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Wednesday, 19 May 2010 13:19

Sylva cardboard box venture collapses

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Stonewall Packaging, a cardboard plant in Sylva, laid off 43 workers last week and shut down operations after coming on line just a few months earlier.

Stonewall Packaging was a venture of Jackson Paper, also a cardboard plant in Sylva, which employs 120 people. Jobs at Jackson Paper are safe, according to the company.

The closing of Stonewall has less to do with the economy and more to do with a stroke of bad luck. When Jackson Paper launched Stonewall, it secured commitments from box companies pledging to buy its cardboard. One of those that pledged to buy a large volume fell through, however. Stonewall was unable to find a new buyer for the corrugated cardboard sheets being churned out.

The cardboard industry is consolidating, with a smaller number of larger companies dominating sales — making it harder for ventures like Stonewall to find a seat at the table.

The Stonewall plant was built last year at a cost of $17 million. The closure is “very disappointing,” according to company officials.

“This is not the outcome that we had hoped for with our investment in Stonewall, and we did everything within our power to prevent it,” Jackson Paper President Tim Campbell said.

The fate of the new facility — whether it will be sold or kept in hopes of one day ramping up again — is unknown at this time, according to company officials.

Stonewall Packaging had been offered both state and county incentives in exchange for job creation and the capital expansion. The state agreed to give the plant $200,000, but had yet to award the money. Jackson County offered Stonewall Packaging a property tax break of up to $1.3 million during the next several years, but it was contingent on the creation of jobs.

What was Stonewall?

Jackson Paper’s official role in Stonewall is that of an investor, although the two plants had a symbiotic relationship. Stonewall was an attempt at vertical integration by Jackson Paper, which makes the wavy middle layer found in corrugated cardboard.

Making a cardboard box is a four-step process. Each step is carried out by a different plant: one to make the wavy middle layer, one to make the outer layers, one to sandwich them together, and one to cut and fold the sheets into finished boxes.

With the cardboard box industry consolidating into the hands of larger plants, Campbell feared the chain his niche product relied on would prove too fragile. Jackson Paper would find an increasingly limited number of buyers for its wavy middle layer of cardboard.

Enter Stonewall.

Stonewall would buy the wavy middle layer produced by Jackson Paper, buy the outer layer from other plants, and sandwich them together to make sheets of corrugated cardboard on site. The venture would secure a stable buyer for Jackson Paper’s product.

Unfortunately, that model collapsed when a box company lined up to buy the cardboard did not uphold its commitment.

Jackson Paper has found buyers to pick up the slack now that it can’t sell its product to Stonewall.

“Operations at Jackson Paper are strong and expected to remain so,” Campbell said. “Jackson Paper has been able to replace those orders lost in the Stonewall shutdown with orders from other customers.”

But that doesn’t blunt the disappointment both managers and employees have over the fate of Stonewall, Campbell said.

“This is a terrible situation for the dedicated and hardworking employees of Stonewall Packaging. Our thoughts and prayers are with them during this difficult time, and we will do everything possible to support those affected,” Campbell said.

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