Obama to visit Montco toy maker to discuss fiscal cliff

Posted: November 29, 2012

When President Obama comes to Montgomery County on Friday, he will speak in front of a two-foot-tall toy helicopter, a toy roller coaster, a toy grandfather clock, a motorized toy carousel, and an American flag made of 49,000 K'Nex pieces.

The Hatfield plastics factory that makes Tinkertoys and Lincoln Logs as well as K'Nex will provide a colorful holiday backdrop for the president to talk about the advantages of extending middle-class tax cuts and the dangers of the fiscal cliff. But the company itself is far from threatened, posting 50 percent growth since 2009 and expanding its payroll to 200, a 25 percent increase in Obama's first term.

"We've really over the last four years defied a lot of the headlines," said Michael Araten, president and CEO of K'Nex Brands. While other companies foundered, reduced staff, and outsourced during the recession, K'Nex moved some of its work back to the United States and saw its profits rise.

The company benefited in 2007 when lead paint spooked American parents away from Chinese-made toys. Now that those concerns have faded, many consumers see K'Nex's "Made in America" label as a way to help the economy, Araten said.

Two of K'Nex's biggest competitors, Lego, of Denmark, and Canada's Mega Bloks, have their components made in China, Denmark, Hungary, Mexico, Germany, the Czech Republic, and elsewhere. K'Nex, which also distributes NASCAR toys and Sesame Street products, likes to market its homegrown credentials.

So why would Obama choose to make his cliff case in one of the nation's wealthiest counties, with 6.4 percent unemployment, well below the national rate?

Josh Shapiro, Democratic chairman of the Montgomery County Board of Commissioners, couldn't say exactly why. But he said the company was a good and seasonally appropriate showcase for American manufacturing.

"This is a great manufacturing story here in the U.S.," Shapiro said, "and here in Montgomery County, and we're happy to have the president come back."

One Republican speculated that Obama aims to sell the middle-class tax cut - along with his proposal to raise taxes on households earning more than $250,000 - to a tough audience.

"He's making his best pitch where he has the hardest sales job," county GOP chairman Robert J. Kerns told the Doylestown Intelligencer.

In a statement, the White House said Obama was going to visit "a business that depends on middle-class consumers during the holiday season, and could be impacted if taxes go up on 98 percent of Americans at the end of the year."

Araten said that was true, but no more so for his company than for others.

"If you take people's discretionary income or lower it dramatically, it's going to hurt every business," he said Wednesday. "Solving a problem of that nature is important not just for businesses like ours but for everybody."

Obama, who was criticized in his first term for not making cases more effectively to the public, has spent much of this week trying to stir up public pressure on members of Congress. He has sat down with leaders of businesses large and small, and now he's headed for Hatfield, where his visit will be closed to the public but open to reporters.

"It's very important to engage," White House spokesman Jay Carney said Tuesday. "As we've seen in election cycles and as we've seen in between election cycles, the American people care deeply about policy decisions."

In the Philadelphia media market, Republican U.S. Reps. Jim Gerlach, Pat Meehan, and Charlie Dent - relative moderates who may be closer to compromise on the fiscal cliff - are in suburban districts sure to be blanketed with news coverage of the president's visit.

On Tuesday, Meehan joined several other Republican lawmakers, including Rep. Jon Runyan from South Jersey, in stepping back from their pledge not to raise taxes.

"The most important pledge is the one I make to my constituents when I'm sworn in," Meehan said in a statement. "I'm going to do the very best I can to avoid the fiscal cliff and keep our economy strong."

Obama's speech at K'Nex Brands may also touch on his proposed tax exemptions for small businesses. One measure would allow a tax write-off of up to $500,000 for companies that hire new workers or boost salaries; another would let businesses deduct 100 percent of the cost of equipment investments for 2013.

Araten said K'Nex and its manufacturing arm, Rodon Group, had hired about 40 workers since 2009 and invested about $15 million in "highly articulating robots" and other tools to launch new products for Nintendo, Angry Birds, and Green Mountain Coffee (the coffee pods you saw in those Black Friday ads).

But he said tax incentives wouldn't make much of a difference to his business: "We're not making decisions based on tax breaks. We're making decisions based on demand."

Araten, a Democrat, said he voted for Obama, and his company's profile reads a bit like a page out of the president's playbook. The toys are educational; the company is family-owned; the manufacturing involves lots of recycling and very little waste.

"We went landfill-free about two years ago," Araten said. "So all that escapes from here every day is a little bit of steam."

Workers at the factory mingled Wednesday with White House advance staffers, hanging the mammoth mosaic flag and arranging toys on the factory floor.

"Doesn't matter who you voted for, it's the president," said Joseph Smith, chief development officer at the toy company. "It should be fun."

Contact Jessica Parks at 610-313-8117, jparks@philly.com, or follow on Twitter @JS_Parks.

Inquirer politics writer Thomas Fitzgerald contributed to this article.

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