Firing a shot across the bow of other suppliers, United Technologies Automotive has surprised onlookers by landing a major future contract with General Motors Corp.
Automotive supplier sources confirmed that UTA had won a contract that much larger and better-financed interior producers had salivated over. The annual contract, which industry observers estimate is worth $400 million to $500 million, will allow UTA to make fully assembled plastic instrument panels for GM's new Delta car program, said sources close to the bidding.
That contract alone would virtually double sales for Dearborn, Mich.-based UTA's interiors group from about $560 million this year. The program, expected to start in 2001, could involve more than 1.2 million current and future vehicles, sources said.
``Winning Delta would be cause for celebration by anyone,'' said consultant Greg Janicki, vice president of consulting group CSM Corp. in Okemos, Mich. ``If UTA has it, that would be a major comeback.''
Some suppliers classified the award as a small miracle for a company in some financial distress. UTA's interiors business unit is undergoing major retooling after suffering lagging sales and excess capacity. Analysts had half-expected UTA to sell the unit to another interiors supplier.
``[Interiors] was the Achilles'-heel of their automotive operations,'' said equity analyst Paul Nisbet of JSA Research Inc. in Newport, R.I. ``It was really hurting their performance and had to be improved.''
In January, UTA brought in Richard Sloan, head of its European operation, to replace Edward Northern as president of its interior systems international unit. Sloan said his goal is to boost sales and shore up weaknesses.
``We don't want to have facilities running at half or three-quarters [capacity] or laid out in a way that takes too much [space] for a given amount of business,'' Sloan said in a Sept. 3 interview. ``We're looking as hard as possible at every dollar spent.''
One of Sloan's recent moves was shuttering a plastic interior trim plant in Bay City, Mich., to rid UTA of excess trim capacity. The 131,000-square-foot plant opened in 1989 and has 300 employees.
The company recently moved up its timetable and now plans to close the plant by the end of December, said representative Daniel Nadolski of the United Steelworkers of America in Midland, Mich. The plant was originally targeted to shut down during the first quarter of 1999.
The facility injection molds center consoles and glove boxes.
``That facility has a history of not making money,'' said Nadolski, representing Local 7270 workers at the injection molding plant. ``I've never seen a facility go through so many managers and foremen. It's a revolving door there.''
Sloan concurred that there was not enough interior business to support four trim facilities. Equipment from that plant will be spread to facilities in Alma, Mich.; Bourbon, Ind.; and Dayton, Tenn. After the plant closes, UTA will attempt to sell the building.
But UTA's interiors group may be emerging — earlier than analysts expected — from its financial malaise. The new GM contract could perk sales for the entire automotive group. In 1997, UTA sales dropped to $2.98 billion from $3.2 billion in 1996. The interiors group was the main culprit for the decrease.
Sloan would not confirm or deny that UTA had won the GM contract. GM does not discuss future supplier contracts.
But Sloan said that his unit had been handed significant business to assemble an entire instrument panel and ship the complete piece to a carmaker.
``It will include a lot of hang-ons that are normally associated with other manufacturers,'' Sloan said without revealing many details. ``It's a complex undertaking with a lot of technical innovations.''
The Delta program, due out by 2002, includes a redesigned Chevrolet Cavalier and Pontiac Sunfire, a new sport utility vehicle, plus models from GM's Saturn line and the Opel Astra in Europe. It was unclear if UTA also would make instrument panels outside North America.
The work would position UTA as a viable producer of entire instrument panels, work the company does in Europe but not in North America. A system could include, depending on the work, the entire dashboard, substrate, wiring system, radio bezel, steering column and possibly the floor console and overhead system.
The contract also could move UTA to the competitive big leagues with such instrument-panel heavyweights at Plymouth, Mich.-based Johnson Controls Inc., Textron Automotive Co. of Troy, Mich., and Magna International Inc. of Aurora, Ontario.
Those companies, and Lear Corp. of Southfield, Mich., already tout their abilities to make entire interior systems for automakers.
Plastics plays a major role in the project, Sloan said.
``You get significant savings in part numbers and mass,'' he said. ``We'll see a real surge in systems over the next three or four years. We want to exploit the full range of our products.''
That the contract comes from GM also is surprising. Currently, UTA does more business with both Ford Motor Co. and — especially for interior trim — with Chrysler Corp.
UTA ranked third on Plastics News list of North American injection molders with an estimated $551 million in relevant 1997 sales, much of it from its interiors unit.
UTA also plans to add process development centers at many of its plants, Sloan said. The company will develop new techniques in such areas as injection molding and urethane processing at existing production facilities, he said.
UTA has gained other new interiors contracts recently that have forced analysts to rethink the company's future, Janicki said.
``They were losing good people because of the uncertainty [about their future],'' Janicki said. ``Now they've gotten more aggressive and have started to grow their existing business.''
Sloan said he would like to triple the company's interiors' sales volume to more than $1.5 billion by 2002.