Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, February 9, 1991 TAG: 9102090103
SECTION: VIRGINIA PAGE: A-1 EDITION: METRO
SOURCE: GEORGE KEGLEY and/ MARK LAYMAN STAFF WRITERS
DATELINE: LENGTH: Long
Earl Smith, a vice president for program management, said Allied-Signal will hold off until late summer a decision on whether to reduce the plant size, make a different product line or drop the project.
The company said it will study the feasibility of making master cylinders, hydraulic boosters or other automotive products at the Glenvar site.
"What they'd really like to do is see if there's another use for that property," Roanoke County Administrator Elmer Hodge said after meeting with company executives.
The county will come out ahead even if Allied-Signal's Bendix Automotive Systems Group does drop plans to build a factory here, Board of Supervisors Chairman Steve McGraw said Friday.
Allied-Signal announced that it had "indefinitely suspended" construction of the disc-brake factory because of a fourth-quarter loss blamed on falling car sales. The Southfield, Mich., company said it will move the first phase of the brake production to an existing plant to fulfill contracts with customers.
If the company does not build on the 177-acre site in Glenvar, Roanoke County gets the land back.
In that case, McGraw said, the county still will have a large tract zoned for heavy industry, with rail siding, quick access to Interstate 81 and, within a couple of years, public water and sewer service. "Ready-to-go" industrial sites are rare in the Roanoke Valley and can be sold for $25,000 or more per acre, he said.
If that happens, the county will have a much more attractive site, said Beth Doughty, marketing and research director for the Regional Partnership.
Roanoke County spent $800,000 to buy the site for Allied-Signal and was ready to spend another $600,000 to extend water and sewer lines to it. Hodge said the county would go ahead with the utility work.
Smith said he does not know what the company will decide, "but intuitively, I believe the odds are very good that we'll do something here." Allied-Signal has spent more than $1 million to design the factory, buy the land and prepare it for construction.
As a last resort before it would give up the site, his company will explore whether its aerospace or engineering groups can use it, Smith told a news conference.
"One good thing," Smith said, is that most of the other product lines being considered for the Roanoke County site would require a plant of about the same size - 275,000 square feet, with 250 to 300 employees.
Allied-Signal's automotive division reported a $9 million loss for the fourth quarter of 1990, down from a profit of $27 million a year ago. That contributed to a 7 percent decline in the parent company's net income from a year ago.
As a result, the company cut $200 million from its $800 million capital program, Smith said. The company also froze salaries for 70,000 employees and reduced pay of top management by 5 percent.
Allied-Signal "isn't going broke; we're just watching our pennies," Smith said.
The automotive-parts executive said he expects car sales by the fourth quarter of this year "will return to the level of a couple years ago," thus boosting demand for the company's products.
The county still considers Allied-Signal "our preferred customer," but the county will market the property in case there is another potential user, Hodge said. "I don't think the site will be there long," he said.
"We don't want to sit on the property if there is another user," Smith said.
Allied-Signal's contract requires construction to start by July 1 or the county will regain possession of the land. Smith said the final decision will not be made by July, but Hodge noted that the deadline is flexible. "If they're making a good-faith effort and it looks promising, I'd recommend that the Board of Supervisors continue to work with them."
Allied-Signal is not alone in rethinking plans for expansion. Other companies are delaying new plants as a result of the recession and the Persian Gulf war. Two weeks ago, Arkay Packaging Corp. of New York said it will hold up construction of a plant in the Jack C. Smith Industrial Park in Bonsack because of the poor economy.
And Hugh Keogh, executive director of the state Division of Industrial Development, said three companies that appeared close to an announcement of construction at Virginia locations last fall have postponed action because of the war and the economy. Two of them are "multihundred million-dollar companies," he said.
Some of the corporate expansion projects in the development pipeline will move ahead, but petroleum-related companies and those with consumer products will take longer, Keogh said.
"I hope indefinite is not indefinite," said Joe Thomas, head of Thomas Bros., the Salem excavation firm that completed about 15 percent of the site preparation before Allied-Signal stopped the work.
Allied-Signal told its general contractor, H&M Construction Co. of Nashville, Tenn., to release subcontractors, suppliers and other vendors from their commitments.
The indefinite delay on plant construction is "a very difficult decision," bringing much disappointment to his automotive sector, Smith said. "But it in no way reflects negatively on Roanoke Valley or the site."
Joseph Stephenson, president of Roanoke Regional Chamber of Commerce, said the delay "certainly doesn't help the image of a fairly stable work environment. But I hope this is only a temporary impediment. That plant will have a significant impact on the valley."
The brake-parts plant was to have employed 30 people starting late this year and as many as 300 by 1995, according to the company's original plans.
Speculation about the future of Allied-Signal Automotive's plans had been widespread in the two weeks since the company put construction work on temporary hold.
But a suggestion that Allied-Signal would proceed with some type of project came with the recent announcement that Smith will speak at the Regional Partnership's annual meeting on Feb. 21.
The mood at Friday's news conference at the county administration building was far different from that in October, when dozens of local business leaders turned out to cheer the announcement of Allied-Signal's plans.
Despite their disappointment, county officials said they were satisfied with the way the company delivered the bad news.
by CNB