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August 07, 2020 01:58 PM

PPP loans help retain nearly 30,000 rubber-related jobs

Andrew Schunk
Rubber & Plastics News Staff
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    When the state of Ohio shut down in March, Mario Vargas, vice president of Akron-based Herbert USA, Inc., had to lay off 22 of 48 total employees at the manufacturer of tire molds, curing presses and building machines.

    Worse, many of the company's chief customers—most of them major tire makers—were forced to shut down their tire manufacturing plants across the globe, putting Herbert in an even more precarious financial position.

    Herbert paid the health insurance for those who were laid off so they would not have to go on COBRA, but Vargas had no idea where the bottom of the curve was going to be—nor when any financial help might arrive.

    When notice of a loan application for the Paycheck Protection Program through the Small Business Administration arrived, Vargas said he applied for a loan in the $350,000 to $1 million range, still filled with uncertainty about the future.

    "Then in April, when I thought there was some hope of it being approved, I started to bring people back," Vargas said.

    Ultimately, all 22 employees who had been laid off were brought back to Herbert because of the PPP loan (which, for Herbert, was in the $500,000 to $700,000 range, Vargas said)—and it even was able to assist a major downstream customer with a delayed invoice of $500,000, allowing the amount to be paid in July rather than June.

    "I could not have skipped the June payment without a PPP loan," Vargas said.

    Such stories were echoed by many of the businesses in the rubber and plastics industry who received PPP loans.

    Since April, the federal government has issued at least $287 million to 1,179 rubber and plastics-related businesses with fewer than 500 employees via the PPP, intended to buoy small businesses against the economic ravages of the coronavirus pandemic.

    The $287 million to $640 million in loans issued—the range is broad because the six loan categories were reported as ranges per business rather than specific amounts per business—is based on Rubber & Plastics News' analysis of data about the Paycheck Protection Program released July 6 by the SBA.

    The PPP loans were aimed primarily at saving jobs by providing low-interest loans to help businesses cover payroll costs and other expenses, including facility leases, mortgages and other non-payroll items.

    According to the SBA, 29,629 jobs in businesses related to synthetic rubber manufacturing; tire manufacturing (except retreading); rubber and plastics hose and belting production; rubber product manufacturing for mechanical use; and "all other" rubber product manufacturing were saved directly because of the low-interest loans.

    "There were many businesses who struggled immensely prior to receiving the loan," said Michael Devereux, partner and director of manufacturing, distribution and plastics industry services at St. Louis-based Mueller Prost, a business advisement and CPA firm. "They were down to the choice of whether to lay off people and close or try to stay open, and many non-tire businesses were not deemed essential and were forced to close."

    And when the loans initially were issued in April, Devereux said, there was so much ambiguity that confusion reigned even with the prospect of having more cash on hand.

    "I had two partners who were eyeballs deep in calls from businesses," he said. "We were on calls every morning, and every day more questions were sent to the SBA. It was literally back-and-forth everyday, and the questions moved from eligibility for the loan to loan forgiveness questions.

    "Ultimately, there is no question that the PPP loans helped."

    In total, $521 billion in PPP loans were given out to businesses as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act. The loans analyzed by RPN were issued in six categories: a less than $150,000 range; a $150,000 to $350,000 range; a $350,000 to $1 million range; a $1 million to $2 million range; a $2 million to $5 million range; and a $5 million to $10 million range.

    In its original form, the PPP forced those companies receiving a loan to spend at least 75 percent of the money on payroll. But in early June, President Trump signed a bill that reformed PPP regulations to give small businesses added flexibility, extending the period of time businesses could use their PPP funding from eight weeks to 24 weeks; and dropping the payroll limit to 60 percent of the amount issued.

    For each category of rubber and plastics-related businesses, the vast majority received loans of less than $150,000, while the fewest businesses received loans in the highest ranges, either in the $2 million to $5 million range or the $5 million to $10 million range.

    The categories were reported based on NAICS codes, and loan recipients in each segment included a large number of firms that were related to the sector—such as suppliers or service providers—and not necessarily a manufacturer of the segment's main product. For example, the tire manufacturing category included only one actual tire maker, Giti Tire Manufacturing.

    'Other' Rubber Products Manufacturing

    Businesses associated with "All Other Rubber Products Manufacturing" received the most total money of any of the five rubber-related categories researched, with 538 companies receiving between $119.3 million and $264.9 million in PPP loans, for an average loan value of between $221,654 and $492,286 million.

    According to the SBA, this money, in aggregate, retained the most jobs of any category as well, with 11,719 jobs being saved directly because of the loans, according to the SBA.

    In the most prolific loan range, 314 companies received loans in the less than $150,000 range, for a total of $16.2 million.

    Three companies received the highest possible loan in the $5 million to $10 million category, including Robin Industries Inc. of Independence, Ohio (465 jobs retained); Ecore International Inc. of Lancaster, Pa. (495 jobs retained); and American Biltrite Inc. of Wellesley Hills, Mass. (346 jobs retained).

    There were 102 companies that received loans in the $150,000 to $350,000 range, for a total of between $15.3 million and $35.7 million, and 88 companies were issued loans in the $350,000 to $1 million range, for a total of between $30.8 million and $88 million.

