Hemlock closing Clarksville plant permanently

CLARKSVILLE, Tenn. – While digesting Hemlock Semiconductor’s announcement of a permanent plant closure on Wednesday, many community leaders sought to put the best-possible spin on it.

Some even expressed relief that the plant closure brings ... well, closure, and an opportunity to look ahead to other business prospects for Clarksville.

But no matter how you slice it, Hemlock Semiconductor, in and of itself, will go down in history as a disaster for Clarksville-Montgomery, the state of Tennessee, and the nation’s industrial complex.

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Looking back, there was that monumental day – Dec. 15, 2008, just over six years ago – at Austin Peay State University, where state and local leaders filled the Music/Mass Communications auditorium to hear the announcement from then.-Gov. Phil Bredesen and Hemlock officials that the company would be locating a $1.2 billion polycrystalline silicon manufacturing plant on 1,300 acres here. It was called in bold headlines, a “done deal.”

There was the groundbreaking and ribbon-cutting on “Solar Way,” owing to what was to be Clarksville’s new-found, future distinction as a leading global producer of polysilicon for the solar energy sector.

But seemingly at the very moment that the massive “small city” was fully built out in northeast Montgomery County, things began to unravel at Hemlock, finally ending this week in a permanent plant closure announcement that many here said they expected, but that was nonetheless painful.

In stark contrast to the public display at the APSU-hosted announcement celebration, Wednesday’s plant closure announcement was made in a one-on-one meeting between company President Denise Beachy and this writer, sitting across a table from her in a quiet, local hotel boardroom.

National trouble, not local

The opening statement actually came from Hemlock spokesman Jarrod Erpelding, who was on conference call from the corporate office in Michigan.

“Unfortunately, we’re here today to announce that we’re closing our Clarksville facility,” Erpelding said.

Then Beachy chimed in: “We have been looking at the Clarksville site constantly, and we’ve reached the conclusion now, with the market looking very long and adverse ... the U.S and Chinese governments still have not reached a formal trade settlement ... that we are going to close this Clarksville facility permanently.”

Beachy called it merely a business decision that is no reflection on Clarksville-Montgomery County, its cooperative spirit or its work force, and in a formal written statement, she added, “As difficult as this is, the continued market adversity and complex political conditions have left no economically viable options for Hemlock Semiconductor to operate the site. It is unfortunate for both the company and the community that these conditions have forced us to take this action.”

What happens next

She said the remaining 50 employees at the plant, which had been idled since early 2013, were notified of the decision Wednesday morning, “and activities are now underway to safely manage the closure of the site and its physical assets.”

The employees that remain are being given the “opportunity to relocate to other Hemlock Semiconductor or Dow Corning sites, while others will receive a severance package.”

Beachy said Hemlock will work closely with the Clarksville-Montgomery County Economic Development Council to consider options for selling the large industrial site.

She added that her staff will be working with the local EDC to determine how portions of the Hemlock facility here might be re-purposed for other business uses.

“We will accept the obligation to disassemble the manufacturing plant and equipment that cannot be re-purposed,” she said.

“It will take us a little bit of time to work through all of this,” Beachy said, citing an estimate of 12 to 18 months.

Hemlock further promises to fulfill its 2015 commitments to local charitable organizations it has made pledges to, including the United Way.

RELATED:Clarksville timeline for Hemlock Semiconductor

Meanwhile, Michigan Hemlock operations remain relatively unaffected by the market conditions that Beachy cites in the company’s reasoning. The plant in Hemlock, Michigan, which has been in operation for more than 53 years and has received more than $2.5 billion of investment in the last decade, remains in operation.

“Hemlock Semiconductor will continue to advance polysilicon technology, which has enabled the era of high-tech innovation that we’re in today,” said Beachy. “Our nearly 1,000 employees will play an important role in helping our customers power the next generation of electronics and solar products.”

When things went south

Things began to turn sour in Clarksville just prior to New Year’s Day 2013, even as the plant was expected to open and launch production. Hemlock Semiconductor instead announced the permanent layoff of most of its Clarksville work force.

As with Wednesday’s plant closure announcement, then-company President Andrew Tometich and Erpelding summoned The Leaf-Chronicle to a local hotel boardroom on a grim Monday morning in January 2013, at the same time the layoffs were being announced to local employees.

About 300 of the 400 Clarksville employees were laid off by March 2013. The layoff also included 100 employees at the Michigan HSC plant, for a total of about 400 workers company-wide, and officials said it came in response to what the company called a “significant oversupply in the polysilicon industry and the threat of protective tariffs on its product sold into China.”

