Sent: Friday, April 28, 2006 8:08 PM
To: John L. Sweeney
Subject: RE: Changing picture marks Sappi talks
It’s amazing that transportation doesn’t seem to be a factor.
I’m still at heart a Duluth booster, being born there. In 1900-20, Duluth was one of the boomtowns of the country. It was thought that because of Great Lakes shipping, they would one day rival Chicago for industry and population.
Two things put the kibosh on that. The weather, of course, was one. But the national highway system and the growth of the automobile/truck industry was even more important.
And ever since then Duluth has slowly “died on the vine.� In the 80s they finally read the handwriting on the wall and discovered tourism and have at least stopped the free-fall.
You may have heard of “Jeno’s Pizza.� A cheap frozen supermarket brand. Also canned sauce. And they invented the Pizza Roll. Manufactured in Duluth by Jeno Paulucci, the same guy who made a fortune by starting Chun King Chow Mein in Duluth and ultimately selling it to R.J. Reynolds. Now he has a new frozen Italian food line named after his mother, “Michalina’s.� Whatever he has touched, through hard work, mostly, he has done well. Demanding boss, but he pays them well. All his managers drive Company Cadillacs. At one point he was the second biggest landowner in Florida, after Disney.
20 or more years ago, Jeno’s moved to Ohio (near West Virginia), claiming that transportation costs were too much living so far north and away from the population center of the country. One time I happened to be on business in NY and flew back via Columbus, OH, and happened to be sitting next to a guy who was Jeno’s Maintenance Manager in OH who was born in Duluth. We had mutual acquaintances. I asked him whether it was that much cheaper to produce in OH rather than Duluth. He laughed and said that in one year they paid for the entire move, including payments on the new building (heavily subsidized by OH because of all the jobs) just through transportation costs alone.
Being in Duluth, they were so far out of the way, they had to pay truckers to drive up there to pick up loads. In OH they were on the main drag and truckers automatically stopped by to pick up loads.
Yet Europeans, South Africans and Asians can sell paper and heavy equipment here, even with 10,000 mile ocean voyages. Doesn’t say much for American efficiency, does it.
-----Original Message-----
From: John L. Sweeney [mailto:sweelab@enter.net]
Sent: Friday, April 28, 2006 7:03 PM
To: Ray Marshall
Subject: Re: Changing picture marks Sappi talks
A- The price of the American firms is attractive, i.e. "low", considering the "off-shore" firm keeps the Sales people, contacts stay in place, customer and prospect lists become the new owner's, Production Machines and their labor force are eliminated, plant real estate is sold and the buyers have [in time] no real American sources of supply, they must pay higher prices for the Production output of non-U.S.
plants of the new owners.
B-That's the only reason a S. African, Finnish, etc. firm would buy paper manufacturers.
When our steel industry went belly up because of the 90 day syndrome and there were no
more American steel companies the new owners [Chineese e.g.] charged 20 times the going
price for rebar steel. Only the Chineese steel plants made the stuff.
After Formica, Inmont, Masonite etc. closed their printing plants because buying gravure
cylinders and paper from the Japaneese wood-grain folks, Topan, DiNippon & Chioda
was such a good idea, it was cheaper, the quality was better than ever before and the Americans
could make more money because of the lower costs of what they used to produce.
Then, the Japaneese firms would no longer supply cylinders, only printed paper at 10 times the
previous prices.
C-- That day can and will come when the "new owners" can't expect to pull out of us higher profits
than they can get elsewhere, China comes to mind right now and Russia came to mind a decade ago.
A---You’ve given me the reasons, but I still find it amazing that so many foreign companies are investing in American firms. Just like in the 19th century.
B-----And it must be, as you state, that they are so inefficiently managed that there is a lot of money to be made.
C----And if they didn’t invest in American firms, we wouldn’t have the money to pay off our balance of payments deficits. And that would really drive the dollar down.
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