CINCINNATI — Harold Faig won't be walking through the replica of the 1880s-era Cincinnati Screw & Tap Co. on his way to lunch much longer, since Cincinnati Milacron Inc. is selling its venerable headquarters and moving into a new era.
The future began Aug. 21, when Milacron rocked the capital equipment world by announcing it would sell its less-profitable metalworking machine business to Unova Inc. for $178 million and focus on plastics machinery and consumable industrial products such as grinding wheels.
While it was applauded by analysts, Milacron insiders called the deal bittersweet because it sells off a huge chunk of the company's heritage. Faig can relate.
``Many of us here have these deep emotional ties to the business," he said.
As vice president of the Plastics Technologies Group, Faig's office in the Oakley-neighborhood headquarters sits above the shop floor where, when he was 19 years old, Faig took a job assembling metalcutting machines. He went to college at night, moving up through the ranks. Now Milacron executives are preparing to move out and let Unova move into the headquarters, complete with its working machine shop, The 1884 Room.
Faig, 50, leads a plastics machinery business that — after six acquisitions in the past five years — has reached $1 billion in sales and employs more than 5,000. Milacron has vaulted to become a global force, manufacturing machines and mold components in the United States, Germany, Austria, Belgium and India.
On the world's plastics machinery stage, Milacron is second only to Munich, Germany-based Mannesmann Plastics Machinery AG, which generates $1.3 billion from nameplates like Van Dorn Demag, Krauss-Maffei and Netstal.
But Milacron has a broader line than the injection press-heavy Mannesmann, turning out injection presses, blow molders, extruders, mold bases and components and screws. ``We simply call it wrapping our arms around the customer,'' he said.
Faig, a soft-spoken but intense leader, discussed Milacron's future, the U.S. economy, the company's stagnant stock price, and other issues during an interview at his Cincinnati office Sept. 4, just two weeks after the machine tool bombshell.
Daniel J. Meyer, Milacron's chairman, president and chief executive officer, announced the decision to sell the Machine Tool Group, which generated $14.5 million in operating profit last year on sales of $458 million.
``That was a bold and courageous move on his part, in a company that has a 114-year history,'' Faig said. ``Not many CEOs, I would venture to say, would make those kinds of moves. It's a lot easier to do nothing.''
In fact, Faig confirmed that Milacron in recent years actually wanted to expand in machine tools by purchasing a German company. But strict German government rules scotched that, and Milacron decided to manage machine tools for earnings and cash flow, instead of growth.
Plastics is another story. In 1993, Milacron, which had been making extruders in Austria, added German injection press production by picking up the Klockner Ferromatik business from Klockner Werke AG. Other acquisitions have included mold component maker D-M-E Co., screw supplier Wear Technologies Inc. and, this year, Autojectors Inc., which makes vertical injection presses. Currently pending is the purchase of Johnson Controls Inc.'s Uniloy blow molding and structural foam molding machine business.
Milacron will use money from the machine tool sale to complete the Uniloy purchase. Faig said the Uniloy-Milacron business, in Manchester, Mich., will be run as an independent unit, much like D-M-E.
Where does Milacron Inc. go from here?
Faig said to expect more acquisitions. But he added: ``I'm not focused on size because of competitive size.'' Instead, he said, Milacron will look for acquisitions that fit, at a fair price.
What about the persistent rumor that Milacron wants to buy Davis-Standard Corp.—the dominant force in an area where Milacron lags, single-screw extruders?
``I'm not going to even comment on that,'' Faig said. ``There are no ongoing discussions with anybody in this area.''
Faig wants to improve Plastics Technologies' bottom line. In 1997, the unit generated operating profit that was 8 percent of sales.
``By plastics machine standards that's good. But it's not good enough for me. Our goals are much higher, and this year we'll add a couple of points to that,'' Faig said.
Faig remains optimistic about the U.S. market for plastics equipment, which has enjoyed its own, seven-year bull market, interrupted by a dip in 1996. ``I think what we're going to see is not so much a slowing, but more of a leveling, at good levels,'' he said.
Turmoil in other parts of the world is roiling the U.S. stock market. Some economists are starting to utter the ``R'' word. But not Faig.
``Capacity utilization is still strong. Consumer confidence is there, and there's no reason to expect a slowdown or a recessionary trend,'' he said.
Milacron has first-hand knowledge of the vagaries in the current stock market. After selling off machine tools — one of the biggest moves in company history — Milacron improved a little, to the low $20s on New York Stock Exchange trading. Last week, the price dropped below $18, the 52-week low. The 52-week high: $33.75.
Is management disappointed? Faig points out that it takes time for news to spread to investors.
``The management team here, we strictly don't run the business based around what the market price is for stock. This company is managed for long-term growth,'' he said. ``We believe that as long as we can continue to do that, the market will favorably reward us and our shareholders.''
Faig said Milacron's global reach and diverse product line amounts to a balanced portfolio. One-third of Plastics Technologies' business comes from less-cyclical products such as D-M-E mold components.
D-M-E is especially profitable, according to a report by Cleveland analyst Mark Koznarek of Midwest Research. He said D-M-E generated 23 percent of Plastics Technologies' 1997 sales but a whopping 40 percent of profit. D-M-E's operating margins are about 15 percent, the report said.
Milacron has launched other new efforts to combat periodic slowdowns in machine sales, such as an Integrated Technologies business that sets up complete manufacturing systems, and Service Tech, which Faig said involves the Internet.
Faig said those less-cyclical offerings should cushion the company against future economic storms.
Faig also said many customers are branching out into new processes — injection molders adding blow molding machines, for example.
``We can help them enter new markets,'' he said. ``We can help them with productivity. We'll have the technological advantage being in all these areas, so that we can see trends sooner, we can see changes in technology and pass that on to them.''
In other issues:
Blow molding plans. Faig said Uniloy, with about $190 million in sales, has about 28 percent of the overall North American blow molding machine market. Uniloy is strongest in machines to make polyethylene packaging, such as milk and detergent bottles. Uniloy is an average player in accumulator-head machines to make very big parts, which Milacron was already in, and is a niche player in PET packaging.
Milacron was an early leader in PET machines, then left the market. Does the Uniloy purchase signal a PET resurgence?
``That's a natural area to look at, but at this point I'm not sure what direction we'll go in in this area,'' Faig said. ``It's a growth market in containers. I'm sure there's room in that market for specialized machinery.''
Brazil. Milacron is not a household word in plastics machinery in Brazil. Brazilian firm Semeraro Ltda. makes about 50 Uniloy blow molding machines a year for sale there; Faig said that agreement remains intact.
But on the injection side, Semeraro already makes injection presses for Italy's Sandretto Group. Milacron recently opened its own machinery sales office in Sao Paulo. Faig said Brazilian manufacturing is an option for the future, as the market grows and becomes more stable. ``We're not happy with our presence down there,'' he said.
Shuffling and synergies. Milacron's new headquarters will be in the Cincinnati area, but an exact site had not been picked. ``There are a lot of areas under consideration,'' Faig said. The Plastics Technologies Group is based in Batavia, Ohio.
Elektron Technologies, set up to handle all-electric presses, will stay at the Oakley campus. Faig said Milacron hung on to the unit's building in the sale to Unova.
No decision has been made on moving any operations from Uniloy's Michigan plant to Batavia, or vice versa. Faig did say Milacron plans to integrate the two firms' accumulator-head lines.
Milacron's Mount Orab, Ohio, machining plant remains part of Plastics Technologies.
Mannesmann Plastics Machinery. ``It's a first-class organization and good competitor. Industry needs good competitors. It keeps the industry healthy and vibrant.''