Kickstart: Private equity boom fades, but plastics unscathed

Private equity has changed the plastics industry in the past 25 years. It's been the biggest M&A trend nearly every year, and it's changed the competitive landscape of the plastics processing, machinery and materials sectors.

Can anything slow down PE investors? How about higher interest rates and reluctant lenders?

Steve Daniels of Crain's Chicago Business reported this week that the PE boom is fizzling, the result of a 3-percentage-point increase in interest rates in just six months and reluctance from bankers and other lenders to finance deals.

"I cannot recall as precipitous a change as is occurring right now," Bruce Hague, Chicago-based president of national commercial banking for CIBC U.S., said. "I don't think it's done yet."

But, the story notes, the biggest impact has been on multibillion-dollar deals. Lenders are still willing to back smaller transactions, "which make up the lion's share of private equity activity." That may be good news for plastics company owners looking to cash out, although it could depress multiples.

The bottom line: Don't write off PE interest in plastics.

As the auto industry transitions from internal combustion engines to electric power, workers are bracing for how it will impact their jobs.

Jobs, minority inclusion and union representation were key points on the agenda of the Rainbow PUSH Global Automotive Summit in Detroit this week.

Kurt Nagl of Crain's Detroit Business covered the event, which included both Ford Motor Co. CEO Jim Farley and the Rev. Jesse Jackson. Farley said insourcing work from suppliers will be crucial to keeping jobs at Ford.

"It takes 40 percent less labor to make an electric car. So as a family company, we have to insource so that everyone has a role," Farley said. "We have a whole new supply chain to fill out, and diversity has to play an even greater role in that than we've had."

Farley said Ford will insource more powertrain components. I don't expect insourcing to have a big impact on Ford's plastics supply chain.

The FIFA men's World Cup soccer tournament kicks off Nov. 20 in Qatar, so I feel compelled to tease it with a plastics-related post.

Typically most of the soccer/plastics stories cover the World Cup ball (always by Adidas) and the team kits (these days they're almost always made from recycled PET, and this year there's also some so-called ocean plastic jerseys).

And who can forget NPE2006, when one company brought comfy couches and big-screen TVs for customers to watch the World Cup games instead of injection molding and extrusion machines.

Today we actually have Qatar-related plastics news as well, a new joint venture with Chevron Phillips to build a $8.5 billion polyethylene plant in Orange, Texas.

But the World Cup always seems to have some controversy as well, and this cycle that's more true than ever. So I'll leave you with a Sports Illustrated deep dive into World Cup greenwashing, including a since-retracted claim that the 2022 tournament is climate neutral and plastics neutral.

I'll give the beautiful game the last word, though. I'm rooting for the Stars and Stripes of course, but when it comes to picking the winner, I have a lucky streak on the line: I was wrong to pick the Netherlands in 2010 but right about Germany in 2014 and France in 2018. This year I'm on the record with Brazil. Although two years ago I would have picked Italy, so what do I know? If you're a fan like me, enjoy!