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Jul 1st, 2005                                Print this article

The MPW 50

By Modern Plastics Editorial Staff

Here's an introductory look at 50 OEMs MPW has chosen to follow for their importance to plastics. Taken as a prism through which to view the future health and trends in plastics, MPW will continue to track these manufacturing leaders for you. Full staff report.

Custom processors live and die by their OEMs' success. The decade of the 1990s saw unprecedented growth in molding capacity as OEMs in a variety of markets-packaging, consumer electronics, telecommunications, computers and business equipment, and more-increased new-product output and built huge inventories in anticipation of the endless demand for goods. Then came the 21st Century.

Brian Jones, president and CEO of Nypro Inc., one of the world's largest contract manufacturing molding suppliers, told the rest of the story recently at a meeting of the Society of the Plastics Industry's molding, machinery, and moldmaking divisions.

"The OEMs changed the philosophy of custom molding," said Jones, citing the statistics: 80% of the OEM suppliers that were around 10 years ago are no longer in existence.

Supplier reduction is a fact of life. For example, Nokia has gone from 600 suppliers to 100, then 20 suppliers worldwide today. Nypro is one of those 20.

Consolidation of suppliers means fewer molders with a larger portion of the pie. Global demands from OEMs means that suppliers have to be global in their business model in order to win the work. Global Supply Chain Management is an absolute necessity if processors are going to play in the same sandbox as the big OEMs

A major shift in the business model or strategic supply chain at an OEM can mean a major shift in business for the supplier. And, as Jones pointed out, a lot of suppliers refuse to face that reality. Making the customer's business your business is key to staying in the game. CG

Look out below

Mega suppliers crumple under heft of their own weight with ample ramifications for lower-level plastic processors

When Delphi spun off from General Motors (GM) in 1999, followed shortly by Visteon in 2000, the size of the automotive OEMs' former parts divisions spurred a wave of consolidations across the supply chain, giving rise to what some have called the mega supplier. As part of this movement, the drive toward integrated assemblies grew, with companies no longer bidding on individual components, but instead vying for entire cockpits or interior subassemblies.

Much of that consolidation was already occurring, according to Automotive News, which found that from 1992 to 2000, the number of suppliers with global sales of more than $10 billion went from three to eight, and the number with sales of $2 billion to $5 billion more than tripled from 11 to 35. The publication felt this concentration would continue, with the 2500 Tier 1 suppliers in 1995 being winnowed down to 1500 by 2005.

Of the players making a push toward total cockpits at one point or another, including Collins & Aikman, Delphi, and Visteon, only Lear claims to be successful, being granted total interior integrator responsibility in 2002 for the 2006 Cadillac DTS and Buick Lucerne, which come out this year.

Lear also appears to be the only one making a profit, earning $15.6 million in Q1 2005. Visteon lost $1.5 billion in 2003, followed by a loss of $1.2 billion in 2004, and the outlook for 2005 remains bleak in the midst of an accounting scandal that has driven out six executives.

In January, Delphi announced that it expected to lose $200 million in 2005, citing raw material costs; the burden of wage, pension, and health-care outlays; and production cuts by its largest customer, General Motors. In its unaudited Q1 2005 financial results, it reported a loss of $409 million. And, of course, Collins & Aikman is already in bankruptcy, filing for Chapter 11 protection on May 17 after the resignation of its CEO David Stockman and the delay of its first quarter earnings release. The company said it would also have to restate 2004 results, but it estimated that it lost $409 million on sales of $3.9 billion for the year.

No relief in sight

In the long run, processors serving these companies have suffered along with them, if they remain in their employ, facing cost reductions and delayed payments. From 2001 to 2004, Visteon reduced its supply base from 2500 to 900. For those that remained, Visteon tried to lock them in for the long haul, increasing the number of suppliers under long-term contracts from 5% when it started to 68% now.

Both Visteon and Delphi continue to try to wean themselves from their former OEM parents, with non-Ford revenue at Visteon up 35% in 2004 to $5.6 billion, which was 30% of total revenue. For Delphi, non-GM revenue for Q1 2005 was $3.5 billion, up 8%. This amounted to 51% of the quarter's total revenues.

That path away from GM has led Delphi to branch into other markets, including wireless and consumer electronics products, which grew 500% in 2003. In that same year, it shipped 1.8 million satellite digital audio receiver systems.

Yes, but.

In spite of their current cash problems, and the future weight of pensions, health care costs, and materials, which they're likely to extract from their suppliers, the automotive market remains a huge one for processors, and one that has benefits. Projections for a tepid 2005 have 15 million vehicles being sold in North America, and another 18 million in Europe.

