SEABROOK, N.H. - Bailey Corp., a supplier to the transportation industry for more than 150 years, has been transformed into a plastics processing powerhouse in the past seven years. Seabrook-based Bailey was foundering as a division of a larger corporation 12 years ago, losing $250,000 a month, when a group of turnaround experts bought it and pushed it to grow as a plastics processor.
Now, while the company is prospering, its chief executive is preparing it for yet another transformation that will see the company into the next century as a significant automotive supplier.
The turnaround artists cut costs and, seven years ago, shed a business that had carried Bailey through most of the past 100 years, placing it on a growth curve that any firm might envy.
Bailey had sales of about $24 million in 1988, after it sold itsmolded rubber business to GenCorp Inc. of Akron, Ohio. Before selling that business, Bailey generated annual sales of $74 million.
In 1994, Bailey reported sales of $108.3 million, and it expects that number to rise to nearly $180 million in 1995, primarily from injection molded and sheet molded plastic products for applications on automotive exteriors and under the hood.
Roger Phillips, the chairman, president and chief executive officer, now is fond of calling the firm ``the new Bailey.'' But Phillips does not forget the firm's past.
The company has been put through several transformations, initially by members of the founding family, and later by assignees of the corporations that bought the company.
Phillips has designed its latest iteration.
He was one of the nine investors who scraped together $300,000 in equity to buy what was then the former Emhart Corp.'s Bailey Division. In a highly leveraged purchase that was typical then, the investors paid $14 million for the division in September 1982.
Led by Dick Curry, who has since died, six of the nine investors were brought together in a corporate turnaround consulting company called Orion Group. That firm operated in New England and, as one of its projects, assisted in reorganizing Uniroyal Corp., Phillips said in a recent interview in Seabrook.
Bailey started as a maker of carriages and sleighs in horse-drawn days but, around the turn of the century, an executive saw a better future supplying products to the nascent automotive industry.
While it produced its own electric automobile - the 1913 Bailey Electric - Bailey mostly left the final assembly up to others and concentrated on supplying extruded rubber weather sealing strips to automakers.
Prior to the current management's purchase, Bailey had changed hands twice.
The company was sold to the former United Shoe Machinery Co. in 1972, and to Emhart Corp. in a bitter takeover battle in 1976.
After Emhart sold Bailey to the current managers, Emhart itself was acquired by Black & Decker Co.
Bailey's rubber weather seals business was both successful and attractive to the companies that bought it. Its products were ubiquitous and, even today in some automotive plants, weatherstrips that surround windows are called ``baileys.''
While Emhart lost money making baileys, the new management stepped in, cut costs and, by February 1983, trimmed monthly expenses of $400,000 - which included financing charges - to a break-even point, Phillips said.
Bailey Corp. continued to make baileys until 1988 when, Phillips said, he and his fellow investors decided the company had to refocus its resources.
To continue to compete in the auto industry with the products that generically bore its name, Phillips said Bailey would have had to compound its own rubber products. That would have required a $6 million to $7 million investment, he said.
``The rubber side of our business was the Mother Church,'' Phillips said, noting that the decision to sell that enterprise to GenCorp was difficult intellectually and wrenching emotionally.
Rubber contributed two-thirds of Bailey's $74 million in sales, but the sale gave Bailey $14 million in profit after it paid taxes and its debt.
Phillips used that money to refocus the company's business, by buying new equipment, primarily injection molding presses, for the company's Seabrook facility.
``Their growth has been directly due to the efforts they set in motion in the last couple of years,'' said David Garrity, auto industry analyst for Smith Barney, a New York stock trading company.
Garrity cited Phillips' strategy to focus entirely on processing plastic components for cars and the shift away from rubber as the reason for the company's growth.
Bailey started its plastics operations shortly after the current management team bought the company, and they built its plastics business by sweat, Phillips said.
``We took every cat and dog project we could get,'' Phillips said.
He explained that the company built a solid working relationship with Ford Motor Co. by delivering on projects that Ford found too troublesome and expensive to develop fully itself. After several years of working such tough projects, Bailey began to gain a good reputation as a company that delivered.
While sales improved slightly in 1990, they dropped back to $24 million in 1991, during a re-cession that hit the auto industry hard.
However, by that time, Bailey was designing, engineering and developing parts on its own for Ford, he said.
In 1992, Bailey acquired TransPlastics of Conneaut, Ohio, an injection molding company with $12 million in sales, and Contour Plastics of Hillsdale, Mich., another $12 million injection molder that also had painting operations.
In July 1994, Bailey bought Premix/EMS, a North Kingsville, Ohio, joint venture between Premix Inc. and Shell Chemical Co., that makes automotive products from sheet molding compound at plants in Lancaster, Ohio, and Hartford City, Ind., and injection molds and paints parts at Portland, Ind.
Premix/EMS was and remains a major supplier to General Motors Corp.
Where sales to Ford contributed 93 percent of the company's sales a year ago, today, Phillips said, Ford accounts for about 55 percent, GM 28 percent, and the remainder to Chrysler Corp. and other automakers.
Phillips acknowledged that the Premix/EMS acquisition temporarily set his company back in operating profits, while he believes the diverse customer base will help Bailey become a stronger company overall.
Bailey's stock has faltered on Wall Street recently, dropping from a high of $16.75 on Jan. 17, to a low of $7.50 on Feb. 21.
However, Garrity said that drop in the company's stock price was due to Wall Street's nervousness over the auto industry's cyclical nature and Bailey's being in the middle of a model changeover. Garrity said he expects the stock's price to strengthen.
Also, he said, Bailey's acquisitions gave it businesses with lower profit margins, which he also expects the company will improve.
``The stock is seen as not being under as much pressure,'' Garrity said, adding that he expects it to level out at $10 per share in the near future.
While Phillips just changed Bailey to the ``new Bailey'' in 1988, he said he does not expect the company to be the same in three years.
``Consolidation is the current mode of the industry. We have systematically built a larger and stronger franchise for our investors, but the rule of thumb is that to be a player in this industry you have to be a $400 million company. Two years ago, you had to be a $250 million company,'' Phillips said.
``Bailey will not exist three years from now in its current form. We will be a part of a larger coalition of companies, or we will be a consolidator of companies,'' he said.
``I don't have to make that decision right now, but I do have the basic franchise, and I expect this company will prosper by either route,'' Phillips added.