In the early 1980s, David Cherry saw a huge potential for thermoplastic olefins developed by Ciba-Geigy Corp. Ciba-Geigy did not think the compounded product line fit in its corporation's strategic plans, and gladly sold the line to its former executives.
With a division that had sales of $5 million a year, Cherry, with the help of John Alleckner, started Research Polymers Inc. to make and market the products, putting them in the ranks of a growing number of compounders who are buying product lines from major resin suppliers.
Today, TPOs are some of the most widely used polymers in the automotive industry and, because of the company's success, Dexter Co. bought RPI in 1986, when it had sales of $40 million.
Today, Dexter has put RPI into a joint venture with Solvay Group, and it is known as D&S Plastics International. D&S has sales of $100 million a year.
Cherry and Alleckner, as fire-in-the-belly entrepreneurs, pushed their company from its beginnings as a small compounder with a niche product to become a multimillion-dollar supplier to the auto industry.
Small compounders have seen such purchases as avenues toward quick growth, while large compounders use such purchases to complete or to widen their product offerings.
Meanwhile, major resin suppliers have looked at the products they have sold as having production volumes too low to be profitable, or as being soniche-oriented that they detract from other business.
Compounders typically are taking over the production of those product lines, and doing what they do best: turning a profit catering to their customers exacting needs.
The shift of such product lines to compounders is a natural outgrowth of the move resin makers made away from shipping less-than-truckload quantities of resins. This began several years ago as a quest to supply large, profitable quantities of resins to their customers while letting resin distributors sell smaller quantities.
``The consolidation of product lines at the large resin supply companies is a continuing trend,'' said Bob Schulz, president and chief executive officer of LNP Engineering Plastics Inc. of Exton, Pa.
``In the 1980s, the resins companies wanted to supply everything for everybody. In 1989 and 1990, the economic crunch came, and people started to focus on what they did best,'' Schulz said.
That trend began with the resin suppliers' exit from less-than-truckload shipments of products, and snowballed with the move toward selling distinct product lines, he said.
``As major resin producers continue to eliminate product lines, they are leaving gaps in what customers are demanding. That's where we come in, that's what we do all the time - we fill those gaps,'' said Paul Cusolito, vice president for sales and marketing for Washington Penn Plastics Co. Inc. of Washington, Pa.
In the first quarter of this year, LNP Engineering Plastics Inc. of Exton, Pa., recently bought a line of 24 specialty grades of thermoplastics polyesters from GE Plastics. LNP also has purchased specialty resin lines from Dupont Co. and Amoco Chemical Co.
Albis Corp. of Rosenberg, Texas, has purchased a line of polybutylene terephthalate, PET and polyphenylene sulfone resins from Bayer Corp.
Teknor Apex Co. of Pawtucket, R.I., purchased a number of tradenamed product lines developed by major resin suppliers, and has incorporated them into its own product offerings under its own tradenames.
When Eastman Chemical Co. exited the polypropylene business, A. Schulman Inc. of Akron, Ohio, bought several of its compounded lines of precolored, reinforced-specialty and foamable grades of PP that it continues to sell under the Tenite tradename.
M.A. Hanna Co. of Cleveland has shuffled and reshuffled a number of products it purchased from other companies, yet uses several of the tradenames that help to distinguish those products in the market.
In each case, and in others, those compounders and others said they are finding profit in the products they bought.
Rick Shafer, strategic marketing manager for the Engineered Materials Group of M.A. Hanna noted his company's previous purchases, and said Hanna is considering purchasing other such lines.
``The major resin suppliers are streamlining their product lines to keep their profit up. They are focusing more and more on their key strengths, and less on specialty products,'' Shafer said in an interview from his office in Dyersburg, Tenn.
``We fit the products into our operations where they are best suited, as we rationalize our distinct businesses to make better rhyme and reason of our compounding operations,'' Shafer said.
Ralph Andy, president of Polycom Huntsman Inc. of Washington, Pa., and Tony deVrught, vice president for sales and marketing for DSM Polymers of Evansville, Ind., said they have seen increased activity from major resin suppliers who are trying to sell product lines.
Andy noted that many major resin producers seem to be moving faster to sell small-volume product lines because they saw such high profits in the past 18 months as demand soared for their high-volume product lines.