Lear, Delphi, Visteon, and C&A are all demanding of suppliers, with each company posting multipage supplier requirement manuals on their websites. Common themes include ISO 9001, QS-9000, or TS 16949 registration. Lear also asks that suppliers produce advanced quality plans for new products, and that component review meetings be held where suppliers can identify product/process characteristics that will be statistically monitored. Suppliers must be able to produce 115% of the quoted volume for a job, and any product or process changes must be approved in advance, with sample parts submitted for review. To keep tabs on suppliers and determine eligibility for its Supplier Hall of Fame, Lear has a supplier rating system, which provides a score based on rejected parts per million, written complaints, delivery, service (including environmental reporting), and competitiveness.

In its statement to suppliers, Delphi says: "Our suppliers are expected to have zero incidents and zero disruptions; provide products with zero defects; and have flawless delivery performance and on-time responsiveness to issues." Delphi suppliers, as do many in automotive, must register at the company's portal hosted by automotive e-commerce platform, Covisint. The company states that it will not accept quotes or issue contracts or purchase orders with minimum order quantities. In terms of payment, its standard term is MNS-2, whereby the minimum payment term is the second day of the second month (on average) following receipt of goods or receipt date of services.

For Collins & Aikman suppliers, just getting paid-period-might be the biggest worry nowadays. In a letter to suppliers, however, the company assured its vendors that going forward, payment will not be an issue, with adequate cash on hand now that credit debt is temporarily suspended, and the fact that it was granted $300 million in debtor-in-possession financing, with new CEO Charles Becker stating, "We are in a better position to pay you today than we have been in some time."

For those suppliers waiting for payment on goods or services submitted before the company entered Chapter 11 on May 17, the wait may be longer. Federal law dictates that the bankruptcy court approve those payments; parties owed essentially take a number. Once the court has established a deadline for filing claims, suppliers owed money will receive a proof-of-claim form with filing instructions.

Going forward, Becker and C&A did concede that now would not be the time for a supplier to impose a price increase. "We cannot pay more for goods and/or services at this time," Becker said in the letter. "Our ability to purchase from you on favorable terms and at competitive prices is critical." TD

Toyota Motor Co.
Revenue: $172.5 billion
Markets: Automotive, housing, marine, biotechnology
HQ: Toyota City, Aichi Prefecture, Japan
Employees: 264,410

If you're in the auto parts business, you'd be lucky to count Toyota among your customers. Group sales were up 8.8% last year to 7.633 million vehicles and it appears only a matter of time until highly profitable Toyota dislodges GM from number one spot in the global auto stakes.

Toyota has traditionally relied on group companies such as giants Denso, Aisin, and Toyoda Gohsei to meet its part requirements, but with these firms running at full capacity to keep up with strong demand for Toyota vehicles, the firm is widening the net to encompass former Nissan group firm CalsonicKansei. "Toyota's strategy is to tap parts suppliers that possess their own unique technologies and learn from them," says George Ohgaki, head of consultant Infinite Technologies (Tokyo). "It's also placing increased emphasis on recyclability."

"Toyota's dominant suppliers are still Japanese, but it's expanding its net to include European and U.S. suppliers," says the EIU's Maxton. "They tend to get a small piece of business to work on for several years to see how the relationship progresses. It is a lengthy process."

General Motors Corp.
Revenue: $193.5 billion
Market: Automotive, electronics, avionics
HQ: Detroit, MI, USA
Employees: 321,000

The world's largest automaker reported that it lost $1.1 billion the first quarter, dragged down by a $1.3 billion loss in its core business: selling cars and trucks. It was the worst loss since GM neared financial collapse in 1992, according to one report. GM's first quarter revenue was $45.8 billion, down from $47.8 billion a year ago. The net loss adjusted for special items came out to $839 million.

Additionally, GM and Fiat SpA officially dissolved a partnership formed in 2000, signing a separation agreement in Amsterdam. GM agreed in February to pay Fiat $2 billion to resolve a contract dispute, allowing the company to divest its stake in Fiat's auto unit and revise their business relationship. Each company will regain ownership of all assets they respectively contributed to their engine joint venture, Fiat-GM Powertrain, when it was formed, and each maintains a 50% interest in a Polish engine plant.

Competitive issues continue to plague GM, as does rising costs of commodities. Like most vehicle makers, GM is seeking alternative process and technologies to help reduce its cost to manufacture. In an online request through NineSigma Innovation, GM is requesting proposals (technical and cost) for identifying, developing, and supplying a compatible nanofiller for thermoset resins, such as styrenated polyesters. Other processes include more thermoformed exterior components using in-mold paint film technology, particularly as the numbers of vehicles produced annually decline.

A report in the Wall Street Journal notes that in an attempt to halt GM's market-share erosion to Asian and European auto makers, GM is changing strategies, and plans to "cut prices, pare down overlapping models, and mount a fresh counterattack against foreign brands in rich, populous West and East Coast markets, and in fast-growing areas like south Florida."

Slumping sales of GM's best-selling SUV models and large trucks have hurt the company and could result in a year of record losses. Currently, GM's U.S. market share is about 25%. The company's revenue per vehicle in the first quarter of 2005 dropped $688 per vehicle. The company's credit rating was recently cut to junk status.

