Two of metro Detroit's largest automotive-plastics suppliers, Cambridge Industries Inc. and Key Plastics LLC, are exploring options that include new financial partners or the sale of some or all of the companies, according to investment bankers, customers and competitors. Madison Heights, Mich.-based Cambridge and Key Plastics, based in Novi, Mich., are both highly leveraged, had their bond ratings downgraded recently and are getting pressure from banks for an increased investment to cover loans.
The companies, which are not related, had combined annual sales of $796 million for the first nine months of 1999. Cambridge lost $16 million for the first nine months of 1999 and expects a loss for the year as a whole.
Both companies' financial problems are being used against them by rivals for new bids, such as Venture Industries Corp. of Fraser, Mich., said an anonymous executive at a Tier 1 supplier that buys parts from Key and Cambridge.
Michael F. Dorney, vice president for sales and marketing at Budd Co.'s Plastics Division, said he has received calls from carmakers asking whether Troy, Mich.-based Budd can handle some of Cambridge's work.
Rumors of Cambridge's availability have been around for a while, according to the anonymous executive and several investment bankers.
"And these commercial banks are keeping their feet to the fire because they had a piece of Breed and are asking, `Is Key or Cambridge next?' said Frederick Taylor, director of high-yield research for Schroder & Co. Inc. in New York.
Breed Technologies Inc. of Lakeland, Fla., filed for protection from creditors last year.
Taylor did not have specific knowledge of deals involving the firms, but said he could envision debt-for-equity swaps in which an investor puts money into the companies in return for buying the debt at a discount.
Cambridge primarily compression molds, but also injection molds, blow molds and extrudes.
Key Plastics is 75 percent owned by its board of directors. Its chairman, Joel Tauber, also is chairman of Detroit-based scrap-metal processor Keywell Corp. Key Plastics was 16th in Plastics News' ranking of injection molders in 1999.
"The market is there and ready for someone to bring together one major Tier 2 plastic injection molder. Suppliers like Lear, Delphi and Visteon would like to have one large supplier, sales of maybe $1.5 billion, that they could rely on. No one is there yet," said Jeffrey Sands, director of investment-banking at PriceWaterHouseCoopers Securities LLC in Detroit.