Freudenberg-NOK to close

Freudenberg-NOK announced yesterday that it would close its manufacturing plant at 51 Growtth ('Get Rid Of Waste Through Team Harmony) Road in the Lakes Business Park in approximately six months. "It could be sooner or it could be later," said Sarah O'Hare, vice-president of human resources, speaking from the firm's headquarters in Plymouth, Michigan yesterday.

The plant, which opened with 213 employees in 1999, currently employs 120 people. O'Hare said that the company anticipated offering a "small number" of employees positions in its remaining five facilities in New Hampshire, at Bristol, Ashland, Franklin, Manchester and Northfield. "We have no expectation that we can support everyone," she said.

George Bald, Commissioner of the New Hampshire Department of Resources and Economic Development (DRED), said that the Rapid Response Team, deployed by the Workforce Opportunity Council, is already working with the company to assist in placing or training employees for other jobs. "The company has been very cooperative," he said.

Founded in 1989, Freudenberg-NOK is a joint venture of the Freudenberg Group, based in Germany, and NOK Corporation of Japan, which produces rubber parts and sealing products under six brands primarily for automobile manufacturers and automotive aftermarkets. In 2007, the privately held company reported sales of $975.5-million.

"This decision was not an easy one," said O'Hare, who explained that the shrinking output from vehicle makers left the firm with excess manufacturing capacity. "All automotive suppliers are operating at less than full capacity and beginning to decrease their manufacturing footprints," she said. Although the year opened well, a three-month strike at American Axle & Manufacturing crippled production while the rising cost of gasoline and troubled financial markets slowed sales, O'Hare said.

Much of the output of the Laconia plant supplies manufacturers of pickup trucks, SUVs and larger cars, for which demand fell sharply as gasoline prices climbed through the summer. O'Hare said that the company sought to sustain its operations by reducing shifts and overtime, but determined it could not wring the excess capacity out of its facilities without closing the facility.

For Mayor Matt Lahey, who was among the principal architects of the Lakes Business Park, new of the closure was "terrible." Describing Freudenberg-NOK as "the anchor tenant" of the park, he recalled the firm's decision to operate in Laconia as "a dream, manufacturing with higher paying jobs. What was just nine years ago a great thing," Lahey continued, "has become a really bad thing." Noting that the prospects of attracting another manufacturer to the park have diminished significantly, he said the closure is "definitely a big step back."

Meanwhile, O'Hare insisted that despite leaving Laconia, "we remain committed to New Hampshire." She said that at the end of August, the company employed 1,093 people at its six locations in the state, which represented almost a fifth of its workforce at 41 locations in North and South America, including facilities in a dozen states, two Canadian provinces, Brazil and Mexico. The firm also operates in Malaysia.

Bald said that he had met with Freudenberg-NOK executives regularly during the past three months as the automotive industry began to slump, including on the eve of yesterday's announcement. "They've had to explore ways to reduce their costs and broaden their markets," he said, adding that his department will continue to do what it can to sustain the company's presence in New Hampshire. "Freudenberg-NOK is still an important part of the economy of the central part of the state," he said.

O'Hare said that company was seeking to wean itself from excessive reliance on the automotive industry by pursuing markets in the aerospace, medical, oil and gas and semiconductor industries. However, she noted that 85-percent of the output of the six plants in New Hampshire was destined to makers of automobiles and trucks, along with agricultural and construction machinery.

The plant on Growtth Road, together with sister plants in Franklin and Northfield, was built in 1999 in partnership with the New Hampshire Business Finance Authority (BFA), which provided financing for the construction and leases the 48,652-square foot facility to the company. Jack Donovan, executive director of the BFA, said that Freudenberg-NOK's lease expires in November 2009. "We have 15 months lead time," he said, "and we'll be working jointly with the company to market the building and replace the jobs."

However, he conceded that in the current economic climate "it will be hard to find a comparable employer."

Without a new tenant, Donovan said that Freudenberg-NOK would be faced with two choices when its lease expires. It could pay a penalty for failing to renew the lease, equal to 60-percent of the outstanding debt on the building, estimated at around $2.5-million, and the BFA would retain ownership with the right to sell or lease to another tenant. Or, the company could pay all the remaining debt and acquire the building, which Donovan considered unlikely. The building and 13.68-acre lot has an assessed valued of $2,740,800.

"This is all really bad news," said Lahey. "The forces beyond our control are the scariest."