Lear
Revenue: $17 billion
Markets: Automotive
HQ: Southfield, MI, USA
Employees: 110,000

Collins & Aikman
Revenue: $3.9 billion ('03)
Markets: Automotive
HQ: Troy, MI, USA
Employees: 23,000

Delphi Corp.
Revenue: $28 billion ('03)
Markets: Automotive, consumer electronics, medical
HQ: Troy, MI, USA
Employees: 190,000

Visteon
Revenue: $18.6 billion
Markets: Automotive
HQ: Van Buren Township, MI, USA
Employees: 70,200

3-M
Revenue: $20 billion
Markets: Consumer, graphics, displays, packaging
HQ: St. Paul, MN, USA
Employees: 67,071

Initially formed as Minnesota Mining and Manufacturing, 3-M has grown through an emphasis on innovation going from sandpaper and cellophane to multilayer films for electronics, and even polymer membranes for fuel cells. The $20 billion company looks to expand on its 585 patents, spending $5.5 billion over the last five years on R&D, including $1.1 billion in 2004.

This year 3-M plans to release a nine-layer membrane electrode assembly, or MEA, which is a building block for fuel cells. On the film side of its business, the company was recognized by the American Chemical Society with the 2004 Creative Invention award for its multilayer optical film technology platform, which uses polymer chemistry to manage light.

The far-reaching company was reorganized into seven major businesses in 2003, and it has undertaken a massive Six Sigma initiative, training 36,000 of 67,000 employees in Six Sigma. In terms of supplier expectations, 3-M, not surprisingly, asks its vendors for continual process improvements to reduce costs. The company bids many jobs through online reverse auctions, and once a job is won, suppliers are expected to participate in the company's Supplier Management Process.

Apple
Revenue: $1.9 billion
Markets: Computers, software, digital accessories
HQ: Cupertino, CA, USA
Employees: 13,426

The 1992 launch of the iMac reignited Apple, generating buzz through its translucent housing, which was a wild departure from the beige or grey shells predominant at the time. Since then, the company has won numerous design awards for its innovative use of materials. In a conversation with the Design Museum of London, Jonathan Ive, VP of industrial design at Apple, commented on the material that has helped differentiate breakthrough products like the iPod. "Polymer advances meant that we can now create composites to meet very specific functional goals and requirements," Ive said. "From a processing point of view, we can now do things with plastic that we were previously told were impossible." Among those advances, Ive cited multimaterial molding and overmolding onto metals, which is key to the iPod. The ubiquitous portable music player is made with a twin-shot of resins and there are no fasteners or battery doors, creating a completely sealed unit.

In addition to unique designs, suppliers interested in working with Apple will have to keep close tabs on the environmental friendliness of the materials they use. The company has banned the use of: Polychlorinated terphenyls (PCT), Polychlorinated dibenzodioxins (PCDD), Polychlorinated dibenzofurans (PCDF), Polychlorinated biphenyls (PCB), Polybrominated biphenyls (PBB), and Polybrominated diphenyl ethers (PBDE).

The company also specifies that there be no PVC parts or packaging of more than than 25g used, although it has exempted closures for cables and wires. The company has worldwide take-back and recycling programs, fed by its design for recycling initiative. In addition, its design for expandability push through FireWire and USB ports as well, as easier memory expansion, ensure that models stay viable longer.

The company's iBook, eMac, and iMac use recyclable PC for the enclosure, while the PowerBook, Power Mac G5, and Cinema Display use aluminum. Large mechanical plastic parts are designed to consist of compatible materials, or one material, for easier reclaim, and larger parts are marked with ISO 11460 and 1043 codes to identify resins used. For its suppliers, Apple is creating supply chain support systems to streamline the materials declaration process so that suppliers know when materials have been phased out.

Caterpillar
Revenue: $30.2 billion
Markets: Earth moving, engines, power generation
HQ: Peoria, IL, USA
Employees: 76,920

Sony
Revenue: $66.2 billion
Markets: Audio, video, televisions, information and communications, semiconductors, electronic components
HQ: Tokyo, Japan
Employees: 151,400

Sony may have slumped to half the market capitalization of South Korean rival Samsung Electronics, and its electronics division may be struggling, but don't count the Japanese giant out just yet. The firm still has a strong brand image and next-generation technologies such as Blu-Ray optical discs that could herald resurgence.

Sony still manufactures about 60% of its products in Japan, and one of the key requirements for suppliers is proximity to its plants. "High quality is a matter of course, so the second key factor is cost," says George Ohgaki, head of consultant Infinite Technologies, based in Tokyo.

And perhaps more than any other global electronics supplier, Sony is pushing green procurement. "It doesn't matter whether the product is shipping to the EU, where legislation might preclude the use of certain halogenated flame retardants, or Asia-Sony applies the same environmental standards worldwide," says Ohgaki. "This has implications for processors as non-halogen compounds are generally more difficult to process."

