Owens-Illinois Inc. is launching a pioneering effort to compression mold billions of preforms on proprietary equipment that the company said could lower production costs significantly.
The project - referred to by Toledo, Ohio-based O-I as preform compression molding, or PCM - is taking aim at the injection molding of PET preforms for monolayer bottles.
Preform production is time-consuming and costly, said Bruce Larsen, O-I vice president and general manager of the firm's Perrysburg-based food and beverage products group. O-I would like to streamline an onerous activity and become the technology leader in monolayer preform production, Larsen said.
``The injection cost for machines and molds is pretty substantial,'' Larsen said during a Feb. 19 interview in Perrysburg. ``The molds cost a million dollars, in some cases. We set out to change that paradigm and bring value to the market, but also do that in a way that gives us proprietary rights to the technology.''
For about two years, O-I has explored the possibility of compression molding the preforms that it now injection molds at many of its plants. It entered into an alliance with both Plastic Technologies Inc., a PET bottle development firm in Holland, Ohio, and with an area machine-tool builder that has expertise in compression molding, ORT Tool & Die Inc.
The original innovative work was done by Tokyo-based Toyo Seikan Kaisha Ltd., a bottle maker and O-I partner. Toyo Seikan has compression molded preforms in Japan for several years.
The companies quickly discovered, through many design iterations, that O-I could realize cost advantages by making its own compression molding machine. O-I, the second-largest blow molder in North America, typically buys preform equipment from industry leader Husky Injection Molding Systems Ltd.
``Our objective was to get a breakthrough compression molding machine design, where the machine and the mold cost no more than the cost of just the injection mold itself,'' said Jeff DiPasquale, O-I vice president and technical director of its plastics group.
Other factors also entered the picture, including more efficient production, lower material costs per preform and better-tasting water.
The water market is a major growth area for PET bottles in North America, but one that O-I has not entered. Custom bottles, for such areas as juices, sports drinks and teas, also are attractive to O-I for future growth.
The growth in those PET markets could make O-I's investment worthwhile, Larsen said. O-I predicts the PET bottle market will grow by 35 billion units during the next four to five years, Larsen said. The market for compression molded, monolayer preforms could account for about a third of that growth, or around 10 billion to 12 billion new units, he said.
``We're a leader in the custom market today for hot-fill and barrier containers,'' Larsen said. ``But we are a nonplayer in water. That is obviously changing.''
O-I's first compression molding machine, built at ORT's facility in Erie, Mich., is to be completed by the end of March, Larsen said. The machine can produce as many as 300 million preforms a year. Production is to begin by June, and time on the machine already is sold out, he said.
O-I will make the preforms at a Toledo-area facility. The company plans a second wave of machine building after the first unit is finished, Larsen said. At least the first two rounds of machines will go to O-I. After that, the company may license machines to outside molders.
The move to the radical new PET process comes at a sensitive time for O-I. The company, also the world's largest maker of glass bottles, said in December that it was evaluating its blow molding operations and possibly could sell them. In early February, as the company made a bid to buy a Paris-based glassmaker, officials reiterated the desire to sell those plastics operations to pare down debt.
O-I's entire plastics group recorded sales of about $1.9 billion last year, with the North American blow molding operations estimated at about $1.1 billion, according to Plastics News. The company would like to find a buyer within six months and fetch at least $1 billion for the operation, co-Chief Executive Officer Thomas Young said in February.
But no matter whose nameplate is on the door, O-I will continue down the compression molding path, Larsen said.
``Part of the strategic study we've been doing is focused on how our plastic container business can best take advantage of all the opportunities we have,'' he said.
The reasons for the sale are the same reasons O-I is moving to lower-cost molding: Few PET blow molders are making much money. Profit margins are thin in a competitive market where bottles sometimes are considered commodity items. O-I suffered a 34 percent reduction in profit before interest and taxes between 2002 and 2003.
It is a fact of life that plagues many PET bottle processors, said Thomas Brady, president of Plastic Technologies and a designer of many commonly used PET bottles.
``In the industry, everyone is struggling with profits,'' Brady said. ``Over the last 10 years or so, converters have abdicated the idea of technology development. Everybody has access to the same technology, no one has any kind of competitive advantage, and that has made the PET business much less profitable.''
In Perrysburg, O-I is working on a bevy of new plastic products: two-piece preforms with a finish that can use post-consumer PET resin or polypropylene; wide-mouth bottles that can be stretched into shape; its patented, SurShot multilayer bottle technology; handles built into bottles; and clarified PP bottles.
O-I has about 30 patentable concepts for the compression molding process, much of them related to the machinery, according to DiPasquale. Virtually the entire machine has been engineered with proprietary technology, except for the PET extruder that was purchased, he said.
The machine continuously extrudes a stream of PET, cutting pellets at the appropriate gram weight and then placing them in preform cavities on a rotary wheel. The process competes well against high-cavitation injection molds for heavy production, DiPasquale said.
Because PET does not degrade as much during the less-stressful, continuous process of extrusion - compared with the stop-and-start work done in injection molding - less acid aldehyde is produced. The by-product produces a citrus odor and taste in water, DiPasquale said.
The process also eliminates gating, cracking and leaking, DiPasquale said. It may be possible to use less PET in the PCM process, lowering costs and producing a lighter-weight bottle, he added.
Others have tried compression molding for bottles before, Brady acknowledged.
``I was involved in a project in 1993 that never went anywhere,'' he said. ``But [O-I] has jumped on a different track to get the train to the end of the line. There probably are some technology facets today that would allow this to happen where it wasn't successful 10 years ago.''
The new machine eventually may tie to a blow molding unit, making the process almost continuous, he said. Within four or five years, compression molding machines may be hooked directly to a PET reactor, Larsen said. That way, resin will not have to be pelletized and shipped to converters; instead, resin producers can make the preforms, saving money, he said.
``It's more doable than you think,'' DiPasquale added.
The process is being watched closely at Electra Form Industries Inc., an outside maker of PET preform injection molds based in Vandalia, Ohio. If the economic requirements are in the right range for blow molders, O-I might have something, said Kevin Harrison, Electra Form vice president and general manager.
A key will be the melt-distribution system of the machine and how well it can respond to a tool, Harrison said. But with the industry hampered by several years of low investment in product development, O-I is bucking a trend, he said.
``The buzzword of our times now is that you have to innovate, otherwise you'll be relegated to being a commodity player,'' Harrison said. ``But you need a head start to do that, because profit margins continue to be squeezed every day. These guys seem to be doing that.''
