Hedstrom Corp. is outsourcing nearly 50 percent of its play-ball production to China, a move officials call necessary for survival.
As of Sept. 1 the firm began sourcing all blow molded balls from the Far East, said Jim Braeunig, Hedstrom's vice president and general manager. Some of the company's rotational molded balls already were produced in China.
``We've got some timetables into the middle of next year that should complete'' the production shift, Braeunig said in a Sept. 17 telephone interview.
The news is significant to the domestic play-ball industry, which is dominated by Hedstrom with two facilities in Ashland, Ohio, about 70 miles south of Cleveland. Competitor National Latex Products Co., also of Ashland, is just a few miles away.
Hedstrom blamed the pressure of foreign competition and an unforgiving retail environment in which chains like Wal-Mart Stores Inc., Target Corp. and Kmart Corp. dictate pricing.
``We cannot increase our selling price,'' Braeunig said. ``If anything, prices will reduce and every element [of cost structure] is going up. Down the road, we feel our business would be under pressure if we didn't react to the competitive needs. We want to make sure we protect the business and our core people.
``Rather than staying the same and going out of business, we'd rather react and change and maintain as much domestic capabilities as we can.''
Braeunig said Hedstrom remains profitable and is depending upon its growing custom molding division to support a union work force in Ashland, where it is the area's fourth-largest industrial employer.
Hedstrom still will be inflating, labeling, shipping, packaging and handling logistics for the made-in-China balls from facilities in Ashland; Reno, Nev.; and Dothan, Ala.
So far layoffs have been minimal - 60, according to Paul Slack, Hedstrom's human resources director, and only 12 are permanent. Typically the firm has a yearly layoff of about 40 and ramps up again in late fall.
``This year it's a seasonal layoff with mass layoff ramifications,'' Slack said. ``We don't expect that the core people who work here are going to be put out. While we were doing seasonal layoffs, we were hiring for the industrial sector.''
All of Hedstrom's custom molding, which represents about 20 percent of its sales, is handled in the United States.
``In industrial rotomolding, we've been able to grow substantially over the past three years,'' Braeunig said, citing the addition of nearly $3 million in business. ``We've seen a significant increase in the number and type of parts that we produce.''
The firm just purchased a Ferry 280 three-armed cart machine that has yet to be installed at Ashland Plant 2, a 105,000-square-foot building that is used 100 percent for industrial products. Last year it added a computer numerically controlled router and earned ISO 9001 certification for the facility. The plant also now houses a 1500 McNeil machine that was used in the ball division.
Officials from Local 524L of the United Steelworkers of America are depending on growth in industrial products and the logistical operations to sustain most of the 220 employees.
``Any time we hear about China, that's a concern,'' said Brenda Hinkson, Local 524L's president and a 22-year Hedstrom veteran.
The union signed a five-year contract with Hedstrom in August 2001, reaching the agreement two months earlier than both sides anticipated. Contract talks included a discussion of the firm's plans to shift some work to China.
``It looks a lot better now than it did a year ago,'' Hinkson said. ``We've had time to work with the company and those involved from China. I think we're actually going to grow bigger. It's going to take downsizing to rebuild again. I have no doubt that nothing is going to change.''
Hedstrom issued a letter in July under the Ohio Worker Adjustment and Retraining Notification Act, anticipating a worst-case-scenario layoff of 70 workers, officials said.
Officials do not plan to dismantle any of the nearly 20 rotomolding machines at the two Ashland plants. The firm had operated five blow molding machines, which sat idle during a Sept. 9 plant tour.
``We have the dominant market share,'' Braeunig said. ``We need to be the price leader and the low-cost producer and that's what we intend to do. We have to work to maintain that core business.''
Unlike other large rotomolded toys, plastic balls are manufactured easily in China. After production, they are deflated and shipped to the United States. Braeunig would not discuss details of the arrangement with Chinese vendors.
``The Chinese are becoming more efficient in processes and in technical capabilities,'' he said. ``Rotomolding happens to be one of those processes.''
Hedstrom, which is owned by a group of investment banks led by Credit Suisse First Boston, reported 2001 rotomolding sales of $56 million on total corporate sales of $275 million.
Hedstrom filed for Chapter 11 in 2000; it emerged from bankruptcy protection last year.