Cisco Systems Inc.
Revenue: $22 billion
Markets: Computer networking
HQ: San Jose, CA, USA
Employees: 34,000

Illinois Tool Works
Revenue: $11.7 billion
Markets: 650 different companies, serving food, beverage, automotive, and construction markets
HQ: Glenview, IL, USA
Employees: 49,000

Microsoft
Revenue: $36.8 billion
Markets: Software, video game consoles, interactive TV's
HQ: Redmond, WA, USA
Employees: 57,000

Black & Decker Corp.
Revenue: $5.4 billion
Markets: DIY, white goods
HQ: Towson, MD, USA
Employees: 26,000

Lego Holding A/S
Revenue: Sales 2004: 6704 million DKK (about €901 million) vs. 7196 million (about €967 million) in 2003.
Markets: Toys, theme parks
HQ: Billund, Denmark
Employees: 5569
Products/Process: Injection molded toy building blocks, interlocking toys, PC-programmable robots
North America, Europe. Most parts injection molded of ABS grades developed specifically for the company. Roughly 15 billion LEGO bricks and other components produced/yr

Honda Motor
Revenue: $80 billion
Markets: Automobiles, motorcycles, power products
HQ: Tokyo, Japan
Employees: 131,600 (consolidated basis)

Nike Inc.
Revenue: $12.3 billion
Markets: Sports and leisure
HQ: Beaverton, OR, USA
Employees: 23,000 (Suppliers, shippers, retailers, and service providers employed by Nike total approximately 1 million)

Samsung Electronics
Revenue: $71.6 billion
Markets: Semiconductors, telecom, LCDs, digital media, home appliances, computers
HQ: Seoul, South Korea
Employees: 60,000

Lexmark International Inc.
Revenue: $5.3 billion
Markets: Laser printers (corporate networks, desktops), ink jet printers (home and office). Sales of its products in more than 150 countries.
HQ: Lexington, KY
Employees: 13,400

Hyundai Motor Co.
Revenue: $26.1 billion (non-consolidated)
Markets: Automotive
HQ: Seoul, South Korea
Employees: 68,000

Having survived the Asian financial crisis of 1997 by jettisoning 25% of its staff, Hyundai has transformed itself from a purveyor of low-price, functional autos into a leading contender in the global market with SUVs, sports cars, and luxury sedans. Its 2004 Sonata ranked as the most reliable car in America by car guide Consumer Reports.

Hyundai's global presence includes production operations in China, India, and now the U.S., the latter a $1.1 billion plant just opened in May in Montgomery, AL. Kia, a brand it acquired in 1998, also has a major operation in Slovakia.

So what does Hyundai's globalization and move up the quality chain imply in terms of plastics processing opportunities? According to Graeme Maxton, a director at the Economist Intelligence Unit (EIU) in Hong Kong, Hyundai has transformed itself from a third-rate also-ran into a top- league player through its dominance of the South Korean market, where it has a 75% share, and it's more than likely to stay loyal to its traditional South Korean part suppliers. "Hyundai's philosophy is that it has a social responsibility to support the national economy, so it will stick with its current suppliers, as is the case with Honda."

Canon Inc.
Revenue: $33.3 billion
Markets: Electronics
HQ: Tokyo, Japan
Employees: 21,300

Canon has teamed up with an undisclosed injection molding equipment producer to sandwich mold housings which include up to 30% of recycled plastics in the center layer.

Haier Group
Revenue: $12.3 billion
Markets: Home appliances, small appliances, electronics, telecom, wine cellars
HQ: Qingdao, China
Employees: 51,000 full-time employees and 175,000 contract workers

Whirlpool Corp.
Revenue: $12 billion
Market: Appliances
HQ: Benton Harbor, MI, USA
Employees: 68,000

Whirlpool reported first-quarter 2005 net earnings of $86 million, compared to $101 million in the same period last year. The decline was driven by significantly higher material and oil-related costs, also causing the company's profits to decline by 15%. Net sales of $3.21 billion were a first quarter record however, and increased 6.7% from last year. The company employs approximately 68,000 people.

"Our first-quarter results reflect the positive benefits from our previously announced price increases, which we initiated to mitigate the significant increases in raw material and oil-related costs," said Jeff M. Fettig, Whirlpool's chairman, president and CEO. "The results of pricing actions over the first three months of this year, including product and brand mix, were in line with expectations. Our operating results were significantly impacted by approximately $190 million in higher material and oil-related costs compared to the prior year's quarter. We were able to mitigate most of this through global price increases, productivity improvements, cost controls and a lower effective tax rate."

Whirlpool introduced a new line of Whirlpool Gold built-in cooking products (ovens, combo-microwaves and electric and gas cook-tops) that feature European design and advanced technologies that help speed cooking. Whirlpool Europe launched its new Origami range of innovative cooktops.

