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Eagle-Picher Industries Inc. will sell its plastics division to help clear a path for growth after emerging from reorganization under Chapter 11 of the U.S. Bankruptcy Code.

The division makes parts from sheet molding compound and fiberglass-reinforced polyester for the automotive industry and other markets. Plants are in Huntington, Ashley and Grabill, Ind., all of which surround the Fort Wayne, Ind., metropolitan area.

The facilities employ nearly 800 and have 49 compression molding presses. Twenty-three of the presses have clamping forces of 1,000-4,000 tons, while the others have much smaller tonnages.

``After some rethinking, we decided to divest ourselves of the operation,'' said Andries Ruijssenaars, Eagle-Picher president and chief operating officer.

``If we're not No. 1 or No. 2 in a niche market, we have to see whether we can get to that position. We concluded that it was impractical and costly to invest an enormous amount of resources in SMC, where we are far from No. 1.''

Eagle-Picher will use the cash infusion from the sale to expand its other operations, Ruijssenaars said. Recently, the company has turned its attention from the freshly settled, six-year bankruptcy proceedings to growing many of its core businesses.

To do that, Eagle-Picher also is selling its small Fabricon Products Division. The River Rouge, Mich., division makes flexible paper packaging products coated with polypropylene and other substrate materials.

Also on the market is the company's Transicoil Division of Valley Forge, Pa., which manufactures small motors and several electrical products.

Cincinnati-based Eagle-Picher has hired a professional search firm to locate buyers. Currently, the company is assessing offers for its Plastics Division from several competitors, Ruijssenaars said. In addition, another bid has come from a management group in the plastics division, he said.

Eagle-Picher officials would not disclose which companies are interested in the plastics plants. Major SMC competitors include Budd Co.'s Plastics Division in Troy, Mich., Cambridge Industries Inc. in Madison Heights, Mich., and Bailey Corp. in Seabrook, N.H., a unit of Venture Industries Corp. of Fraser, Mich.

Although Eagle-Picher gave no timetable for the sale, a company source said to expect a decision within 60 days.

The plastics division recorded 1996 sales of about $80 million, less than one-tenth of Eagle-Picher's combined annual sales of $891.3 million. Eagle-Picher manufactures hundreds of industrial products for the automotive, defense, aerospace and construction markets.

Industry experts estimate the division could be sold for $20 million to $40 million.

The plastics group suffered a blow last year when General Motors Corp. announced it was discontinuing its line of front-wheel-drive minivans. The 153,000-square- foot Huntington plant had supplied SMC roof panels for the vehicles, which include the Chevrolet Lumina, Oldsmobile Silhouette and Pontiac Trans Sport.

``It's been a profitable division, but we're reeling a little from the loss,'' said plastics division sales engineer James Grzelak. ``It's a tough time in automotive because we're being asked do what we can to keep prices affordable while trying to fill capacity.''

The 135,000-square-foot Ashley plant and 290,000-square-foot Grabill facility are operating at close to capacity, Grzelak said. Automotive components account for 60 percent of the plants' business. The facilities also produce parts for recreational watercraft, outboard motor cowlings, agricultural tractor cabs, exterior doors and other components.

The potential sale comes on the heels of Eagle-Picher Industries' emergence from bankruptcy Nov. 29. The firm had filed for protection in 1991 to resolve 150,000 personal-injury claims, dating from 1934, from exposure to products containing asbestos.

Under the settlement, Eagle-Picher agreed to pay $2 billion to cover present and future claims. Funds to cover claims and all the company's outstanding shares of common stock were transferred to a trust fund for distribution to litigants. Since then, Eagle-Picher has shifted from a publicly held to a private company.

Eagle-Picher had not made any transactions to buy other companies or shed divisions since it went into Chapter 11, Ruijssenaars said. Even so, since 1991, sales ballooned from $585 million to close to $900 million.

Since November, however, the company has made up for lost time by launching an aggressive expansion program. It invested close to $200 million recently in plants, equipment and products. New programs include construction of a $14 million ore-processing plant near an Oregon mining site and a $12 million plant in Virginia to make rubber-coated engine and brake seals and gaskets.

However, Eagle-Picher's SMC business has moved in fits and starts, with some years showing profits and some showing losses, said Ernest Hirsh, vice president of the company's automotive division.

``The folks in the plastics division have done a marvelous job at keeping operations moving forward over time,'' Hirsh said. ``We think another company that specializes in this area could do an even better job at being good parents. That would be a win situation for everyone.''