A Texas investor group has taken control of electronics components supplier Plastron Industries Inc. in Pharr, Texas, previously a subsidiary of Summa Industries.
Summa sold inventory and certain assets of the Plastron unit at book value and agreed to lease some fixed assets to the investment group. The buyers' new name for the business is Plastron Manufacturing LLC.
James Swartwout, Summa chairman and chief executive officer, acknowledged problems. ``I made a mistake'' a couple of years ago, he said. Summa moved Plastron to Texas from Bensenville, Ill., and invested in developing the Pharr operation. In hindsight, Swartwout said he should have sold the business.
In Reynosa, ``the Mexican company we picked to do manual intensive labor did not perform,'' Swartwout said in an Oct. 19 conference call with securities analysts.
``The [Plastron] business continued to erode with migration of the business to China,'' he said.
Customers tended to move long-run, high-volume parts to Asia. The remaining ``shorter-run, intensive operations changed the dynamics for the whole business,'' he said. ``It was a phenomenon that we knew was going on, but it exceeded our expectations.''
In its financial reports, Summa now lists Plastron - its entire electrical components segment - as a discontinued operation.
The move to south Texas from Illinois was designed to serve customers migrating to the Rio Grande Valley and to reduce manufacturing costs. Although the move substantially reduced labor costs, the expected savings were not realized, Summa said in a news release.
The investment group paid ``a modest amount of cash'' and issued a promissory note due Aug. 30, Swartwout said. The leased assets include the 30,000-square-foot Pharr building, with a value of about $1 million, and equipment worth about $4 million, according to Summa.
Summa acquired Plastron in 1999.
Across all of its operations, Summa has lost some business in the face of major steel and resin cost increases, Swartwout said. It was ``impossible to hold the line'' on pricing to customers.
The company also has a contract to sell a Fullerton, Calif., property in late November, contingent on a developer's request for a zoning change. The property is worth $550,000, Summa said.
Torrance, Calif.-based Summa reported profit of $1.6 million on sales of nearly $109 million for the fiscal year ended Aug. 31.