Whirlpool Latin America saw the most robust first-quarter sales: $442 million, a increase of 15.9% from the prior-year period. Whirlpool Asia came in second at a 7.6% increase in sales ($94 million). Whirlpool Europe came in just under Asia with a 7.3% increase in sales to $729 million for the first quarter, representing a record first quarter in units and sales. Whirlpool North America had sales of $1.96 billion, up by 4.5% over the same period a year earlier.

Whirlpool recognized 21 companies out of its approximately 700 U.S. suppliers, for outstanding performance. The companies were judged on quality of their goods, productivity, and material management. "The suppliers we partner with are vital in helping us to maintain our status as the world's leading home-appliance manufacturer," said Franklin Stam, Whirlpool's VP for North American procurement. "Those that we are honoring this year consistently meet our requirements in quality, productivity, engineering, design, availability, and, increasingly, innovation."

Several plastics companies were among those receiving the Whirlpool award, including Mercury Plastics Inc., Innovene (plastic resin), and TH Plastics Inc. which received two awards.

The Gillette Co.
Revenue: $10.4 billion
Markets: Personal and oral care products, electronics, razors, batteries, cosmetics, small appliances, dental products
HQ: Boston, MA, USA
Employees: 30,000.
Company expected to merge with Procter & Gamble in the autumn 2005.

HP (Hewlett-Packard Co.)
Revenue: $83.3 billion (2004 sales)
Markets: Consumer electronics, business machines, optical goods, software. Computers, digital cameras, computer auxiliaries
HQ: Palo Alto, CA, USA
Employees: 150,000

Lenovo
Revenue: $23.1 billion (HK$)
Markets: Computing
HQ: Beijing
Employees: 9200

Johnson & Johnson
Revenue: $47.3 billion (2004 sale); 2004 net earnings: $8.5 billion
Markets: Health care, consumer, pharmaceutical, medical devices, diagnostic equipment, contact lenses, child-care products, female hygiene, dental-, skin-, hair-care products
HQ: New Brunswick, NJ, USA
Employees: 111,000

Dell
Revenue: $51.1 billion
Markets: Consumer electronics-computers, printers
HQ: Round Rock, TX, USA
Employees: 57,600

Dell is taking the reins on recovery and recycling before legislation forces it to do so. Last month Dell announced it would increase by 50% its goal for recovery of used computer equipment that it sells; last year it took back more than 11 million kg of equipment.

Although its headquarters is in the U.S., also its largest market, the firm's design for Environment (DfE) initiatives are geared to meet the European Union's Reduction of Hazardous Substances (RoHS) directive. As a result, Dell has three broad targets for DfE, including reducing its use of 52,000 tons of lead and 33,000 tons of brominated flame retardants (FR) by FY08. The company says it has already "virtually eliminated" its use of these FRs in desktop, notebook, and server-chassis plastic parts.

Nissan Motor
Revenue: $79.7 billion
Markets: Automotive, marine, forklifts
HQ: Tokyo, Japan
Employees: 119,350

Motorola, Inc.
Revenue: $31.3 billion
Markets: Telecom, electronics, broadband systems, cell and cordless phones, electrical entertainment
HQ: Schaumburg, IL, USA
Employees: 68,000

LG Electronics
Revenue: $24.6 billion
Markets: Telecom, home electronics and appliances, security, computers
HQ: Seoul, South Korea
Employees: 66,000

Johnson Controls Inc.
Revenue: 2004 sales: $26.6 billion
Markets: Automotive interior systems, control systems, batteries, instrument and door panels, air conditioning-, heating-, fire and security-systems, automotive batteries
HQ: Milwaukee, WI, USA
Employees: 123,000

Automotive supplier Johnson Controls expects its suppliers to meet stringent controls to make its supplier list. Processors who meet the company's standards-and there are far fewer than in the past-know they have made a mark with their quality and delivery.

"There is a strong focus on decreasing the number of suppliers according to the company's commodity strategy to make use of synergies for the whole company. Purchasing of goods and services accounts for a high proportion of the company's overall costs. This is why it is important to optimize the supplier structure and establish a network that is more closely aligned to Johnson Controls' processes," says Jens Gotthelf, purchasing manager supplier development at Johnson Controls (Burscheid, Germany).

What are the criteria to select one processor over another? Gotthelf says suppliers need to have ISO 9000:2000 and/or ISO/TS 16949 certification. Any new processor has to go through an extensive evaluation process to determine if they can supply products according to the company's quality, health and safety, and environmental (ISO 14001) standards. Assessment is based on quality management strategies, which include commercial, materials, engineering, and leadership systems, Gotthelf says.

The type and quality of the processor's machine park is an important factor in determining if the converter will qualify as a supplier. "We also inspect the production locations if performance-related or specific project-related requirements are needed," he says.

Johnson Controls doesn't tie itself to a single processor or moldbuilder for specific parts, but relies on several to do the jobs. A number of vendors are selected in case their production would be adversely affected by factors such as labor problems, strikes, or natural disasters. Freedom by the processor to select materials to process based on low price or availability isn't an option, he says. Johnson Controls and its customers demand processors use specific raw materials for quality reasons.

