LOS ANGELES — Last year, Stadco Inc. of Los Angeles rocketed onto the plastics scene like one of its customers in the aerospace industry.
First, Stadco bought HPM Corp. of Mount Gilead, Ohio, a 120-year-old company that makes injection molding presses, extrusion systems and die-casting machines. The deal was announced in February 1996, and completed that spring.
Then, in November, Stadco dropped another bombshell: HPM in turn would buy a German injection press maker, Hemscheidt Maschinentechnik Schwerin GmbH & Co.
The plastics machinery fraternity has viewed HPM as a solid, but somewhat staid, competitor. HPM was owned by about 270 shareholders, more than half of them company employees through a 1976 management buyout. All of a sudden, HPM had a new owner and was expanding into Europe. HPM and Hemscheidt together employ 900.
``HPM has been in park for several years, waiting for a driver,'' said Neil Kadisha, Stadco president and chief executive officer. Kadisha also likes to call HPM a ``sleeping giant'' and ``the best-kept secret in the industry.''
HPM, founded in 1877 to make apple presses, is a household word in the U.S. plastics industry. But Stadco ... Who is this Stadco, anyway?
Privately held Stadco does specialized, high-precision metal machining for aerospace customers, such as Boeing Co. and McDonnell Douglas Corp. The company occupies 250,000 square feet of space over four city blocks of Los Angeles, where it employs about 400.
Some of the parts are gigantic. On a tour earlier this year a machinist rode up and down in a special booth to finish a cover for a Boeing 777 jet engine, and other technicians finished an aluminum plate measuring 18 feet by 30 feet, for Raytheon Co.'s national missile defense project.
Kadisha wants to triple HPM's sales to more than $300 million during the next several years. He said Stadco plans to invest about $20 million in HPM.
``We can finance necessary investment in this company,'' Kadisha said. ``Whereas in the past, HPM has definitely been lacking in financial backing.''
The company's hulking Mount Gilead plant shows its age. But Kadisha said: ``We are not planning to build a new building because we believe, with increasing our efficiency over there, our capacity can grow substantially.''
HPM's sales had hit a plateau at about $100 million. When Stadco acquired the company last year, HPM President William Flickinger said new ownership was needed ``to take the next quantum leap.''
But Kadisha, interviewed at Stadco's Los Angeles factory earlier this year, said technological prowess is more important than sales growth.
``We believe that HPM deserves to be among the five most-leading plastic equipment manufacturers in the world, not necessarily by size of sales—because that is not our goal and will not be our goal in the future. We mean among the five who make the most significant positive contribution to our customers and to the industry,'' he said.
Stadco is expert at precision machining of very large parts, just a few at a time. Large-tonnage injection molding machines — used by automotive and appliance molders — are one of HPM's strongest suits. Hemscheidt, a relative newcomer to North America, has had some success selling big-tonnage injection presses to those same markets, thanks to its retractable tie-bar technology.
Stadco officials hit on plastics machinery after a one-year acquisitions study of industries that require large, precision parts. The two finalists: plastics machinery and equipment for handling nuclear waste. Once they decided plastics was a better match, Stadco officials looked for acquisition candidates.
Kadisha approached Flickinger in late 1995. Stadco ended up buying all the company's stock, except stock owned by Flickinger.
``Our move to the plastics industry, again, was not because HPM was cheap, or that it was for sale. It was totally strategic, getting into this industry. And we are in this industry for a long term. We are not here short-term,'' Kadisha said.
He said Stadco will continue to run HPM's factory in Mount Gilead and its Remanufacturing Division in Marion, Ohio, as well as the Hemscheidt factory in Schwerin, Germany. Hemscheidt will add extrusion manufacturing, he said.
The two companies continue to use the word ``merger'' officially to describe the transaction. The amount of stock owned by Flickinger, who remains at HPM, has never been disclosed.
Kadisha declined to provide additional terms of the deal.
Kadisha, walking through the Stadco shop floor, pointed out a large ring-shaped part used on a satellite launching device. ``You cannot machine this part. You have to build a machine to build this part,'' he said. ``The precision is a dentist's level of precision.''
Stadco's work has included large molds for composite parts such as helicopter wings and components for a Who's Who of U.S. nuclear missiles — the Titan, Polaris, MX, Trident, Peacekeeper and others.
Stadco long has been active in the U.S. space shuttle program. When Challenger exploded after takeoff Jan. 28, 1986, Stadco helped redesign the grooved cases that fit together to house the solid rocket boosters.
Work done by Stadco in Los Angeles is highly specialized — seemingly the opposite of HPM's higher-volume work making injection molding machines in central Ohio.
But Kadisha said Stadco's Los Angeles factory will machine some parts for HPM and Hemscheidt, which should result in faster delivery in plastics machinery, and more-precise components.
``We're going to bring aerospace precision to commercial equipment,'' Kadisha said. ``And we believe it should not make it more expensive, but it should make it less expensive because we will be able to do innovative work because of our precision capability.''
Aerospace manufacturing innovations are about 10 years ahead of traditional industries. ``We believe we can narrow that gap,'' Kadisha said.
``Another thing we bring to HPM is a talent of marketing and sales,'' Kadisha said. ``HPM, in the last 10 years, has been very passive about marketing. Basically many in the industry have been such loyal and happy customers of HPM that they really did not need much of a sales force to sell their equipment.''
At NPE 1997, held June 16-20 in Chicago, the company rolled out a new, two-platen injection press. But HPM watchers looking for dazzling new technology will have to wait for the K'98 show next year in Dusseldorf, Germany.
``[1996] was a year where our goal was not higher sales, but our goal was to reinforce the foundation of the company and prepare ourselves for a major expansion after NPE,'' he said.
HPM now has its own financing arm, called HPM Capital Group. Plus the company has plans to set up a western regional office in Los Angeles.
HPM also is beefing up its screw design efforts. In March, Ferdinand Pranckh, newly named general manager of extrusion, announced a new Process Research and Development Group dedicated to screws. HPM also has added a new screw manufacturing cell and purchased a whirling metal-cutting machine.
Kadisha, a major shareholder in Stadco, said he has been the company's president and chief executive officer since the late 1970s. A holding company he founded, GNC Industries Inc., purchased Stadco in 1981.
The Stadco executive has a varied background as an investor and manager of companies in wireless communication, retail distribution, textiles and land development. He also serves on the board of directors of Qualcomm Inc. of San Diego, a major supplier of digital wireless communications delivered via satellite. According to the most recent filings with the Securities and Exchange Commission, Kadisha owns 1.63 million shares of Qualcomm today, or about 2.45 percent of total shares.
Qualcomm products include OmniTracs, a system that electronically monitors long-haul trucks, and CDMA, a key software and hardware system used in wireless communications.
Qualcomm had 1996 sales of about $600 million. Kadisha said he expects the company's sales to hit $2 billion this year.
