Philadelphia-area firms investing in their factories
In a summer filled with bad economic news and rampant complaints about tight credit, many manufacturers are still investing in their factories.
In a summer filled with bad economic news and rampant complaints about tight credit, many manufacturers are still investing in their factories.
Dietz & Watson Inc., the Philadelphia deli-meat producer, for example, last week started running a new $2 million packaging line for presliced meats sold by supermarkets.
"This is the kind of investment you have to make regardless of the economy," said Dietz & Watson's chief executive officer Louis Eni, whose grandfather founded the company in 1939.
Other local companies have also made recent investments in plants and equipment.
Southco Inc., a manufacturer of locks, latches and fasteners in Concordville, spent $5 million to upgrade its facility there and install new manufacturing equipment.
In Cinnaminson Township, Sea Box Inc., which turns shipping containers into refrigerated containers for the military, temporary housing for large zoo animals, or control rooms for unmanned aircraft, recently spent more than $100,000 on equipment, including three forklifts.
It is no surprise to Kevin Blakely, chief executive of the Risk Management Association in Center City, that manufacturers who pay their bills are able to borrow money.
"The money is still out there, it's just not available at the same rates or the same underwriting standards that some sectors got accustomed to. In other sectors, it's business as usual," Blakely said.
Not that manufacturing is booming. Manufacturing production has been down for three straight quarters, said Daniel J. Meckstroth, chief economist at the Manufacturers Alliance/MAPI, a trade group in Arlington, Va.
Industrywide profits are down this year, but they are still relatively high, giving manufacturers, especially large ones, strong cash flow, Meckstroth said. "For that reason [manufacturing is] not hurt as much by this credit crunch."
Whatever the industry, lender Wilmington Trust Corp. looks at a company's cash flow, collateral, management and ownership when it makes loans, and it is finding lots of worthy borrowers.
The Wilmington bank said its regional-banking business added $483 million of loans in the second quarter, the largest quarterly increase in the company's history.
Jeffrey J. Culp, president of Wilmington Trust of Pennsylvania, said the lender's Mid-Atlantic operations benefited from "diversity of industries that are here and the quality of the companies that are here."
When companies are not getting loans, there is usually a reason. Either cash flow or collateral are inadequate, Culp said.
At PNC Financial Services Group, lending to customers with at least $30 million in annual sales was up 27 percent in the second quarter, compared with the same period a year earlier, spokesman Edward J. Kozmor said.
Southco CEO Brian McNeill said the privately held, 109-year-old manufacturer's investment in Concordville was part of a global rebalancing of its manufacturing operations. Some of its previous Concordville operations were sent to other U.S. plants and some went overseas. The company has 3,000 employees, including more than 500 in Concordville, and facilities in 10 countries.
The new operation specializes in injection molding used to make parts out of plastic for its customers in industries such as electronics, automotive and aerospace.
McNeill said problems in the credit markets reached Southco indirectly, when its customers in troubled industries could not get loans. "Companies like Southco . . . are not having any issues getting credit," he said.
Eni, who runs Dietz & Watson with his brother, Chris Eni, and sister, Cindy Yingling, said the company's bank did not hesitate to lend money for the packaging line, which started filling orders this week.
The new resealable package, which is replacing the vacuum-sealed packs Dietz & Watson has been using, presents the slices in a pile folded this way and that, the way it comes off a deli slicer.
Workers have started making way for a second $2 million machine, and Dietz & Watson plans to bring in a third next year, if sales of the new package, which is similar to peel-back and resealable Oreo cookie packages, go as well as expected.
Eni said his experience showed that money was still flowing. "The faucet is not turned off at all. What it is, the faucet is flowing correctly. It's flowing to the people who are a good risk," he said.
