video: EXCLUSIVE: Capco Steel—Once the Boast of RI, Now Shrinking
Tuesday, May 01, 2012
Capco Steel—once the poster child for state and local efforts to help businesses—has laid off hundreds of workers and recently closed one of its plants as the region’s largest steel fabricator struggles to stay open, GoLocalProv has learned.
A multi-million-dollar loan guarantee from the state and additional funds from the City of Providence to pay some employee wages apparently haven’t been enough to stem the tide of economic woes facing the company.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST“We’re really trying to keep it going,” CEO and founder Michael Caparco, Sr. told GoLocalProv. “Hopefully we can save this thing and turn this around.”
Just three and a half years ago, Capco Steel employed about 900 workers, according to Caparco. But then, in October 2008, the recession struck. In the space of just two weeks, Caparco said his business lost $85 million worth of contracts, a blow from which it appears to have yet to recover.
“It’s been a very difficult three and a half years,” Caparco said. “We’re trying to recuperate from that.”
Company benefited from Providence jobs program
Capco Steel’s financial challenges are all the more noteworthy because the company has been the beneficiary of state and local government programs.
In March 2010, state officials announced that the Economic Development Corporation would be extending a $5 million loan guarantee to Capco, helping it to obtain $26 million in financing from Webster Bank.
Then-Mayor David Cicilline praised the deal at the press conference. “This is an important company to our city. It’s an important company to this neighborhood. It’s an important company to the state,” Cicilline said. “This is how we have to work together to create jobs. You couldn’t have made a better decision, a better investment, in a better company.”
Cicilline soon followed suit.
In June 2010, Cicilline formally launched his own job creation venture, known as Jobs Now Providence. The program used federal economic stimulus funds to pay the wages of workers at qualifying businesses. Capco Steel became the model business for the effort, with the mayor’s office boasting in a June 10, 2010 city newsletter that 14 employees were already working at Capco, thanks to Jobs Now, with a dozen more coming on board.
But those jobs proved relatively short-lived.
Jobs Now was part of a statewide employment program that expired in September 2010. Within a year, all those new jobs were gone, according to Caparco. (Cicilline’s Congressional office declined to comment for this story. He is pictured below on a tour of the company.)
$5 million in state funds on the line too
The state-backed loan does not appear to have turned things around either.
At the time that Capco obtained the financing deal, the company was already down to 450 workers. Capco planned to use the loan and line of credit to make one hundred new hires and expand its business. “With this commitment from Webster Bank, we have the investment we need to grow our company and add employees,” Caparco said in a March 24, 2010 press release.
Instead, the opposite has happened: two years later, Capco’s workforce is even smaller.
Today, the company is down to 100 workers. “That’s why the unemployment rate is where it’s at,” Caparco said, adding that having to do the layoffs has made him "sick."
At the start of this year, Capco Steel closed its East Providence plant, after laying off 50 workers over several months, and sold all the equipment it had at the facility. As the business has continued to shrink, Caparco even is reportedly trying to rent out space to white-collar tenants in his Acorn Street headquarters in Providence.
Ed Mazze, a professor of business administration at the University of Rhode Island, criticized the city and the state for making funds available to local businesses without monitoring how the money is used. “They provide dollars,” Mazze said. “They do not hold these firms accountable for any targets they are supposed to achieve.”
Caparco said the state and city have done “enough” to help his business, saying that the key issue was a lack of construction projects to bid on. For now, he said he’s focused on getting more work for his company. He declined to speculate on what will happen to Capco if new jobs don’t materialize in the near future. He also would not go into detail about any new projects his company is seeking.
‘Blow to Providence’
“I think it just would be a terrible blow to the City of Providence and the state if they were to close or lay off people,” Mazze said. “To me, we are continually in a state of surprise when these things happen rather than being ahead of the issue.”
Roy Coulombe, the business manager for the Iron Workers Union Local 37, said Capco has a major employer of his members. “I do hope it works out,” Coulombe said. “We wouldn’t want to see him go anywhere. He’s been wonderful for us. He’s like an aircraft carrier.”
Coulombe blamed unfair competition from Canadian steel companies—where he said health care is subsidized by the government. “It’s hard to compete with them,” Coulombe said. “They’re starting to dominate industry down here.”
For Caparco the problem is simple: it’s the economy. “We’re a great company, but unfortunately, the economy got to us,” he said.
Ironically, given all the support he has received at the state and local levels of government, he blames government for the economic problems he’s facing. “You’ve got to blame the government,” Caparco said. “The government has destroyed this company—this country.”
Asked to clarify his remarks, Caparco said he was referring to government loans to prospective homeowners who were unqualified.
‘Last of the job creators’
Capco Steel was founded in 1990 and moved to its present location in Providence in the early 1990s. In its two decades of business so far, the company has had its hands in everything from Gillette Stadium to the Providence Place Mall to construction at the World Trade Center in New York City.
Capco also has a reputation as a family business that is dedicated to its employees. Michael and Patricia Caparco founded the company in 1990 in their kitchen. Today, Michael Caparco serves as CEO and the vice president of operations is Michael Caparco, Jr. (The company name “Capco” is shortened from their last name, Caparco.)
Keven McKenna, a friend and business neighbor on Acorn Street, said Caparco was a business owner who cared about his employees—once even covering the college tuition costs for his employees. McKenna, a long-time attorney who ran for Attorney General in 2010, described Caparco as an old-fashioned manufacturer who was more interested in tinkering with his model train sets than living up the CEO lifestyle on a golf course.
“Everybody who knows him, loves him” McKenna said. “He’s just a stand-up guy.”
“He’s the last of the job creators in Rhode Island,” McKenna added.
Note: A spokeswoman for the Rhode Island Economic Development Corporation, which oversaw the state’s loan guarantee to Capco Steel, was not able to respond to a request for comment in time for publication.
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