This year has been one of transition for MVP Plastics Inc. in Middlefield.
The injection molder started 2019 with about 95% of its business in the automotive sector. By August, that share was intentionally down to a little more than 60%, said president and CEO Darrell McNair. As demand for new vehicles declines, he wanted to protect his company against a possible downturn.
"Think of it as a tripod," McNair said. "The more legs you have up underneath you, the more stable the foundation."
McNair has wanted to diversify MVP Plastics — which has plants in Middlefield, Ohio, and Brownsville, Texas — away from automotive for a long time. But 2019 actually presented an opportunity to start that process. The company had an automotive program that was phased out, which opened up capacity for other work.
Diversification helps businesses to "spread the risks," particularly when the economy is sluggish like it is now, said Perc Pineda, chief economist at the Plastics Industry Association in Washington, D.C. He's heard more interest in business diversification in the plastics industry in the last three to four months as production, while still positive, has declined compared to last year. Companies are looking for potential areas of growth in which they might expand.
Automotive in particular is an industry going through a lot of changes that could affect suppliers, Pineda said. The industry's move toward more electric vehicles will change the types of parts vehicles need. Even the ride-sharing trend could lead to more demand for recycled, easy-to-clean materials in vehicles, he added.
These changes don't mean that plastics companies have to abandon the automotive sector altogether, but Pineda said it is a good time for companies to think about how they want to fit into the sector going forward.
At MVP Plastics, the company's decreased automotive work gave it the chance to make some moves in the consumer market.
For one, the company had been doing molding for car seats and booster seats for a customer in Canada, McNair said; this year, that work moved beyond molding and into full assembly.
MVP also made an acquisition in late 2018 that brought a line of arts and crafts-related storage containers, like pencil cases, to the company. That work began to ramp up in 2019. McNair said that in 2020, MVP intends to put a marketing plan in place for that container line. Currently, MVP is selling those products to retail chains.
With plans to further diversify the company, he's looking at another non-automotive acquisition he hopes to complete by the end of the year. That would take MVP's automotive business to less than 50% of its overall business.
The transition hasn't been easy, though. The automotive program phased out in February, and the car-seat assembly for Canada didn't begin until August. McNair said the company had to modify shifts and lay off some employees to match the lessened work. MVP started out 2019 with about 80 to 85 employees, McNair said. Today, it has about 65. He declined to disclose annual revenue for the company.
But McNair said he's hopeful the changes MVP made in 2019 will set it on a course for success.
"I'm hoping it creates a stable platform for the future for us to grow off of," he said.
He's optimistic about 2020. The consumer programs that started in 2019 will be ramped up by then, and the company has some new programs launching next year, too.
A new relationship with a Chinese company could also lead to new business.
In 2019, MVP entered into a strategic alliance with Junchuang Auto Technologies Co. in Suzhou, China. So far, the two companies have a signed commitment, and work is expected to begin in early 2020, McNair said. MVP has previously had a small presence in China through a different partner, but this will significantly grow its status there.
McNair said the new partnership was largely driven by tariff pressure, as Junchuang's products were being exposed to additional costs. MVP will serve as a U.S. manufacturing source for Junchuang, and MVP will be able to manufacture its own products at Junchuang's plant in China.
The Chinese business is primarily automotive, so it doesn't help with McNair's business diversification goals. But the alliance will give MVP more of a foothold globally, which is something its automotive customers have been looking for.