Solidifying its position in a growing market, Decoma International Inc. will open a new bumper fascia molding plant near Toledo, Ohio, partly financed from the supplier's first public stock offering.
Decoma, a wholly owned subsidiary of automotive supplier Magna International Inc. of Aurora, Ontario, plans to open the 350,000-square-foot plant in June. The plant, operating as Norplas Industries Inc., will injection mold and paint fascias using thermoplastic olefin material.
The company plans to invest more than $70 million in construction and equipment costs, said Robert Potokar, Decoma vice president of operations. About $60 million of that amount is expected to come from a stock offering scheduled for this month.
In December, Decoma announced plans to spin off its exterior plastics business, which includes bumper fascia and plastic body panel operations.
The Norplas plant could be the first recipient of proceeds from the stock offering. The company also is negotiating a contract to open a molding plant in Brazil later this year, Potokar said. The facility would be Magna's first in that country.
The Norplas plant, located southeast of Toledo in Northwood, Ohio, will help the company meet swelling demand for TPO bumper fascias, Potokar said. Fascias, the cover skin assembled over a metal bumper beam, are one of Decoma's primary products.
``Our other [bumper fascia] facilities are at almost full capacity,'' Potokar said. ``Our strategy was to open the plant at a site near automakers. The technology we'll be using there is a leap ahead in plant efficiency.''
The plant will begin production with five to eight 4,000-ton injection molding presses, and a dedicated paint line. The company expects to employ about 100 when the site opens, according to Potokar.
The facility also will feature a recycling area to regrind and repelletize scrap from parts. The company uses a small percentage of the regrind materials in its bumper fascias, Potokar said. The plant will recycle paint sludge for other uses.
Initially, the facility will work on several 1999 model-year programs for Big Three automakers. Much of the growing demand is driven by the light-truck market, including sport utility vehicles and pickup trucks that are converting to front bumpers made of TPOs, Potokar said.
The company expects a large switch to the material in the heavy-truck market by the middle of the next decade, he added.
TPO's share of the auto industry continues to grow. According to figures compiled by material supplier Montell Polyolefins' automotive group in Troy, Mich., the top 10 TPO producers in North America made about 830 million pounds of TPO and polypropylene last year. That figure is expected to rise to 1.23 billion pounds by 2007.
Over time, Decoma would like to produce entire front-end modules from the site, Potokar said. Those modules, which are not in production today, could include lighting, grilles and radiator openings.
Decoma announced Feb. 24 that it would sell about 10.5 million shares of Class A subordinated stock at US$6.70 (C$9.50) to raise money for the spinoff.
``What we want to do is set ourselves up to be a self-supporting profit center,'' Potokar said. ``This is an important step toward that.''
The stock sale will help the company continue on its steep growth path, said analyst Dennis DesRosiers of DesRosiers Automotive Consultants in Hamilton, Ontario. To remain competitive, Decoma needs sales to continue growing by more than 20 percent, DesRosiers said.
``That's the standard,'' he said. ``Either you eat or be eaten. They have the resources to take on commitments that others shy away from.''
Major competitors vying for bumper fascia business worldwide include Sommer Allibert SA of Nanterre, France; Venture Industries Corp. of Fraser, Mich.; and Textron Inc. of Troy, Mich.
Decoma, based in Concord, Ontario, currently operates three bumper fascia facilities and has a joint venture to make fascias in Mexico. Magna also owns a 51 percent share in Conix Corp., a Dearborn, Mich.-based maker of bumper fascias. Ford Motor Co. owns the other 49 percent.
Last year, Decoma ranked third on Plastics News' list of North American injection molders, with estimated relevant sales of $573 million in 1996.
Overall, Decoma recorded $669 million for its fiscal year ended July 31. The company's exterior plastics operations accounted for about $352 million of that total.