Old-timers in plastics processing and toolmaking must chuckle when they see all the stories about the inevitable trend toward consolidation in their businesses.
You see, they´ve been through this before. Deal makers didn´t suddenly discover plastics for the first time a few years ago. Plastics have been in and out of favor with investors for more than 50 years.
If you have any doubt, think movie history. No, not the disdainful and frequently misquoted scene from 1967´s The Graduate, but Frank Capra´s 1946 classic It´s a Wonderful Life. In that film, industrialist Sam Wainwright (George Bailey´s one-time rival for Mary Hatch´s affection) made a fortune manufacturing plastic hoods for World War II planes.
In post-war America, the idea that a financier could get in on the ground floor in the plastics industry and make a million dollars had a ring of truth to moviegoers. To many people, it still does.
Today, however, plastics is becoming a more difficult business to break into.
A few years ago, anyone with a barn or a decent-size garage could become a composites fabricator if they were willing to learn the art of hand lay-up. Styrene emission regulations now are driving small firms out of business.
Most apprentice mold makers once dreamed of starting up a small shop of their own. Today, the cost of the technology and stiff competition from around the world are making that tougher.
New injection molders and thermoformers used to pop up on our news pages every week — not to mention dozens of would-be plastics recyclers. The pace of those start-up shops has slowed. Blame that on the cost of equipment and the expense and scarcity of trained workers.
It´s the cyclical nature of business: Companies start, then consolidate as markets mature. New firms eventually crop up that cherry-pick business from the big firms. Right now we´re in the consolidation phase.
When this stage is finished and it´s time for fresh growth again, entrepreneurs will find that the game has changed. For one, the playing field no longer has boundaries. Any start-up injection molder or tool builder really does have to worry about competition from Mexico and China, not just the shop down the road.
In last week´s issue, a top executive of Singapore-based Flextronics International Inc. was quoted saying: "I think it will be harder and harder for injection molders to be located in the United States." Flextronics is rapidly expanding its own processing business, but it´s also feeling pressure to cut costs. Just a few days ago, it announced plans to shut down the bulk of its manufacturing operations in Singapore, where it employs about 900, and move the work to China and Malaysia.
Still, "harder and harder" doesn´t mean impossible. With every layoff announcement and plant closing, the seeds are being sown for a new crop of capitalists who will find the right niche for a new business.