Grim and Grimmer

As bleak as the fate of the Big Three is looking at the moment, and life for the autoworkers, and their various suppliers, the picture has been steadily getting even darker on the possible alternative jobs front.

Some had hoped that the makers of agricultural machinery could be a possible source of employment, but the closures and bankruptcies of multiple alternative fuel ethanol plants makes those job avenues doubtful.

Note the following, and then after I'll talk more about the likely aftershocks soon to follow.

Yesterday:

Just three years ago, its co-founder was named a finalist for Ernst & Young's entrepreneur of the year contest in northwest Ohio.

But now Greater Ohio Ethanol LLC's lone plant on Houx Parkway in Lima is shuttered.

And this week, bankruptcy Judge Mary Ann Whipple, of Toledo, approved a request for an expedited hearing where she will consider the firm's request to begin seeking bids for the four-month-old plant. The hearing is set for 1:30 p.m. Monday in U.S. Bankruptcy Court in Toledo.

Another hearing is scheduled for Dec. 4 there on a motion by creditor Nedra Corp. of Payne, Ohio, to convert the firm's month-old reorganization case to a liquidation.

But recent developments represent a huge slide for plant founders, who raised millions from private investors and once talked of building seven ethanol plants across Ohio. The $150 million Lima plant was to have produced 54 million gallons of the gasoline additive ethanol each year. In 2005, co-founder Gregory Kruger was a finalist for local entrepreneur of the year.

But the Lima plant was plagued by construction cost overruns, production problems, and a national credit crisis that blocked owners from obtaining loans needed to survive.

As a result, it was unable to supply its sole customer, BP Products North America Inc., with an agreed-to 49 million gallons of ethanol a year.

Today:

Construction crews were scheduled to start digging up the sandy soil next spring to make way for an ethanol distillery plant in San Pierre. The plant promised to revive the town's economy, bring high-paying jobs to one of the state's poorest counties, and double its tax rolls, a scenario that has played out repeatedly in struggling towns across the Midwest over the past three years.

But last month, the developers of the San Pierre plant announced that the $62 million deal was dead. Banks involved in the project had shut their doors and cut off their lines of credit. Desperate calls to dozens of other financial institutions led to the same answer: No.

Already battered by other market forces, the ethanol industry has been hit hard by the banking world's credit crunch, and the seemingly bright future of the corn-based biofuel has been cast in doubt.

In Pratt, Kan., the grinding mill machinery stands silent at the Gateway Ethanol plant. It was open for less than six months before running out of money, and there were no bank loans available to keep it going. The company has filed for bankruptcy.

In Royal, Ill., developers abandoned efforts to build a plant there and in six other locations, citing an inability to obtain financing. Plants have been shuttered, or plans for new ones halted, in Mead, Neb.; Belle Fourche, S.D.; Blairstown, Iowa; and Melrose, Minn.

Less than two years ago, the idea of distilling corn into a gasoline substitute won over Wall Street and rural residents, with visions of reviving the weakened farm economy and investing in greater US energy independence and green energy. Other agricultural businesses - from local co-ops to small-town merchants - saw a boost, as farmers suddenly had money for new clothes, spa visits, and farming equipment.

Friday here in Michigan:

Bankrupt ethanol producer VeraSun Energy Corp. reportedly is closing its ethanol plant in Woodbury.

The company has stopped taking corn at the plant and plans to shut down the facility when the existing supply is used, an Iowa State University professor who follows the company said.

Roger McEowen, director of the Iowa State University Center for Agricultural Law and Taxation, said he also has learned that two of VeraSun's Iowa plants soon will close.

...

VeraSun on Wednesday reported a third-quarter net loss of $476.1 million, or $3.03 a share, compared with a profit of $7.8 million, or 9 cents a share, during the same period last year. Yet revenue increased nearly fivefold to $1.08 billion.

VeraSun filed for bankruptcy protection Oct. 31 after it bet wrongly in the commodities markets. A number of other producers, who hedge commodities to protect themselves from price spikes, are running into the same trap.

Farmers supplying VeraSun Energy Corp., the nation's second-largest ethanol producer, are being told the company doesn't necessarily have to honor its corn contracts under Chapter 11 bankruptcy protection.

McEowen recommended farmers and elevators consider bankruptcy lawyers to collectively represent them.

November 18:

OTTUMWA — The prospects of building a $300 million ethanol plant in Wapello County is on hold thanks in part to woes on Wall Street and a shaky U.S. economy.

“ ... It’s the credit crisis. The banks are holding onto the money and they are not releasing it,” said Unity Ethanol Project Manager Joy Fullenkamp. “After the buyouts were taken care of, the banks are saying ‘We’ve loaned out too much money already’ and they are going to sit on it for a while.”

A lack of credit coupled with dropping oil prices as well as a smaller gap between regular gasoline and the ethanol blend has meant lower demand for the product.

“Ethanol is still cheaper and it always will be, but right now with the difference being minimal, people are not buying as much ethanol blend,” Fullenkamp said.

Also from November 18:

Look for more ethanol plant bankruptcies soon. Mark Lakers, president of Ag and Food Associates, an Omaha, Neb., middle market merger and acquisitions investment bank, expects as many as 40 Chapter 11 filings by the end of January.

Those include the 16 VeraSun plants in 8 Midwestern states in bankruptcy proceedings since Oct. 31. The U.S. now has about 150 ethanol plants in operation.

First of note is of all the automakers, only the Big Three produce vehicles that are able to run on ethanol. Ouch.

As noted in one of the press reports, the ethanol plants in bankruptcy won't be honoring their contracts with the farmers. The farmers will have to settle for a much lower payment for the corn they've already produced, harvested, and delivered.

They may also have already purchased new or upgraded farm equipment to meet the needs of the ethanol plants. Uh-oh. Now, how to pay for that expensive equipment? If they can't pay, the makers of agricultural machinery will be hurting from that blow, as well as a blow they will take for possibly adding to their inventory in anticipation of continued sales growth based on the growing demand for alternative fuel sources.

Bankrupt alternate fuel companies, cash poor farmers, financial hardship for farming equipment manufacturers, other avenues for displaced workers cut off, and more cars to sit unsold on the lots of dealers of Big Three autos.

Back to the jobs drawing board.

-Diane