Industry Watch 19830

Trend "Hungary" for bigger piece of European market 
IN SPITE OF ITS NAME, Trend Technologies continues its efforts to buck the trend of a slowing economy. The San Jose-based company completed another expansion and continues to operate with a business strategy buoyed by optimism in decidedly pessimistic times. Its latest expansion, a 102,000-sq-ft molding facility in Kunszenmárton, Hungary, typifies its business model of late: Snatch up market share as competitors retract their own and establish regional manufacturing centers to better serve customers around the globe. 

"We try to have design centers with local manufacturing," Trend VP of Strategic Business Brad Frank explains, "and then we have low-cost deployment sites. So [Trend's Guadalajara, Mexico facility] tends to be the low-cost deployment site for North American business, and Hungary is the low-cost deployment site for our European business." 

Despite the plumbing and electrical infrastructure for far greater capacity, the new Hungarian plant is currently operating with only 10 machines (see photo, right). The construction of its 50,000-sq-ft main production bay can accommodate 20 machines, but for now it remains largely vacant as Trend tries to attract business. 

"For 102,000 sq ft, it's been kind of slow," Frank says, "but for the existing 10 machines it's fine. Obviously if you put 102,000 sq ft in there you're looking for some large programs, and to date, though we've done some quoting, I wouldn't say that any programs of great magnitude have panned out yet—although we continue to work." 

Trend's European Business Manager Bert Vermuelen says that when trying to lure large jobs, companies must display adequate capacity up front instead of a willingness to add space and machines later on. 

"We set ourselves up for some very significant growth objectives," Vermuelen explains. "We chose to build the facility all at once to a scale that could accommodate any project that any of our customers might throw at us. In our industry, the time that it takes to build a building is longer than our customer's decision time of who they will place a particular piece of business with." 

Typically, Trend works to target computers, networking products, and high-end servers as core markets, but it's adjusted to the Hungarian and European market landscape. 

"A larger proportion of the market in Hungary is for consumer electronics," Vermuelen says. "So we've tuned our strategy a little bit more around those kinds of markets and those kinds of customers as well." 

While Trend waits to fully utilize its new plant's capacity, Frank says it carries a tremendous amount of confidence into sales calls. 

"The other element to our strategy is our ability to go into the customers and say, 'Look, if you want to multisource globally, we've got a low-cost deployment solution in each of the regions,'" Frank explains. "Hungary is our European [deployment site], so you can supply Europe out of the Hungary operation." 

Textron, Collins & Aikman struggle to finalize sale 
DESPITE AN APPARENT snag in the deal's financing, Textron and Collins & Aikman claim the sale of Textron's Trim Div. remains alive and won't join the wreckage of other high-powered deals brokered before Sept. 11 that have since been junked. Both companies say the initial timeline was to consummate the deal by the end of the fourth quarter, and they say that deadline remains intact. 

"We are still shooting to have [the sale] close by the end of the year," Sue Bishop, Textron's media relations manager, says. "It had been left open from the beginning, and we had essentially said that we thought it would close by the fall/fourth quarter. While there have been a few bumps along the way, as I said, we're still confident that it will get done this year." 

The sale was cleared by European Union regulators on Sept. 17, and appeared to be moving forward, but the shaky financial landscape that evolved after the Sept. 11 attacks and plunging profits at Textron started to undermine it. For the third quarter, Textron Inc. posted a loss of $330 million and a 12 percent decline in revenue. In response, on Nov. 3 Textron cut 200 salaried positions, many of which were in the Trim Div. Among the victims was its president, Bill Maclean. 

"There was a general downturn in the economy and financial markets [following the attacks]," Aaron Stowell, Collins & Aikman manager of corporate communications, says. "It's made things more difficult, but certainly if you look at it overall, we're cautiously optimistic that we're going to be able to get this done by the end of the year." 

Textron's Bishop says neither company is backing out now. 

"We remain a committed seller and Collins & Aikman remains a committed buyer," Bishop says. 

