Published: September 19, 2008 10:16 am      

George Hohmann: Financial turmoil threatens to spread to local initiatives

CHARLESTON — Deepening turmoil on Wall Street is threatening to spread to Main Street and could put some proposed local projects in jeopardy.



Already this week, Charleston Mayor Danny Jones and Kanawha County Commission President Kent Carper said developers' interest in building a hotel on the Health Department's site downtown has waned.



Also seemingly stalled: A plan by McJunkin Red Man Corp. to sell $750 million of its stock to the public.



The company, which is co-headquartered in Charleston and Tulsa, Okla., filed its plan for an initial public offering on Aug. 19. But the offering has not occurred.



Lehman Brothers Holdings Inc. is an underwriter of the offering, according to The Wall Street Journal. Lehman filed bankruptcy Monday.



On Thursday, the Journal reported that the bankruptcy filing is expected to limit Lehman's access to capital for underwriting or debt deals. Lehman's rivals are looking for ways to capture some of the bankrupt firm's business, the Journal said.



What effect an aborted public offering -- or a lengthy delay -- would have on the big New York City-based investment firm Goldman Sachs, which owns a majority stake in McJunkin Red Man, is not known.



It also isn't known what the impact might be on McJunkin Red Man's other owners or on its 3,484 employees.



McJunkin Red Man spokeswoman Beth Morrison did not return a phone call Thursday seeking comment.



Another project that seems stymied is the South Charleston stamping plant's rebirth. In May 2007 Gov. Joe Manchin committed $15 million in state money to refurbish the plant and Cleveland financier Ray Park, the plant's owner, announced he would invest $20 million.



At that announcement, Park said the addition of new automation equipment was expected to allow the plant to create 79 jobs in its first year, 140 jobs in its second year and as many as 550 jobs in its fourth or fifth year.



Several people who have been inside the plant say every inch of it has been painted and that the automated production lines are impressive. But it has been 16 months since Manchin and Park held their press conference and the company has not announced any contracts or held a grand opening.

"We're still on track," Park said Thursday in a phone interview from Detroit. "It's taken a lot longer and costing more than originally planned but we'll have a beautiful plant when it's completed.



"We have a little work for GM and Mercedes right now -- they're short-term contracts," he said. "We really haven't been in a position to accept work. I was in a Charleston restaurant the other day and someone said, 'I heard you're very busy.' That's not the case at all. We've been very busy renovating the facility inside and out. I'd say by the end of this year we'll be pretty much through with the renovations.



"We hope to get a contract or two in the next six months for production in mid-2010," he said. "It's a slow process to get a major contract. Even if you had one today, by the time you had the dies built in Korea or Japan, you'd be involved long before you would start stamping parts. It's a long-term project.



"I think we're in a good position," Park said. "There's a lot of (stamping) capacity in this country but not of this class."



Meanwhile, the U.S. auto industry is in double trouble. First it was competition from Japanese manufacturers. Now it's high gas prices.



Park said the Wall Street turmoil isn't impacting the stamping plant project although, indirectly, it seems to affect everything. "I noticed an article the other day that said people are buying more food to take home and cook. It spills over into everything, from selling autos to auto parts makers that feed the big companies."



Park noted that Ford, Chrysler and General Motors recently asked the federal government for $50 billion in low-interest loans to help Detroit build fuel-efficient vehicles. "I think that's probably going to happen," he said.



The Wall Street turmoil isn't going to have any impact on Kureha Corp.'s plan to build a $100 million specialty plastics plant in Belle, said Elizabeth Gershon, executive vice president of Kureha's United States subsidiary.



Japanese companies tend to be very cautious and often have every last detail, including all of their financing, arranged before making an announcement.



Tokyo-based Kureha announced the Belle project last December and held a groundbreaking ceremony in April, although steel erection is not expected to begin until next month. The company has been recruiting personnel.



THF Realty's plan to build a shopping center on FMC Corp.'s South Charleston fly ash pond is unaffected by the gyrations on Wall Street, said THF spokesman Andy Boyd. "Hopefully it won't impact the public financing we're seeking on this project," he said.



Boyd said the problems "may impact the economy overall so that consumer spending slows and retailers pull back." However, THF has talked to the shopping center's potential tenants. "They're still showing interest," he said. "At this point we don't anticipate any impact from the turmoil on Wall Street."