Wednesday, December 1, 2010

US Will Win 'Green War' When Match Chinese State's Strategic Focus and Industry Scale

NOVEMBER 29, 2010
Glow From Solar Factories Fails to Match Town's Hopes
By TIMOTHY AEPPEL, Wall Street Journal

GREENVILLE, Mich.—When a fast-growing maker of solar equipment broke ground here in 2006 on the first two of what it said would eventually be six giant new factories, it seemed the sun was finally shining on this town's battered economy.

Just months earlier, Sweden's Electrolux AB had shut its Greenville refrigerator plant, nearly snuffing out what had been the town's marquee industry for more than a century. Counting jobs lost at local Electrolux suppliers and two other smaller factories, this western Michigan town of 8,000 lost some 4,000 jobs almost overnight, and unemployment in Montcalm County soared to nearly 16%. Kenneth Snow, the town's mayor, says attracting the solar plants was a turning point at a dark moment.

Many cities are counting on green industries to help replace the more than eight million jobs lost during the recent recession. The Obama administration has said it wants to make cultivating these businesses a national priority. But Greenville shows how hard that will be to accomplish.But solar hasn't taken up the slack many thought it would. The two plants were built, and now employ 320 people between them. The company—United Solar Ovonic, known as Uni-Solar, a unit of Energy Conversion Devices Inc. of Auburn Hills, Mich.—has indefinitely shelved plans for additional factories in Greenville.

Built on technologies that are new and evolving, green industries spawn lots of start-ups, but they can shrivel just as quickly. Other countries are also pushing—and subsidizing—these same industries, making it hard for them to take root and expand in costlier locales like the U.S.

"Many places are looking for a miracle, and they think alternative energy plants are going to be a savior," says Daniel Meckstroth, an economist at the Manufacturers Alliance/MAPI, an Arlington, Va., public policy and research group. But the businesses aren't large enough or growing fast enough to create large pools of employment.

Greenville's twin solar plants each sprawl more than 288,000 square feet, equal to five football fields. The two buildings sit side by side and are mirror images of each other, part of Uni-Solar's strategy of building up capacity by adding identical, separate buildings as they grow.

But shortly after the plants were built, managers realized they could double their capacity by simply attaching a small wing to the side of each and reconfiguring the floor plans to maximize the use of long rows of automated machines.

Joseph Conroy, vice president of operations for Uni-Solar, says it isn't in the company's "near-term plan" to build more factories in Greenville, mainly because it doesn't need to. "We've already doubled the capacity of our original plants and could double it again" in the two existing structures, he says.

On a recent day, only 50 workers were needed to run a 12-hour production shift, with 25 in each plant. Employment at the factories peaked at 400 before the recession, but it now hovers at about 320.

"We've ramped up production in recent months," says Tim Kelley, the plant manager. "But with no clarity on where the market is going, we've done it with overtime," adding on hours for existing workers. Employees like the arrangement, he says, because they can make up for some of the pay they lost when the plant cut hours and ordered furloughs during the recession.

The factories currently have 66 workers who once worked for Electrolux, many of whom went through training at the local community college.

But even with the training, it was a tough transition for 51-year-old Donna Cooper, who worked in the refrigerator plant for 28 years. She says that going back to school so late in life was daunting. She was also "terrified," she says, by the series of interviews she went through to get the job, beginning with a 3-on-1 session with Uni-Solar managers.

"I'd never had a job interview," she says, noting that when she joined Electrolux, she was one of several hundred people who signed up at the factory over two days during an expansion. That screening process consisted of reading an eye chart and showing she could touch her toes, then being told when and where to report for work.

But the real shock came when she arrived for her first day of work at Uni-Solar. "I didn't understand that buildings this size could be run with so few people," she says. "I pictured 1,200 jobs."

Many workers were also struck by the lack of noise and bustle. "I came here and thought the machines weren't running," says Jeff Adams, a 57-year-old production technician. Indeed, the long rows of machines that apply thin coatings on sheets of stainless steel to create photovoltaic panels are nearly silent.

But while the plant's quiet environment is appealing, wages can be a sore point. Mr. Adams figures he earns about half the $50,000 a year he made as a manager at a local auto-parts plant that closed down. Ms. Cooper says she made $16.50 an hour at Electrolux, and now, even after taking courses to qualify for the work, she earns less than that. The average wage, including premiums for things like working nights, is $15 to $16 an hour, Mr. Kelley says.

"High wages for unskilled workers is a thing of the past," says Ms. Cooper.

Uni-Solar's Mr. Conroy says his company had to hit the brakes on its expansion plans once the global financial crisis hit.

The company's solar panels are designed to go on the roofs of large commercial buildings, but those projects dried up world-wide, including in Europe, which buys 80% of Uni-Solar's products.
Then there's China. The rise of a host of Chinese-based competitors has driven down prices of the company's products world-wide. "Our average selling price has fallen 30% to 40% in the past 18 months to two years," says Mr. Conroy. The company reported a fiscal-first-quarter net loss in early November of $13.5 million, or 29 cents a share, on sales of $68.4 million.

Mr. Conroy says Uni-Solar is looking at all options to restore profitability, including moving its production abroad. The company is in talks with India, he says, but he won't elaborate other than to say that many foreign governments seem eager to cultivate solar industries.

"Greenville is a classic story," says Michigan Gov. Jennifer M. Granholm, who was instrumental in luring Uni-Solar to Greenville and advocates promoting green industries. "It's not just a recession story. It's a structural change in our economy."

"If we don't have robust industrial policy in this nation," she adds, "all those jobs will be sucked away" to foreign competitors.

Write to Timothy Aeppel at

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