Companies combine mold component resources 
CACO TECHNOLOGIES Inc. and PCS Co. are pairing complementary technologies in a business move designed to provide their customers with a total hot runner and mold base solution. The recently announced partnership intends to meld Caco's hot runner and IPM (Interactive Process Manager) controls with the PCS line of mold bases by offering the controllers and the hot runners in a bolt-on format or as part of a fully assembled mold base. 

John Thirlwell, Caco's vp of sales and marketing, says some new products will coincide with the launch of the partnership, including a cluster hot runner nozzle and a new IPM controller. He says the move fortifies the companies' tooling component presence and capitalizes on shared markets. 

"[Caco's and PCS's] markets are very similar," Thirlwell says. 

Steel importers face federal scrutiny 
ON DEC. 19, the International Trade Commission (ITC) will present President Bush with a series of recommended punitive actions against steel importers. The actions will aim to protect domestic steel producers against foreign competition, but according to many steel importers who count U.S. tooling shops among their primary customers, this seemingly benign and perhaps patriotic gesture on behalf of U.S. steelmakers could reap unexpected and highly detrimental consequences for American moldmakers. 

The ITC examines cases of alleged trade law improprieties for specific industries. A group of domestic steelmakers testified before the commission, arguing that steel importers were "dumping" cheap steel into the States, or selling the product at less than fair values. In a sweeping judgment, 12 different lines of steel, including the tool steels used for molds, were identified as products that faced unfair competition from importers. 

Tom Schade, vp and general manager of International Mold Steel, fears the repercussions of what 30 and 40 percent tariffs could mean for his business as well as U.S. moldmaking. As an importer of high-quality, specialized mold steels, his company's products don't fit the dumping designation, with many costing more than domestic counterparts. Despite this, Schade has found his company lumped in with others in the broad and, as he feels, ill-conceived action. 

"If [the ITC] goes forward, and we don't get our exclusions, and they throw punitive tariffs on our product line," Schade says, "it will be detrimental to our business, but we will survive it short term. The people it destroys are my customers, and my customers are mold shops. Once that happens, it will be the death knell of our business." 

Schade admits that it's difficult to say definitively, but he estimates that some lines of tool steel, like 420 stainless, are sourced outside the U.S. up to 90 percent. The potential 30 to 40 percent tariffs on that steel would ultimately trickle down to moldmakers. 

Schade and others argue that steels that are almost entirely produced overseas pose no real threat to U.S. steelmakers. 

In testimony before the commission, Precision Marshall Steel President and CEO Jack Milhollan questioned how much U.S. steelmakers were actually affected by imports of tool steel. 

"Although the domestic industry may claim that it is injured by imports," Milhollan testified, "I have been in this business for long enough to see that such an assertion is simply not the case. The 3.9 percent market share that the domestic industry claims to have lost absolutely does not constitute serious injury." 

Since 1998, more than two dozen domestic steelmakers have filed for Chapter 11 bankruptcy protection, but instead of being undermined by low-cost imports, Schade feels that many of these companies operated flawed businesses that would have failed regardless of imports. 

"What you're doing here is applying tariffs to support failed companies or failed business models," Schade said. "If a company is bankrupt, it's bankrupt." 

Schade likens the current economic atmosphere to that of the late 1920s when the Hawley-Smoot Tariff Act was implemented to protect U.S. businesses after the stock market crash. Other countries retaliated with their own protectionist tariffs, trading ceased, and the global economy sank into the Depression. He says the once-booming market of the late '90s and its subsequent swoon sets up a familiar stage, and one industry-specific tariff could set a trade war into motion. 

"One small action for one specific industry—do you think it's going to stop there?" Schade said. "Everyone who can think of a reason to have tariff protection for their products is going to throw out the same things, and there will be retaliatory tariffs from overseas." 

The President will respond to the ITC's recommendations by Feb. 17. In the interim, Schade himself has written a letter to President Bush in an attempt to stress the dire situation a once-vital segment of U.S. manufacturing faces. 

"Loser number one is going to be the mold and die industry in this country," Schade says. "Once all the toolbuilding moves offshore, the next thing to move will be the molding. I hate to sound like an alarmist, but this one scares the hell out of me."