CLEVELAND - A management group has petitioned bankruptcy court to purchase the injection and reaction injectionmolding businesses of Elyria, Ohio-based General Industries Inc., a pioneering plastics company that began mold-ing 80 years ago. The group is prepared to spend $9 million for the operations, which include four factories and 425 employees. The businesses generate annual sales of about $60 million, about twothirds of that from injection molding and one-third from RIM, according to James Lynam, president and chief executive officer of General Industries.
Lynam, who is leading the group, will remain in the top post at the new company, called G.I. Plastek Inc.
The deal was announced July 31-just three days after G.I.'s parent, Industrial General Corp., filed for Chapter 11 reorganization in U.S. Bankruptcy Court in Wilmington, Del. Industrial General is aDelaware holding company formed to purchase General Industries in 1985 through a leveraged buyout.
Senior managers of G.I.'s Plastics Division and Plastek Division had been planning the purchase for the past 18 months, according to Lynam and Steve Trapp, vice president of marketing.
They expect the purchase to close within 30 to 45 days. A hearing has been scheduled for Aug. 14 in bankruptcy court.
The management group is not buying G.I.'s compression molding operation. The landmark Elyria factory, built in 1903, closed July 28, leaving the fate of 100 workers there uncertain.
Last week two former compression molding executives, Darrell Hastings and Mike Nussbaum, were negotiating to buy the business, which molds processes sheet molding compound and bulk molding compound on 19 presses.
More solid is the Lynam-led deal for G.I.'s injection molding and RIM.
``We see absolutely nothing that would indicate that this would not be approved by the judge,'' Lynam said in an interview in Cleveland.
He also expects creditors to support the sale. Except for some equipment financing already in place, G.I. Plastek will not assume any of the firm's liabilities, although Lynam said the ownership team is making payment plans with creditors.
Eight senior managers have spent the past week on the road, explaining the proposed buyout.
``I expect no disruption whatsoever with our core constituencies: our employees, our customers and our suppliers,'' Lynam said.
Lynam, a 29-year G.I. veteran, characterized Industrial General's problems as typical of many LBOs in the 1980s. The holding company was highly leveraged, he said. Industrial General will emerge from bankruptcy owning only a unit making electric motors.
G.I. Plastek will benefit from new financial backing under the new owners, Lynam said. They plan to invest more than $4 million in the first 18 months, mainly in machines, he said.
He declined to say how many people are in the ownership group or provide details on the sources of financial backing. All but three members are current senior managers. Lynam said plans call for creating more equity positions for other G.I. Plastek employees in the future.
General Industries holds an important place in plastics history. In 1915, the company began compression molding car horn buttons from Bakelite phenolic resin and phonograph records from shellac. Over the next 40 years, it grew to an 120-press, compression molding giant.
On the injection molding side, G.I. was one of the first U.S. molders to buy an early Isoma press from Germany, in 1936. G.I. diversified into RIM processing in 1983 by purchasing Plastek Corp. of Newburyport, Mass.
If the court approves the sale, G.I. Plastek will include one injection molding plant in Bellville, Ohio, one injection molding plant and one decorating and assembly plant in Marysville, Ohio, and the Newburyport RIM plant in Massachusetts.
Along with its history, G.I. boasts some of the longest continuous molder-customer relationships in plastics, dating back more than a half century with firms such as Ford Motor Co. and Kirby Co., the Cleveland vacuum cleaner maker. Newer customers include Deere & Co.
``Our key business philosophy is to grow with our existing customer base,'' said Chuck Lagasse, founder of Plastek in Massachusetts and now vice president of new product development.
A reorganization last year helped prepare G.I.'s plastics businesses for the pending sale, according to Lynam. The company decentralized, moving some managers from Elyria headquarters to the factories. Day-to-day decision making also moved to the plants, involving all employees. Top corporate management now looks years into the future, working with customers to design new products.
Trapp said the company has focused on several markets, including agriculture, construction, telecommunications, automotive, appliance and industrial. Examples of new products include plastic heating and air conditioning systems for large trucks, splice closures for optical fibers, large RIM parts for heavy equipment and parcel lockers for the U.S. Postal Service.
Meanwhile, despite the bankruptcy filing, new plastics orders are coming in, according to David Dailey, general manager of injection molding. He said some customers have moved molds from existing molders to G.I. in recent days.
