HOLLAND, MICH. — Executives of Clarion Technologies Inc. cut their teeth in automotive plastics, where consolidation has rattled suppliers. Now, backed by high-powered investors and a string of acquisitions, Clarion is leading some consolidation of its own. In just two years, Clarion's plastics universe has expanded from a small Ohio molder, Triangle Plastics Inc., to 660 employees at six factories running 150 injection presses in Michigan, Ohio and South Carolina.
The biggest deal came March 1, when Clarion bought appliance parts molder Drake Products Corp. in Greenville, Mich. The $50 million in sales from Drake bring Clarion's total sales to about $120 million for a full year.
Expect more deals, Clarion President Bill Beckman said, as the company continues to push into its core markets of automotive, heavy trucks, furniture and consumer goods.
Beckman subscribes to the "critical mass" philosophy that says midsize suppliers can't survive. Clarion officials want sales to reach the $500 million mark by 2003, then eventually to hit $1 billion.
"Speed is critical in this process. We can't just grow internally for the next 20 years and think that's going to get us there. We have to grow internally, and we also have to do acquisitions. There's a window that we have to hit," Beckman said.
Publicly traded, but still closely held by management and directors, Clarion is loaded with former executives of automotive suppliers, including Prince Corp. (bought by Johnson Controls Inc. in 1996) and the former Bryan Custom Plastics (now Plastech Engineered Products Inc.).
Just don't slap Clarion with the label "automotive molder."
"Automotive has too finite a strategy, especially from a public-company standpoint," Beckman said. "It has to be a broader base." He said the goal is to have 40 percent of its business coming from the auto market, 30 percent from heavy trucks and 30 percent from consumer goods and furniture.
Clarion wants to serve those markets using current principles of the automotive food chain: fewer, but bigger and better suppliers with design and assembly expertise, and the ability to manage big projects.
Tim Kline, as chief operating officer, oversees all manufacturing. "The suppliers to automotive have really done a nice job of offering full-service capability to the automotive com- panies to help them reduce their costs," Kline said. "But nobody's really done as extensive a job of doing that in the nonautomotive sectors. So it's our intention to build our nonautomotive share by offering those folks what they deserve."
The company has set up teams dedicated to each core market. They don't mix. Members of the heavy-truck group, for example, do not get involved in consumer goods, or automotive.
"They deal with that area only," Kline said. "So that when automotive hollers, we don't take all of our resources and put them all in automotive, so that heavy truck suffers."
The split-market approach becomes unified in Jenison, Mich., at Clarion's technology center. Clarion bought the 23,000-square-foot design shop, Mito Plastics Inc., in mid-1999.
"This resource sets us apart from the other Tier 2 suppliers," said Royce Parker, managing director of the automotive business unit.
The technology center has become Clarion's de facto headquarters — and a high-tech place to impress customers. Sixty employees, about a dozen of them engineers and designers, develop products, do prototyping, run a model department and a tool shop that makes small molds.
Parker showed off a few projects:
Designers in Jenison not only designed a plastic housing for Bissel's Lift-Off vacuums, they also built about 45 working models in time for demonstrations at a trade show.
In just 30 weeks, the facility designed and cut production molds for a Gerber no-spill drink cup.
Clarion began production of large-tonnage parts last year at a new, 168,000-square-foot factory in Montpelier, Ohio. Kline and Gene Schubert, who heads the heavy-truck group, are based there.
Ten injection molding machines, topping out at a 5,000-ton HPM machine, mold parts such as car bumper fascias, interior trim, truck baffle covers, and waste-handling bins.
Kline and Schubert left Bryan Custom Plastics after Plastech bought the molder in nearby Bryan, Ohio, in 1997. Plastech filed a lawsuit against Clarion, claiming the new company stole trade secrets and hired away at least 10 former Bryan employees.
The companies settled and, last fall, Clarion announced it would become a Tier 2 supplier to Plastech on some jobs. During a recent visit at the Montpelier plant, a 1,450-ton press was molding Ford door-panel trim for Plastech.
In early 1999, Clarion brought in Beckman as president and Dave Selvius as vice president of corporate finance. Now Selvius is chief financial officer. Both men worked closely at JCI's Interior Division, where Beckman was CFO and Selvius was director of corporate finance. Clarion moved its executive offices into the historic Woman's Literary Club in Beckman's hometown of Holland.
Beckman, 52, said he was already thinking about leaving JCI and buying a plastics molder when Clarion came calling. Beckman and Selvius are both investors in the company.
Clarion shares recently began trading on the Nasdaq SmallCap Market under the symbol CLAR, after moving up from an over-the-counter stock.
"We're a publicly traded company. That gives us a much better source of capital to make acquisitions with and to grow with," Beckman said.
Although Clarion is publicly traded, about half its stock is owned by executives and a board of directors packed with veterans of automotive and finance. According to Beckman, that gives Clarion a core group of patient investors.
That's a good thing, since the company lost $5.75 million for the first nine months of 1999, effectively its start-up year, which included building the Montpelier plant. Year-end 1999 numbers were not available for this story.
Clarion board members include Chairman Jack Rutherford, the former president and COO of Navistar International Corp.; Vice Chairman Troy Wiseman, co-founder of athletic clothing maker B.U.M. International Inc.; Fred Sotok, former executive VP and COO at Prince; Craig Weirda, a former Prince director who owns five Michigan car dealerships; and Bryan Cressey, co-founder of an investment firm with more than $1 billion in private equity funds.
Beckman said the firm should turn a profit in 2000.
Backed by the board, Beckman said Clarion wants to move quickly and seize opportunities, including acquisitions. That certainly was his experience at Johnson Controls.
"The JCI experience, I think, brought you into the realm of `What does the customer need out there and how do you address that?' JCI said the customer wants to go to one supplier to do a whole interior, and they were going to figure out how to do that. They ran hard, they ran fast. We learned a lot," said Beckman during an interview in Holland in January.
What did Beckman learn? To begin with, the importance of program management in this era of supplier consolidation. Companies like JCI manage entire systems for car interiors — and they need large, competent Tier 2 molders.
"They look at the injection molding industry and say, `I'm looking for a partner. I don't want to source it to 28 different, $30 million molders. I want one partner to take care of it,'|" he said. "That's why you need to be $500 million-plus, at least, and with a lot of technical capabilities. You can't just mold."
The same forces are pressuring — and consolidating — the heavy truck, furniture and consumer goods markets, he said.
Just like its molding capability and expertise at designing new products, Clarion sells its ability to manage big jobs, even outsourcing the molding when necessary.
That catches customers' attention, said Parker, Clarion's automotive director.
"They spend millions of dollars a year trying to do this integration," he said. "What if the same company could provide them with the designers and engineering, could take it through the prove-out and prototype phases, and successfully bring it to production?"
