Decoma International Inc. is in high gear, with a new molding operation under construction in Georgia, an upgraded paint line in Belgium, an ongoing search in Poland for a new plant and opportunities to take over production for troubled suppliers in Europe.
As the Concord, Ontario-based exterior plastics auto specialist reported record sales of US$465.5 million for the third quarter, President and Chief Executive Officer Al Power and Chief Financial Officer Randy Smallbone noted the firm is seeing continued opportunities.
Decoma just received approval for a $77 million molding, decorating and assembling operation near Atlanta to supply DaimlerChrysler AG's Mercedes plant in Vance, Ala. That plant, with production likely to start in early 2004, also will provide Decoma with an operations center to chase other auto contracts throughout the South.
The company is investing $38 million in Genk, Belgium, for a paint line to supply exterior parts for Volkswagen AG, and is in the final stages of locating a molding, sequencing and assembling facility in Poland, also for Volkswagen, Power said.
Added to that is the turmoil involving troubled suppliers in Europe, including Peguform GmbH, the German arm of Venture Holdings Co. LLC of Fraser, Mich., which is in insolvency and up for grabs.
``In Europe we are experiencing more opportunities for takeover business, and the quoting is extremely active in the wake of several troubled suppliers,'' Power said during a Nov. 6 conference call. ``Traditionally, there haven't been many takeover opportunities in the market, but this is changing - which is clearly an opportunity for our European business.''
Consider the impact on Merplas, one of Decoma's two British molding operations, which is incurring losses, but is located near an automaker now supplied by Peguform in England, Power said. The work easily could be rebid - giving Decoma the chance to bring new businesses into the underperforming Merplas - or Decoma could consider acquiring the Peguform operations as a whole.
Power said it is too early to determine what tack the company will take, but said it does give Decoma a more competitive position.
``The current climate is providing opportunities to acquire complementary businesses,'' he said. ``While we remain focused on managing our existing operations, we will continue to [look into] other opportunities to augment our growth, but will only follow through on such acquisitions if the opportunity is right.''
Decoma is well-positioned to chase any opportunity.
Its sales for the first nine months of 2002 climbed 13 percent compared with a year earlier, to nearly $1.53 billion. Likewise, its operating and profit are on the upswing. Profit climbed 43 percent for the year so far, to $69.9 million.
The firm also is looking at big sales in the coming years. It has six major contracts for front-end modules, a new business area for Decoma. It also is in talks with Asian automakers about the potential for Decoma to produce bumpers for vehicles produced in North America.
Traditionally, Japan's carmakers have molded their own fascias, Power noted, but the rising cost and complexity of bumper modules are prompting those companies to consider other options.
``During the third quarter and into the fourth we have had a number of promising discussions,'' Power said. ``It's a significant change in philosophy to even be having their discussions about going forward.
The new Atlanta plant will only aid in those discussions, he said. It will give the company a real foothold in the South.
Talks do not always pan out, though. Decoma had entered negotiations with Federal-Mogul Corp. to buy its exterior lighting unit, but Power noted negotiations failed to land a sale, although Decoma is ``open to alternative proposals'' from Southfield, Mich.-based Federal-Mogul.