Injection molders who have experience processing parts using specific polymers could have an edge in getting the business since this is also a point considered during the evaluation process. Gotthelf says Johnson Controls tries to avoid single project sourcing of suppliers and has a target to integrate them into the business on a partner relationship.

Solectron Corp.
Revenue: $11.6 billion
Markets: Automotive, communications, computing & storage, consumer products, industrial, medical, networking
HQ: Milpitas, CA, USA
Employees: 57,000

TRW Automotive Holdings Corp.
Revenue: $12 billion
Market: Automotive
HQ: Livonia, MI, USA
Employees: 60,000

Ford Motor Co.
Revenue: $171.6 billion
Market: Automotive
HQ: Dearborn, MI
Employees: 320,000

Ford's situation is little better than GM's. The company reported a 37% drop in first-quarter earnings. Ford earned $1.21 billion in the first quarter compared to $1.26 billion a year ago and said its revenue per vehicle sold in the first quarter rose $494 to $23,492.

However, Ford has agreed to bail out former subsidiary Visteon Corp.; take back 24 Visteon plants and 17,400 workers; and spend a total of $1.6 billion to $1.8 billion to help Visteon restructure into a smaller company with less U.S. production and more diverse customers, said a Wall Street Journal report. Like other Tier One suppliers, Visteon has struggled with higher raw material costs and pricing pressures. Visteon's primary customer, Ford, has lost market share. Visteon's losses have totaled $3.2 billion since it was spun off from Ford in 2000. The bailout could hurt Ford.

One report noted that Ford has cut its earnings forecast and is nearing junk status itself, "although some of its ratings remain a notch or two above those of GM."

Paccar
Revenue: $11.4 billion
Markets: Trucks
HQ: Bellevue, WA, USA
Employees: 20,500

Maytag Corp.
Revenue: $4.7 billion
Markets: Appliances
HQ: Newton, IA, USA
Employees: 18,000

Maytag reported that first-quarter profit plunged 80%, hurt by higher costs and lower sales. Maytag's debt was cut to the highest level of the so-called "junk" status, and it emerged that Chinese appliance giant, Haier, was considering buying them out. The company's net income fell to $7.7 million from $38.7 million in the year-earlier quarter. CEO Ralph Hake said that "aggressive cost cutting is necessary for the company to remain competitive. The effort has been painful-and it has not been enough," Hake adds that "Maytag's recent price increases didn't come anywhere near covering soaring steel and resin costs."

The company may be on the verge of ending its dividends after an "80% collapse in first-quarter earnings and a pummeling of Maytag's share price during April," said the Wall Street Journal in its "Heard on the Street" column. The company has always paid out an $.18 cents per share dividend since 1998, through good times and bad. The company's yield-the annual dividend divided by the current stock price-has "ballooned" to 7%, higher than the average 2% for the industry. Whirlpool current yield is 3%.

Maytag has made strategic missteps, being slow to react to changing market conditions and move manufacturing overseas to capitalize on lower labor costs. Roughly 12% of its products are made abroad. In 2004, Maytag closed a large refrigerator plant in Galesburg, IL, and opened a new refrigerator factory in Reynosa, Mexico.

Maytag is also feeling pressure from foreign makers, particularly LG Electronics of South Korea. Hake says more aggressive cost-cutting measures would be necessary to remain competitive.

On May 12, Maytag cut its quarterly dividend in half, to 9 cents per share, payable June 15. Hake said the cut will help fund stepped up advertising and R&D expenses related to new product introductions. The company is also finalizing plans for restructuring certain manufacturing operations.

The company said it could owe $40 million to an investor group led by Ripplewood Holdings LLC if the proposal to be taken private by the group falls apart. Ripplewood had announced that it agreed to purchase Maytag for $1.13 billion, and to assume $975 million in debt. According to an SEC filing, unless there's a breach of the merger agreement, either party can walk away from the proposed acquisition if it isn't completed by December 15.

Medtronic Inc.
Revenue: $9.1 billion
Markets: Medical devices
HQ: Minneapolis, MN
Employees: 32,000

Medtronic's primary business is cardiac rhythm management (pacemakers), vascular (stents), and cardiac surgery. Two other business include the neurological and diabetes business, and the Spinal/ENT (ear, nose and throat) and navigation business.

Art Collins, Medtronic's chairman and CEO, noted that strong operating performance in two of the company's largest product lines, ICDs (Implantable Cardio Defibrillator) and Spinal products, collectively represented more than 42% of current quarter revenues. "Diabetes products also closed out the year on a favorable note and Medtronic's annual revenues exceeded $10 billion for the first time in the company's history," Collins stated.

The company's Neurological business manufactures the Restore Rechargeable Neurostimulation System-the most powerful and longest lasting battery among competitive rechargeable neurostimulators, with a life of up to nine years. The Diabetes Business makes the Paradigm family of insulin pumps, which are sold globally. Diabetes revenues of $179 million experienced 20% revenue growth over the year-ago period.

