The automotive sealing industry is continuing a shakeout, with talks under way to sell North America's largest sealing supplier and another specialist also up for grabs.
Sacramento, Calif.-based conglomerate GenCorp Inc. announced July 12 it is negotiating to sell GDX Automotive Inc., which makes about a quarter of the vehicle body seals sold in Europe and North America.
Farmington Hills, Mich.-based GDX is joined on the auction block by Cooper Tire & Rubber Co.'s Cooper-Standard Automotive Group, which has been available to bidders since March.
GenCorp executives were careful to note that the talks to sell GDX may not be successful, and offered no indication of when a sale could take place. GDX produces seals from rubber and thermoplastic elastomers.
``We have listened to our shareholders who have felt that GDX was no longer an asset,'' said Terry Hall, GenCorp's president, chief executive officer and chairman, during a July 15 conference call.
GDX would do better under the ownership of a private company that can invest in needed capital improvements, he said.
GenCorp finished its first six months of fiscal 2004 with a net loss of $331 million on sales of $136 million, which will include a one-time pretax charge of $261 million related to GDX's sale.
``Market forces are working against us, with increased material cost, capital requirements and high development start-up costs on new platforms,'' Hall said. ``In the auto market, which is famous for its pricing concessions, [the pressures] are particularly onerous.''
GDX already has restructured its operations, closing one plant in Marion, Ind., and others in Germany and Ireland during the past three years, with another in France set to close this year.
The company produced 31 percent of the glass run channels made in Europe and North America in 2001, according to a study by industry consultants ITB Group. Cooper-Standard was responsible for 17 percent.
GDX produced 27 percent of the primary door seals made in the two regions for that year, while Cooper Standard picked up 15 percent.
But the business has been changing, said Joel Kopinsky, a principal with ITB in Novi, Mich.
Firms like GDX and Cooper-Standard once could specialize in seals for complete body systems from rubber they compounded themselves. TPE now is gaining a stronger foothold in body sealing, so rubber specialists like GDX must go outside their own doors to buy the resin. At the same time, automakers are lowering their costs by allowing smaller competitors to bid on smaller sealing contracts, rather than complete vehicle systems. That increases the pressure on major players, he said.
``It's a very difficult business,'' Kopinsky said.
The auto unit has dragged down GenCorp's performance this year.
The firm ended 2003 with a net profit of $22 million on sales of nearly $1.2 billion. GDX represents nearly two-thirds of GenCorp's total sales, with $786 million from the auto group in 2003. The unit had a net profit of only $8 million for the year.
For the first quarter of 2004, GDX posted a loss of $14 million on sales of $184 million, which executives blamed on reduced auto production and increased pricing concessions to customers.
Those kinds of numbers can prompt a conglomerate like GenCorp to shed the auto sealing business and emphasize work in businesses with a higher potential for return, such as GenCorp's aerospace and defense group, Kopinsky said.