For Paul Gentilini, his $4 million decision to expand the 59-year-old family auto dealership in Woodbine is an investment in the future.
Gentilini Motors’s new Chevrolet dealership opened Feb. 17, moving from an existing dealership on Washington Avenue to a new facility on Route 550 with a showroom and service department nearly six times larger. The 30,000-square-foot facility includes a 20-bay service department, whereas only three were available before, he said.
“For us it’s a matter of growth. We could have survived in the old building. We just didn’t have any room for growth,” he said.
Gentilini said other factors were involved as well. The showroom is now next to the company’s Ford facility.
“Whenever you spend multi-million dollars, it’s always a risk — no matter if it’s a good or a bad economy,” he said. “I think it’s a good time because the interest rates are low. For us, a lot of it was a matter of, we had to make a decision. If we wanted to grow our business, we had to do it.”
Across the U.S., the number of businesses’ investing in themselves — by building new headquarters or moving into additional space, or buying new trucks and equipment — has grown in the past few years, according to federal data.
Nonfarm businesses invested $1.4 trillion in buildings and equipment in 2012. That’s a 15 percent increase from the year before, according to the latest information from the U.S. Census Bureau’s Annual Capital Expenses Survey, released in March.
These investments had grown gradually from 2006 to 2008, when they reached $1.37 trillion. They fell nearly 21 percent from 2008 to 2009, as the recession took its toll on businesses large and small, forcing some out of operation. Others opted to cut expenses and curb spending to survive.
At Folsom-based South Jersey Industries, the parent company of South Jersey Gas, the company has been making investments from computer software to solar cells on rooftops to compressed natural gas-fueled trucks and fueling stations. The company built a $2 million compressed natural gas fueling station in Millville last year, and is in the middle of a decade-long plan to gradually replace its fleet of trucks and cars with natural-gas powered ones.
Retrofitting large utility trucks can cost $30,000 to $40,000 each, said Michael Renna, president of South Jersey Industries.
Part of the plan is to have natural gas fueling stations in positions where its growing fleet of these vehicles can access them. The company built another CNG station last year at an office in Glassboro, Gloucester County.
“We’re of the mindset that CNG at this point in time is best supported through a fleet-like application until there are more vehicles on the road and more stations,” he said. “It’s a chicken and the egg thing. We made a commitment over a 10-year period to replace our entire fleet of utility vehicles.”
Business spending can be based on a variety of factors — expansion plans, company strategies, government policies and borrowing costs.
Economic uncertainty and government policies may curtail some companies from spending on capital investments or increasing hiring, according to the latest Duke University/CFO Magazine Global Business Outlook Survey released in March.
From minimum wage increases to impacts from the Affordable Care Act, about 69 percent of chief financial officers polled by Duke said government economic policies are causing them to hold back on business expansion plans, or to hoard cash.
Capital expenditures are expected to increase about 7 percent this year, which is considered moderate spending, said Campbell Harvey, a finance professor at Duke University’s Fuqua School of Business. A robust recovery would see double-digit growth, and the lower spending is consistent with very slow employment growth, he said.
CFOs expect low interest rates — driven by Federal Reserve policy to encourage borrowing — to increase their costs by about 1 percentage point by the end of the year. Interest rates, still considered low by historic standards, would have to increase by about 3 percentage points to significantly affect borrowing plans, according to Duke’s survey.
“The issue is not the cost of borrowing. The issue is the availability of good projects to invest in and the policy uncertainty that makes it difficult to project cash flows,” Harvey said. “This explains the CFOs’ lack of concern about modest changes in interest rates.”
In Cumberland County, Darrell Morrow is the owner of Morrow Associated Enterprises, a parent company that includes subsidiaries that are engineering laboratories.
Morrow, a retired engineering professor at Rutgers University, currently runs businesses that test packaging for beverage, food and pharmaceutical industries. The operation, which is moving from Blackwood in Camden County to Vineland this year, is expanding its business to add a plastic-bottle design and light manufacturing facility, he said.
Work here could make bottles cheaper, stronger and more economically friendly, he said.
Overall, Morrow said the facilities represent about a $3 million investment.
“We could be making them stronger with less material, which would have positive environmental and company economic impacts,” he said.
The Morrow Associated Enterprises project includes Urban Enterprise Zone loans for $650,000, and $208,500 to the holding company for the real estate, Vineland’s Director of Economic Development Sandy Forosisky said.
Morrow said he’s expanding his business to capitalize on his extensive experience in the field. He was once the director of Rutgers University’s Center for Plastics Recycling Research.
“I have 40 years of experience working with packaging engineering and plastic packaging and I want to tap into that,” he said.
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