Medtronic serves customers in 120 countries, has global manufacturing plants with regional headquarters in Switzerland and Japan, and employs 32,000 people worldwide.

Lucent Technologies inc.
Revenue: $9 billion
Markets: Communications networking
HQ: Murray Hill, NJ
Employees: 31,000

Abbott Laboratories
Revenue: $19.7 billion
Markets: Medical devices, pharmaceuticals
HQ: Abbott Park, IL
Employees: 60,000

Royal Philips Electronics nv
Revenue: $41 billion
Markets: Domestic appliances/personal care, consumer electronics, medical, semiconductors, lighting
HQ: Amsterdam, Netherlands
Employees: 160,900

Unilever
Revenue : $42 billion in 2004
Markets: Food, hygiene, personal-care products
HQ: London, England
Employees: 220,000

Unilever has rationalized the number of brands it carries and drastically reduced its supplier rolls. For example, in the last five years in Europe it reduced its processor supply base for margarine tubs from 12 to only three processors. Unilever still has more than 100 brands, among them Knorr, Lipton, Dove, and Ben & Jerry's.

Unilever's packaging often features novel developments that are both consumer-friendly and less costly to produce, such as the world's first aseptically filled blowmolded plastic bottle filled with a neutral pH product that can be closed with a snap-on cap with no foil placed over the bottle's neck (February 2004 MPW, pg. 14).

Unilever pushes its packaging suppliers to do things others cannot. RPC molds the recently introduced, newly designed tubs for Unilever's top-selling Lätta margarine brand and also thermoforms the lids. Printing of the lids had been a post-forming process; now the sheet is printed first and then embossed during thermoforming.

Baxter International Inc.
Revenue: $9.5 billion
Markets: Medical devices, pharmaceuticals, biotechnology
HQ: Deerfield, IL, USA
Employees: 48,000

Procter & Gamble
Revenue: $51.4 billion in 2004
Markets: Personal care, hygiene, food
HQ: Cincinnati, OH, USA
Employees: 98,000

As detailed in this magazine's December 2004 issue, P&G is making radical changes in the way it purchases materials and plastic packaging. Processors are being asked to do more-no surprise that-but also given options that may help them make better use of their equipment's capacity, benefiting both parties.

The OEM has also started a licensing program to make some of its in-house developed technology available to a broader market-at a price, of course. One of the first offerings is its Virtual Package Simulation (VPS) extrusion blowmolding simulation technology; Stress Engineering Services has exclusive rights to license this for a time.

Want to impress P&G? Tell it something it does not know about consumer behavior. In recent articles in Newsweek and the Wall Street Journal, the company's resurgence in the last few years is attributed to its focus on watching how consumers use its products, hearing their suggestions, and then rapidly acting on them.

The firm has made big acquisitions in the last years: Clairol in 2001 for $5 billion, Wella in 2003 for $6 billion, and Gillette this year for $55 billion.

Centex Corp.
Revenue: $13 billion
Markets: Homebuilding, construction
HQ: Dallas, TX
Employess: 17,500

DaimlerChrysler
Revenue: $192.3 billion
Markets: Automotive
HQ: Stuttgart, Germany
Employees: 384,723

In the plastics processing industry, DaimlerChrysler's smart city cars have been especially newsworthy; this magazine has mentioned innovations in these vehicles alone more than 20 times. Polycarbonate window glazing, all-plastics body panels, and other leading-edge automotive plastics processing-the smart's suppliers have been in on the ground floor on all of these.

Now smart is suffering in Europe, with restructuring of the smart business and layoffs are expected to cost the carmaker more than $1 billion this year.

But smart's future may just be taking off in, of all places, the U.S. Santa Rosa, CA-based ZAP in May said it has submitted a $1 billion purchase order to DCX for smart cars. That month ZAP-which imports smart cars and makes them street legal for the U.S.-says it also began talks with North American automotive parts suppliers about possibly making some parts for the vehicles .

Cummins inc.
Revenue: $8.4 billion
Markets: Power generation, especially diesel motors
HQ: Columbus, IN
Employees: 28,000

Deere & Co.
Revenue: $17.7 billion in 2004
Markets: Tractors, lawnmowers and other agricultural, forestry and lawn-care machinery
HQ: Moline, IL, USA
Employees: 29,000

Nokia corp.
Revenue: $39.6 billion
Market: Telecommunications
HQ: Espoo, Finland
Employees: 51,000

Nokia last month announced its strategy to reduce the total cost of mobile-phone ownership for consumers in very poor, but rapidly growing, markets, especially the African continent. One result is it will be marketing very low-cost Nokia 1110 and Nokia 1600 mobile phones, marketed toward first-time users. For suppliers, this strategy obviously will likewise mean keeping manufacturing costs very low.

