Tuesday, April 17, 2007
Staff photo by Gregory Rec
At Shape Global Technologies in Sanford, polypropylene CD cases are one of the company's primary products. But the company is diversifying into other products, including medical filters like these assembled by Sandra Blow.
Staff photo by Gregory Rec
At Engineered Automation of Maine in Scarborough, Shane Swinburne, a service technician, works on a machine that will affix security tags to products for retail stores. Engineered Automation formed after Shape's initial financial problems in the late 1980s.
Staff photo by Gregory Rec
Lynn Hodgson places a package of CD cases onto a conveyor belt where it will be affixed with a label at Shape Global Technolgies.
Staff photo by Gregory Rec
Vincent Boragine, president of Shape Global Technologies, is working at diversifying the company's product line. The company is not yet profitable, but Boragine hopes it will be by year's end.
SOME DESCENDANTS OF SHAPE INC.
CARTHUPLAS USA -- Manufacturer of CD/DVD cases. Announced recently it was closing its Kennebunk plant and moving to Gaffney, S.C.
EAM INC. -- Founded in Scarborough by Steve Swinburne and Jim Robinson, employees in Shape Inc.'s automation division. EAM makes automation equipment for a variety of industries, from media-packaging to pharmaceuticals.
FORM TECH TOOL & MOLD -- Founded by Michael Lamontagne, who had worked in Shape's toolmaking division. Form Tech recently acquired Northern Mold, a company founded by former Shape employee Mike Raymond. The combined company is moving into new space in Biddeford.
SAGOMA TECHNOLOGIES -- started by Shape Inc. co-founder Tony Gelardi. Biddeford business makes a number of CD-DVD packaging devices, as well as a number of other plastic components, such as packaging for headlamps and tweezers. Shape Inc. co-founder Paul Gelardi (Tony's brother) joined Sagoma as chief executive officer a year ago, after a Chapter 11 reorganization.
SHAPE GLOBAL TECHNOLOGY -- Created by Vincent Boragine, who was an executive with Shape Inc., and business partner Richard Courcy. Based in Shape Inc.'s former Sanford operations, Shape Global makes a variety of plastic products, both as a custom manufacturer and as a proprietary developer.
U.S. OPTICAL DISC INC. -- A former division of Shape Inc. in Sanford that makes compact discs.
SANFORD - At a factory here, workers dot the plant floor, packaging CD cases, stamping logos on speaker covers, welding together pieces of medical devices using an ultrasonic technique.
Up the turnpike in Biddeford, another company excels in building liquid silicon tool sets; its custom products are used in the manufacturing of suits for F-15 pilots, medical devices and fishing tackle.
In Scarborough, a firm designs and builds robotics for industries including pharmaceuticals, medical devices and automotives. Machines developed and built there put security tags into many products sold at Wal-Marts.
Aside from each being a manufacturer, these companies seem to have little in common. But each of these companies -- as well as several others in the region -- are all scions of Shape Inc.
Shape was founded in Biddeford in 1973 as a manufacturer of eight-track cassettes. It grew and expanded as technology changed, eventually making audio and video cassettes, compact disc cases and computer accessories. Shape once employed 3,000 workers in plants worldwide.
But the company went through two bankruptcies, finally liquidating in 2000. Along the way, Shape divested itself of a number of units, many of which became the small companies still alive today. When it filed for its second bankruptcy, the company had just over 200 employees in one plant in Kennebunk.
That plant was sold through liquidation to Carthuplas, a Belgian company that recently announced it would close its Kennebunk operation and move it to South Carolina, in search of cheaper energy and freight, and more ready labor.
Many of the same factors that bedeviled Shape Inc. affected Carthuplas, too. But some of the other children of Shape are thriving in Maine, helping to illustrate some of the elements necessary for survival as a manufacturer in the state.
"You can't survive in a commodity business in Maine," said Peter Ciriello, Carthuplas USA chief executive officer and president of the former Shape Inc.
THE ONE-TWO-THREE
Paul and Tony Gelardi, who are brothers, founded Shape in 1973.
