Libbey Glass developments raise questions

Imagine opening your paycheck and finding less money than you expected, then receiving notice your health insurance and utility costs had gone up.

What would you do?

It's a scenario playing out at Libbey Glass, the beleaguered manufacturer of glass tableware. Battered by foreign competition and rising production and labor costs, the company has launched a cost-cutting strategy that has included layoffs, plant closings and a growing presence overseas, where manufacturing costs are lower.

But for the 1,000 employees who work at the Shreveport plant, the developments are spurring speculation about the future of the area's ninth largest business.

About 16 positions were eliminated this summer as part of a 10 percent reduction in Libbey's North American salaried workforce. The local plant also recently canceled a decorating line's second shift because of reduced product demand and transferred those line workers to other departments.

"It's mixed emotion throughout the plant," said United Steel Workers Local 711T president Jacob Lewis, who said the shutdown appears to be temporary. "Everybody is still working although they may not be doing the same thing they were doing."

But recent actions by the company have employees on edge:

Libbey shuttered a plant in California this year, a move expected to save the company $11 million to $13 million annually.

In January, Libbey acquired 95 percent of the shares of Portugal-based glass tableware manufacturer Crisal. Libbey considers the move complementary to its 2002 acquisition of Royal Leerdam to provide glass tableware products worldwide.

Libbey will break ground on a $46 million glass tableware manufacturing facility in China this year. The facility, which will be operational in early 2007, will provide Libbey with low-cost manufacturing capabilities.

Libbey is pursuing the possible purchase of the remaining shares in Vitrocrisa, the largest manufacturer of glass tableware in Latin America. Vitrocrisa is a joint venture between Libbey and Vitro S.A., with Libbey currently owning 49 percent of the shares and Vitro owning 51 percent of the shares.

It's those developments that many employees in the local plant said they consider as evidence of pending layoffs or a temporary shutdown. Employees asked not to be identified because of company warnings to fire anyone who talks to the media.

But union president Lewis said there has been "no indication" from management that those actions will happen.

"There is enough available work to keep the plant going," he said.

Local and corporate Libbey officials did not return repeated phone calls from The Times over the last two weeks. Plant manager Frank Russell was not available when a reporter stopped by the plant last week.

The state Department of Labor has not received notice of plans to close the plant or initiate mass layoffs, and government and economic development officials say they have not heard otherwise.

Kurt Foreman, Greater Shreveport Chamber of Commerce senior vice president of economic development, points to Libbey's plans for a warehouse and distribution facility in west Shreveport as confirmation of Libbey's future presence locally. The expansion is not expected to create any full-time permanent jobs although about 200 construction jobs will be tied to the project.

"They wouldn't go ahead with a huge $30 million or $40 million project if that was the case. They're on the hook for a 20-year lease," Foreman said. "Everyone I've talked to at Libbey seems positive about things. I don't think you would go out and spend that kind of money if the location didn't make sense as a key place in North America for them."

A glass half full?

Two weeks ago, Libbey's stock sank to its lowest level in more than a decade. Then last week the company said it expects to announce lower-than-expected sales in the third quarter. There will also likely be a negative impact on fourth-quarter earnings from higher natural gas, transportation, delivery and manufacturing material costs at the Shreveport plant after the recent hurricanes, the company said.

But there may be some local good news in Libbey's financial woes.

Earlier this month, creditors temporarily reduced Libbey's borrowing ability -- a move that will likely affect the company's ability to purchase a Mexican tableware division. Because of that plant's extra manufacturing capability, there was some question to the need of Libbey's existing U.S. operations.

"I would view (the reduced borrowing capacity) as a temporary reprieve," said analyst Jim Barrett, vice president of research with New York-based C.L. King & Associates. "But whether it's Shreveport or Toledo (the company's only other U.S. glass tableware manufacturing plant), Libbey has a real challenge on its hands."

Aside from its high domestic production costs, Libbey has struggled to price its products competitively.

"The candle companies and the floral companies and the person shopping at Wal-Mart are all looking for the lowest price," Barrett said. "We recognize Libbey's name but we're not going to pay a whole lot extra to pick up Libbey glasses. ... Therein lies the problem. Their consumer brand, while well known, doesn't command a premium in the marketplace."

A helping hand

State and local government officials, aware of Libbey's challenges, have long strove to preserve the local plant, which has operated in Shreveport since 1974 and is the company's largest North American facility.

The Caddo Parish Industrial Board -- a parish-appointed committee that helps structure business incentives -- this year sold revenue bonds to build the warehouse and distribution facility.

The industrial board will own the 650,000-square-foot facility and lease it to a real estate investment trust, which in turn will lease it to Libbey Glass.

The 20-year arrangement, which will rely entirely on private dollars for funding, will end up saving the company interest expense while keeping expensive real estate debt off the publicly traded company's books.

"They are full bore on moving forward," Foreman said. "I've been on the phone directly with these guys a lot lately. They're very excited. I don't expect anything negative at all. They're full steam ahead."

The warehouse should be complete next fall.

In addition, Caddo Parish, the city of Shreveport, Caddo Parish School Board and Caddo Parish sheriff's office crafted a 20-year agreement with the plant that will save Libbey Glass an estimated $10.7 million in property taxes on the new warehouse.

To help protect local jobs, the tax-abatement agreement includes provisions that will require Libbey Glass to maintain 900 jobs during the first five years. The guarantee drops by 100 jobs every five years through the length of the agreement. If employment drops below the agreed-upon figure at any point during the 20-year period, Libbey Glass will have to pay that year's property taxes.

"We're all trying to keep the jobs here, keep the people employed," Lewis said. "It's kind of hard to predict the future. ... But for the time being, there's enough work. No one has hit the streets."

600450 Libbey Glass developments raise questions
Date: 24 October 2005

See more news about:

Others also read

Emirates Glass, a Dubai Investment subsidiary, has won a major contract to supply 140,000 square meters of its premium glass to the prestigious development on the Palm Jumeirah, reaffirming its already established reputation as the single most prominent company in the entire regional glass industry.The deal was announced during the company's participation in the prestigious Big 5 show, the largest annual venue for the entire Middle-East glass contracting industry.
Packagers such as the UK's Rexam and private equity firms are set to vie for pump-sprayer business Calmar, which France's Saint-Gobain (SGOB.
Isra Vision Systems AG supplier of machine vision systems, has successfully improved its market position in display glass inspection with a major order totalling 1.8 Mio Euro.
Jain Scientific Glass Works, manufacturers of glassware for laboratories, is importing glass as raw material from China, which was much cheaper than the local product and abundantly available.
The National Lime & Stone Co. will discontinue production of calcined lime early next month at its Carey plant, the company CEO announced Thursday.
The following stocks are moving in Japanese markets today. Prices are as of 12:55 p.m. at the Tokyo Stock Exchange. Stock symbols are in parentheses after company names.

Add new comment