Manufacturer looks to stay in county
At San-Mar Laboratories Inc., owners will get a little help from the state to keep their business in Westchester and out of the four-decades-long exodus of manufacturers from New York.
It”™s just not the help they wanted from the state to grow their 35-year-old business.
A contract producer of over-the-counter drugs and health and beauty treatment products and a matchmaker for holders of intellectual property and marketing partners, San-Mar operates a 135,000-square-foot plant and currently has about 250 employees in Elmsford. The privately held company averages about $30 million in annual revenue. Unlike several of its regional competitors, San-Mar has survived an industry slowdown that began in 2007 and forced the manufacturer for a time to cut back to four-day work weeks and single shifts.
“We”™re kind of in a tough spot,” said Frank V. Penna, executive vice president and a co-owner of San-Mar. “Like most companies, our traditional credit lines have dried up” in the recession and credit market crisis. “That”™s what we really need to grow the company.”
For manufacturers in the Hudson Valley, the drought of credit lines for operating expenses is not a widespread problem, said Harold King, executive vice president of the Council of Industry in Newburgh, a nonprofit manufacturer”™s association with 135 member businesses that employ nearly 7,000 workers in the seven-county region. “Generally speaking, they”™ve got good long-term relationships with their banks,” he said.
”˜Personal loyalties”™
Manufacturers here, though, are not making significant investments in their New York facilities, King noted. “I don”™t necessarily see that a company picks up and moves, but I do see that a company makes investments elsewhere” at its plants in other states or in foreign countries, he said. “Rather than growing here, they”™ll maintain what they”™ve got” and avoid big investments. “That”™s been the trend for decades.”
Looking to stay and grow in Westchester, San-Mar”™s owners applied to the state”™s Empire State Development Corp. for a low-interest line of credit. “They turned it to a grant instead” for $750,000, said Penna, “which is nice, but it”™s not what small businesses need to grow their business.”
The grant award through the state”™s Jobs Now program is contingent upon final passage of the 2010 state budget. To receive it, San-Mar must invest about $1.9 million in a new computer system and other equipment and improvements and create 115 new jobs over the next three years. State officials when announcing the award said the company faced increased operating costs in 2009 and considered moving its plant to another state or selling to a competitor.
“We take our lumps for being loyal” and remaining in New York, said Penna. “If it were purely a business decision, we should probably move out of New York,” where San-Mar”™s costs have risen by about $125,000 to $150,000 annually with the Metropolitan Transportation Authority”™s year-old payroll tax on employers in the MTA commuter region, he said. “It”™s more because of personal loyalties. As a private company, we can do that. It costs us more to do business here, but that”™s the way it is.”
Penna said about half a dozen of San-Mar”™s competitors and the company”™s own outside accountant have gone out of business in the recession. “The economy has just beat the hell out of everyone,” he said. “It”™s been a shakeout time.”
”˜Stable in the valley”™
Though still in long-term employment decline and extensive structural change, manufacturing output in New York showed brisk growth in the first half of 2010 after bottoming out in 2009, according to economists at the Federal Reserve Bank of New York.
Manufacturing employment slowed again in June, however, when the state lost 2,600 manufacturing jobs after gaining 1,900 in May. New York lost a monthly average of 3,100 jobs in manufacturing through 2008 and 2009.
William C. Dudley, president and CEO of the Federal Reserve Bank of New York, said manufacturers”™ production in this region has grown as companies have been rebuilding their inventories “to bring them into a better balance with sales.” A rebound in exports of manufactured goods, especially capital goods, after a weak 2009 also has driven factory output here, Dudley said.
For manufacturers, “It”™s been pretty stable in the (Hudson) valley for the last eight months,” said King at the Council of Industry.
Looking ahead, “I think we”™re doing a lot of treading water,” he said. Though “pretty healthy financially,” manufacturers are “playing it tight to the vest” on hiring in an uncertain economic and regulatory climate. Many are using temporary workers rather than add permanent employees, he said.