Eklind Is Closing Its IL Plant

[zendriver]

You implied rates as you stated the following


Assessment values have nothing to do with the state, your county does those. Nor are they being manipulated by the state to get you to pay more. They are driven by the market and mostly by inflation. The only way for the states cost to to “subsidize” the wealthy corporation would be to raise the assessment rate. Leaving the rate the same or lowering it is not a form of effective manipulation to put more burden upon the citizens of the state as you claim.

The states cost to buy replacement vehicles, salaries, supplies, ect are also going up buy the same significant inflation over the last decade

Something is economically wrong in communities that are not experiencing inflation related assessment increases across the whole country

In the contest of “splitting hairs, simply to make a point” you’re the clear winner

Congrats.

 

[RoninB4]

When I make a dash and grab like that I pack a cooler. Only stop for gas and to pee.
I bought 1944 Monarch - 12CK

-Nice piece, I've always liked Monarch build quality and design. Got it up and running yet?

 

[Farmall450]

Illinois vs "The Midwest" might be one of the more silly comparisons out there, IMO.

Indiana has a housing shortages, but in metro areas of growth, which makes perfect sense.
Our population of course is increasing in those areas, but dropping in rural areas, so presumably those homes would be available.

FWIW isn't that blue line heading upward? That should be positive.

How is comparing a state to adjacent states (e.g. where that state's disgruntled members might move) a silly comparison?

Comparing to Alaska would be a silly comparison.

 

[Farmall450]

-When the tollways were to be constructed they were supposed to be free in 1973. That never happened (surprise).

Worse yet, the rates are about to spike.

 

[zendriver]

How is comparing a state to adjacent states (e.g. where that state's disgruntled members might move) a silly comparison?

Comparing to Alaska would be a silly comparison.

We may have different definitions on what the "Midwest" is since AFIK includes the Dakotas, Kansas and several other states not adjacent to IL.

Probably doesn't matter for comparison anyway, since the demographics are so different.

Chicago area alone is nearly 10 million people. Indianapolis is the largest city in IN at 900,000

Apples to oranges comparison between even these two states, IMO

 

[Ultradog MN]

-Nice piece, I've always liked Monarch build quality and design. Got it up and running yet?

I had had the same lathe - a 42 model, for 5? years. I combined the best of the two into one better one and sold off enough parts that I don't have a lot in it.
It's the crown jewel of my shop.
I made an adapter for a post hole auger on Friday for a friend. I owed him.
He keeps my lawn mower running...

 

[American Locomotive]

Could faltering demand for “classic” L-shaped hex keys have played a role as well? And might this spread to other categories/ sorts of tools as well?

Personally, I think it is only the beginning.

Kind regards,
Olli

I think this is really the biggest driving factor, as I mentioned earlier. Eklind's catalog was very small, and hyper focused on fairly traditional hex keys. Lots of better and more innovative products have shown up on the market in the past 10 years. You gotta' keep innovating.

There's a reason Illinois mfg jobs more than halved since 1970, but Indiana's only lost a third. You might argue that's insignificant, but the several hundred thousand people without good jobs would disagree (I'm sure someone will state those jobs aren't good too, but ask any small town who's lost their only factory that and see if the outcome was positive).

I wouldn't look too much into it, really. Companies are constantly shopping around for whichever state will give them a sweetheart tax deal. Once those deals dry up, they'll move somewhere else to keep fleecing the local taxpayers.

Same thing happened with Hasbro here in RI. 100+ year old company that's been here for their entire existence. They just up and moved to Boston this past year because they got a very lucrative tax deal.

 

[Ultradog MN]

I wouldn't look too much into it, really. Companies are constantly shopping around for whichever state will give them a sweetheart tax deal. Once those deals dry up, they'll move somewhere else to keep fleecing the local taxpayers.

Same thing happened with Hasbro here in RI. 100+ year old company that's been here for their entire existence. They just up and moved to Boston this past year because they got a very lucrative tax deal.

Hmmm
There might be more than one way to look at things.
A company that is prudent with their finances might want to incorporate in a state that is prudent with its finances.
I'm just a hick from Lower Slobovia but my perception of states like NY, IL and CA is that they don't measure up credit rating wise as well as states like IN, AR or MT might. In the case of Ecklind, management might have looked at Moody's and decided IL was no longer a good, long term place to invest and moving would have taken years to get back to profitability. So they simply pulled the plug. Some will attribute management's decision to greed. I see it as no different than a union worker who sees the writing on the wall at the place he's worked for 35 years and cashing out before the fall.

