ALLIEDSIGNAL CHARTS PLASTICS UNIT'S FUTURE

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MORRIS TOWNSHIP, N.J.—AlliedSignal Inc. plans to expand globally and add to its lineup of engineering thermoplastic resins, according to company Chairman Lawrence Bossidy.

Europe is the top priority on the geographic expansion front, with China, India and Eastern Europe following close behind.

The firm's plastics holdings now emphasize two materials: nylon and, to a lesser degree, engineering-grade polyesters.

``We do know we have a product offering that needs to be broadened,'' Bossidy said in a May 6 pre-NPE briefing at the firm's Morris Township headquarters, near Morristown.

AlliedSignal has ``discussions under way,'' both in Europe and the United States, that would add to its menu of ETP resins, he said.

He declined to be specific about the plans, adding in response to questions that ``ABS is not high on our list'' and that he does not ``see us being as broad a line supplier as DuPont [Co.].''

AlliedSignal has made no secret of its desire to expand. A recent report by investment banking firm CS First Boston Corp. stated: ``Allied is sitting on nearly $2 billion in cash and has borrowing capacity for another $2 billion. Making acquisitions is strictly a function of value and timing.''

It added, however, not to expect the company to go ``elephant hunting,'' and to expect continued focus on the Engineered Materials segment, which includes plastics.

Although Bossidy is in charge of the entire company, and the plastics unit is a relatively small part of the $13.9 billion operation, he displayed a keen understanding and easy familiarity with the plastics business.

Geographically, AlliedSignal Plastics traditionally has not strayed far from its U.S. base. The company took a big step toward becoming a global player in 1995, when it bought Polymer und Filament Rudolstadt, a nylon and PET resin and fiber manufacturer in Rudolstadt, Germany.

Plans to expand that operation recently were given a go-ahead, after having been put on hold by Robert Gillette, the new vice president and general manager of AlliedSignal Plastics. Gillette joined the firm in December, coming from GE Plastics, where he was general manager in SÌo Paulo, Brazil.

Gillette said AlliedSignal plans to invest more than $100 million to expand compounding and resin production facilities in Europe.

Now that AlliedSignal Plastics has a foothold in Europe, Bossidy said China is the next market to tackle. AlliedSignal already has nine wholly and jointly owned ventures in China, including a polyester fibers plant — but no plastics operations.

``I think we'll get started first of all in Europe,'' Bossidy said. ``China is not easy these days, you know. The rules change daily. We lose $10 million a year there, and we can afford to do that. I don't want it to be $100 million.''

Gillette agreed that ``Asia is the obvious next step.'' The firm has a joint venture operation in South Korea, but otherwise has only distribution deals in the region, he said.

Latin America was conspicuously absent from Bossidy's list of key future markets, particularly considering Gillette's background in that region.

``We have not, over the years, had the greatest experiences in Latin America,'' Bossidy said. But he noted that some markets, including Brazil and Mexico, are now looking up and appear more stable than they have in the past.

``I wish we were larger in Mexico than we are,'' Bossidy said, and added, ``If I was big in Brazil right now, I'd like it. But to go there [now] and build [a business] in hard currency, I'm not sure this is the best time to do that.''

AlliedSignal needs to grow both internally and through acquisitions to meet Bossidy's aggressive goals. He expects sales to grow about 8 percent a year internally, and 4 percent through acquisitions, for a total of 12 percent annually.

Gillette expects significant growth from new applications in electrical and electronics and business equipment markets. He also cited automotive applications, where he expects nylon to pick up business in two-part welded manifolds, replacing both metal and one-piece, lost-core plastic varieties.

To help develop new applications for its materials, the company recently beefed up its Applications Design Engineering Group.

The group, which has tools at its disposal, including stereolithography, computer-aided-design and mold-filling software, is moving into newly renovated space at the Morris Township complex. The setup will put the applications engineers in closer contact with researchers, processing trouble-shooters and marketing officials.

AlliedSignal officials declined to provide details on the cost of the project, which is scheduled for completion by July 1. More than 65 employees will be relocated to the 27,000-square-foot revamped space, which includes a 14,000-square-foot high-bay area that will house a variety of advanced processing equipment, including injection presses and extruders.

Mark Minnichelli, manager of design engineering for the company's Modulus Design Group, said AlliedSignal is distinctive, both for having these complex design capabilities, and for being willing to share them with customers and potential customers without a lot of strings attached.

Gillette said processors need help with design services because, in many cases, their customers have pushed design duties to the processor level.

Working with processors in this area is becoming more important, he said, ``especially the way Detroit is headed. More and more I think we'll see the Tier 1 type of approach in other industries.''

In other news, the company:

Announced plans to beef up U.S. compounding operations, bringing more of its compounding needs in-house, to gain expertise for new products and material development, Gillette said.

Announced that it reached an agreement with Advanced Elastomer Systems of Akron, Ohio, to jointly develop applications and markets for nylon-based soft-touch products, including AES Santoprene thermoplastic elastomers that chemically bond to AlliedSignal's Capron and Nypel nylon resins.

Promoted Michael J. Bogar to director of sales and marketing, Americas. He joined the firm in 1993, and was most recently western regional sales manager.

Revealed plans to add staffing in the next year. ``You can't cost-reduce yourself to prosperity,'' Bossidy said.