By Dave Roepke and Tracy Frank / Forum staff writers, Published May 05 2009
Alien considers closing Fargo plant
That’s one of several options the California-based “smart tag” manufacturer is considering to offset a drop in demand caused by the flagging economy.
No decisions have been made yet, said Victor Vega, Alien Technology marketing director. The company is collecting information and evaluating options, which include doing nothing, job cuts, temporarily closing, or simply closing the north Fargo facility that opened in 2006.
“It’s not an easy decision for him to make,” Vega said of Alien CEO George Everhart.
“Smart tags” are ultra-high-frequency radio frequency identification products and services that Alien provides to industries such as retail, manufacturing, defense and pharmaceuticals.
The Morgan Hill, Calif.-based company is studying assembly techniques for smaller-scale production, Vega said. The market slowed in November and December but seems to be picking up again, he said.
“We’re just looking at it at this point,” Vega said. “It’s really all just driven by volume.”
If Alien closes its plant in the North Dakota State University Research and Technology Park, the state and city would lose their bet on a business that was supposed to transform the area into a sort of smart tag Silicon Valley.
Predictions back in 2003 that the facility would produce 1,100 jobs and a
$55 million payroll by the end of the decade never materialized. Last fall, the facility employed 35 people.
If Alien leaves
Losing Alien would leave the state to decide what to do with the stock it bought as part of a package of development incentives. It is unclear how much the equity in the privately held company, bought for $1 million, is worth now, said Shane Goettle, commissioner of the North Dakota Department of Commerce.
If Alien leaves, the state would work out an “exit strategy” for its holding, Goettle said. That could mean hanging on to the investment for a few years until the company is doing better, he said.
“We have to engage the company pretty aggressively yet about what happens with our equity stake. None of that’s occurred yet. We’re still on the edge of this news,” he said.
The state-owned Bank of North Dakota loans worth $1.2 million and $1.7 million would be collected in conjunction with a private bank that was the “lead lender” on the project, Goettle said. He said he couldn’t name the lead lender, or the collateral Alien put up to guarantee the loans.
Alien executives came to Fargo about a month ago to brief local officials on its financial struggles. One of those local officials was Brian Walters, president of the Greater Fargo Moorhead Economic Development Corp.
Alien executives said closing the Fargo location was a possibility, a potential turn of events that Walters attributed to the poor economy and the risk high-tech companies take.
“You win some of these, and you lose some of these,” he said. “We like winning more than losing.”
Tony Grindberg, executive director of the NDSU Research and Technology Park, said he hopes Alien figures out a way to stay. If it leaves, he doesn’t think that will hurt the ability to attract high-tech companies to Fargo.
“We want what’s best for Alien, but companies come and go every day in Silicon Valley. In North Dakota, you’re a big fish in a small pond,” he said.
City would lose, too
If Alien closes, a loan for $134,000 from GFMEDC would be in default, Walters said. The portion already released to help pay down interest on other loans, about $90,000, would be due in full in four months, with interest at 11 percent, he said.
The company could ask the development corporation for a grace period if it temporarily closed the Fargo plant, Walters said. The GFMEDC board would need to approve it, though.
Alien also received a 10-year property tax exemption from the city for its north Fargo building, which it leases from Renaissance Development LLC.
With the building assessed at $3.8 million, Alien didn’t have to pay about $82,500 per year in taxes – nearly $250,000 over three years, said City Assessor Ben Hushka. If Alien closes, the city won’t be able to get the exempted tax back, he said.
The Fargo facility houses Alien Technology’s fluidic self-assembly strap assembly process – a technique of placing radio frequency identification chips onto an antenna, which makes an inlay for RFID tags.
“That technology that we have invented is actually very well suited for very high-volume production, but in this period of inconsistency and the lower market volumes, what we have chosen to do at this point is to research alternative techniques of attaching the chip to the antenna,” Vega said.
Alien is looking into different alternatives on how to manufacture the inlays. If sales increased, the company would consider going back to the assembly suited for high volumes, Vega said.
Walters said if Alien opts for a short-term shutdown, the development corporation would help seek a temporary tenant for the building.
“It doesn’t help us to see their financial challenges magnified,” he said.
Readers can reach Forum reporter Dave Roepke at (701)241-5535 and
Tracy Frank at (701) 241-5526