 

[CHI_Tool&Die]

Hmmm
There might be more than one way to look at things.
A company that is prudent with their finances might want to incorporate in a state that is prudent with its finances.
I'm just a hick from Lower Slobovia but my perception of states like NY, IL and CA is that they don't measure up credit rating wise as well as states like IN, AR or MT might. In the case of Ecklind, management might have looked at Moody's and decided IL was no longer a good, long term place to invest and moving would have taken years to get back to profitability. So they simply pulled the plug. Some will attribute management's decision to greed. I see it as no different than a union worker who sees the writing on the wall at the place he's worked for 35 years and cashing out before the fall.

I cannot think of any real world situation where a company is pulling the plug on anything because of state finances. It’s all about incentives, labor, and resources. A lot of the companies that were listed as leaving IL left because the markets changed and having a HQ in the Midwest didn’t make sense. Boeing moved to DC for the proximity to government regulators, CAT and most of the other ag equipment guys are focusing on the big markets in Asia, etc. I’m not saying NY, IL, MA, and CA don’t have their issues but those are still states (specifically their large metro areas) that are desirable for many companies to move to because there are a lot of benefits there.

Eklind failing probably has more to do with management decisions and the hex key market than anything else.

 

[Firebrick43]

I cannot think of any real world situation where a company is pulling the plug on anything because of state finances. It’s all about incentives, labor, and resources. A lot of the companies that were listed as leaving IL left because the markets changed and having a HQ in the Midwest didn’t make sense. Boeing moved to DC for the proximity to government regulators, CAT and most of the other ag equipment guys are focusing on the big markets in Asia, etc. I’m not saying NY, IL, MA, and CA don’t have their issues but those are still states (specifically their large metro areas) that are desirable for many companies to move to because there are a lot of benefits there.

Eklind failing probably has more to do with management decisions and the hex key market than anything else.

Caterpillar flat out told the state in 2011 that they would relocate plants out of the state if Illinois raised corporate taxes again. I remember being in Peoria for training listening to the radio on some state spokesperson saying that Cat wouldn't actually do that.

Illinois raised taxes and cat started moving a significant portion out of state including their headquarters. Mossville is but a shell for R&D, Joliet closed, Aurora pretty much closed, Rockdale Closed.

They did exactly what they said they would because of Illinois finances.

Governor Pat Quinn: 'Caterpillar's not leaving Illinois' | ABC11 Raleigh-Durham | abc11.com

Caterpillar raised the possibility that it could move out of Illinois, and higher taxes are getting the blame.

abc11.com

 

[RoninB4]

They did exactly what they said they would because of Illinois finances.

-Illinois (Will-Annoy) has a long history of doing whatever the f*ck they want to the citizens and businesses through excessive taxation when the budget ran short. The resultant tax increases are the SOP of their government. It used to be a nice place to live/work.

 

[Ultradog MN]

Eklind failing probably has more to do with management decisions and the hex key mamarket.

LOL
Hex key market yes.
"Management decisions" are a different ball game. If Management is paying attention they are surely eying the tax level very closely.
When a state is getting their credit rating downgraded it means they will have a harder time kicking the can down the road by borrowing More money.
That leaves them with 2 options. Reduce spending - which is nearly impossible in a state like Illinois - or raise taxes.
I do not know what criteria Ecklind management used in making their decision to close but I will bet my house that a financially over extended state government had more than a little to do with their decision.

 

[reader2580]

A reasonably profitable company would just move their production to another lower cost state if it was costing too much in their current state. My guess is Eklind probably wasn't profitable enough to justify moving the plant to another state.

 

[American Locomotive]

Caterpillar flat out told the state in 2011 that they would relocate plants out of the state if Illinois raised corporate taxes again. I remember being in Peoria for training listening to the radio on some state spokesperson saying that Cat wouldn't actually do that.

Illinois raised taxes and cat started moving a significant portion out of state including their headquarters. Mossville is but a shell for R&D, Joliet closed, Aurora pretty much closed, Rockdale Closed.

