When Diversified Plastics announced it was planning to close its plant near Centralia, three employees put together a plan to buy the operation. Their efforts prompted Centralia’s then-Mayor Shelley Becker to call Barry Stevens, Matthew Old and Lance McCann “heroes.”
“I’m no hero,” McCann said. “I’m just a guy who believes in something and found two other guys to believe in.”
The trio purchased the plant’s equipment, inventory and furnishings, but they couldn’t save all of the jobs. Half of the 56-member work force was laid off by Diversified Plastics before the change, and Stevens, Old and McCann could only retain eight employees.
“There’s not a day that goes by without that gnawing at us,” McCann said.
The reality of owning a business gradually has been sinking in for the trio of northern Boone County men who decided a month ago to buy the business that was getting ready to put them out of work. Two weeks ago, Old wrote out the first payroll checks for the 11 employees of the newly created Alliance Foam Technologies.
“That was a little bit of a dose of reality,” Old said.
The three men faced a different, harsher reality in February when Nixa-based Diversified Plastics announced it was going to close its plant on the campus of Sunnydale Academy Adventist School near Centralia. The plant, in operation since 1976, was getting the axe from Diversified because Citation Corp. was pulling about half of its work from the plant.
For Stevens and Old, the business venture is personal. They put up their homes as collateral for the Small Business Administration loan through The Bank of Missouri.
“That was a make or break” for the deal “if we didn’t do that,” Stevens said, explaining the only other option was to let the plant close and look for another job. “We didn’t have a pocketful of money sitting around.”
Old hopes to see the number of employees grow to at least 20 by September, “if things continue on the upswing like we’re seeing.”
That’s good news for former employees — many of them frequently ask the new owners about job opportunities. Seven of the plant’s 16 presses and three of its four specialized glue machines are in operation. “It’s really hard to tell them it may be a while,” McCann said. “We’d love to have everybody back here tomorrow.”
It was Old, systems manager for the new company, who first suggested to Stevens that they join forces to buy the business.
“You build your life around your job,” Old said. “It’s time to see if we can make this work on our own.”
And if the venture doesn’t work?
“We can’t blame anyone else,” Old said. “I’m tired of not being the master of my own destiny.”
Stevens, an employee of the local plant since 1996 and plant manager since July 2007, admitted he initially laughed at Old’s buyout suggestion. Still, he entertained Old and McCann’s number-crunching to see whether a buyout would be possible.
McCann called Stevens “the glass half-empty guy” — the one who questioned all the answers McCann and Old came up with.
“My job was to ask questions,” Stevens said. “It’s real easy to get caught up in the thing emotionally. We had some pretty intense discussions at times.”
McCann said the decision to become “entrepreneurs in the truest sense” was a “heart-and-mind” decision. He readily identified himself as the most emotional of the three partners. He choked up in a public hearing on March 25 when he was given the opportunity to read a resolution of support from the Centralia Board of Aldermen.
The application for an Action Fund Loan through the state Department of Economic Development required the would-be business owners to have a municipal sponsor. That’s where the city of Centralia stepped in, even though the plant is located six miles from Centralia and is in Audrain County.
The city’s “sponsorship” did not require making a financial obligation, just an official expression of the plant’s importance to the community’s economic well-being. The city’s resolution of support said Diversified Plastics was an integral part of the community.
Stevens wouldn’t reveal the purchase price negotiated with Diversified Plastics except to say it was “very, very good.” It also helped that Diversified continued to provide operational support two weeks beyond its closing date, to give Stevens and his partners the time they needed to get financing.
“We ran” longer than anticipated “on Diversified’s money,” McCann said. “We just can’t say enough good things about them.”
Financing scrutiny from The Bank of Missouri and the Department of Economic Development called for real numbers, cash-flow estimates and a solid business plan, all of which the new ownership group was ready to provide, partly because the group had already been working for financing through another, unidentified lending institution.
The Bank of Missouri was the third bank Stevens and his partners approached. With the help of bank President David Keller and SBA loan specialist Keith McLaughlin, the loan process was completed fairly quickly.
“We wouldn’t be here without them,” McCann said. The group also had help from Columbia CPA Bob Gerding and plans to utilize the services of the University of Missouri’s small-business center.
Plus, federal stimulus money created a program that eliminated many of the fees associated with SBA loans. “There were a whole host of things that came together for this to happen,” Stevens said.
McLaughlin, senior vice president of The Bank of Missouri’s SBA Lending Division, said the plan presented by Stevens and his partners was “a perfect fit for SBA to step in and help revive this business and get people re-employed. … These are three experienced guys who know how to run the business and a rural community that needs employment. It’s really a success story. These guys are really dedicated. They’re hardworking.”
The new company will continue to lease the building from the Iowa-Missouri Seventh-day Adventist Conference. One stipulation of the lease is that the facility can’t operate on Saturday, which the Seventh-day Adventist Conference observes as the Sabbath.
The new business model has one shift. Diversified had three shifts. The new company also expects to see some savings by working four 10-hour days.
“We’re attacking it from top to bottom,” working hard to create a different, more efficient business model that generates more productivity and greater quality, McCann, 38, said.
Old, 38, added: “If we don’t send a quality product out the door, our customers won’t come back.”
Stevens, 52, said one thing that sold him on the business plan was the indication that the economic decline has stopped or at least slowed down.
“We got in it at the bottom,” he said, “so there’s no place to go but up.”
Alliance Foam Technologies makes foam patterns for foundries, which use the patterns to make castings for industrial and consumer markets.
Utilizing “lost foam” technology, the new company uses expandable polystyrene — or EPS — which is displaced by molten metal to become the housing for water meters or electric motors and other products.
Citation Corp. in Columbiana, Ala., is one of 10 Diversified Plastics clients that committed to keeping a relationship with the new plant if Stevens and his partners could successfully purchase the business. AFT produces patterns for motor frames for Citation’s Baldor Electric Motor Co.
The jobs that are leaving AFT include a Freightliner exhaust bracket and a John Deere corn stalk roller, a part for a combine that once included 32 different parts. Lost foam technology enabled the product to go from a 32-piece fabrication to a one-piece casting.
Old said the company is thinking outside the box and looking for a wide, diverse customer base. “We’re trying not to let any one process be our bread and butter,” he said.
The automotive industry was a staple of Diversified’s business, but Stevens said the new company will avoid that sector for the time being.
“We’ll let someone else bear that risk right now,” he said.
Stevens and McCann have degrees in business management. McCann is a graduate of Rock Bridge High School. Old, a graduate of Southern Boone County High School in Ashland, has degrees from Linn State Technical College and the University of Iowa.
Although McCann and his partners have diverse work and educational backgrounds, he said it “just kind of broke my heart” to see a large percentage of workers in their 40s and 50s being laid off or seeking work with limited or no marketable skills, especially in the current economy.
“It’s been an emotional roller coaster,” Old said.
McCann quickly added, “It’s just starting.”
Original article can be found here.