September 20, 2007
By ANDY KIRKALDY
HANCOCK — Vermont Plywood LLC, Hancock’s largest employer, closed its doors on Sept. 6 after a little more than three years under new ownership, putting 35 employees out of work.
Vermont Plywood CEO Dan Davis bought the 120,000-square-foot plant on 50 acres on May 21, 2004, paying Chesapeake Hardwood Products $775,000 for the Route 100 facility that was formerly operated by Weyerhaeuser Co. Vermont Plywood made plywood for the housing industry, notably paneling, cabinetry and furniture.
That deal was supported by a $730,000 Community Development Block Grant and a $640,000 Vermont Economic Development Authority (VEDA) loan. But Davis said broken promises by Chesapeake caused immediate problems, and a downturn in the housing industry contributed to the decision by Vermont Plywood’s financial backers to pull the plug earlier this month.
Technically, VEDA, along with the United States Department of Agriculture, which guaranteed the VEDA loan, and the Union Bank of Morrisville foreclosed on the property on Sept. 6, said Davis, who was still on the site this week.
“The place all belongs to the bank now,” said Davis, who had once hoped to employ as many as 70. “I’m only here packing up corporate records … I’m among the unemployed.”
In retrospect Davis pointed the finger at Chesapeake as dealing the major blow to his company. As part of the purchase agreement he said the company agreed to do $2 million a year of business with Vermont Plywood, but quickly abandoned the deal after the sale.
“They shorted us $2 million of sales in the first year. It wasn’t a little thing,” he said.
Davis said he did not have the resources to pursue a fair legal settlement, and instead accepted an amount “roughly 10 percent” of the lost revenue that one year of sales to Chesapeake would have generated.
“We didn’t have deep enough pockets to pursue the litigation … We never really recovered from that,” he said. “Going forward they wouldn’t contract with us … That was our bootstrap to get this place really going.”
More recently Davis thought he had a deal with Canadian firm Kruger Inc. to keep Vermont Plywood afloat. He said Kruger at one point had a letter of intent to purchase the facility, and had promised to provide at least enough raw material to allow his company to make 1,000 sheets a day of plywood.
Instead, wood enough for only 500 panels a day showed up, less than Vermont Plywood’s break-even point.
“When push came to shove they opted to take their inventory and go home,” Davis said, adding that “We were expecting their business to ramp up so we could live with Chesapeake’s business going away.”
This summer’s housing slump, which is tied into the nationwide sub-prime mortgage lending mess, essentially proved to be the final nail in the coffin.
“You don’t have to pick up the paper to figure out what is going on with housing right now … There’s a significant slowdown,” said Davis.
Davis, a West Burke resident, does not know what his next move will be personally. His employees have chosen different paths so far.
“Several of the people that work here have already found other jobs. Some are holding out hope someone will buy the plant,” he said.
Davis is not optimistic the plant will reopen quickly, simply because of the market conditions in the housing sector. But he said that the lean manufacturing techniques he introduced allowed his 35 employees to produce almost as much plywood in one shift — 3,000 panels — as Chesapeake’s 100 employees did in two shifts. And he said before Chesapeake jumped ship the plant was profitable in three out of his first five months.
“Somebody could pick up this plant on the cheap and make plywood again someday,” Davis said. “We have proven the plant can be productive.”
Rep. Willem Jewett (D-Ripton), who lobbied for the original financing package, said he would work with the bank and state economic development officials to try to find another owner.
“It’s going to take time and hard work by the bank and the economic development group to get this thing restarted. I trust everyone has that goal,” Jewett said. “Leaving that as an empty building doesn’t seem like a good idea.”