The incentives

The total public investment in the Hemlock plant was $343.1 million, which includes $244.7 million in state incentives, $77.8 million in tax breaks from Montgomery County and $20.6 million in other incentives from the county, according to an Aug. 19, 2011, story by the Nashville Business Journal. That total doesn’t include an additional $60.5 million committed by the Tennessee Valley Authority in the form of infrastructure grants and other incentives.

“The Hemlock debacle is living proof that corporate welfare has no place in Tennessee,” said Justin Owen of the Beacon Center, a Tennessee free-market advocacy group. “Taxpayers should not be forced to unwillingly invest in private companies – especially those in volatile markets – through corporate welfare schemes.”

Clint Brewer, spokesman for the Tennessee Department of Economic and Community Development, said the state gave Hemlock a $95 million capital grant that has already been paid out.

Brewer said the department has since implemented a clawback system that now governs grants of such magnitude. Clawbacks help government agencies recoup some of their investment when economic development deals don’t create the jobs promised on the front end or fail to meet other benchmarks.

Gov. Bill Haslam, R-Knoxville, said Hemlock recently told the state it had a plan to grow the business. Haslam prefaced his comments by pointing out the state’s investment was negotiated before he took office in 2011.

“So we were both surprised and disappointed to get the announcement from them,” Haslam said on Wednesday. “That deal was structured before we got here in a way that I think made a lot of sense at the time. In the end, obviously the fact that they’re not going to be growing and adding those jobs in Clarksville, like I said, is a disappointment for all of us.”

As part of its performance agreements, Hemlock had agreed to repay Montgomery the $20.6 million it borrowed to buy land for the plant. Had the plant opened, that money would have been recouped in lieu of taxes.

Wednesday evening, County Mayor Jim Durrett told the county Budget Committee he was assured this morning by HSC that the company “will honor every commitment they have made to us,” including paying off the bond to make sure the county is not left with any indebtedness.

Durrett just told the county Budget Committee, “Montgomery County taxpayers are not going to be out any money because of this.”

Back to work for EDC

Reaction Wednesday from Clarksville-Montgomery County officials was a mixture of disappointment and hopefulness.

Clarksville Mayor Kim McMillan said her immediate concern is for the people still employed at the Hemlock plant. “The city will offer them any support we can. I have spoken with representatives from Hemlock and have been assured that they are making every effort to assist employees transitioning to other opportunities. We will assist those efforts in any way possible.

“We will also support the efforts to find alternative uses for the plant through our partnership with the Clarksville-Montgomery County economic development team,” McMillan added. “They are already at work to identify potential companies and industries that are a good fit for the space.

“In the meantime, I appreciate Hemlock’s commitment to continue paying its debt obligations and fulfilling other obligations to the community even as it is closing its current operations here.”

In its own prepared statement, the EDC through Executive Director Cal Wray wrote, “The shutdown of the plant will be a great loss for the community. The EDC is disappointed by this unexpected news and recognizes that this sector has been troubled and negatively affected on a global level by the U.S. and Chinese governments’ inability to settle trade agreements.

“We feel for the loss the employees are experiencing, and our economic development team is already working with our city and county mayors to ensure that we continue to create career opportunities for the citizens in this region,” Wray said.

Some good from Hemlock

“It is also important to note that the eight-year-long relationship between Clarksville-Montgomery County and (Hemlock) has garnered several positive outcomes. The community has experienced massive infrastructure improvements and the Industrial Development Board has been provided 833 acres of land that can be used to recruit new industries. From 2009 to 2011, (Hemlock) boosted our local economy during a time of recession by helping to create record highs in both sales tax and hotel-motel tax,” Wray said.

The EDC, despite Wednesday’s developments, remained complimentary of Hemlock’s local contributions.

“(Hemlock) has been a valuable community partner since their official announcement to locate in Clarksville-Montgomery County in 2008. The company was an integral community partner through their support of the local school system and several non-profits. They were also a key player in the creation of the Montgomery County Green Certification Program. Their contribution to Austin Peay State University’s Chemical Engineering Program constructed a state-of-the-art facility that has become a game-changing asset to their growing engineering department,” Wray said.

Further, the local agency cites industrial scores that will “create new hiring opportunities within our region,” including Hankook Tire, Agero, Bridgestone Metalpha USA, Akebono and Florim USA.

Dave Boucher of The Tennessean contributed to this report.

Jimmy Settle, 245-0247

Business editor

jimmysettle@theleafchronicle.com

Twitter: @settle_leaf

AT A GLANCE

•$1.2 billion plant on 1,300 acres was supposed to open in early 2012 with 500 employees.

•Hemlock has agreed to disassemble the plant and any equipment that cannot be re-purposed over the next 12 to 18 months.

•Remaining 50 employees will be offered positions in Michigan or severance.

•Clarksville-Montgomery County EDC will work to find another tenant for the TVA-certified mega-site.