ANOTHER VIEWPOINT:
This is a reprint of an article posted on the Internet in May, 2002 under the auspices of ECA Watch.
The title for the report is, The Beloit Saga: APP, ECA's, and the Bankrupting of America's Oldest Paper Machinery Companies. A portion of the report is based on the " The Beloit Chronicles Series" as posted on this web site on The Beloit History Page.
The report is as follows: (No specific author is cited for this story). See End Notes.
"The headline of the U.S. Export/Import Bank's February, 19, 1997 press release proudly proclaimed, "ExIm Bank backs $176 million Beloit sale to Indonesia: Supports Hundreds of Wisconsin, Illinois Jobs." US ExIm had agreed to provide over $130 million of guarantees for the sale of two paper-making machines to the APP conglomerate for their use in the Indah Kiat and Tjiwi Kimia mills.
In the press release, Jeffery Grade, who -- before his fall from grace -- was the CEO of Beloit's parent company, Harnischfeger Industries, gushed, "This is an excellent example of how ExIm Bank assists American businesses in securing orders and jobs for our country. �c There were hundreds of jobs at stake at Beloit �cWe were up against some formidable foreign competitors, and Ex-Im Bank financing made the difference."
"This is what Ex-Im Bank's mission is all about," said Ex-Im Bank's Director and Chief Operating Officer Julie Belaga. "We protect U.S. jobs by stepping in where an export wouldn't go forward without us, where competitive financing would not be available to our exporters without an Ex-Im Bank guarantee."
Ex-Im's 1997 press release went on to quote two congressmen: Jerry Kleczka, "who strongly supported the export by the Beloit unit of Harnischfeger which is located in his District" and who said, "The timing of the Bank's consideration of the Harnischfeger loan application was crucial to the company's competitiveness in the process. I was glad to be able to facilitate the communication between the company and the Bank."
The press release quoted Illinois Congressman Don Manzullo: "Nowhere, in any other manufacturing sector do we see purer competition. Outside of Beloit Corporation, there are only two other paper-machine manufacturing companies in the world - one in Finland, and one in Germany. This deal gives Beloit Corporation a foot-up in the fast-growing Asia market."
Within two years of this announcement - largely as a result of highly risky and failed Indonesian paper and pulp investments -- the Beloit Corporation, established in 1858, and its parent company, Harnischfeger, established in 1884, would be bankrupt. Beloit's Finnish competitor would take over much of Beloit's American operations, reducing competition in this sector to the point that the Justice Department was called in to investigate anti-trust implications. The ripple effect would be felt throughout working communities across the United States.
By August of 1999, Harnischfeger had cut 2,800 jobs and company stock was rated "the S&P's worst performing stock for the year."2 A Beloit customer in Washington State who had ordered a $45 million dollar paper-making machine in 1998 and who, two years later, was still waiting for delivery, summed it up, "How they can self-destruct in a couple of years is almost beyond comprehension."3
Beloit City Council members were stunned and calculated that the potential loss of jobs for employees who are taxpayers, homeowners and a part of the community "would be devastating."4 Beloit Jones Corporation shocked the residents of Dalton, Massachusetts by closing its plant and firing 258 workers.5 Beloit's Blackhawk Plant in Rockton, Illinois and its Perform Pro Pipe Roll Shop in Beloit, Wisconsin announced the elimination of 350 jobs.6 Beloit announced the discontinuation of its funding for operations in the United Kingdom, Italy, and Austria.7 As another 125 employees were laid off, former CEO Jeffrey Grade sued to obtain a $5.7 million severance package.8 Beloit's operation in Nashua New Hampshire announced layoffs of another 60 - 90 people.9 By April of 2000, Wisconsin's unemployment rate had seen its "biggest jump in almost two years" with the highest rates - by a factor of 4 -- in the Janesville-Beloit region.10 State officials concluded that Beloit and Harnischfeger owed over 300 of their former employees $4.2 million in severance pay.11
Beloit's Finnish competitor Valmet, mentioned in the ExIm press release took over key Beloit assets in Wisconsin and elsewhere -- despite Congressional anti-trust and job-loss concerns -- and renamed its operation "Metso USA".12 Mitsubishi Heavy Industries and Canada's Laperriere and Verreault, Inc purchased Beloit's papermaking equipment, and pulp and finishing units. By June, 2001, it was estimated that as a result of the Beloit Corporation bankruptcy, the city of Beloit lost $5,970,900 in property tax base and $1,664,000 in personal property tax base which had provided support for city, county, state, school district and college operations.
Export Credit Agency guarantees had made it possible for an American company to leverage private sector investment under extraordinarily risky environmental, social, and financial conditions without any requirement of significant due diligence. As the risks came home to roost, not only did Indonesian farmers and Indonesia's forests pay a heavy price, but the blow was felt harshly by American workers and their communities.
1. This research was carried out in tandem with ongoing work by NADI, Indoneisa.
Contact information: Inge Altemeier (HornungTV@t-online.de), Feri Irawan (bablas_feri@yahoo.com); Stephanie Fried (stephf@environmentaldefense.org); Rivani Noor (walhi_jfed@yahoo.com or rv_noor@lycos.com).2. "Harnischfeger buyout offer?", 4/13/99, The Beloit Chronicles - Part II. Collection of newspaper clippings from the Beloit Daily News, the Rockford Register Star, Janesville Gazete, Milwaukee Journal Sentinel, Capital Times of Madison Wisconsin, compiled by Luigi Bagnato, retired from Beloit after 29 years of service. www.finishingnet.com. (now The paper Industry Web)
3. "Beloit customer: "How can they self-destruct in a couple years?", 3/4/00, The Beloit Chronicles -Part IV.
4. "The closing of Beloit Corporation, a major blow.", 8/24/99, The Beloit Chronicles - Part III.
5. "Dalton, MA "shocked" at plant closing," 9/2/99 The Beloit Chronicles - Part III
6. "Big cutbacks at Beloit Corporation," 9/8/99 The Beloit Chronicles - Part III
7. "Beloit Corporation closing down worldwide,"12/19/99, The Beloit Chronicles - Part III
8. "Grade wants $5.7 million," 11/22/999, The Beloit Chronicles - Part III
9. "Nashua lays off 60 to 90 people," 2/19/00, The Beloit Chronicles - Part IV
10. "Wisconsin unemployment rate up," 4/27/00, The Beloit Chronicles - Part V
11. State Representative Dan Schooff reacted to Harnischfeger's claims that it did not have the money to make severance payments: "Harnischfeger has a lot of guts to comaim they don't have enough money to pay their debts to employees, and then come to the Beloit Corp auction and buy hundreds of thousands of dollars worth of equipment," Schooff said. "I can sum their actions up in one word - ridiculous." Citation in "Harnischfeger told to pay $4.2 million to Beloit employees", 9/7/00, Beloit Daily News
12. "U.S. representatives question legality of Beloit bidder," 1/13/00; "concerns about Valmet monopoly", 1/16/00; "Legislatures try to retain Beloit jobs", 1/25/00; "Local and state lawmakers still battle Valmet buyout," 1/27/00, "Valmet purchase could make monopoly,", 2/19/00; "Beloit/Valmet deal may be delayed by Anti-trust discussion," 2/23/00 The Beloit Chronicles - Part IV"
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Reprint posted: March 26, 2006