It's really too complex to just say "taxes too high so plants closed" Sure, Aurora closed, but they added 500 jobs to the Decatur Illinois plant to make up for it. Joliet and Rockdale production moved to Mexico. That's more than just "taxes." Also Keep in mind Caterpillar was doing very poorly about 8-9 years ago. They had a ~5 year stint in the mid 2010s where their profits were way down, including 2015/2016 where they lost nearly $100 Million. They were closing plants all over the place, including plants in Georgia and even China. They were doing massive consolidation and restructuring to cut costs. Especially after their highway diesel engine business basically imploded.

They did exactly what they said they would because of Illinois finances.

Governor Pat Quinn: 'Caterpillar's not leaving Illinois' | ABC11 Raleigh-Durham | abc11.com

Caterpillar raised the possibility that it could move out of Illinois, and higher taxes are getting the blame.

abc11.com

I think the key part, which backs up my earlier claim is this:
"The correspondence says at least four states have approached the company about moving since Illinois raised its income tax in January." Which ties in with @zendriver 's post:

So, these are profitable companies, that instead of staying and paying IL taxes - like everybody else, they just bail to where it is cheaper, usually because those taxpayers are "willing" to pay these Corporation's share of property (and other) taxes, sometime for decades.

Take a look at Caterpillar's $750 Million dollar expansion in Lafayette

a ten-year personal property tax abatement for their $625 million investment in manufacturing equipment, and-a ten-year real estate tax abatement for their $100 million plant expansion investment.

Surprise, it's a tax abatement! So they're going to add $725 Million worth of "improvements" to their plant and not pay a single dime on any of the increased property or real estate value for 10 years. What does that get Lafayette? 100 additional jobs. Will those people even live in Lafayette? Possibly, but no guarantee. Will the 10 years of no-taxes for this expansion ever be made up by those 100 employees spending in Lafayette? Nope, no way.

Or how about their $90 million expansion in Schertz Texas , where they're adding just 25 jobs.

As part of the agreement, the new expansion is required to have equipment on the ground by the end of 2025. If by the end of 2026 Caterpillar adds and keeps 25 new employees, a 100% rebate will be applied to their 2026 property taxes. The following years, a tax rebate will be applied to their annual county property taxes should Caterpillar maintain those new employees, but the percentage of the rebate would drop by 15% each year, down to a 15% rebate by 2035, according to the agreement.

Oh look. A whole year with no taxes, and then a gradual phase in over the next 10 years. Do you think those 25 jobs will ever make up for that shortfall? Nope.

It's all a big ******* game to these companies. It doesn't matter what Illinois set their tax rates to. These executives constantly shop around. They know some ******* state/city/town council will give them a no-taxes-agreement to build/expand a plant that will add a handful of jobs that will never end up recouping the lost tax revenue. Whenever their tax abatement is up, they'll either threaten to leave and get another sweetheart deal, or they'll say they need to "consolidate" and close the plant. Sticking it to the tax payers over, and over, and over again. It's literally corporate welfare.

 

[Firebrick43]

Take a look at Caterpillar's $750 Million dollar expansion in Lafayette

Surprise, it's a tax abatement! So they're going to add $725 Million worth of "improvements" to their plant and not pay a single dime on any of the increased property or real estate value for 10 years. What does that get Lafayette? 100 additional jobs. Will those people even live in Lafayette? Possibly, but no guarantee. Will the 10 years of no-taxes for this expansion ever be made up by those 100 employees spending in Lafayette? Nope, no way.

That is not at all how the abatement works. They pay plenty of taxes over the 10 years on the additional investment.

Only the first year do they not pay anything on the investment increase and by year 10 its only a 10 percent decrease to their tax bill, and that is only to the new equipment, not the existing.

https://www.lafayette.in.gov/AgendaCenter/ViewFile/Item/20199?fileID=63250

 

[LOW1]

LOL
Hex key market yes.
"Management decisions" are a different ball game. If Management is paying attention they are surely eying the tax level very closely.
When a state is getting their credit rating downgraded it means they will have a harder time kicking the can down the road by borrowing More money.
That leaves them with 2 options. Reduce spending - which is nearly impossible in a state like Illinois - or raise taxes.
I do not know what criteria Ecklind management used in making their decision to close but I will bet my house that a financially over extended state government had more than a little to do with their decision.