"We grew the company from nothing to $200 million in sales," said Paul Gelardi. "At that $200 million level, we got into some problems."
The flood of low-cost products from China represented one problem. Another was a 70 percent increase in the cost of materials. A third: Shape's financial institution was the Bank of New England, which went bust, causing financial problems for the company, said Gelardi.
"That was the one-two-three," he said.
Tony Gelardi founded Sagoma Technologies in Biddeford about a decade ago. The company was an outgrowth of Shape's molding division, and makes a number of CD-DVD packaging devices, as well as a number of other plastic components, such as packaging for headlamps and tweezers. Sagoma filed for Chapter 11 bankruptcy and reorganized a year ago. Paul Gelardi joined the company as chief executive officer.
"It's a mature business, you've got a flood of product that comes in from Asia, it's very materials-sensitive, shipping expenses are high, labor costs are comparatively high," said Gelardi.
But, he said, "We haven't given up on the state, and we haven't been driven to move."
Some of the other issues affecting Carthuplas affect companies like Sagoma. Electricity costs are high, noted Gelardi, and those represent at least 5 percent of Sagoma's costs.
Ciriello said Carthuplas had a contract with Kennebunk Light & Power for below-market rate power, but deregulation changed the business environment and that affected the deal. Carthuplas is now paying four times as much for electricity as it did four years ago.
The overall cost of oil is driving up freight costs, said Ciriello, and Carthuplas has to ship raw material up from the Gulf Coast, and ship product to the Southeast or West Coast.
Work force issues were another factor in the decision to move, he said. It's impossible to attract good management to a state that has such high taxes, said Ciriello. And, he said, it was hard to hire technical labor. Instead of taking $12-an-hour work at Carthuplas, Ciriello said, people would choose to stay on public assistance and work under the table.
"I think that culture exists in the state of Maine," said Ciriello. "Very clearly, there's a welfare state assistance sort of penalty we're paying here."
Ciriello suggested Maine needs to restructure its taxes and work on providing affordable energy to companies in order to compete even regionally.
"There's some big holes in whatever strategy exists," said Ciriello. "You can't just say you're a technology state. Where's the meat on the bone?"
That said, Ciriello acknowledged that Carthuplas was in a largely commodity business, unlike some other Shape spinoffs that are apparently succeeding.
"They have a knowledge base, a technical skill set that's hard to acquire these days," said Ciriello. "Those companies have survived because they're very good, capable guys -- and small and nimble."
EAM INC. IS FOUNDED
During the first Shape Inc. reorganization, the company got out of the automation business. Two employees in that division, Steve Swinburne and Jim Robinson, founded EAM Inc. in Scarborough.
With Shape's approval, they continued with some of the work that had been done there, according to Roland Wyman, another Shape alum who joined EAM in 1995 and is the company's director of sales.
EAM takes in custom automation work for customers like Johnson & Johnson, Ortho-McNeil Pharmaceutical, Sony Music, American Disc and others.
The company has just under 20 employees, mostly highly skilled engineers and technicians. While much of the work is still in automation equipment for the CD/DVD manufacturing sector, they've also diversified into other areas, like the machines that place security tags in products, demanded by Wal-Mart.
"We do have to get very creative in finding next year's work, so to speak," said Wyman. "We have to be the sorts of people that are perceived to bring something to the table that people might not otherwise be able to find."
Another company, Form Tech Tool & Mold, grew out of Shape's toolmaking division, DAP. Michael Lamontagne, president and chief executive officer, just acquired Northern Mold, a company founded by ex-Shape employee Mike Raymond.
Lamontagne planned on moving the combined company out of Maine to New Hampshire for tax reasons, but Biddeford Economic Development Director Robert Dodge worked with the company to keep it in the state.
Lamontagne is consolidating his Dayton operations and Northern Mold's Biddeford shop into a new space, also in Biddeford. Form Tech will be one of the state's Pine Tree Zone companies, taking advantage of rebates of 80 percent of income taxes paid by qualifying workers and the possibility of avoiding sales taxes on new equipment, plus breaks on energy.
