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October 20, 2003 02:00 AM

MPM slates factory for E. Europe

Bill Bregar
Senior Staff Reporter
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    Signaling that Mannesmann Plastics Machinery GmbH is taking a greater role in its member companies, a top executive revealed plans to build a joint components factory in Eastern Europe, to double Demag Plastics Group's production in China and India, to add China technical centers for Netstal and Krauss-Maffei - and to close another Van Dorn facility in the United States.

    Van Dorn's facility in Strongsville, Ohio, for spare parts and service that opened with fanfare in 2000, will move into the company's Strongsville injection press assembly plant before the end of the year.

    MPM Chief Executive Officer Pepyn Dinandt announced the news at an Oct. 15 news conference during the Fakuma trade show in Friedrichshafen.

    Dinandt repeated MPM's oft-stated commitment to a ``multibrand strategy'' - offering injection presses, extruders and other equipment under the Krauss-Maffei, Demag Ergotech, Berstorff, Netstal, Van Dorn and Billion nameplates.

    But he also spelled out new details about the future of the world's largest plastics machinery company, owned since 2002 by Kohlberg Kravis Roberts & Co., a New York buyout firm.

    MPM generated sales of 1.14 billion euros ($1.24 billion) for its 2003 fiscal year, which ended Sept. 30. While sales gained just 1 or 2 percent from 2002, and have been flat for the past three years, Dinandt said MPM ``more than doubled'' profitability from the 2002 level.

    ``The reason why we were able to increase our profitability on this scale was because of our extreme focus on ... purchasing and material costs,'' Dinandt said. ``And obviously, in some of the brands - especially Van Dorn, for example - we also have made some large-scale redundancies.''

    On the purchasing side, Munich, Germany-based MPM has done some team buying of components for all six member brands, things like hydraulics, castings, machinery bases and cabinets for controllers, Dinandt said. MPM also cut the number of its packaging suppliers from 20 to five. Savings have totaled several million dollars.

    MPM will see even more savings when the machinery giant opens a shared components plant in Eastern Europe. Plans call for the plant by 2005 to start machining components for injection units, which would be shipped to MPM member assembly plants.

    Dinandt said company officials are looking at sites in the Czech Republic and Slovakia.

    Van Dorn downsizes

    As for Van Dorn, ``redundancies'' is European business-speak for cutting back when facilities or employees no longer are needed.

    Van Dorn, which now has joined with Germany-based Demag Ergotech to form a single injection press company called Demag Plastics Group, already announced it is closing two component plants in South Carolina. Van Dorn is selling its Duncan, S.C., machining operation that turns out toggle components, platens and parts for injection units. On Sept. 25, the company announced it would close its screw and barrel factory in Fountain Inn, S.C., and move screw production to Strongsville.

    Van Dorn also has sold a small building across the street from its factory, which had been used for sales, training and demonstrations.

    As the weak-kneed U.S. injection press market struggles to get back up, Van Dorn and other North American plastics machinery suppliers have laid off employees. At Fakuma came confirmation that the the Strongsville aftermarket operation, currently in a 77,500-square-foot building equipped with high-tech telephone equipment, will be folded into the main assembly plant.

    MPM chief Dinandt defended the cutbacks at Van Dorn.

    ``Considering the fact that they had four plants, with the development of the U.S. market the way it has been, that was three plants too many,'' he said at the news conference.

    By the end of this year, Van Dorn will have one facility.

    Dinandt said MPM has made cuts at Billion, its unit that makes injection presses in France. But he said MPM's medium-term plan does not call for any more factory closings.

    ``For the next five years, we don't see the need to do any further plant rationalizations,'' he said. MPM employment has held steady at 6,250, although some jobs added through acquisitions have replaced some lost through layoffs.

    Strongsville plays an important role as MPM's only U.S. injection press factory, according to Helmar Franz, a co-executive managing director of Demag Plastics Group. The consolidations were done to keep Van Dorn a viable, strong company, he said during DPG's own news conference at Fakuma, held the day after the MPM event.

    Franz said Van Dorn's sales declined by 15 percent in the fiscal year just ended, to 76.2 million euros ($82.6 million), from 90 million euros ($97.6 billion) in 2002.

    Officially, the big news for Demag Plastics Group was its decision to double injection press output at its joint venture plants in Chennai, India, and Ningbo, China. Each plant will expand to 600 presses a year, from the current level of about 300. The operations are doing well, Franz said, from sales to their home markets and exports to other countries.

    Netstal tech center

    MPM announced that Netstal, a Swiss maker of high-end injection presses, wants to establish a technical center in China focused on PET preform molding. Krauss-Maffei's planned tech center could be the first step in Chinese manufacturing for the German press supplier that is MPM's largest unit. Dinandt said Krauss-Maffei could build small-tonnage presses in China in three or four years.

    Both tech centers could open by late 2004 or early 2005. Dinandt called China ``a very dynamic market.''

    Given all the talk about investment in China and Eastern Europe, do the consolidations at Van Dorn indicate a lack of confidence in Van Dorn? Franz said: ``No. That's not correct. But one has to understand that the American market is decreasing. You need to adapt capacities. There's no other way. ... And this is what we are doing.''

    Franz pointed out that half of the closing Strongsville building was used for parts storage and assembly of controller cabinets. Van Dorn has enough space in its main plant to house all the operations easily, he said.

    Franz said Demag Plastics Group will improve Van Dorn's service and bring in new products by harmonizing product lines.

    ``This is all designed to strengthen the operation. It is designed to be a commitment'' to the U.S. market, he said.

    He added that the goal of the restructuring is to help Van Dorn weather a difficult U.S. market. He called the American operation ``one of our strengths of the Demag Plastics Group.''

    ``If the situation's bad, you need to keep yourselves fit,'' he said. ``And you never keep fit if you are fat. You're always fit if you are slim.''

    Dinandt said MPM has continued to invest, even as it does some cost cutting. Krauss-Maffei bought the Neureder robot business.

    Extruder supplier Berstorff picked up Adolf Seide Engineering, which makes smoothing rolls and other devices for film and sheet.

    Also, he said MPM did not cut back spending on research and development, and has invested to improve service.

    He said MPM is always ready to talk about an acquisition that fits. The company, which is heavily weighted to injection molding technology, still wants to grow in extrusion. But there are no deals in the works.

    ``There's nothing that is `hot and cooking' - as one would say in English - to talk about,'' Dinandt said.

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