GM Sleepy Hollow Nightmare Shows Peril for Factories

GM Sleepy Hollow Nightmare Shows Peril for Factories

 

By Linda Sandler and Patricia Hurtado

July 9 (Bloomberg) — General Motors Corp. closed its minivan factory in Sleepy Hollow, New York, 13 years ago, after a record 82-year run for a company plant.

Encouraged by the site’s views of the Hudson River, just 23 miles north of Manhattan, GM made development plans to help the village replace it as the biggest employer and largest source of tax revenue.

“This is some of the prime real estate in the world,” said Anthony Giaccio, 45, the village administrator, describing the potential that villagers and GM saw in the 97-acre site.

Potential is still the operative word. GM and New Jersey- based Roseland Property Co. spent $11 million on developing the site and on cleaning lead, methane and other toxins out of its soil before scrapping plans about a year ago to build 1,000 homes, offices, stores and a river walk, Giaccio said.

The delay in developing the site may prove to be a harbinger for other towns about to go through the same end-of- an-era experience with less promising real estate. GM is abandoning 16 factories in Michigan, Indiana, New York, Ohio and other states as it uses a bankruptcy sale to put its best assets into a new entity. Many plants are contaminated, requiring costly cleanup.

“It’s going to be very difficult to sell or dispose of them,” GM restructuring chief Albert Koch told the judge in charge of the carmaker’s bankruptcy on July 1. GM estimates the plants’ environmental liabilities at $530 million, he said.

New York developer Donald Trump was turned down by GM in the 1990s when he proposed to build a $1 billion residential, retail, hotel and spa complex on the Sleepy Hollow site.

“In their great wisdom they chose somebody else and that’s why they are bankrupt,” Trump said today in an e-mail.

One property the Detroit-based carmaker is ditching is a foundry in Massena, New York, bordered by the St. Regis Mohawk Indian Reservation and the St. Lawrence River. Built to make aluminum cylinder heads for the Chevrolet Corvair in the 1950s, it generated PCB sludge and waste from hydraulic fluids.

$225 Million Cleanup

It would have cost GM an estimated $225 million to clean up the site and restock the river with edible fish if it held on to the property, said John Privitera, a lawyer for the tribe at McNamee Lochner Titus & Williams PC in Albany, New York. Now GM creditors or the state will get stuck with the costs because bankruptcy law permits shedding such obligations.

Chrysler LLC will ditch seven factories and an office building by 2010 as part of a similar bankruptcy plan that created Chrysler Group LLC, a streamlined entity now run by Fiat SpA. Chrysler’s bankruptcy plan creates the same second-act challenge for communities in Michigan, Missouri and Delaware that now have eyesores in the making.

The old Chrysler’s discarded factories and vacant real estate have a book value of about $2.6 billion and may fetch 6 percent to 12 percent of that sum when sold to satisfy creditor claims, according to court documents.

GM hasn’t disclosed the book value of its discarded assets, which include a nine-hole golf course in New Jersey and a parking lot in Flint, Michigan in addition to the factories.

In Limbo

With plans for the Sleepy Hollow site in limbo, beech saplings and weeds are about the only things that have developed there since the last GM vehicle was made. Factory buildings, where Chevy Luminas, Oldsmobile Silhouettes and Pontiac Trans Sports were produced, have long been torn down. All that’s left are cracked concrete plant floors and stumps of rusted girders.

Sleepy Hollow’s 10,000 villagers had one piece of luck. GM has cleaned up much of the toxins accumulated in the land since it started making cars there. The new GM, which is holding on to the site as an asset, will finish the cleanup, including toxins in the river, according to spokesman Tom Wilkinson.

Wilkinson declined to say if GM plans to resume its project with Roseland, which might reconsider “if the deal was right,” said Michael Greene, a Roseland vice president involved in the estimated $80 million project.

‘Too Good’

“It’s too good a site not to be developed,” he said.

One sticking point to the deal was a village demand for $22 million in amenities, such as an extra exit and entrance and a river walk, Giaccio said during an interview in the red brick village hall he shares with the fire and police departments.

“We wanted a jewel on the Hudson,” said Maria DeMilia, a former trustee of the village. “They wanted to make money.”

Expressions of interest in the site by developers such as Toll Brothers Inc. came to nothing, Giaccio said. Toll Brothers didn’t return a call seeking comment.

In 1985, GM paid almost $1.5 million in taxes to the village, then called North Tarrytown, providing 49 percent of its total tax revenue. The year the plant closed, GM paid less than $1.1 million in taxes, or about 24 percent. Two years later, GM’s village taxes had dropped to about $176,000, or 4 percent of tax revenue.

‘Village Is Suffering’

“I don’t like the fact that the village is suffering, and we have no income,” said DeMilia, 46, whose aunt was a salaried GM employee who lost her health benefits.

The 99-cent store on Beekman Avenue, the village’s main street, is now empty. A toy store, five restaurants and bars and a tailor shop have shut down since the plant was closed.

“We used to have 3,500 workers buying groceries, cigarettes and lunch,” said DeMilia. “We had a florist and three more restaurants.”

Seeking to attract some tourist revenue, the village renamed itself Sleepy Hollow in 1996, according to village historian and real-estate agent Henry Steiner. That gave it a link to Washington Irving, who wrote “The Legend of Sleepy Hollow,” a short story that features the Headless Horseman and a gangly teacher named Ichabod Crane.

Irving’s house is nearby, and he is buried in Sleepy Hollow cemetery, along with Andrew Carnegie, Walter Chrysler, Elizabeth Arden, Brooke Astor and Harry and Leona Helmsley.

Sleepy Hollow is a variant of the Dutch name for a river bay that existed in Irving’s day and is now covered by the land- filled GM site, Steiner said.

New Lives

Some abandoned car factories have managed new lives. GM sold an Oklahoma City assembly plant for almost $60 million last year to Oklahoma County, which leased it to the U.S. Air Force to expand its Tinker Air Force Base. The automaker turned a brownfield site in New Jersey into the Hyatt Hills Golf Complex, the nine-hole course it’s turning over to creditors.

If some Sleepy Hollow project goes ahead, Giaccio said his preference is for a developer that uses the Roseland plan. Starting from scratch might stretch out the process another 10 years, he said.

The bankruptcy case is In re General Motors Corp., 09- 50026, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Linda Sandler in New Yorkt ; Patricia Hurtado in U.S. District Court in New York at pathurtado@bloomberg

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