Trying not to be too political here.

If I owned an Illinois plant I would be worried about that states’ public employees pension obligations and how those would be paid.

And I would compare production costs in strong and in weak union states.

 

[American Locomotive]

That is not at all how the abatement works. They pay plenty of taxes over the 10 years on the additional investment.

Only the first year do they not pay anything on the investment increase and by year 10 its only a 10 percent decrease to their tax bill, and that is only to the new equipment, not the existing.

https://www.lafayette.in.gov/AgendaCenter/ViewFile/Item/20199?fileID=63250

Okay, it's similar to the agreement they did in Schertz then. That is still a massive amount of money the state and city will never get. Over the entire 10 year period, they will only pay 45% of the taxes they normally would. Lafayette has a ~2.3%-ish tax rate on industrial personal property. They're investing $750 Million into the plant, ~625 million of which is new equipment. 2.3% of 625 million "worth" of equipment is $14.38 Million. Multiply that by 10 years = $143.8 Million worth of potential tax revenue. Do the math with their abatement rates, and that works out to a total reduction of $79 MILLION worth of potential tax revenue.

Yes, I know that depreciation means that new equipment will have a lower value each year, but still. Will those 100 extra jobs bring $79 Million in extra net-income to the state's coffers in 10 years? Never.

It's a losing deal for the Indiana tax payers, but they are often given no choice. If these companies are not being seduced by a sweetheart from from some other state, they're actively extorting states they're already in. They'll say things like "We need to expand this plant, but if we don't get a tax deal, we're just going to shut the whole thing down and move somewhere else who will give us a deal".

I've seen the above play out multiple times in Rhode Island. The local community gets screwed if the deal goes through, and gets super screwed if the deal doesn't go through and the company leaves.

 

[Firebrick43]

The equipment they install in Lafayette is usually in place for 25 to 30 years or more. A surprising amount is still in place from 1982. Its large specialized machinery. They will collect taxes on it over the course of time.

Not to mention all the ancillary jobs created that are not Cat direct hires. Every thing from wabash industries that give mental or physically challenged individuals jobs doing minor assembly or janitorial jobs to all the plant service contractors for coolant, scrap, millrites, ect. And those hundred jobs will buy homes, cars, eat out, ect.

Yes, I know that depreciation means that new equipment will have a lower value each year, but still. Will those 100 extra jobs bring $79 Million in extra net-income to the state's coffers in 10 years? Never.

Would they have invested less in LEC if they hadn't given an abatement, who knows. But there is no "loss" They didn't have that revenue to begin with.

I could have worked 100's of hours of extra overtime over the years. Just because I didn't doesn't mean I lost money. Somethings are more important than total dollars taken in.

If tax revenue collected in total was all that was important, Illinois would be one of the most wonderful states to live in. Yet there are few that would agree that there is any extra benifit to them for the double amount that they pay in taxes compared to indiana.

 

[Ultradog MN]

Fellas,
It's called free enterprise.
I live in the Twin Cities.
Maybe I want to start a business building dog houses. If the taxes, buisness license, building rental and utilities are cheaper in Minneapolis I will open my business there. If St Paul is cheaper I'll open it there. If St Paul adds a bunch of taxes and costs I will move my business - if I can afford to. Or I'll close it and sell the assets.
I don't have more loyalty or obligation to one city or the other. Why should I? I just want to build dog houses and make as much money as I can. If Menards charges more for materials I will go to Home Depot. I'm going to shop around for the lowest price. What is wrong with that?
It's called capitalism and it's the American way
Is my example about a dog house business any different than Caterpiller shopping for a better deal to keep their costs lower and make more money for their share holders?
Maybe Illinois could learn from Caterpiller.
Control your spending or youre in for some hard times

 

[American Locomotive]

Control your spending or youre in for some hard times

Huh. You mean like Cat did in 2015-2016 when they were losing millions of dollars, and started negotiating all these tax abatements that are coming into play now? Extorting towns by threatening to close and move plants?

I've sat through plenty of municipal planning meetings. No one *wants* to do tax abatements, because they don't produce the income the city would otherwise get, and it sets a bad precedent. They're essentially only done when the developers or company make it clear they'll pack up and leave without it.

These tax abatements are unfair to all the taxpayers, and are extra unfair to all the businessess that don't get them either. It's literally corporate welfare.

