A downsized Hexcel Corp. is emerging from bankruptcy protection this month, but the Pleasanton, Calif., structural materials supplier faces chal-lenges in its honeycomb, advanced composites and reinforcement fabrics businesses. The aerospace market, which Hexcel dominates in honeycomb, remains depressed. Regulators smile on consolidations such as Lockheed and Martin Marietta, and uncertainty grows as the customer base shrinks.
Hexcel decreased its vulnerability to Pentagon cutbacks by selling its units that sell radar-evading parts to stealth aircraft manufacturers. But the firm still must worry about how its conventional aerospace customers will be affected by military program decisions.
The firm faces tough competition for work from key customers like Boeing Co., which accounted for 19 percent of Hexcel's 1993 sales of $338.6 million.
``Hexcel remains a preferred supplier, and the period in Chapter 11 has not affected that,'' said Larry Boster, Boeing's senior manager of raw materials procurement. ``Regardless, we still have to ensure the best value for the Boeing Co.''
The result: Hexcel competes for contracts, but does not always win.
Hexcel's bankruptcy cost the firm $16.5 million through Dec. 31 for its reorganization.
Hexcel's bankruptcy was visible because its stock is publicly traded, but others in advanced composites ``had equally large problems,'' said D.J. DeLong, carbon fibers business manager for supplier Amoco Performance Products Inc. in Alpharetta, Ga.
The bankruptcy proceedings ``sapped time, energy and cost, but now Hexcel can get on with business,'' DeLong said.
``The fundamental nature of the business and customer base is unchanged, competent managers understand what they are doing and the company has a good market franchise,'' he said.
``Hexcel is making some tough decisions, but appears to be making the right ones,'' said David Breault, manufacturing manager with Texas Instruments Inc.'s nonmetallics engineering and manufacturing department in McKinney, Texas.
Hexcel, TI's primary supplier of polyimide-based products, is working with TI on possible ``future composite programs requiring more specialized materials,'' Breault said.
``Hexcel produces high-quality [prepreg] and achieves a tighter tolerance than what others can do,'' said Gary Beck, vice president of Horizons Sports Technology Inc., a San Diego supplier of high-end composite sporting goods.
Hexcel's bankruptcy ``exhausted a lot of cash and internal energies,'' said Alan Wagner, an owner of specialized distributor Texas Almet Inc. ``Now, they can redeploy assets and concentrate on areas where profit can be generated. They can put dollars into development and not in attorneys' hands.''
In November, Hexcel and Texas Almet, based in Arlington, Texas, formed Express Honeycomb to deliver small or expedited orders of Hexcel honeycomb.
``It took us more than six months to put the agreement in place,'' Wagner said. ``We could have done it in three months.''
Bankruptcy preoccupied Hexcel.
``Some come into a market to underbid and take advantage of a weakened company,'' Wagner said, `` but I think they're making a mistake [if they think] that Hexcel can't withstand the competition.''
Hexcel, as an independent, U.S.-based, publicly held firm, is not a typical player in the composites industry. Many of Hexcel's competitors have deep-pocket parents able to absorb losses - many in the oil industry. Hexcel remains as an independent, projecting 1995 sales of about $307 million.
Overcapacity in prepreg manufacturing has squeezed profit from advanced composites producers like Hexcel. No high-volume applications have sparked the niche, although high-margin athletic-shoe components, golf-club shafts and snow skis help, and infrastructure repairs show promise.
Family-owned M.C. Gill Corp. of El Monte, Calif., is challenging Hexcel's honeycomb dominance. Boeing is close to awarding Gill a three-year, $25 million contract to supply Nomex honeycomb core in commercial aircraft. Hexcel had held this contract.
Gill, previously a Hexcel customer, started making honeycomb for internal use but now sells from its expanded capacity. Employing 150, Gill dominates in fiberglass-reinforced aircraft cargo liners and is the third- or fourth-largest manufacturer of aircraft sandwich panels.
William Woodrow, Hexcel vice president of marketing and business development, said Gill is ``a low-overhead operation that has taken jabs at some specific market niches.''
``By contrast, Hexcel has supplied 50 percent of Nomex honeycomb for the aerospace merchant market,'' he said.
Boeing's composites-packed 777 twin jet still offers plenty of opportunities for Hexcel. For each 777, Hexcel supplies a wide variety of honeycomb parts and, as a sole source, about 12,000 pounds of prepreg. Boeing plans an annual build-rate of 60 aircraft by 1998, observers said.
One 777 contract that Hexcel expected to receive, however, has not materialized. Toray Industries Inc. of Ehime, Japan, is the sole-source supplier of toughened carbon-fiber-reinforced-plastic for the 777 tail and floor beams. Toray was expected to qualify Hexcel as a second source but, ultimately, that did not happen, Woodrow said.
Although Toray built a plant in Frederickson, Wash., to supply Boeing, Hexcel continues to supply prepreg to another Toray unit, Composites Horizons Inc. of Covina, Calif.
``Until late 1994, Toray produced prepreg only in Japan,'' said Thomas Hynes, president of Composites Horizons.
Toray Composites (America) Inc. shipped refrigerated prepreg from Japan for the 777-tail-and-floor-beam startup.
``It doesn't make economic sense to ship [the material] to the U.S. in a cold condition,'' Hynes said.
Outside the aircraft industry, Hexcel is looking for work from a variety of markets. Infrastructure rework is beginning to pick up.
Joint venture Hexcel-Fyfe Co. of Del Mar, Calif., ``wrapped more than 1,500 columns on 30 buildings and parking garages last year,'' said Edward Fyfe, president. He expects California transportation officials this summer to approve the venture's glass-polyaramid architectural wrap system.
Knytex Co. of New Braunfels, Texas, a joint venture of Hexcel and Owens-Corning Fiberglas Corp., supplies reinforced fabrics to Hexcel-Fyfe but principally provides stitched reinforcements of fiberglass and polyester yarn for boat manufacturers.
In addition to its thermo-setting honeycomb, Hexcel makes continuously formed thermoplastic honeycomb. Woodrow said applications range from energy-absorbing automotive knee bolsters and instrument panels to air-flow controls for supermarket freezers, and furniture core.
Hexcel filed Dec. 6, 1993, for protection under Chapter 11 of the U.S. Bankruptcy Code in Oakland, Calif. The firm filed a reorganization plan Nov. 7, which the court approved Jan. 10.