    Twenty companies in the "All Other Rubber Products Manufacturing" category—including Rahco Rubber Inc. of Des Plaines, Ill., and Vail Rubber Works Inc., of St. Joseph, Mich.—were issued loans in the $1 million to $2 million range, for a total loan amount for these 20 companies of between $20 million and $40 million.

    Rahco, a manufacturer of custom molded rubber parts and seals for OEMs and other suppliers, ultimately said it received about $1.08 million from the PPP.

    "We ultimately spent 75 percent of our loan on payroll and the rest on utilities," said Lori Eyre, office manager at Rahco.

    To round out this reporting segment, 11 companies received loans in the $2 million to $5 million range, for a total of between $22 million and $55 million.

    Synthetic Rubber Manufacturing
    Business related to synthetic rubber manufacturing saw 1,944 jobs retained due to PPP loans, according to the SBA. Like the other four rubber-related segments, most businesses out of the 94 synthetic rubber-related companies to receive loans were in the less than $150,000 category, at 47 companies for a total of $2.72 million.

    No businesses in this segment received loans in the $5 million to $10 million range, the only non-tire segment that did not have a business to receive a loan in the top category.

    Three businesses received loans in the $2 million to $5 million range (for a total of between $6 million and $15 million), including Dexco Polymers L.P. of Houston; Smooth-On Inc., of Macungie, Pa.; and Trim-Lok Inc., of Buena Park, Calif.

    Twenty-two companies received loans in the $150,000 to $350,000 range for a total of between $3.3 million and $7.7 million, and 17 businesses received loans in the $350,000 to $1 million range, for a total of between $5.95 million and $17 million.

    Five companies were issued loans in the $1 million to $2 million range, for a total of between $5 million and $10 million.

    Overall, the 94 companies related to synthetic rubber manufacturing received a total of between $23 million and $52.4 million in PPP loans, for an average loan value of $244,362 to $557,660 per company.

    Tire Manufacturing (except retreading)
    There were 2,018 jobs retained in businesses related to the tire manufacturing (except retreading) category, with 124 companies receiving PPP loans totaling between $21.9 million and $44.6 million, according to the SBA. This gave an average loan value per business of between $176,532 and $360,000.

    One company, Giti Tire Manufacturing (USA) Ltd. of Richburg, S.C., received a loan in the top $5 million to $10 million range, and one company, Micron Precision L.L.C. of Charlotte, N.C., received the second-highest possible loan in the $2 million to $5 million range.

    There were 18 companies that received loans in the $150,000 to $350,000 range, for a total of between $2.7 million and $6.3 million, including Atturo Tire Corp. of Waukegan, Ill., and Southeast Rubber and Safety L.L.C. of Chattanooga, Tenn.

    Eleven companies received loans in the $350,000 to $1 million range, for a total of between $3.85 million and $11 million, and four companies received loans in the $1 million to $2 million range, for a total of between $4 million and $8 million.

    There were 89 companies that received loans in the less than $150,000 range, for a total of $4.34 million.
    Hose and Belting Manufacturing
    This category saw the second-highest amount of businesses receive loans (second only to the All Other Rubber Products Manufacturing) at 250 companies being issued loans for a total of between $56.6 million and $130.5 million. This range produced a per company average loan value of between $226,280 and $521,880.

    The loans helped retain 6,734 jobs, including 33 jobs at Crushproof Tubing Co. of McComb, Ohio, a producer of exhaust hoses, bellows, boots and sleeves for a spectrum of industries. Crushproof was one of 50 companies to receive a loan in the $350,000 to $1 million range, specifically coming in at around $400,000, according to Todd Grayson, director of product development at Crushproof.

    "We would have had to lay people off, no question about it," Grayson said. "It absolutely helped us to weather the storm when things went sideways. Instead, we were able to grow our business and retain our highly skilled work force."

    One business, Beltservice Corp. of Earth City, Mo., received a loan in the top $5 million to $10 million range, while seven companies received loans in the $2 million to $5 million range.

    There were 139 companies to receive loans in the less than $150,000 range; 47 to receive loans in the $150,000 to $350,000 range; and six businesses to receive loans in the $1 million to $2 million range.

    Mechanical Rubber Product Manufacturing

    Three companies received the highest loan amount in the $5 million to $10 million range in this segment, including AirBoss Rubber Compounding (NC) Inc., of Scotland Neck, N.C.; Polymer Enterprises Inc., of Indiana, Pa.; and BRC Rubber & Plastics Inc., of Fort Wayne, Ind., for a total of between $15 million and $30 million in loans.

    Seven companies received loans in the $2 million to $5 million range, and 14 companies received loans one category lower in the $1 million to $2 million range.

    There were 36 companies to receive loans in the $350,000 to $1 million range, and 39 businesses to receive loans in the $150,000 to $350,000 range. Like all other rubber and plastics-related industry segments, the most loans were issued in the less than $150,000 range, with 74 companies receiving such loans.

    Overall for the segment, 7,214 jobs were retained across 173 companies receiving PPP loans, for a total of between $66.3 million and $147.9 million and an average loan value of between $383,121 and $852,486 per company.

    Hollee Keller, Plastics News staff, contributed to this report.

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