RACINE, Wi. — A local aluminum-casting manufacturer is learning firsthand how a turbulent economy affects a company’s expansion plans.
Premier Aluminum this month began an addition that will more than double its space. The privately held subsidiary of Birmingham, Ala.-based Ligon Industries makes aluminum castings for the food service industry and electric utilities.
President Bob Haebig said annual revenues have been growing by about 10 percent per year and are now about $20 million. “We knew we would have to expand soon if it kept growing,” he said.
Premier makes permanent-mold aluminum castings from steel dies, Haebig said — and also does its own tool-and-die work and machining of most of its own products.
The castings, which can weigh from 1 to 90 pounds each, are very leak-resistant and are most often used by the fast-food industry as cooking containers.
A secondary product category is parts for circuit breakers, transformers and other electrical components used by electric utilities.
The work keeps about 70 people here and about 26 more in the Allenton, Wis., plant employed.
The company is adding about 51,000 square feet to its current 40,000-square-foot plant. The estimated $7 million addition — the cost includes equipment — will replace leased warehouse space.
To finance the work, Premier initially asked the City of Racine not for money, but for its name, so Premier could finance its project with industrial revenue bonds. IRBs are sold to investors, and earnings are exempt from federal income tax. Premier expected a better borrowing rate that way, Haebig said.
The Racine City Council approved issuing up to $7 million in IRBs for the project, and it was in the works — until the turbulent national economy got in the way.
With IRBs, City Development Director Brian O’Connell said, the City would have been a conduit for Premier’s financing. It would not guarantee payback to investors, incur a cost or take on any liability.
But last week that plan changed. Haebig said Premier’s parent company, Ligon, decided not to proceed with the IRBs, but to fall back on known financing relationships instead.
Uncertainty in the financial markets, he said, meant uncertainty about what rates an IRB would produce in six months, when the project is finished and the contractor wants payment.
“No one could give you any firm information,” Haebig said. “It’s a very unstable time to do financing. It’s just such a dynamic time for the markets.”
The slumping economy has also thrown Premier’s employment growth forecasts into doubt. A couple of months ago, Haebig said, the company expected to be able to take on 20-24 more employees in the next three years with the expansion.
However, he is much more cautious now. He said five or six new workers in three years is a pretty safe bet, and 10-20 possible “if we grew to $25 million.”