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Last Updated: Mar 31, 2009 - 2:29:20 PM |
Victor Plastics filed for chapter 11 bankruptcy protection on Jan. 15. Mitch Traphagen Photo
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VICTOR – Victor Plastics filed for Chapter 11 bankruptcy protection on Tuesday in Minnesota – a move that could mean the loss of jobs in Victor. The parent company of Victor Plastics, VPI Acquisition, is incorporated in Minnesota. The filing indicated debts of $19.5 million.
While bankruptcy protection under Chapter 11 does allow for reorganization, the company’s release to the media indicates that operations will cease by early May.
The Chapter 11 filing, however, leaves open the door for reorganization either under current management or under management set up by secured creditors.
A company statement to employees indicated that all wages would be paid in full as operations wind down. Vacation and personal days, however, may be lost if a sale or reorganization does not occur before May.
“Our firm has worked strenuously to avoid bankruptcy,” said Mike Tryon CEO of Victor Plastics. “However, due to industry outsourcing to overseas competitors, intense market competition, loss of key customers, and increasing costs of raw materials - particularly resin - we were unable to operate profitably, so we were forced to make some tough management decisions. We understand how tough this is on our employees, their families and our customers; we have a plan in place to ensure an orderly wind down.”
“Employees will be laid off gradually as production slows down. We are working with local government agencies to assist our employees interested in other employment opportunities, and will work closely with Victor’s customers to meet their immediate production needs. We expect that production will continue in this limited capacity through the first week of May. After that we will do our best to help customers find other suppliers.”
According to company spokesperson Lynn Nelson from the Links Group, a public relations firm, Victor Plastics employs 429 employees. Nelson was not able to confirm the exact number of employees that will be affected at the Victor plant – nor could she provide details on when layoffs could begin. Calls made to VPI for local comment were referred to the public relations firm.
Ron Brookhart, an engineer formerly employed by Victor Plastics, estimated that as of last year there were approximately 250 people employed in Victor. He estimates approximately 175 are employed today.
Victor Plastics began in 1983 as a startup founded by Victor resident Jim Kubu. The company grew rapidly with three plants opened in less than a decade. It was very highly regarded in the community. According to local sources, upon Kubu’s sudden death in 2002, the family had hoped to operate the business in his memory. Due to the size and rapid growth, however, management became difficult.
The Kubu family was not immediately available for comment on today’s announcement.
In 2004, Victor Plastics, Inc. was sold to Spell Capital Partners, LLC, of Minneapolis, a private equity firm. According to the company’s Website, revenues for the yerar were $102.5 million.
On April 23, 2005, Victor Plastics announced the shut down of their Kalona Plant, resulting in the layoff of 209 employees. The company was, at the time, one of the largest employers in Kalona. The acquisition of Maytag by Whirlpool Corporation was cited as the primary reason for the closing.
Engineered Plastic Components of Grinnel announced plans last year to purchase the Kalona plant.
Also in 2005, Victor Plastics reported investing heavily in capital equipment. At the time, the company employed more than 700 people.
In 2006, Victor Plastics moved it’s headquarters to the North Liberty location and expanded via acquisition in Flora, Miss., purchasing Kincses Tool & Molding Corp. That plant was renamed and retooled to manufacture parts for Whirlpool Corp.
By the end of that year, VPI and Spell Capital Partners had publically announced plans to begin making further acquisitions.
On Internet message boards and blogs, some area residents expressed frustration at hearing the news first on television rather than from the company. Others expressed concern about accumulated vacation time and other benefits or the impact on the community itself.
Victor Mayor Roger Pawlak monitored the situation throughout the day on Tuesday.
“We were blindsided by the bankruptcy announcement today,” said Mayor Pawlak. “VPI is a major employer in the area, the economic impact will be widespread. We can only hope that someone will step up to the plate with a rescue effort. Our hearts go out to the employees affected.”
According to media reports, city officials in North Liberty were also caught by surprise with the announcement.
According to their Web site, Spell Capital Partners is a private equity and buyout firm based in Minneapolis. The company portfolio lists seven manufacturing operations located in Minnesota, Iowa, Indiana and Arizona.
Stay with the East Iowa Herald for further coverage of this event.
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