Mid-Atlantic changes course to stem losses Recycler admits strategy backfired

April 22, 1992|By John H. Gormley Jr. | John H. Gormley Jr.,Staff Writer

The Mid-Atlantic Recycling Corp. has reversed course in an effort to staunch heavy losses that threaten the company's Clinton Street plant, billed as the largest paper-recycling plant in the nation.

Opened a year ago, the plant took a novel approach that the company hoped would be a boon to the recycling efforts of communities across the state. The company agreed to accept -- at no charge -- all kinds of paper mixed together. That meant communities could send all of their waste paper to Mid-Atlantic, not just the carefully sorted paper required by most other recycling operations.

The strategy backfired. The high cost of sorting the paper combined with depressed markets for waste paper and pushed Mid-Atlantic's operation into the red.

"Mid-Atlantic would be one of the first to admit we made a strategic mistake," said Scott Menzies, the company's chairman. Mixing recyclables only increases the cost of recycling it."

The company has revamped its management and its operations.

David C. Tolzmann Jr. Mid-Atlantic's president, is no longer managing the plant. That responsibility has been turned over to the Newark Group Inc., a New Jersey company that operates 11 paper mills and buys and sells 2 million tons of waste paper a year.

"We decided to go with some pros to run the plant," Mr. Tolzmann said.

An investor in the project, Mr. Tolzmann, a former Baltimore Sun executive, remains on Mid-Atlantic's board but no longer receives a salary.

The new management has moved to cut costs and to get Mid-Atlantic out of the unprofitable business of accepting unsorted residential waste paper.

At its peak, Mid-Atlantic was processing about 2,500 tons of paper a month. That has dropped by 40 percent, to about 1,500 tons a month. The dramatic decline resulted largely from Mid-Atlantic's decision to start charging tipping fees.

Suppliers of mixed waste paper now pay up to $35 a ton. There is little or no charge for carefully sorted paper. Rather than pay the fees on unsorted paper, Howard and Baltimore counties have been taking their paper to other recyclers.

The original investment in the Mid-Atlantic plant included a $1 million state-guaranteed loan. State officials hoped that the Mid-Atlantic plant would help relieve the state's problems in disposing of solid waste by accepting all kinds of waste paper in large amounts.

William E. Hancock, executive vice president of the Newark Group's recycled fiber division, said Mid-Atlantic made a mistake in telling communities to leave the sorting to Mid-Atlantic instead of the state's householders. "Ten million hands can sort that pile a lot better than 20 guys" at Mid-Atlantic, he said.

Thanks to staff cutbacks and tipping fees, Mid-Atlantic has stopped losing money. "I think right now we're just about breaking even on the efficiencies we've brought to the party," Mr. Hancock said.

The Newark Group is not charging Mid-Atlantic for managing the plant. Mr. Hancock said his company, the exclusive marketer for Mid-Atlantic's baled paper, hopes to profit from that arrangement once market conditions improve.

Mr. Menzies refused to disclose how much Mid-Atlantic lost in its first year. Late last year, Mid-Atlantic said it was losing about $15 on every ton of paper it accepted.

The company has not defaulted on its loans, said Mr. Menzies, who expressed confidence that the recycling center is moving onto solid ground.

"We've lost enough to know we don't want to lose any more. It's the price of learning. That doesn't mean we're going to quit," he said. "I'm sure we're headed in the right direction."

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