THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Sunday, January 28, 1996 TAG: 9601270349
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY MYLENE MANGALINDAN, STAFF WRITER
LENGTH: Long : 160 lines
Don Goldberg didn't realize that simply maintaining his relationship with one of his city's international companies would pay off so handsomely.
During a courtesy call in the early 1990s to Mitsubishi executives in Japan, Chesapeake's economic development director was told the company might have other projects.
It turned out to be an expansion of a subsidiary, the world's largest maker of synthetic paper, the Oji-Yuka Synthetic Paper Co. Ltd.
Executives from Mitsubishi, one of Oji-Yuka's parents, had suggested that the synthetic paper manufacturer look at sites near its chemical operation in Chesapeake. That recommendation set in motion the wheels of economic development negotiations between the company and Goldberg.
``The opinion of a sister company is very highly regarded and respected,'' said Goldberg, who started talking to Oji-Yuka about two years ago. ``They're going to make their own decision, but they'll trust the opinion of a sister company or a member of the family.''
What resulted was the recent announcement that Oji-Yuka, under its U.S. subsidiary name YUPO Corp., would build a $100 million synthetic paper plant employing 100 people in Chesapeake's Greenbrier Commerce Park. It ranks as one of the largest initial capital investments made by a company relocating to Hampton Roads and the second largest in the city's history.
Established in 1969 as a joint venture between the New Oji Paper Co. Ltd. and Mitsubishi Chemical Corp., Oji-Yuka is the world leader in paper made from a polypropylene plastic base.
The Tokyo-based company, which earns $150 million in annual revenue, or 15 billion yen, makes synthetic paper used for pressure-sensitive labels, thermal printing and commercial printing. Products range from gift bags to airline baggage tags, magazines to posters, detergent bottle labels to packaging material.
Synthetic paper sounds misleading because people can't imagine what it's like. But don't confuse Oji-Yuka's manufacturing processes with those of traditional paper mills.
Oji-Yuka's product comes closer to the plastics industry than paper. What it makes is more durable, thicker and chemical resistant - and it uses largely different processes.
And unlike paper mills, Oji-Yuka's plant doesn't present environmental concerns and isn't a large water user, city officials say.
A demonstration video showed a model dunking an entire book made of synthetic paper in water. The book didn't tear or lose its shape.
About 45 percent of Oji-Yuka's product is exported from Japan, where its three existing plants are located. Because the United States is the world's largest consumer of paper, Oji-Yuka spotted an opportunity to form an American subsidiary.
Its customers vary from companies that design labels to advertising firms that produce the billboards and signs in fast-food restaurants, said Warren Harris in Chesapeake's economic development department.
``We are expecting the market to grow more than 10 percent,'' said Hirosuke Fukuda, treasurer of the new U.S. subsidiary. ``In the past, the market has grown that much a year. We're expecting that growth to continue down the road'' as applications for synthetic paper broaden.
As evidence of this optimism, the Oji-Yuka master plan calls for the addition of 300 to 400 people at the Chesapeake plant over several years. The project also has the potential to increase in four phases to a $400 million investment.
Little information exists about synthetic paper, for which Oji-Yuka owns several patents and considers a niche market. In its strictest definition, the market is less than $1 billion, Fukuda said. However, in varied forms and categories like print double film, YUPO's market reaches billions of dollars.
``On this continent, we don't have competitors that make the exact same type of synthetic paper,'' Fukuda said. ``There are other people who make similar paper.''
Mobil Chemical makes a film similar to YUPO's product that can be written on. It's used for products in the publishing and printing industries.
A French company called Arjobex also makes a film product similar to YUPO, but it's used mainly for bottle labels.
``In essence, we have a competitor, but their product is not much like ours,'' Fukuda said.
Four times as expensive as natural paper, synthetic paper appears cost prohibitive. Yet, it has been sold in the United States under the trademark KIMDURA by Kimberly-Clark Corp., the second-largest U.S. household and personal-care products company, also known as the world's leading tissue manufacturer.
