MORRISTOWN, N.J. — AlliedSignal Inc. is growing its nylon compounding business and said it may do the same with its recycled-PET unit.
But officials with the Morristown-based industrial conglomerate admit that making a major addition to its product line probably will be done through the acquisition of an existing business instead of through internal expansion.
AlliedSignal's plastics unit, which is part of its polymers division, raked in more than $700 million, or 4.5 percent, of the firm's 1998 sales of $15.5 billion. AlliedSignal trails only DuPont of Wilmington, Del., in North American nylon resin production.
AlliedSignal's nylon films unit, with primary production facilities in Pottsville, Pa., posted sales of about $300 million last year.
The firm already has increased compounding capacity 25 percent at its nylon production site in Chesterfield, Va., and plans to boost capacity 15 percent at a compounding plant in Sparta, Tenn., by June. The expansions will help AlliedSignal support the 6-8 percent annual growth the plastics unit has seen recently, according to Rob Gillette, the firm's vice president and general manager of engineering plastics.
``We set records for U.S. shipments in March and came close to doing it again in April,'' Gillette said in a recent interview in Morristown. ``But the key to the market this year is how fast Asia comes back. If Asia comes back strong, we can see double-digit growth this year.''
Depressed Asian markets and oversupply of raw materials such as caprolactam have driven nylon prices downward since late last year. Increased Asian demand could tighten caprolactam supply and stabilize prices later this year, Gillette said.
AlliedSignal also is looking at the possibility of expanding capacity for its recycled PET production in Moncure, N.C. Gillette said PET recycling has benefited through legislation in some parts of the country, adding that the company has similar hopes for Evergreen Nylon Recycling, an Augusta, Ga.-based nylon-carpet recycling joint venture AlliedSignal has launched with DSM Engineering Plastics of Evansville, Ind.
Although AlliedSignal's interest in German engineering resins giant Ticona has dimmed since parent company Hoechst AG announced it may package Ticona in an initial public offering, Gillette said AlliedSignal still is looking into acquisitions and alliances that will allow it to expand further into the engineering resins world.
``For us, right now, [an acquisition or alliance] is the best way to go,'' Gillette said. ``But we don't have a timetable set up.''
Gillette added that there still is room for consolidation among smaller specialty-nylon producers that may have difficulty competing as the market continues to grow.
The automotive market, which accounts for about 35 percent of North American nylon end uses, finds Allied pinning its hopes on air-intake manifolds, as are many other nylon makers.
Gillette said about 15 percent of U.S. manifolds currently are made of nylon, but that number should reach 50 percent in the next five years. At 4-6 additional pounds of nylon per vehicle, the windfall for nylon makers could be enormous.
On the new-product front, AlliedSignal commercialized four new grades of its Capron SE nylon resins last month. The grades aim for surface enhancement in power tools, mirror housings and door handles, according to application development engineering manager Mark Minnichelli.
AlliedSignal's focus on application development has led to the hiring of 10 new design engineers and computer specialists in the past three years, Minnichelli said. The firm's global design engineering team now is 25 strong. Its North American technical service group also has grown recently and now totals 14.
``The drive, especially in home improvement, is the need for product differentiation,'' Minnichelli said. ``Nowadays you can go into a Lowe's or a Home Depot and see a whole wall filled with drills, whereas before you'd go to a hardware store and see only two or three out on display.''
AlliedSignal also plans to launch new impact-modified grades of its Ultra-Tough Capron nylon resins later this year. The grades will be less expensive than previous Ultra-Tough products, but still will be able to withstand prolonged exposure to temperatures as low as minus 40§, said Darryl Nazareth, the company's technology and Six Sigma director for engineering plastics.
The new grades are being targeted for use on snowmobile parts as well as in pillar applications in vacuum cleaners.
``It's important for us, not only that we develop new materials that can outperform anything else, but that we help our customers in designing parts they can use,'' Nazareth said.