Lamontagne now has six employees, and hopes to grow to 14 or so within the next few years.
Form Tech makes the custom molds needed to make plastic parts. They've worked with Velcro Industries to develop molds for plastic hooks.
They have begun making molds for liquid silicon, for O-rings, head catheters, cell phone skins and other uses.
"Our name is really moving out there now that we're moving into silicon, that's how we got around the Chinese market," said Lamontagne.
Another way around China is doing sensitive medical-device work that U.S. companies don't want done abroad.
"To keep secrets in the country, they use us," said Lamontagne. "They won't go to China."
To succeed, Form Tech keeps pushing its technical envelope. The next challenge is to master metal injection molding, and ceramic injection molding.
Despite Form Tech's recent acquisition and further plans to grow, Lamontagne said he learned a basic business lesson from Shape: Don't overextend yourself.
Both Form Tech and EAM are operating in ways that keep them out of the commodity markets, and that's important, said Meriby Sweet, director of the Maine Small Business and Technology Development Center at the Maine Technology Institute. Manufacturers in Maine have to build value-added pieces of a product, so they compete not on price, but quality and uniqueness, she said.
"Really they're not in the business of just cranking out plastic shapes, they're in the business of solving a customer's problems," said Sweet. "You don't just have a guy with a CNC machine in their garage. They have to understand the customer's issues, and become very customer-focused.
"In many cases, that's why some businesses succeed and some don't."
TRYING TO DIVERSIFY
While two other Shape descendants are still making plastic products, they're trying to diversify and add value.
Vincent Boragine joined Shape in the months prior to its final liquidation as chief financial officer. While Carthuplas saw value in the Kennebunk operations, Boragine saw potential in Shape's shuttered Sanford plant.
"In every bankruptcy case, not every product line is a loser," he said.
He and Richard Courcy bought the 40,000-square-foot building and 25 acres, plus equipment and inventory, for $2.5 million. They named the company Shape Global Technology. The company is not yet profitable, but they hope it will be by year's end, said Boragine.
They took over lines that Carthuplas wasn't making -- the flexible, cloudy plastic DVD/CD cases, made of polypropylene and used mainly for shipping.
Shape Global still makes the proprietary products it had developed as Shape Inc. And it also develops and makes new products, such as a CD/DVD case that's tamper evident.
But that's only about 50 percent of its business. The other half is contract manufacturing. Someone else explores the market, figures out what the next big thing is, and comes to Shape Global to make it. That spreads out the risk, said Boragine.
And it also helps Shape Global diversify. Yes, it makes CD/DVD cases. But it also makes human-shaped plastic pieces for a New York artist, and lighthouse-shaped bird feeders and medical devices, toys, games, and a lot of other things. They can help a client design something --Ýlike Domino's Pizza's auto-cheeser, which evenly distributes cheese -- and then make it. They can help a client with marketing. They can take plastic pieces someone else has made, and print on them.
"There's a lot of lines in the water," said Boragine.
Similarly, the Gelardi brothers' Sagoma does about half contract manufacturing, and half proprietary product development.
Many of their products are in the media-storage area, but include specialties like holograms and CD/DVD cases made to look like hardcover books.
"We try to be very innovative," said Paul Gelardi. "We offer very creative designs and some unique manufacturing approaches to reduce costs and risks."
Staff Writer Matt Wickenheiser can be contacted at 791-6316 or at: mwickenheiser@pressherald.com
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Behind the Shape, Inc. story is another; several people committed suicide, many divorces, and broken families. The decline of manufacturing in Maine is a shame. The quality of life with the seasons, ocean, mountains, and forests of Maine is priceless, and I did not have to relocate to Houston to recognize that - the opportunities dried up. I’m barely managing to hold on to my humble cottage in Shapleigh – the slow painful dying process of that dream is excruciating, akin to John Steinbeck’s, “Grapes of Wrath”. In thirty years, one could imagine that the Gelardi descendants will continue occupy oceanfront Kennebunkport, and their former employees will be grateful to be occupied by the up and coming low cost country, which has assumed their mortgages….
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