In 1994, 5,000 tons of YUPO were exported to the United States. Oji-Yuka officials expect to produce twice that amount each year at the 160,000-square-foot Chesapeake plant, to be located off Executive Boulevard at Corporate Lane,
Executives viewed the growing worldwide demand for their product as a chance to expand their business significantly. And the United States seemed to be a natural site for their fourth plant as it provided cheaper labor, greater access to markets in Canada and South America, as well as being the world's largest paper market.
Chesapeake and company officials gave assurances that the synthetic paper is a clean industry, in which all waste will be handled properly.
``It's not a smoke-stack industry,'' Goldberg said. ``Everything's contained. It's plastics.''
Considered a big power user, YUPO will use more power than water for its plant because its entire manufacturing line involves a series of enclosed machines controlled by a computer.
This ``closed system'' means that more than 75 percent of the manufacturing process is contained within equipment and not released into the air or water. No smoke or odor will escape.
YUPO will be discharging waste water, but it's no different than discharges from large companies like Mitsubishi or a major military installation the size of Oceana Naval Air Station or the Little Creek Naval Amphibious Base, said Guy Aydlett, chief of industrial waste at Hampton Roads Sanitation District. Any company that discharges more than 25,000 gallons of industrial waste water a day for treatment qualifies as a ``significant industrial user.'' And the YUPO plant falls into that category.
Aydlett was impressed with YUPO's openness and its operation.
``They are an excellent company - very cooperative and very open. They're willing to do anything,'' he said.
Aside from its contribution of $500,000 in real estate, machinery and tool taxes to city coffers, YUPO will help stimulate other sectors of the local economy, city officials say.
Company representatives expect the plant to generate sales revenue between $60 million and $70 million during the plant's initial stages.
In hiring technically skilled people for its manufacturing jobs, YUPO is expected to pay $8.50 to $16 an hour, Goldberg said. Also, each job at the the plant could create two other jobs in the local economy.
For instance, Oji-Yuka will interview construction companies, but Mitsubishi's heavy-machinery division should be involved in some capacity, Goldberg said. Local people will be hired to build the plant; local companies will supply and serve its needs, he added.
``It's also going to give other industries and companies the opportunity to add jobs,'' Goldberg said. ``It creates a lot of job base. It makes us very cosmopolitan. That's very important. We like that. It helps us when we market to know we market the world.''
Bill Judah and John Plemmons both recognized that their interaction with Oji-Yuka was different and bigger than most deals.
Plemmons, a vice president with Signet Bank, which sold the property in Greenbrier Commerce Park to Oji-Yuka for $2 million, cannot recall a transaction he's ever been involved with that was essentially brokered by a sister company.
Involved in the sale of additional land to Mitsubishi in late 1993, Plemmons received a call from Mitsubishi telling him that it wasn't interested in the balance of land near the 40 acres it bought. But the chemical firm knew of another interested party, which happened to be a corporate relative.
``Ordinarily they wouldn't have known the market,'' Plemmons said about Oji-Yuka, which started talking to Signet Bank in June 1994. ``You might normally expect a company coming overseas like that to be extremely wary, but they had someone they trusted. They were able to get the deal done.''
The Oji-Yuka deal involved the sequence of events that led to the company's plant opening announcement.
The land sale had closed a full year earlier in December 1994.
``They knew that was one of their prime locations when they bought the property,'' Judah said.
``They purchased it because they weren't sure if it would be available if they procrastinated. Their decision to go ahead with the plant in Greenbrier wasn't until the last quarter of 1995. They wanted to make sure all the t's were crossed and i's were dotted.
``Japanese people are very thorough. They taught a lot of us about due diligence.'' ILLUSTRATION: Graphic
JOHN CORBITT/The Virginian-Pilot
THE PROCESS OF SYNTHETIC PAPER PRODUCTION
SOURCE: Yupo Corp.
[For complete graphic, please see microfilm]
by CNB