After putting a large dent in its parent company's third-quarter profit, Collins & Aikman Plastics Inc. is undergoing a multimillion-dollar shake-up of both its facilities and its management team.
Figures released last week for publicly held Collins & Aikman Corp., based in Charlotte, N.C., revealed that the company absorbed an operating loss of $39.8 million for the quarter and a loss from continuing operations of $42 million. The comparable period in 1996 showed operating profit of $24.7 million and a profit on continuing operations of $6.9 million.
Chief Executive Officer Thomas Hannah pinned much of the decline on charges incurred by C&A Plastics, the company's injection molding subsidiary that changed its name last month from Manchester Plastics Inc.
In a conference call to investment analysts, Hannah identified manufacturing problem areas such as defective parts, equipment malfunctions and tooling difficulties. The company had to scrap some of its tools and replace equipment, Hannah told the analysts.
The CEO also told the group that C&A Plastics took a $4 million write-off during the quarter to restructure operations, according to fixed-income analyst Jane Haugh of KDP Investment Advisors Inc. in Montpelier, Vt., who heard the remarks.
``[Hannah] said they needed to make changes in the corporate culture, manufacturing systems and management,'' Haugh said. ``It came as a total surprise to me, and the news was much worse than I expected. We thought [C&A Plastics] was improving, and all of a sudden, it was a lot worse.''
At the same time, the subsidiary is embarking on a major expansion program that will wipe away many shorter-term body blows to its profit, said C&A Plastics President D. Michael Weston in a Nov. 4 telephone interview. The changes include a consolidation of resources, a recently opened plant in Mississauga, Ontario, and the addition of about 40 injection presses this year, Weston said.
``It is a good and solid company,'' Weston said. ``We're on a steep growth curve, and we have had a lot of business awarded to us with new technology for our company. We feel great about our future and the terrific backing we're getting from Collins & Aikman.''
Weston also pointed out that the subsidiary's sales were up 21 percent for the quarter, compared with a year ago. Sales figures for C&A Plastics were not broken out, however. C&A Plastics expects to record sales of close to $200 million this year, Weston said.
Weston was hired by the Troy, Mich.-based subsidiary in March to replace retiring President Edward Wells. Weston was with Troy-based Textron Automotive Co. for 23 years in a variety of positions, the last of which was executive vice president for worldwide manufacturing.
C&A Plastics is a major automotive supplier of molded interior parts, such as instrument panels, door panels, headrests, air outlets and consoles. The company was purchased by Collins & Aikman in September 1995 as part of an acquisition of its parent company, Troy-based Larizza Industries Inc., for $184 million.
C&A Plastics, which has about 3,000 employees, was ranked 18th on Plastics News' list of North American injection molders with $187.1 million in 1996 sales.
The company had financial troubles when Collins & Aikman took it over, said several analysts. Still, most analysts thought those days were over, Haugh said.
``You'd think the company's inability to meet OEM standards would have surfaced before now,'' she said. ``That's why this was so out of the blue.''
Collins & Aikman officials would not comment on details of specific problems. Company spokeswoman Kim West said Hannah was committed to growing the plastics portion of its business and has made that clear to employees.
A company news release said C&A Plastics had incurred charges for asset impairments, goodwill reductions, provisions for programs operating at a loss, inventory adjustments and other previously deferred costs. In addition, the unit had been hurt by manufacturing inefficiencies related to product launches and record volume for its products, the release stated.
Collins & Aikman's stock price steadily plummeted in October to about $9.75 per share on Oct. 31, three days after the figures were released. The price peaked at about $11.25 in early September. The company is traded on the New York Stock Exchange.
Weston said C&A Plastics is making headway in its improvement effort. The company recently realigned its Troy-based management team by consolidating purchasing, program management and quality development at its central location.
C&A Plastics has hired experienced executives from other large Tier 1 suppliers, said Weston, who didn't reveal the executives' names or titles. He said the team will take a new management tack to shore up efficiency.
``We'll get better economies of scale by pulling all our locations together for purchasing,'' Weston said. ``We're also trying to take eight different divisions and get everyone focused in the same direction. We want everyone riding the horse the same way.''
C&A Plastics has eight plants located in Manchester, Homer, St. Joseph and Williamston, Mich.; and in Gananoque, Scarborough, Stratford and Mississauga, Ontario.