Compounder RheTech Inc. of Whitmore Lake, Mich., has struck a deal with South Korean plastics giant LG Chem Ltd. that will provide each company with manufacturing in the other's region.
The alliance was driven by a need to supply the automotive market, which accounts for more than half of RheTech's annual sales, said David Bening, vice president of sales and marketing.
``What we found as we were marketing to [automotive] transplants in North America is that there's a long, arduous process to get approved,'' Bening said by phone. ``Companies like Hyundai want to use approved sources in North America.
``LG was looking to build, buy or set up an alliance here, and we were running into the same thing in Asia with Ford and GM,'' added Bening, who joined RheTech in late 2003 after a 24-year career with resin distributor General Polymers/Ashland Distribution in Dublin, Ohio. ``What we're essentially doing here is sharing manufacturing assets.''
In late 2004, RheTech began making LG's Lupol-brand polyolefin compounds for use in the Hyundai Sonata vehicle being produced in Montgomery, Ala. RheTech's own materials are being quoted and bid for production at LG's compounding plants in South Korea and China.
``Import/export is not a viable long-term option,'' RheTech President Richard Gall said in a news release. ``This alliance puts us both in position to meet local customer demand very quickly and reliably.''
Potentially, the RheTech/LG alliance could be expanded to include LG's consumer products such as refrigerators, washers and dryers, Bening said. A similar alliance is being considered for the European market, he added.
RheTech operates compounding plants in Whitmore Lake and Fowlerville, Mich., as well as a color and additives masterbatch and compounding plant in Sandusky, Ohio. The 150-employee firm compounds polypropylene, polyethylene, thermoplastic olefins and a variety of engineering plastics and alloys. Total annual capacity at its three locations - which operate about 20 extrusion lines - is around 170 million pounds.
In 2004, RheTech posted sales of more than $80 million, a 5-6 percent jump from the previous year.