and an average of $3.1 million for each of the subsequent four years. But voters turned the measure down, and as a result, the district laid off 43 teachers in early March with the expectation of saving about $1.8 million. By late April, the district would recall 14 teaching positions due to a variety of retirements, resignations and changes in departments which created unplanned vacancies.

During April 7 elections, a majority of the local school referenda going before voters were defeated. Voters in Oshkosh approved one referendum asking for an additional $1.3 million during each of the next five years to catch up on neglected facility maintenance projects, but the same voters also turned down two other referenda, rejecting $15 million in borrowing to construct a new north side elementary school as well as an additional $500,000 in taxes each of the next five years for security upgrades in the district’s schools.

In other referenda that same day, voters in Oakfield narrowly rejected an additional $700,000 in taxes during each of the next four years to cover operation and maintenance expenses. Voters in Ripon approved a measure to borrow $500,000 to replace the high school boiler and repair the roof on various schools in the district, but turned down a separate referendum question to increase taxes by a combined amount of $2.15 million during the next three years to pay for classroom staff and related instructional expenses.

6 Smoking ban

On May 18, Gov. Jim Doyle signed a statewide smoking ban into law, which will prohibit cigarette smoking in all Wisconsin taverns, restaurants, hotels and most other workplaces, effective beginning in July 2010. Those in violation of the smoking ban will face fines of up to $250, while business owners who don’t attempt to stop smokers would get a warning and then a $100 fine for subsequent violations. Tribal casinos and existing cigar bars and specialty tobacco shops will be exempt from the ban.

7 Grand Chute police merger

One of the news stories we held up as a potential model of municipal collaboration a year ago won’t come to fruition after all.

In early December, the Town of Grand Chute Board of Supervisors ultimately decided to discontinue exploring the possibility of a merged police department with the City of Appleton after learning there would be little, if any, cost benefit to such an arrangement. The two departments had operated under the auspices of a merged Appleton Police Department through a trial arrangement since mid-2008.

A consultant’s report presented to town officials in January indicated the town could pay up to 70 percent more for local police services if it were to go ahead with the merger. A later report prepared in May indicated the town would save about $78,000 in 2011 and nearly $300,000 annually by 2014.

But ultimately a memo issued by Grand Chute Administrator Jim March in early November suggested the proposed police department merger between the town and the City of Appleton may not provide the estimated more than $100,000 in annual cost savings to both departments and suggested the town cease plans to merge. Town officials also suggested concern about potentially diminishing Grand Chute’s identity if its police services were delivered through the Appleton Police Department.

8 Paper industry dumping

In early November, the U.S. International Trade Commission ruled there was sufficient evidence to conduct an investigation into allegations that China and Indonesia unfairly subsidize paper exports to the U.S. market, damaging the competitive abilities of three American coated paper manufacturers including Appleton Coated and NewPage Corp.

The complaint brought forward by the three domestic paper manufacturers alleges foreign subsidies have allowed the foreign papermakers to double their share of the U.S. market for coated papers, leading to job losses and plant closures such as the NewPage plants in Kimberly and Niagara. The investigation is expected to reach into early 2010, and could ultimately lead to U.S. trade sanctions against China and Indonesia.

NewPage officials had expressed there wouldn’t have been a need to close its Kimberly mill if not for the alleged dumping activities from China.

9 College Avenue bridge reopens

Following more than 15 months of being closed to traffic, the College Avenue Bridge in downtown Appleton reopened after a nearly $18 million reconstruction project. The crucial link between the east and west sides of the community now accommodates four lanes of traffic, includes two 5-foot bike path lanes, two 8-foot sidewalks and viewing platforms overlooking the river.

The entire construction project also included a separate $4 million effort to improve the approaches to each end of the bridge, including a two-lane roundabout on the east side of the bridge. Among the busiest stretches of road in northeastern Wisconsin, the College Avenue Bridge accommodates average traffic volumes of 22,500 vehicles a day.

10 Kaukauna storm water utility

One of the last remaining communities in the Fox Valley to establish a storm water utility came under fire from business owners and residents about paying a new fee during a difficult economy.

In mid-June, the City of Kaukauna Common Council delayed establishing a storm water utility by six months following a public hearing in which several business owners claimed they weren’t in a financial position to begin paying the utility fees. The city is planning about $4.5 million in storm water management projects. By early July, the city council reversed course and decided to implement the new storm water utility at the start of 2010. In making the decision, city officials presented a payment plan that would gradually increase the utility fee in the years between 2010 to 2013 to make it more affordable to property owners.

Honorable Mentions

Olsen’s Mill bankruptcy

A battle over the right to purchase the bankrupt Olsen’s Mill Inc. of Berlin was awarded to a local investment group led by C.R. Meyer & Sons Construction Co. President Phil Martini in an agreement that covers more than $19 million in costs, including payments of $15.5 million to creditors and $3.7 million in outstanding checks to corn and grain growers. Green Lake County Circuit Court Judge William McMonigal halted the early April proceedings with concerns a French-based investment group would discard forward purchase contracts and pre-purchase agreements with farmers, eventually dissolving the operation. Judge McMonigal said he felt confident the local investment group would continue to operate the business in good faith and find support from local farmers.

Park Plaza Hotel

In May, Nash and Chhinder Gill, brothers from Vancouver, Canada, outbid nine other interested buyers in a sheriff’s auction and paid nearly $2 million to purchase the former Park Plaza Hotel on the Fox River in downtown Oshkosh. The deal to purchase the eight-story, 179-unit hotel includes management of the recently renovated Oshkosh Convention Center. The distressed property had been in bankruptcy the past three years, and had continued to operate under the ownership of the Madison-based bank which originally financed the previous owners. The Gill brothers said they’re planning substantial investments to the property to upgrade the quality of rooms and the hotel’s amenities to qualify it for a national hotel brand.

Work begins on U.S. 41 bridge

With a $32.3 million push from the federal American Recovery and Reinvestment Act approved in February, the state Department of Transportation announced construction for two overpasses of U.S. Highway 41 near Oshkosh and the reconstruction of the Lake Butte des Morts Causeway would begin in April as opposed to the original scheduled start date of 2011. The project to widen the existing causeway to six lanes could be complete sometime in 2011.

Bemis merger

In early July, Bemis Company, Inc. of Neenah announced it will acquire the Food Americas operations of Alcan Packaging for $1.2 billion. The deal includes 23 flexible packaging facilities in the U.S., Canada, Mexico, Brazil, Argentina, and New Zealand, including operations in Menasha. In announcing the acquisition, Bemis officials said they expect to be able to provide annual savings of $65 million on previous Alcan Packaging operations. The combined company is expected to generate annual sales of more than $5 billion and employ more than 20,000 employees at 84 production facilities worldwide. The merger was still working through the regulatory process at the end of 2009.

Chrysler closures

As part of Chrysler’s bankruptcy filing in early May, the auto manufacturer announced it would cut 789 of its dealerships nationwide and 18 in Wisconsin, citing low sales. Local dealerships that closed or discontinued their Chrysler lines in early June included Ernie von Schledorn of Lomira, Plach Automotive in New London, Mueller Chrysler in Oshkosh, and Van Lieshout and Simon Dodge in Kaukauna.

Grand Opera House

After discovering critical issues with the trusses supporting the roof of Oshkosh’s historic Grand Opera House in late February, the 125-year-old facility closed for any performances for the remainder of the year. With the State of Wisconsin including $500,000 in its 2009-2011 biennial budget to assist with the repair costs, the city’s common council approved $2 million in funding in late August to repair the roof trusses and as well as renovate mechanical and safety systems at the theater.