After making a recent management change, Depco International Inc. plans to become more aggressive as an automotive supplier by buying another company and opening a new plant.
The Etobicoke, Ontario-based company's Dualex Enterprises Inc. subsidiary, a maker of extruded and coextruded exterior moldings, wants to acquire an auto parts molder for about $25 million to $60 million, said Depco Chief Executive Officer Mario Forgione. The company hopes to complete the purchase within 18 months, he said.
The company's Canadian division, based in Rexdale, Ontario, also will open a new, 150,000-square-foot plastics extrusion and molding plant by September 1999, Forgione said. Preliminary plans call for the plant to open in Brampton, Ontario, just north of Toronto.
Dualex will shift its Dualex Canadian division headquarters to the site, which is more than twice the size of its current 70,000-square-foot building. Ideally, the new plant will have room to grow to 200,000 square feet, Forgione said. Equipment needs have not been determined, he added.
Those heady growth plans come on the heels of the February retirement of Depco CEO Richard Motyl. Forgione, formerly the company's chief operating officer, was given a mandate by the privately held company's shareholders to pursue expansion opportunities.
``We need to build critical mass to survive,'' Forgione said. ``For a company our size in the automotive industry, it's either eat or be eaten. If we don't get aggressive, our long-term viability could be in question.''
To do that, the company hopes to buy an automotive supplier that quickly could double Dualex's $60 million in 1997 sales. Dualex is setting its sights on a company equipped with large-tonnage plastics injection molding or that can perform rubber molding, an area that would be new for the company.
Currently, Depco primarily conducts extrusion and coextrusion work from three Ontario-based plants and one in Port Huron, Mich. Parent company Depco is the administrative arm for Dualex. The company operates sales and engineering offices in Port Huron and Troy, Mich.
Dualex, which has 14 extrusion and coextrusion lines at the four plants, also does some injection molding on presses with clamping forces of 100 tons or less. Those presses mainly are used to make small parts such as end caps.
Its coextrusion operations include combining elastomeric and steel materials to make window reveal moldings and appliques. Dualex also molds exterior decorative trim pieces using PVC and extrudes a variety of elastomeric seal assemblies and weatherstripping for car exteriors.
The expansion partly is predicated on two major contracts recently awarded by General Motors Corp., Dualex's main customer. The contracts will start within the next year, Forgione said. The company specializes in moldings and trim work for GM's higher-end vehicles.
The company's expansion strategy is one adopted by many auto suppliers with sales of less than $100 million, said Dennis Virag of Automotive Consulting Group Inc. in Ann Arbor, Mich. It is difficult for companies in that midlevel sales range to compete with the manufacturing and marketing resources of a mega-supplier, he said.
However, Dualex's acquisition strategy could be easier said than accomplished, he added. Fewer companies are on the sales block due to the flurry of buyouts the past few years.
``Everybody would love to find a bargain, but there are few high-value players anymore because of the industry's dynamics,'' Virag said. ``There have been so many acquisitions that companies are selling for a premium now. The question is whether they could afford to pay it.''
Dualex's main competitors are larger companies. They include Concord, Ontario-based Decoma International Inc., a unit of industry colossus Magna International Inc.; GenCorp Inc. of Fairlawn, Ohio; and Concord-based Triam Automotive Inc.
Two weeks ago, Magna said it planned to purchase Triam for $50.1 million.
Allowing a larger company to buy Dualex might be the easier route for the company to take, Virag said.
Yet, Dualex's first priority is to grow the 35-year-old company on its own, Forgione said. Within five years, Dualex would like to record $200 million in annual sales, which would put it in loftier sales society.
``We have a substantial war chest to achieve those goals,'' Forgione said. ``We're looking to undertake an expansion through controlled growth. It really is a no-brainer as a way to keep us profitable for the future.''