 

[blackwire]

After reading all these comments, seems like every American manufacturer should just pack up and move to the People's Republic of China. Imagine how much money they can save.

 

[Ultradog MN]

It's literally corporate welfare.

Okay.
It was fun and interesting guys but time for me to back out of this thread.
When people start using code words and phrases there is no point in continuing the debate.
I hate to see another old american company close its doors but I do have a pretty good stash of Ecklind allen wrench sets and there's lots of them on ebay.
Thanks to all for your replies.

 

[American Locomotive]

Oh waaaah. I have no patience for companies extorting local communities with threats or getting special treatment (i.e., money in the form of tax agreements) that no other company gets.

Not to mention Cat has a long nasty history of being tax cheats, using clever accounting and off-shore accounts to hide income. Nearly a billion dollar settlement with the IRS a few years ago.

No company, especially Cat, deserves special treatment from any municipality. We'd be way better off if everyone stopped these silly tax agreements. Companies would stop hopping state-to-state, and communities would not be repeatedly bent over backwards or destroyed when they finally do leave.

 

[Brownsfan]

As a side note to all this. Menards has all their Eklind stuff on clearance. Only a few dollars off at this point. Looks like Bondhaus is replacing it. At least they went with a quality replacement.

 

[YesIHaveAHammer]

Does the US not have state aid rules?

Different of course but similar here in Europe, where we have the union. There are state aid rules. Countries aren't allowed to distort competition through grants, tax incentives, low rate loans, guarantees, or obstacles to trade. The idea is to prevent a race to the bottom where eventually every country loses out.

However the union itself does distribute economic development funds to declined/neglected local regions, even those in rich countries. But mostly to the less developed countries. There have been many examples of companies taking advantage of these funds (as is permitted) to move operations to those areas. Given the source of those funds, it can be controversial, as countries effectively end up paying companies to leave.

 

[zendriver]

Does the US not have state aid rules?

Different of course but similar here in Europe, where we have the union. There are state aid rules. Countries aren't allowed to distort competition through grants, tax incentives, low rate loans, guarantees, or obstacles to trade. The idea is to prevent a race to the bottom where eventually every country loses out.

However the union itself does distribute economic development funds to declined/neglected local regions, even those in rich countries. But mostly to the less developed countries. There have been many examples of companies taking advantage of these funds (as is permitted) to move operations to those areas. Given the source of those funds, it can be controversial, as countries effectively end up paying companies to leave.

Doesn't seem that much different.

Therefore the Treaty generally prohibits State aid unless it is justified by reasons of general economic development.

State aid

State aid overview

competition-policy.ec.europa.eu

 

[YesIHaveAHammer]

Doesn't seem that much different.

Therefore the Treaty generally prohibits State aid unless it is justified by reasons of general economic development.

I believe that headline is a gross oversimplification. The exception is for economic development of economically "bad" areas, much like the union itself does with the funds I described.

In any case there appears to be an exception for small to medium sized companies, which a company the size of Eklind would fall into. I guess it's impractical to keep on top of all the small stuff, so they just look at things could that meaningfully distort the market at scale.

 

[neophyte]

Does the US not have state aid rules?

Different of course but similar here in Europe, where we have the union. There are state aid rules. Countries aren't allowed to distort competition through grants, tax incentives, low rate loans, guarantees, or obstacles to trade. The idea is to prevent a race to the bottom where eventually every country loses out.

However the union itself does distribute economic development funds to declined/neglected local regions, even those in rich countries. But mostly to the less developed countries. There have been many examples of companies taking advantage of these funds (as is permitted) to move operations to those areas. Given the source of those funds, it can be controversial, as countries effectively end up paying companies to leave.

The US has “Anti-Trust” laws, designed to prevent Monopolies from controlling the market for a particular good or service, by having too large a percentage of that market, usually by purchasing out competitors.
There are also laws against “price fixing” amongst providers of similar goods, and laws against selling items at significant discounts to drive competitors out of business.
As far as “government entities” providing tax breaks or tax incentives to encourage companies to move locations, as far as I’m aware, there are no laws, and those sort of deals are usually left to voters to complain about, or otherwise to vote politicians out of office, which is sometimes not a quick fix.
Even Switzerland complains about the tax haven that is Delaware.