Alien Technology Plant In N.D. Yet To Meet Potential

Maker of radio frequency identification tags expected to employ 319 workers at its Fargo plant by 2008, but its current count is only 35.

FARGO, N.D. (AP) -- From the ceiling of Alien Technology's facility in north Fargo hang several vacuum hoses, waiting to be hooked up to the technological marvel that assembles and tests the company's "smart tags."

They serve as a reminder that while Alien has enjoyed strong growth in recent months, the plant is operating at less than full capacity. It also is short of long-term job projections Alien provided when seeking tax breaks and economic development incentives to expand to Fargo.

By 2008, Alien had expected 319 workers in Fargo. Its current count is 35. The company postponed its initial public offering of stock in July 2006, and went through a round of layoffs designed to boost efficiency and cut costs.

"I think, in their minds, obviously with their IPO they expected to be at a different stage," said Brian Walters, executive director of the Greater Fargo Moorhead Economic Development Corp.

"But, again, for the capital investment they've made and the jobs that have been created, (they) have exceeded what we required," he said.

Among Alien's customers is Wal-Mart, which is leading the retail sector's charge into using smart tags to track goods from the warehouse to store shelves. The radio frequency identification tags have microchips that contain identifying information.

"They're one of the leading companies in this technology," John Simley, a Wal-Mart spokesman, said of Alien Technology.

Alien, based in Morgan Hills, Calif., announced in July 2003 that it would build a plant in the North Dakota State University Research and Technology Park in Fargo.

The Bank of North Dakota provided a $1.7 million loan and another $1.2 million through a low-interest loan program. The state bank also took a $500,000 equity stake in Alien.

The Greater Fargo Moorhead Economic Development Corp. loaned Alien $134,000 to help buy down the interest. In turn, Alien had to create 31 jobs. Officials say the 2007 figure of 38 employees more than met that requirement.

The state Commerce Department's North Dakota Development Fund bought a $500,000 preferred stock equity investment in Alien. When the shares are sold, the proceeds will go into a revolving fund for investment in other businesses.

Dean Reese, CEO of the fund, said he has reviewed Alien's financials and participated in conference calls with Alien's private investors. What he heard looks promising, he said.

Reese said Alien jumped into the IPO process "maybe a little too early," but he gave the company credit for its progress since then.

"I have to commend them for backing that thing off," he said. "In fact, they're probably looking better than they were before that."

The city of Fargo gave Alien a 10-year, 100 percent property tax exemption on its facility. The exemption is worth about $87,500 per year, based on the plant's appraised value of roughly $3.8 million.

When Alien applied for the exemption in December 2004, it projected 23 employees in 2006, with seven of those jobs paying more than $15 per hour and the rest paying less.

The exemption was awarded before a change in state law requiring companies that receive public incentives to report employment figures, said City Assessor Ben Hushka.

Jay Tu, Alien's senior director of operations, said it's hard to predict future employment at the plant. Alien had said it could employ 1,100 people with a payroll of $55 million by the end of the decade.

"Obviously, we've been very happy with our relationship with the community, and we are very happy to continue growing within the Fargo community," Tu said.

The Fargo plant opened in 2006. At the end of that year, it had 44 workers with an average hourly salary of $22.21, according to figures the company reported to the development corporation.

At the end of last year, Alien reported 38 employees, down six from 2006, said Justin Pearson, vice president of business retention and expansion for the development corporation. An average hourly wage was not available.

Josh DeCock, a quality engineer at the Fargo plant, said it now has about 35 workers.

Despite the layoffs, Alien's production has almost doubled over last year, DeCock and Tu said. Tu declined to be specific but said Alien produced "probably on the order of 100 million" tags in 2007.

Through its research partnership with NDSU, Alien improved the efficiency of its manufacturing processes to keep pace with the evolving RFID industry, Tu said.

"We're working smarter, we're working more efficient, and we're producing better product," DeCock said.

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