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November 06, 2006 01:00 AM

Moll break from Whirlpool to spur closings

Bill Bregar
Senior Staff Reporter
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    Moll Industries Inc.'s 50-year history of molding for Whirlpool Corp. is over, causing Moll to close three plants and lose a $60 million chunk of business.

    Moll announced Oct. 27 that the company will close factories in Fort Smith, Ark.; La Vergne, Tenn.; and New Braunfels, Texas. Dallas-based Moll will cut 416 jobs from the three plants, according to Dana Gecker, marketing manager. Moll will close the plants by the end of this year.

    Moll officials said the decision was made for financial reasons, because the custom injection molder was faced with ``unsupportable'' profit margins on its Whirlpool work.

    Joe Pack, Moll's vice president of sales and marketing, said the two companies could not agree on pricing.

    ``We couldn't bring our costs down into the pricing it needed to be,'' he said. ``At the end of the day, we couldn't top it. We couldn't beat their pricing. And so we elected to exit,'' he said.

    Two appliance industry sources said Moll tried unsuccessfully to raise prices to Whirlpool, but Pack strongly denied that. ``We did not try and increase pricing at all,'' he said. Pack said the contract covered several issues, including pricing, engineering and tooling support, and future givebacks.

    People from several molders that serve the appliance market declined to comment when asked if they are trying to get the Moll business. Hundreds of molds for Whirlpool parts are being moved out of the Moll factories, said one source at a competing appliance molder, who spoke on the condition he not be identified.

    Pack also said Whirlpool is looking to move some of its injection molding work to automotive molders, a segment that has lots of excess molding capacity.

    ``Shutting down facilities in the Midwest has left a lot of capacity in the injection molding world, on the automotive side, and they feel that they can capitalize on the existing capacity and give economic pricing,'' Pack said.

    Pack said Moll already has seen automotive molders quoting on appliance jobs.

    Whirlpool spokeswoman Jody Lau declined to comment on which companies are getting the Moll work.

    ``We do not comment on our relationships with individual suppliers or our supply chain strategy,'' she said.

    Whirlpool has been realigning its manufacturing after merging earlier this year with Maytag Corp. to create a mammoth company that holds nearly half the U.S. appliance market.

    A major cost-cutting program includes moving work around and closing some appliance assembly factories.

    One source close to Whirlpool disputed Pack's comments about automotive molders. He gave Whirlpool's perspective: ``I've closed and consolidated Maytag facilities and I've inherited those suppliers. I've idled capacity at those molders, and so if I need capacity, I've got the pre-approved supply base that already knows appliance. This means that there's no real reason to even go look at the automotive guys.''

    U.S. appliance companies are under pressure from an intense retail environment and Asian competition, including LG Electronics Inc. of Seoul, South Korea, and China's Haier Group in Qingdao. Haier had wanted to buy Maytag and establish a major U.S. presence.

    Ending the rumors

    Moll's plant-closing announcement ended weeks of rumors in the appliance industry that Whirlpool was considering pulling work from Moll, one of its largest plastics part suppliers. Whirlpool was a key account for the molder. Moll officials said about 40 percent of its sales come from the appliance industry - largely Benton Harbor, Mich.-based Whirlpool. Moll had $162 million in total sales in 2005.

    Pack said each of the three plants set for closing have about 50 injection presses. Some of the machines will be moved to other Moll plants and the rest will be auctioned off, he said.

    ``It's not a decision we came to lightly. It is a difficult decision to make, but it is the right one for Moll to make,'' Gecker said.

    Moll Chief Financial Officer Jim Rugg said the three plants set to be closed mainly served Whirlpool. Moll's five remaining factories are in Seagrove and Lexington, N.C.; Donegal, Ireland; and Ramos Arizpe and Empalme, Mexico.

    Moll already had started a diversification strategy to do more medical, consumer product and automotive molding. Gecker said the company still has some business in appliances, but she declined to identify any customers.

    ``We're committed to the appliance business, and this is not an exit out of appliance for us,'' she said.

    The rumors about Moll and Whirlpool accelerated after Moll abruptly shut down a factory in Tucson, Ariz., just two months after it moved work there from a shuttered plant in Costa Mesa, Calif.

    Gecker said Moll is ``financially stable'' under owner Highland Capital Management LP, a Dallas investment firm. Highland officials had no comment.

    Moll has experienced financial problems in the past. Former owner George Votis led a string of debt-financed acquisitions in the 1990s. But in 2002, Highland Capital Management, its chief lender, forced Moll into Chapter 11 when Moll was past due on $48.4 million in loans. Highland ended up taking control of the custom molder and the firm emerged from bankruptcy in mid-2003.

    Rugg said the company is investing in injection presses at its plants that will remain open, and is hiring people for its core market segments. The company said its Mexican operations and medical business are growing and now are ``focal segments.''

    Gecker said Moll's Ramos Arizpe plant also does work for Whirlpool. The plant opened in late 2005 to serve a Whirlpool plant in that town that makes side-by-side refrigerators. But she said Moll's factory there is getting more nonappliance work, including in Mexico's growing medical market.

    Moll's relationship with Whirlpool goes back more than 50 years, beginning with the old Moll Tool & Plastics that started in Evansville, Ind., in the late 1940s.

    Gecker called it ``a long and very positive partnership,'' but added, ``the business is a dynamic business and things change.''

    Already price-sensitive, the appliance market is getting even tougher, said the anonymous appliance molder. ``It's a scary thing when you're in this industry,'' he said.

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