DETROIT — Excess capacity is forcing Standard Products Co., a supplier of exterior automotive trim, to shut down two plants by year-end, including a 224,000-square-foot plastic extrusion and molding operation in Schenectady, N.Y.
The Dearborn, Mich.-based supplier, which announced the decision to employees Jan. 27, said the shutdowns were needed to reduce capacity and pare costs across its 14 North American plants. The company will close its Campbell Plastics plant, which primarily extrudes PVC body side moldings, and a 115,000-square-foot rubber processing plant in Lexington, Ky. The Kentucky plant makes belt weatherstrip assemblies and other extruded rubber sealing systems.
The plastics plant has 232 hourly and 32 salaried employees, and the rubber plant has 239 workers. The company said it will shut down Campbell Plastics within 12 months and its rubber plant by the end of August.
Campbell Plastics, which the company acquired in 1967, is only operating at 40 percent capacity, well below the company's targeted production goals, said Donald Sheley Jr., chief financial officer for Standard Products.
``We reached a point where it was necessary to take action,'' Sheley said. ``We couldn't pass the costs of excess capacity to automakers and expect to remain competitive. The way the market is changing, our only decision was to close the plants.''
The New York plant's capacity problem is expected to grow larger in May, when it ceases work on side trim for Ford Motor Co.'s F-series light trucks. Ford told plant officials in December that it was shifting production to Decoma Exterior Systems Group, based in Concord, Ontario. Ford's contract with Campbell Plastics had expired last year but work continued while a new contract was negotiated, according to Standard Product sources.
The Ford F-series work is the plant's largest contract, accounting for 40 percent of production, said Campbell Plastics general manager Jim Kaczynski. The plant, which produces as many as 8,000 vehicle sets a week for the light trucks, has not replaced the lost business, he added.
No reason was given by Ford for shifting the contract to Decoma. Ford spokeswoman Cheryl Eberwein said the loss of the business had no impact on the plant closure.
``It was a capacity decision,'' she said.
Sheley emphasized that even with the Ford contract, overcapacity is a major problem.
``In all probability, we would have come to the same conclusion about the plant,'' he said.
Decoma, one of the world's largest suppliers of exterior automotive components, is owned by Magna International Inc. Magna officials would not confirm receiving the Ford contract at press time.
The plant's 264 employees are represented by the International Union of Electrical Workers Local 318. As of Jan. 29, the union had yet to sit down with management to work out a severance agreement, said business agent Rick Dempsky. The union contract runs until September 1999, he added.
Dempsky said employees were told by plant management that Ford wanted to shift its F-series side trim work to a larger Tier 1 supplier who could provide a variety of components.
``We've been living on the edge and barely hanging onto our product line for quite a while,'' Dempsky said. ``It's still disappointing that it had come to this.''
Besides the Ford trucks, the plant also makes exterior molding for the Chevrolet Lumina, Ford Monte Carlo, Ford Probe, Dodge Dakota and other models.
Profit squeezing might also have played a role in the plant shutdowns. In a highly competitive market, automakers have asked suppliers to keep a lid on prices. Standard Products reported 1996 sales of $1.1 billion, an 8.8 percent increase compared with 1995 sales of $995.9 million. However, profits for the year declined by 27.3 percent to $14.6 million from $20 million in 1995.
Sheley said both plants were barely turning a profit.
The 11,000-employee company plans to transfer equipment to its remaining three North American plastics plants in Spartanburg and Winnsboro, S.C., and in Cleveland. The Campbell plant has eight extrusion lines, three injection molding machines with clamping forces of 1,000-1,500 tons and a number of small, 150-ton presses. Equipment not needed at the other plants will be sold, Sheley said.
Standard Products ranked sixth in sales among North American pipe, profile and tubing extruders in Plastic News' 1996 ranking, with $280 million in related sales.
The company said in a Jan. 27 news release that it expected to record a significant charge against earnings in the third quarter of fiscal 1997, which ends March 31, due to the cost of the plant closings. That cost cannot be determined until union negotiations are concluded, Sheley said.