WASHINGTON -- The Treasury Department is considering offeringfinancial incentives to the US subsidiaries of foreign papermakingfirms if they will compete against Crane & Co. of Dalton, Mass., forUS currency-paper contracts.
Officials for Crane, the nation's sole supplier of currency paperfor more than a century and one of the largest manufacturers inwestern Massachusetts, say they would be forced to lay off workersand idle specialized machinery if the company loses its lock on thebusiness, valued at $75 million a year. About 200 of the 1,400employees produce nine truckloads a week of customized cotton andlinen paper for the Bureau of Printing and Engraving.
"I'm distressed, and I'm concerned," said Lansing E. Crane, thechairman and chief executive officer of the firm. "I have noobjection to them seeking competition. That's the American way. Theproblem is with the government giving other people an unfairadvantage over Crane & Co."The Treasury Department has put a draft solicitation on theInternet encouraging paper manufacturers to bid for the work andoffered subsidies in unspecified amounts for start-up costs andequipment plus a four-year contract as an inducement. The aim is tobuild enough competition into the market that over time thegovernment will recoup its subsidies many times over through lowerprices from manufacturers.Larry Felix, an official at the Bureau of Printing andEngraving, a division of the Treasury, said the bureau is required bylaw to seek competition. "The bureau is required to do everythingpossible to get competition, and that is what we are doing," he said.The government is scheduled to issue a final solicitation inFebruary. To get a contract, a competitor would have to show thatafter factoring in the government subsidy, it could in reasonabletime beat Crane's best price."It is insane. It is an outrage," said Rep. John Olver, anAmherst Democrat. "Because the bid process has not produced Americancompetitors who feel they can beat Crane, they have gone out andasked foreign competitors what it would take to have you come in andcompete with our American company."Sen. John F. Kerry, whose staff has been working on the issue,said, "I do not believe we should use government resources toartificially create competition."Crane & Co. is a 195-year-old family business with a nationalreputation for production of high-quality paper. Indeed, the companyhas won the contract to produce the invitations for the last twopresidential inaugurations. It has been the sole source for currencypaper for the Bureau of Printing and Engraving for 117 years.Although the currency paper contracts are put out to public bid everyfew years, no US firm has tried to compete against Crane for decades.Crane's current contract expires in six months.Indeed, bureau officials say they have no quarrel with Crane'sperformance. Bureau auditors have found that Crane's prices haveincreased less than the rate of inflation. The company said it hasmade major investments in equipment to reduce the cost of producingthe currency paper in recent years."The bureau is very satisfied with our relationship with Crane.We receive a quality product. We have always had timely deliveries,"Felix said.But the fact that the only significant competition is likely tocome from large foreign firms with US subsidiaries could proveproblematic because of security considerations involved in producingcounterfeit-proof currency paper. The value of US currencythroughout the world is intrinsically tied to the difficulty inreplicating it. Moreover, subsidizing a foreign company runs counterto the stated US policy of supporting American over foreignmanufacturing concerns.Earlier this year, language added to the appropriationslegislation changed the interpretation of a 1988 law that wasauthored by the late Rep. Silvio O. Conte, a Pittsfield Republican,requiring US currency paper to be manufactured by a company that is90 percent US-owned. Under the new interpretation, it is now 50percent US-owned. This change opens the door for US subsidiaries offoreign companies to get a piece of the market dominated by Crane.Nearly two years ago, the Bureau of Engraving and Printing sentquestionnaires to major manufacturers, asking what would induce themto supply US currency paper. The firms indicated that only majorsubsidies would get them to compete with Crane because of the specialequipment and expertise needed.Olver estimated the subsidy could be as great as $100 million,more than the $75 million value of an annual contract. He denouncedthe draft solicitation as a "sweetheart deal" to induce a foreigncompany to produce US currency paper.The greatest potential threat to Crane is seen as coming fromDeLaRue, the British conglomerate that prints currency for manynations, including Britain. DeLaRue has two US subsidiaries andowns a paper mill in Georgia, the home state of House Speaker NewtGingrich.Felix, the bureau spokesman, said Crane had an advantage over allcompetitors because of its track record. The bureau ultimately willmake its final decision "based on the total cost to the government,"he said."Crane is the best at it, clearly they have a leg up," Felixsaid. "Most companies are not willing to compete against Cranebecause this is a business they know well."
No comments:
Post a Comment