Maybe the processor most closely associated with Nokia is Finland's Perlos, also in Espoo. Perlos now is introducing into its facilities a new assembly process, developed in-house, to make its production lines more flexible (April 2005 MPW). Firm officials talk about "an exponential increase in productivity" as a result of this new automation.

Volkswagen AG
Revenue: $121 billion
Markets: Automotive
HQ: Wolfsburg, Germany
Employees: 342,500

Start good, get better, and do it everywhere

If keeping OEMs happy were an easy task, then maybe they would not have spent such effort in the last decade slashing their supplier rosters. One processor reveals what he does to remain top-tier.

Excelling at multiple processes and offering practically every decoration option imaginable is a good start, according to officials at RPC Group. The London-based company is Europe's largest rigid packaging processor, with nearly 45 sites spread across 12 countries, and its customer list includes many of the personal care and food processing powers on our list of Notable OEMs. Unilever is its largest customer, and P&G and Kraft Foods rank in the top 10 for the group. Even some of our list's automotive OEMs shop at RPC.

One of the reasons publicly traded RPC has been so successful engaging OEMs, even as many have savagely reduced their supplier rolls, is that it offers so many processing and decorating options that potential customers need not look elsewhere.

Invest and expand

Alfons Böckmann is director of the Bramlage-Wiko cluster, headquartered in Lohne, that includes seven injection molding facilities. RPC organizes its facilities into clusters based on process (blowmolding, injection molding, thermoforming, or sheet extrusion) as well as end markets and customer base. Chiefs of the seven clusters report directly to RPC CEO Ron Marsh. The clusters increasingly work together to offer complete packaging solutions, for instance a blowmolded or thermoformed package with an injection molded closure, decorated to match.

Böckmann says his seven sites realize about €175 million in annual sales, with nearly 60% from cosmetics packaging; pharmaceuticals, medical parts, and food packaging also weigh in heavily. Group sales now approach nearly €1 billion. "We live from new packaging ideas," he says, and by that he means the ones that RPC brings to its customers, not the other way around. His cluster's critical strength, he says, is its ability to develop novel new packaging ideas that also, and very significantly, mold quickly and assemble well.

RPC Group now is investing €40 million in his cluster in machinery and facilities to include a new hall to co-locate and upgrade its parts development and moldmaking operations. Most molds made at RPC are for captive use-it even makes many of its stack molds-but it also markets its moldmaking capacity to non-competitive processors.

Expansion is also occurring at strategic levels. The Group exports globally but now processes only in Europe. Böckmann's cluster alone ships €30 million of empty packaging to the U.S. each year. In January, RPC will open a molding facility in Allentown, PA to serve current OEM customers, among them Kraft Foods for its Tassimo beverage systems. Such customers are eager to see RPC's processing expertise available locally, he says. For example, he shows one part, a thick-walled jar, which he says is molded in the U.S. by a competitor in almost 1-minute cycle times; RPC's mold-cooling expertise helps it form the same package in Lohne in almost half that time. More expansion is planned. "We already have our feelers out in Asia," Böckmann says, with operations there likely by 2007.

Invest some more

To keep OEMs pleased, you must invest, often, in new technology. Böckmann's cluster recently ordered an additional 40 injection molding machines to join the 460-odd ones it already runs. Many of the new units are 1000-tonne Husky and large Netstal Synergy presses, suitable for fast-cycle molding of high-cavity tooling. The Lohne site has about 550 employees working flexible shifts. Mold cell automation is a given, so the firm requires only about two employees for every 12 presses. Almost all presses are fed directly from silos.

At the Lohne facility, largest in the Bramlage-Wiko cluster, there are more than 100 injection molding machines with every major German, Austrian, and Swiss manufacturer represented, plus the new Husky units. The site also has a few Novapax injection blowmolding machines. Böckmann says the varied machine park is important to ensure his firm's versatility. "We do selective and mass market products...3000 to 1 billion is the range of production runs we do." His cluster of companies alone has 1100 "real customers," he says, with the typical commercial project running for two to three years.

About four years ago, the firm increased its investment in automated inspection systems (especially vision-inspection and leak-detection equipment) so that now nearly every molded part-closure, jar, or whatever-is checked before being automatically boxed. Boxes are palletized automatically, with pallets then moved via elevator to an underground storage site.

RPC Bramlage-Wiko offers inmold labeling, assembly up to 18 components, and decoration options aplenty. "I believe that as a cluster we offer more decoration options than any other processor," says Böckmann. Decoration assets include a new five-color Isimat screen printer that he reckons is the most modern in Germany.

Never, ever stop R&D

Not surprisingly, RPC keeps its R&D work a closely held secret. However, Böckmann allows that one current project involves injection molded packaging with a new type of barrier layer. "Customers want to replace not just glass and metal packaging, but also their use of coextruded thermoformed sheet," he says. Molding containers rather than thermoforming them would give customers advantages in precision, design options, and decoration options, Böckmann explains.

Matthew Defosse mdefosse@modplas.com

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