Plastics machinery folks are joking that, lately, Cincinnati Milacron Inc. issues more surprising announcements than President Clinton.
The latest bombshell, on Aug. 21, was that Milacron is getting out of its original business, metalworking machines, entirely, by selling its Machine Tool Group to Unova Inc. for $178 million.
For Cincinnati Milacron, the 30-year-long transformation from a stalwart U.S. machine tool company to a global plastics machinery maker has been nothing short of amazing. At the company's Cincinnati headquarters, employees going to lunch pass through a replica of its first machine shop, complete with 1880s equipment powered by wide leather belts. Unova has purchased that building, and now the surviving company — renamed Milacron Inc. — is looking for another headquarters in the area.
It's been quite a ride for Milacron's plastics employees, many of whom are 20- and 30-year veterans of ``the Mill.'' The company began turning out injection molding machines in 1968. Business boomed through the 1970s. But in the 1980s intense Japanese competition clobbered Milacron, as well as other U.S. injection press makers. Some didn't survive. Milacron fought back, proudly flying the American flag and launching its Wolfpack strategy to improve quality and reduce costs.
It worked, and other parts of Milacron, including machine tools, adopted Wolfpack. Today one of the Wolfpack architects, Harold Faig, is global machinery boss for Milacron's plastics machines.
In the past three years, Milacron has spent more than $450 million for three major acquisitions — D-M-E Co., Autojectors Inc. and Johnson Controls Inc.'s Uniloy blow molding business. Milacron now makes $1 billion worth of injection and blow molding machines, extruders and mold components a year, in factories in the United States, Europe and India.
Machine tools never really recovered from the Japanese onslaught; the business remains marginally profitable. Now Milacron plays in just two main businesses — plastics equipment and high-margin industrial products that need to be periodically replenished, such as grinding wheels and cutting fluids.
The new Milacron also moves much more quickly. Milacron's decision to sell an India-made injection press as an Autojectors machine in the U.S. market came just one month after the Autojectors acquisition.
What do the sweeping changes mean? Broadly, Milacron's continued faith in plastics is good news. Executives spent much of last week explaining to Wall Street why a major U.S. industrial company loves plastics.
Here are some questions investors should ask:
Milacron said machine tools are a cyclical business. But plastics machinery has its ups and downs, too. This year, after more than five remarkably strong years, North American demand seems to be cooling. Will sales in Europe and Latin America take up the slack?
Speaking of Latin America, what's going on down there? Semeraro Ltda., a major Brazilian injection press maker, has a 3-year-old deal to build blow molding machines for Uniloy. Are injection presses next, given Brazil's booming automotive industry?
When can we expect more acquisitions? The rumor mill keeps churning, and Davis-Standard Corp.'s name keeps coming up. Milacron officials have indicated they want to beef up their extrusion offerings.
Not too many years ago, the idea of Milacron buying Davis-Standard sounded outrageous. But that was before this series of bang-bang moves. Now that Milacron so dramatically has cast its lot with plastics machinery — an industry undergoing consolidation — anything is possible.
Plastics News senior reporter Bregar covers machinery.