Analyst predicts United Solar Ovonic's troubles are only 'temporary' by Julia Bauer | The Grand Rapids Press Wednesday May 06, 2009, 7:55 PM GREENVILLE -- Although the solar cell plants for United Solar Ovonic LLC are shutting down for a month, the company should be in good shape once the economy recovers, an industry analyst said Wednesday.
Starting May 17, 425 Greenville employees will be on a "production furlough" until June 17, company spokesman Mark Trinske said Wednesday. United Solar Ovonic's plant in Auburn Hills also is shutting down for three weeks, starting May 17.
Courtesy Photo The United Solar Ovonic facility in Auburn Hills, seen here in 2006, also will be shutting down for three weeks starting May 17. "This is temporary situation," said Rob Brown, an analyst with Craig Hallum Capital, of Minneapolis, Minn.
Construction is delayed for an expansion under way in Greenville. Two new production lines were being installed at the two plants to double output of the thin-film solar cells and related products. The company makes rooftop solar panels that gather sunlight and convert it into electricity.
A $220 million Battle Creek plant was built out enough to lock up the structure, but no equipment or hiring will be added until the economy improves. The plant is to employ about 350 people eventually, according to the company.
"We're adjusting production to meet market demands," Trinske said.
A chill in liquidity in the banking system is driving customers to stall plans already on the books, he said.
"We don't want to build inventory and have inventory sitting on the shelves," Trinske said.
That's quite a reversal from just a year ago, Brown said.
"Up until the end of last year, they were constrained with more demand than they could produce and they were building factories as fast as they could," he said. "That all changed with the economy, and now they're in the opposite situation.
"I'm very hopeful that can turn around."
Trinske said two factors will help ease the crunch on the solar energy sector.
"In the U.S., the catalyst is really going to be government policy, to make it much more cost effective to do solar," Trinske said. "In Europe, it's access to capital.
"They just need to get liquidity in the banking system."
On Tuesday, one of Uni-Solar's largest customers, Solar Integrated Technologies Inc., of London and Los Angeles, warned investors its existing line of credit would expire July 3, but other lines of credit had not yet opened up.
If that doesn't change, Solar Integrated could be sold.
"It's one of our big customers," Trinske said. "It's an ongoing problem. All of these companies in the solar value stream, when their credit dries up, are in trouble."
United Solar Ovonic's parent company, Energy Conversion Devices Inc., is not in that situation, Brown said.
"They have a strong balance sheet -- $434 million of cash and $339 million in long-term debt, so we have no concerns about the viability of the company," he said.
"It's more a question of near-term financial results."
Energy Conversion Devices, based in Rochester Hills, reports its third-quarter results Monday before the market opens.
On Wednesday, its stock closed down 53 cents to $19.88 on the Nasdaq