Automotive parts supplier Excel Industries Inc. is evaluating its strategic options, including the possibility of selling the firm.
The Elkhart, Ind.-based company — on a short list of major suppliers of plastic window encapsulation systems — announced Nov. 18 that it has hired investment banking firm Morgan Stanley Dean Witter & Co. to consider alternatives to enhance shareholder value.
The alternatives could include anything from new acquisitions to merging operations with another company, said Excel Chief Financial Officer Joseph Robinson.
No timetable was set to complete the evaluation at Excel, Robinson said.
But others on Wall Street said a sale could be likely for the firm. Excel's announcement immediately was greeted by a sharp rise in the publicly traded firm's stock price, which jumped three points to about $18.60 a share Nov. 18. By Nov. 20, the stock still was trading at close to $17 a share.
Several equity analysts said the firm is a viable candidate to be sold. One reason is that Excel has had difficulty running its fairly new seat-track mechanisms business. The firm will take a $9.3 million loss in pretax profit, about 75 cents a share, during Excel's 1998 fiscal year to account for high start-up costs on its new seating products, the firm said.
The company did not plan well for costs to obtain necessary equipment to launch new seat-track programs, said analyst Michael Corelli of Du Pasquier & Co. in White Plains, N.Y.
That difficulty, plus the company's problems competing with larger interior-parts suppliers, has industry experts anticipating a sale, Corelli said.
``They've been hurt by terrible start-ups of new launches,'' Corelli said. ``I think they've been disappointed by their stock prices. At this point, selling would not be a bad idea.''
The company has not ruled out any alternatives that would spike shareholder value, said investor relations spokesman William Schall. The Excel board of directors decided to hire Morgan Stanley after reviewing its strategy on a continuous basis, he said.
The company's sharp sales increases — spurred by recent acquisitions — without corresponding stock price changes has played a part, Corelli said. Excel recorded $962 million in 1997 sales with profit of $17.5 million.
But the recent seat-mechanism problems might have further spurred the decision to seek outside help. Those difficulties stemmed from Excel's 1996 acquisition of Atwood Industries Inc. of Rockford, Ill., which makes seat parts and recreational-vehicle components.
Since the acquisition, Excel has closed seat-mechanism plants in Rockford and Battle Creek, Mich., and consolidated operations in Stockton, Ill., Schall said.
But recently, costs spiraled in making seat parts at the Stockton plant for the redesigned Ford Motor Co. Windstar minivan and several General Motors Corp. cars. That led Excel to not only announce lower earnings figures but to seek pricing relief from Southfield, Mich.-based supplier Lear Corp., which is assembling those seats using the Excel parts, sources said.
The firm's core business in injection molded plastic parts continues to perform well, Robinson said. Those operations include molding operations run by Excel's Mishawaka, Ind.-based Plastic Products Group, which includes its Nyloncraft and Mark 1 Molded Products subsidiaries.
Those operations ranked 61st on Plastics News' listing of North American injection molders with $85 million in 1997 sales.
The firm makes plastic parts for window encapsulation systems and door systems and other custom injection molded products. Window encapsulation competitors include Donnelly Corp. of Holland, Mich., and Guardian Industries Inc. of Auburn Hills, Mich.
In January, Excel also said it would buy 70 percent of Schade GmbH & Co. of Plettenberg, Germany. Schade, which has sales of more than $275 million, makes plastic encapsulated window modules and exterior trim.
Any and all of those operations could be part of the review process, Schall said. Another possibility is selling part of Excel's sprawling operations, he said.
``Nothing is out of the question,'' Schall said. ``Our minds are open about it, and we want the best advice from Wall Street. ''