Twenty years after diversifying into plastics, Worthington Industries Inc. is studying whether to refocus on its core steel processing business by selling or spinning off its $300 million-plus plastics molding unit.
The Columbus, Ohio-based company announced April 1 it has hired investment bankers to study options for three subsidiaries: Worthington Custom Plastics, Worthington Precision Metals and Buckeye Steel Castings.
Publicly traded Worthington said the review will ``explore strategic options to maximize the value'' of the subsidiaries. If the units are sold, proceeds would be pumped back into the company's steel businesses, used to buy back stock or to reduce debt, said Todd Rollins, manager of investor relations.
Salomon Smith Barney Inc. of New York will handle the strategic review of Worthington's plastics businesses. No target date has been set for completion of the process.
Worthington Industries, founded in 1955 as a steel broker, entered the plastics industry in 1978 by acquiring a company that made plastic and iron pipe fittings and valves. More acquisitions propelled the company into automotive parts.
Worthington Custom Plastics' main business remains automotive interior trim parts, but in recent years the company diversified into other markets, such as appliances and lawn and garden products.
Worthington, which has gas-assisted injection molding capability, makes interior parts such as instrument panel components, door panels, consoles and armrests. Automotive interior trim manufacturers have been consolidating in the past several years, creating megasuppliers like Lear Corp., Magna International Inc. and Johnson Controls Inc. — companies that can supply complete pre-assembled vehicle interiors to car assembly plants.
According to Plastics News and industry estimates, Worthington Custom Plastics generated $360 million in 1997 sales and employed 3,600 at eight factories.
Last year, the company placed 11th in Plastics News' ranking of North American injection molders, based on 1996 sales of $325 million.
Robert Schenosky, senior analyst at Merrill Lynch & Co. Inc., said the automotive megasupplier trend means it could make sense for Worthington to exit plastics.
``The segment of the company that has been the growth vehicle, historically, has been steel processing. With that said, the plastics business, with the consolidation in the industry, [means] Worthington's view is you have to get bigger or exit the business,'' he said.
Worthington reports financial information for its plastics unit within the company's Custom Products division, which also includes Worthington Precision Metals. The plastics unit accounts for most of the division's sales.
Schenosky said Custom Products is generating 18 percent of the company's sales but only 10 percent of its profit. The other unit up for sale, Buckeye Steel Castings, is only marginally profitable, he said.
John P. McConnell, Worthington Industries chairman and chief executive officer, said recent spending has focused on the steel business.
``Worthington has invested approximately $1 billion over the last six years to position the company for growth. Over 80 percent of this capital spending has been concentrated in our core business segment, processed steel products,'' he said in a news release.
Worthington reported fiscal 1997 sales of $1.9 billion.
John Halula, group executive vice president of Worthington Custom Plastics, did not return telephone calls.
Given the auto interior consolidation movement, who might be interested in buying Worthington Custom Plastics? Contacted last week, two potential candidates, Lear and Magna, declined comment.
Lear of Southfield, Mich., has been on an expansion binge recently, forming a joint venture with Donnelly Corp. of Holland, Mich., to make complete interior overhead systems for vehicles; buying a European company, Keiper Car Seating; and picking up shares of car flooring maker Masland Corp. of Carlisle, Pa., in 1996.
Last year, Lear negotiated to buy an instrument panel factory in Logan, Ohio, from Goodyear Tire & Rubber Co., but Lear later pulled out of the deal.
Magna, a unit of Decoma International Inc. of Concord, Ontario, bought European seating maker Tricam Group Holdings Ltd. of Nottingham, England, last year and purchased several other European interior suppliers. In 1995, Magna bought shares of Farmington Hills, Mich., seating and parts supplier Douglas and Lomason Co.
Johnson Controls Inc. did not return a telephone call for this story. JCI spent $1.35 billion to buy interior parts molder Prince Automotive of Holland, Mich., in 1996.
Textron Automotive Co. of Troy, Mich., the No. 1 molder on the Plastics News ranking, did not return a telephone call. Textron also supplies interior parts.
On April 1, the day of the announcement, Worthington Industries' stock gained $1, to close at $19.125.