Defiance Inc. of Cleveland is selling all of the common shares of its Owosso, Mich.-based Vaungarde Inc. subsidiary, which injection molds and paints automotive plastic parts, to Quoin Inc. of Grand Rapids, Mich. Defiance would not disclose the deal's terms, but said it will take a noncash charge of about $2.6 million, or 39 cents a share, to cover its loss on the sale. The charge will be applied against its estimated pre-sale earnings of 23 cents per share in its fiscal fourth quarter, ended June 30.
The transaction is expected to be complete by the end of the month. Privately held Quoin Inc. purchases, then operates, various manufacturing companies as autonomous subsidiaries.
While we have achieved substantial improvements over the past year in Vaungarde's operations, which bodes well for its future, the business does not fit our long-term stategic direction, said President and Chief Executive Officer Jerry A. Cooper. Vaungarde recorded an unspecified operating loss on sales of about $10 million for the fiscal year ended June 30.
Part of our long-term strategy is to focus on our core competencies - tooling systems, testing services and precision machined components for the U.S. automotive industry, he added.
Vaungarde has 125 employees in Owosso, along with nine injection presses with clamping forces of 75-250 tons.
Vaungarde injection molds urethanes and paints parts for original equipment and aftermarket manufacturers in the automotive, heavy truck, agricultural and recreational vehicle markets.
This is an industry we know well, said Quoin President John DeMaria. Vaungarde has a unique niche and an expert finishing system classified by General Motors as qualified to paint any of its parts.
The subsidiary's sales of $10 million last year accounted for about 10 percent of Defiance's total 1996 sales.
Defiance supplies tooling systems, testing services and precision machined components to the U.S. motor vehicle industry.