Demag Plastics Group's assembly operation in Strongsville, Ohio, has suffered a slow decline for several years, a steady trickle of layoffs, production cuts and frequent strategic changes by management. Even so, the news that manufacturing is ending there came as a surprise.
A depressing surprise, if you support U.S. manufacturing. What signal does it send when leaders of the world's largest plastics machinery maker - Mannesmann Plastics Machinery GmbH of Munich, Germany, the parent of DPG - decide they don't need a single U.S. assembly plant?
The company formerly known as Van Dorn Plastic Machinery Co. was once a manufacturing powerhouse, employing about 700 and generating $150 million in sales in the mid-1990s. The 240,000-square-foot plant will become a shell of its former self when the final 102 manufacturing workers are laid off on Aug. 28 and Sept. 28.
Demag Plastics Group will move assembly of the large two-platen injection press, the Titan, to China or India.
At a November trade show in China, an official of MPM's biggest unit, Krauss-Maffei Kunststofftechnik GmbH, said KM is looking to open an assembly plant in China. It already makes extruders there. Altogether, MPM member companies, which also include Netstal-Maschinen AG and Berstorff GmbH, build plastics machinery in Germany, Switzerland, China and India.
Strongsville was the only U.S. assembly factory for all of MPM.
By shutting down assembly in Strongsville, MPM and its owner, Chicago investment group Madison Capital Partners, are making a statement: It no longer makes business sense to build injection molding machines in the United States. Not even for a conglomerate with total sales of about $1.6 billion. Not as a hedge against currency fluctuations. Not for large-tonnage injection molding machine business that has been fairly solid.
Clearly, the U.S. market for injection presses remains depressed, half the size of the boom period of the late 1990s. DPG executives also said strong demand for all-electric presses - now about 50 percent of units sold to the U.S. market - makes it less important to build hydraulic machines in Strongsville.
DPG officials promised to retain about 75 people in Strongsville to handle sales, service and technical support. Still, shipping costs to send Asian-built large-tonnage machines to U.S. customers will eat up profit. Also, no more assembly could make DPG vulnerable to competitors for spare parts to serve the 11,000 presses installed in North America, most of them Strongsville-made Van Dorns.
We would love to hear answers from Madison Capital. But ever since Madison bought MPM in July of 2006, its officials, including President and Chief Executive Officer Larry Gies, have declined to comment. (To be fair, the previous owner, Kohlberg Kravis Roberts & Co., also kept a low profile).
Gies' only public statement so far was that Madison Capital would not break MPM apart and sell individual units. But a year later, we're starting to wonder. In March, Madison announced a new corporate structure that puts Netstal injection presses as a subsidiary of Krauss-Maffei. Also, Berstorff and KM will merge their extrusion operations. No plants were to close as result. But Demag Plastics Group will remain independent, with its own separate management.
It sure looks like Madison is cleaning up DPG for sale.