Plastic fuel-tank maker Walbro Corp. is taking one step forward and one step back in the South Korean market.
The Cass City, Mich., firm has divested its venture with Daewoo Precision Industries Inc., parent of South Korean carmaker Daewoo Motor Co. Ltd. The partners had a plant making fuel-system parts near Seoul, South Korea.
Walbro had a 49 percent interest in the venture, said Daniel Hittler, Walbro chief administrative officer. The recent devaluation of the South Korean currency made it a pricey proposition to import raw materials from other countries to make the fuel-system components, he said.
``A lot of materials cost nearly double what they had before the currency crisis,'' Hittler said.
Walbro sold its interests to Daewoo, based in Gijang Gun, South Korea. Daewoo plans to use local parts and materials, such as high density polyethylene, to injection mold the products, including fuel pumps and fuel-sending units, Hittler said.
``The currency effect is devastating and financial stability is threatened,'' he said.
In January, Walbro opened a blow molding plant in Ch'onan, South Korea, that is more secure.The plant opened after the company received a contract from Daewoo. The facility is making about 120,000 HDPE fuel tanks annually for Korean automakers.
Walbro's future still is a little unsettled, said equity analyst Richard Hilgert of First of Michigan Corp. Operating results for the second quarter, released June 20, show a 9 percent rise in sales and a 67 percent increase in operating profit over the 1997 period.
However, its share price is low, trading July 30 at $10.06, while profit dipped to $95,000 from $1.18 million in the 1997 period.
That makes Walbro a strong takeover candidate, Hilgert said, despite an anti-takeover defense it recently adopted. Walbro officials have said they have no plans to sell the company.