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Otto Industries Inc., a major injection molder of waste containers and material-handling products, plans to phase out work at its captive molding facility and farm out the work to custom molder Arkay Industries Inc.

Otto, in Charlotte, N.C., announced in December that it had formed a strategic alliance with Arkay. Otto will phase out most of its manufacturing in Charlotte and split the work into three units, with production in Arkay's Prattville, Ala., plant, and two new plants to be built — one in Lodi, Calif., specifically to serve Otto's customer base on the West Coast, and another in Michigan at a yet-to-be-determined site, said Otto President David Morris.

Arkay also announced plans for a $3.5 million expansion of the Prattville facility to accommodate additional equipment, which includes the purchase of four new molding machines. Arkay employs 65 in Prattville, and expects to hire another 22 as the expansion is completed.

Phasing out Otto's Charlotte operations, which employ 130 permanent workers, will take place over a year as equipment is moved to Arkay plants. Most employees will be given the opportunity to relocate to Arkay facilities.

Morris said the company will offer incentives to encourage employees to stay at the Charlotte plant during the phase-out, and the company will provide assistance in finding new jobs to those who do not wish to leave the Charlotte area with Otto.

After restructuring, Otto's headquarters and some limited manufacturing will remain in Charlotte.

``We're fortunate to have a group of dedicated people here,'' Morris said.

``When we started looking at our operations in Charlotte and trying to decide where we needed to be in the 21st century, we knew we needed to be closer to our customers,'' he said. With the Arkay agreement, ``we are now able to provide our customers with increased research and development capabilities, along with enhanced customer service,'' he said.

Morris explained that the Arkay/Otto relationship goes back about three or four years when Arkay began molding some of Otto's product lines.

``We were impressed with the way Arkay does business,'' said Morris. ``They're flexible manufacturers, which will give us greater agility in our markets, and this alliance will allow both companies to take advantage of each others' strengths.''

Otto is the U.S. division of Otto Group of Kreuztal, Germany. The firm started its manufacturing operation in the United States in 1989. The Charlotte plant specialized in molding large parts, including commercial refuse containers.

Arkay serves the material handling, automotive, appliance and electronics industries. The Miamisburg, Ohio, company ranked 99th in Plastics News' 1996 survey of North American injection molders with related sales of $44.1 million.

``We're honored to be awarded with this tremendous business opportunity with one of our existing and valued customers,'' said Kevin Kuhnash, president of Arkay.

``It will enhance our ability to bring new jobs to existing and new communities where manufacturing opportunities exist,'' he said.

Arkay will provide technical assistance to Otto through Arkay's technical center in Miamisburg.

``We'll have seven plants to choose from and can spend our capital dollars on new, innovative mold designs to improve our products and service to our customers,'' Morris said.