Mill: Plant’s owners begin long process of deciding whether to rebuild

July 19--Swanson Group wants to rebuild the Springfield Plywood and Veneer mill that was destroyed by fire Thursday, but it may take a couple of months for the company to sort through its options, Chief Operating Officer Chuck Wert said Friday.

"A plant of that nature from the ground up would cost somewhere north of $100 million," he said. "Until we sit down and engineer and budget a new plant I don't think anyone is in a position to decide if we have the financial wherewithal. Our desire is to rebuild the facility, but we have to look at all the options."

Wert, who is based at the company's Glendale headquarters, said he was in Eugene Friday morning to meet with the company's insurance agent. The mill was insured, but it will take a while to sort through details, such as what the policy will cover and the difference between what the mill had been worth and what it might cost to replace it, he said.

As the smoke clears, the economic impacts of the mill's loss are coming into focus. There's the initial job losses and less local spending by mill employees; customers whose productivity might be affected by delays; local suppliers of glues, resins and fuel, who now have one less account; and the potential loss of tax revenues to the city of Springfield, Springfield schools and other taxing districts.

The loss of 250 "fairly high-paying jobs is sizeable when you're looking at the total number of employees in Springfield," said John Tamulonis, Springfield's community development manager.

"It has a ripple effect," he said. "You've got somewhere in the $10-million range payroll. That gets spent two to three times in the community, so it has a big impact."

U.S. Rep. Peter DeFazio said the "mill's destruction is a blow to our local economy and hundreds of our friends and neighbors who worked there."

He said he would reach out to Swanson Group CEO Steve Swanson on Monday and look for any opportunities to help at the federal level.

If the company decides to rebuild, it could be years before the mill's 250 workers would be back on the job.

"If they started (rebuilding) today, it could be two years before a plant could be rebuilt, and that would be very aggressive," said Steve Killgore, vice president of sales and marketing at Roseburg Forest Products in Roseburg. He was former president of McKenzie Forest Products, which sold the Springfield mill to the Swanson Group in 2007.

The mill site is in Springfield's enterprise zone and a new plant there could qualify for three to five years of property tax waivers, Tamulonis said. If the Swanson Group invested at least $25 million in the new plant in equipment, they could reopen with the same number of employees, or possibly fewer, pending city council approval, he said. To qualify for the full five years of waivers, the mill would have to offer average wages and benefits, such as paid vacation and medical insurance, that are 1 { times the Lane County average, which is in the $40,000 range, Tamulonis said.

While the Swanson Group explores whether to rebuild the mill, it is shifting as much work as possible from Springfield to its plant in Glendale, Wert said. It is looking at adding a third shift to glue plywood panels in Glendale, as it networks with other local wood products companies to find jobs for its workers and explores the possibility of replacing temporary workers at its mills with longer term employees from Springfield, he said.

In addition to its Glendale plywood and veneer plant, Swanson also has a sawmill in Glendale and a stud mill in Roseburg.

Of the 7 million feet of plywood that were on order at Springfield, 5 million feet are being shifted to Swanson's Glendale plant, Wert said.

The Glendale plant already was busy so the extra orders will be stacked on top of existing orders, meaning the Springfield orders will take several weeks longer than initially promised, Wert said.

The other 2 million feet of orders at the SpringfieldGlendale plant can't make, he said.

About 60 percent of the Springfield mill's products went into houses as sheathing and flooring and about 40 percent had industrial or commercial uses, Wert said. The mill shipped products across the United States and into Canada.

"We've been producing 15 million feet a month at Springfield," Wert said. "You pull that much wood out of the marketplace all at once and it creates a little bit of a panic, and there's a fairly significant ripple effect in the marketplace."

The mill's loss shouldn't disrupt the overall plywood market long-term, but it may cause a bit of a scramble in the short-term, wood products industry experts said.

"Western plywood mills were pretty well booked and the market was fairly strong," said John Anderson, publisher of Random Lengths, a wood products trade publication based in Eugene. "I guess it will be kind of a scramble to fill any of the orders that the Swansons aren't able to fill at their other plant."

Swanson Group overhauled the Springfield mill after buying it in 2007. It upgraded the veneer dryers; the lathe, which spins and peels logs to produce veneer; and the "lathe charging system," an automated system that optimizes the amount and quality of the veneer.

The mill had gone through a succession of owners, but none had updated the mill much since Georgia-Pacific owned it in the 1960s, Swanson told the Register-Guard in 2008.

Swanson "invested millions into it," Killgore said. "Quite a bit of it was state-of-the-art plywood equipment. They made a significant investment to that facility."

Most mill insurance policies force owners to accept a substantial reduction in benefits if they don't rebuild, said John Murphy, CEO of Murphy Co., who rebuilt his company's mill in Sutherlin after it burned in 2005.

"If it's a replacement-cost (policy), you have to rebuild at the full value that you insured for," he said. "We had replacement cost insurance, so we rebuilt."

The fire struck the Springfield plant at a time of steady demand in the market. Plywood plants in North America produce a total of about 11 billion feet a year, Killgore said.

"The economy is ever so slowly improving," he said. "We've had a relatively good market here starting in March, so it's really unfortunate for them. This is the peak season for demand.

"For Swanson Group these things are a blow," Killgore said. "They're insured, so long-term it's not catastrophic to the company by any means. These are difficult situations to work through -- lots of details with employees, getting them situated and moving on with their lives; investigating the fire; and determining 'Do we rebuild?' They have a lot of work ahead of them. I wish them well."

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