As much as 20 percent of plastics processors are about to drown in a sea of red ink, with another 60 percent just treading water - and some of them risk failure if there are stormy skies in the economic future.
But there is money to be made, three new surveys say, and good opportunities are there for small, agile companies.
Niche players - those who can offer specified processing that customers want and competitors cannot provide - are reporting profit margins well in excess of 10 percent annually, with some seeing double that or more.
``Nearly 20 percent of the companies are doing very well by any measurements you would care to use,'' said Craig Fitzgerald, a partner with Plante & Moran LLP's management consulting services in Auburn Hills, Mich.
Fitzgerald recently completed a study of more than 300 automotive suppliers, while Jeff Mengel, also a partner with Plante & Moran, wrapped up a survey of all types of plastics processors. The Michigan Manufacturing Technology Center, a state-supported consulting group, also just completed its annual benchmarking study of processors with 500 or fewer employees.
Each report has similar conclusions: that the economy has hit manufacturers hard, but firms making careful investments in technology and planning can succeed.
Profit margins for nine large Tier 1 auto suppliers in Fitzgerald's study was 3.4 percent in 2001, as they took on more work while battling high debt loads from acquisitions and price reductions from automakers. The average margin for lower-tier suppliers, though, was slightly better at 4.7 percent, but the best operators in that group saw profit margins before interest and taxes of 30 percent.
``In a lot of ways, it's better to be a Tier 2 specialist than a Tier 1 with all that money spent on engineering and design work which the [automakers] may not pay for,'' said Daniel Luria, vice president of strategy and measurement for Plymouth, Mich.-based MMTC.
Businesses in the worst shape are shoot-and-ship molders with high debt loads that rely on high-volume production to stay in business. They are losing out to cheaper production costs outside the United States and an overall decrease in outsourcing.
The business climate for nearly everyone is tough and getting tougher, though. Luria noted that clerks entering data about businesses from the last calendar year even noticed the decreases in sales.
Companies that had reported $10 million in business in 2000, he said, reported $5 million for this year's study. Some with $12 million were listing less than $10 million.
``A lot of things went wrong in 2001,'' Luria said.
And while early drops in sales numbers are linked to reductions in an overstock of inventory by original equipment manufacturers, production levels did not resume even after industries corrected those high levels, he said.
In all, the median processor in the MMTC study saw sales decline 3.2 percent in the two-year period between 1999 and 2001, he said. That compares with 17 percent sales growth for the median between 1998 and 2000.
The top 10 percent of companies in the study, however, saw their sales climb 39.5 percent between 1999 and 2001.
Those successful firms increasingly are willing to take on difficult processes and do them well - investing not just in machinery, but in employee training and skills to make complex parts.
Mengel referred to those firms as the ``Ted Nugents'' of the plastics world, hunting for every opportunity.
For instance, they may tear down products made by others and find ways to use special technology, such as two-shot molding or in-mold decorating, to make them better.
A proprietary product can be valuable, he said, but often requires a lot of investment in marketing to entice buyers, something smaller companies cannot afford easily.
Taking on engineering and design work can pay off for now, Mengel said. But he warned that if the economy weakens, customers are likely to bring that work in-house.
With an estimated 6,000 injection molders in the United States alone, there is little room for companies that do not bring something new to the table.
``It's hard to be different,'' he said. ``The more you can take a process that has an art to it, then people are going to come to you because you have the skill sets to do that work. They're coming to you because you've got something unique.''