Aeroquip-Vickers Inc. has sold a 49 percent stake in two North American plastic exterior trim automotive plants to Inoac Corp. in a move that strengthens its ties to the large Japanese supplier.
Aeroquip Corp., a subsidiary of Maumee, Ohio-based Aeroquip-Vickers, entered into an agreement July 25 with Inoac, based in Nagoya, Japan, to operate the two Aeroquip plants jointly. The plants, located in Livingston, Tenn., and Atlanta, make body side moldings, decorative bumper strips and roof moldings.
Aeroquip maintains a 51 percent interest in each plant. Terms of the deal were not disclosed.
Aeroquip and Inoac formed another joint venture in 1988 to operate a plant in Fremont, Ohio, that makes blow molded spoilers and exterior trim components. The companies also have set up a separate office in Clinton Township, Mich., near Detroit, under the name Aeroquip Inoac Corp., to manage the joint properties.
The strategy further distances Aeroquip-Vickers from day-to-day plastics operations. Earlier this year, the company announced it would sell eight plastics interior plants to concentrate its automotive activities primarily on its fluid connector products. Since then, four of the plants have been sold and two others are on the verge of closing.
However, the publicly held company did not want to jettison its exterior trim plastics plants, said equity analyst Thomas Burns Jr. of New York-based NatWest Securities Corp. Aeroquip is traded on the New York Stock Exchange.
``It's too profitable a business for them to walk away from, but it doesn't match up with the company's other core areas,'' Burns said. ``It makes a lot of sense for them to grow that side of the business with a joint venture partner and report it separately on [Aeroquip-Vickers] earnings statements. That way, they can be successful and not have to worry about [the plants].''
Jointly, the three Aeroquip-Inoac plants have 330,000 square feet and about 700 employees. The Fremont plant, one of the largest producers of plastic vehicle spoilers worldwide, is the largest facility, with 235,000 square feet and 550 employees.
That plant, which recorded $65 million in sales last year, has been a model for the company, said Aeroquip spokesman Lee Brower. Inoac's influence has led to an infusion of Japanese management techniques under a kaizen approach made successful by Toyota Motor Corp. They include quality circles where intra- and cross-departmental employees resolve time and cost issues and hold daily team meetings and training sessions.
The Fremont plant saved $1.5 million last year because of its quality circles, said plant operations manager Michael Beebe. Brower said other Aeroquip plants have begun to duplicate those techniques.
``The technologies [at the other plants] fit what Fremont has done very well,'' Brower said. ``Why not capitalize on what Aeroquip Inoac has instituted so successfully already? The joint venture will continue to help both parent companies significantly.''
Inoac, which recorded about $2 billion in 1996 annual sales, also is one of the world's largest suppliers of instrument panels and makes a variety of rubber, plastic and composite products.
Besides its work with Aeroquip-Vickers, the supplier has a joint venture in North America with Johnson Controls Inc.'s Automotive Systems Group of Plymouth, Mich., to make instrument panels and interior components under the name Intertec Systems LLP. In addition, Inoac also has a joint agreement with SAI Automotive AG of Frankfurt, Germany, to produce instrument panels, door panels and consoles at a plant near Greenville, S.C.
The Livingston and Atlanta Aeroquip plants make exterior components using extrusion, reaction injection molding and blow molding methods and have Class A painting lines. The components primarily are made with either PVC or Noryl polyphenylene oxide engineered resins.
The plants provide exterior components for Big Three automakers and several Japanese transplants. The 42,900-square-foot Atlanta facility has 61 employees and the 45,000-square-foot Livingston plant employs 73.
Officials at Aeroquip Inoac offices in Michigan declined comment on the joint venture. Specific equipment usage and sales volume figures for the plants also were unavailable.
Aeroquip Corp. recorded sales for the first six months of 1997 of $586.2 million, compared with $567.2 million the year before. Of that total, the closed or sold plastic interior trim facilities contributed $42.2 million in sales.
The sale or closing of those facilities also helped account for a decline of $12.6 million in automotive sales for Aeroquip's second quarter, compared with results in the previous year.