Collins & Aikman Corp. is adding blow molding and more in-house recycling capabilities as it looks for ways to vertically integrate production.
The automotive interior specialist, which lists a global injection molding fleet of 909 machines, is looking for opportunities to capture dollars and improve its bottom line.
``We have accelerated our in-sourcing process,'' Chairman and Chief Executive Officer David Stockman told stock analysts during a July 8 meeting at Collins & Aikman's Troy, Mich., headquarters. ``We're doing that by putting more and more activities in our plants that used to be done on the outside. Why do we buy rather than make certain things? What proprietary advantages can we get, particularly in chemical compounding?''
The company is in the pre-launch phase now of its own compounding unit in Belleville, Ontario, starting on the high-cost engineered resins such as PVC alloys and urethane blends used as the outer skin on parts such as instrument panels.
It is installing in-mold applique capabilities at its Port Huron, Mich., molding facility and now is looking at other capabilities, Stockman said.
Adding blow molding for components such as air ducts can add to C&A's sales base while reducing the cost for shipping those parts for assembly onto the company's interior systems, he said.
New machinery to recycle scrapped parts will mean that Collins & Aikman can not only regrind standard resins - a practice it does already throughout its facilities - but also re-use damaged parts even after they go through a paint line. That should cut resin buying costs, he said.
Coming out of the red
Every dollar can make a difference for C&A, which has done well in terms of operating income, but finished in the red with net losses. In 2003, it had $3.98 billion in sales, but a loss of $57.5 million. It had a net loss of $23.3 million for the first quarter of 2004 on sales of $1.06 billion.
Collins & Aikman has not completed its fiscal numbers for the second quarter, but preliminary results show sales of $1.03 billion and profit before income tax, depreciation and amortization of about $100 million for the quarter.
The auto industry has always been tough, Stockman said, with continuing demands for suppliers to cut prices. With oil prices high, and resin costs continually climbing, there is not much hope for a quick recovery.
``Our ability to translate pricedowns has been severely restricted,'' he said. ``We do not think it's a permanent condition of life, but for the moment, we are in a bit of a squeeze.''
Meanwhile, C&A is busy launching new products. It won $450 million in new business for the second quarter, and is building a handful of new facilities.
The firm is constructing its first plant in Turkey, a sequencing center in Kocaeli, for a Ford Motor Co. contract.
The region that straddles Europe and the Middle East is a growing market: Automakers turned out a record 506,045 cars and trucks there in 2003, a 46 percent jump from a year earlier and nearly double the 270,000 made in 2001.
Collins & Aikman also is readying new facilities in Hermosillo, Mexico, to supply Ford, and in Montgomery, Ala., to make instrument panels and other components for a new Hyundai Motor Co. Ltd. assembly plant.
``We believe we're strongly on the comeback trail,'' Stockman said. ``We're not here to crow about anything. We have a lot of wood to chop and a lot of challenges in front of us.''