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January 03, 2000 01:00 AM

TI shores up Walbro with big GM contract

Joseph Pryweller PLASTICS NEWS STAFF
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    WARREN, MICH. — Six months after buying Walbro Corp., TI Group Automotive Systems has brought both discipline and a stunning new contract to the company. Walbro has been awarded a major fuel-system contract by General Motors Corp. for its new Epsilon midsize-car program, due out in the 2003 model year, according to several supplier sources familiar with the program. The contract could be worth as much as $175 million in annual sales.

    The global contract is a major coup for the new Walbro. The fuel-system supplier, based in Auburn Hills, Mich., had been slowed by management and profitability issues before the TI Group takeover in June.

    Those problems also were recognized by TI Group plc, an Abingdon, England-based conglomerate with $2.2 billion in 1999 sales for its automotive systems unit. But the company wanted a leading fuel-system company to marry with TI-owned Bundy Group, a maker of vehicle fluid-carrying systems based in Warren.

    With TI Group's financial discipline and operating savvy, the company believed those problems could be easily fixed, said D. James Davis, president of TI Group's North American operations. Walbro recorded sales worldwide of $677.9 million in 1998.

    "We knew coming in that Walbro's cash management was very poor," Davis said during a Dec. 16 interview. "Justification for capital spending and control of capital spending was also very poor. And we had some sorting out to do with management teams."

    The proof of that tinkering is in the contracts. The Epsilon contact includes the Chevrolet Malibu, Oldsmobile Alero, Pontiac Grand Am, Saturn L series and Opel Vectra in Europe.

    Walbro, retaining its name under TI, will make coextruded plastic fuel tanks, pumps and fuel lines under the contract, said Davis, who did not specify which automaker gave the award.

    As many as 1.6 million vehicles could be produced globally with Epsilon, according to sources familiar with the global platform. If Walbro has the entire contract, it could be worth between $100 million to $175 million in sales annually, sources said.

    "They are a company to watch closely," said one competitor who did not want to be named. "They're much stronger now."

    TI Group is both expanding and reorganizing to transform Walbro, said Davis, who works from TI Group's Warren offices in the Bundy headquarters building.

    Among plans is an expansion at Walbro's Ossian, Ind., plant. The company is spending more than $10 million next year to bring in two more double-shuttle coextrusion machines, Davis said.

    The 60,000-square-foot Ossian plant opened in 1997.

    TI's automotive systems — including all its fluid storage and delivery products — are expected to reach about $1.2 billion in North American sales in 1999, placing the company among the leaders in fuel-system revenues.

    "We are planning some very aggressive growth," Davis said. "With both Bundy and Walbro, we are in a better position in North America than most of our competitors. We want to take advantage of that."

    One concern is new evaporative emission requirements, called LEV II, that are expected to be enacted in California by 2002. That state's air regulations board wants to limit the amount of fuel and vapor emissions coming from vehicle fuel systems.

    Typically, regulations enacted in California tend to roll across the United States, Davis said. A team from both Bundy and Walbro are working at Walbro's Auburn Hills testing center to develop products that meet those tighter standards, he said.

    Internally, TI Group has replaced most former Walbro executives with its own officials. The company is integrating its marketing and engineering teams and organizing them by customer account, Davis said.

    The company is terming its new approach "common sense marketing," or CSM.

    "We're treating it more like a grocery line than a bank line," Davis said. "In a bank line, a customer goes to the next available window when a project comes up, whether it's for DaimlerChrysler, GM or someone else. We're setting up a grocery line, where we can choose the line we want.

    "That way, the really important focus can be on our customers."

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