Dow Chemical Co. and DuPont Co. form a joint venture? BASF Corp. and GE Plastics do joint research? Ha! Why,Corp. and Corp. would form a joint venture first!
Well, that's exactly what happened. New Venture Gear, a transmission and transfer case manufacturing joint venture between GM (36%) and(64%) will be wrapping up its sixth year of operation next month. Formed from a merger of two money-losing operations, it now is the world's largest producer of transfer cases and is starting to rack up profits, thanks to a strong U.S. light truck market and extensive productivity improvements.
It shows that in today's world, business rivalries go only so far.
Most analysts and industry observers say the new 50/50 elastomers venture between DuPont and Dow, which will be starting up the first quarter of 1996, makes sense. Elastomers, which are elastic, rubber-like plastics used extensively in cars and trucks, are a strong niche in the plastics market. By combining their resources, the two companies promise one-plus-one will equal far more than two. Combined global elastomer sales for the two companies currently are about $1 billion; the new enterprise has the potential for growth at more than twice the industry rate, leading to total revenues of $2 billion within five years, the companies say.
The new venture, named DuPont Dow Elastomers, combines DuPont's leadership position in synthetic rubber with Dow's proprietary technology. DuPont introduced Neoprene, the world's first synthetic elastomer, over 60 years ago and has remained a leader in elastomers research and development, production and marketing. Dow's technology -- described as "the world's most advanced metallocene chemistry" -- will have broad use in future elastomer product development. This combination of technological and marketing capabilities should provide customers with a more competitive range of products than currently available, the companies say.
The BASF, GE Plastics agreement to jointly develop plastic body panels has a few market watchers a bit more puzzled. But the companies say they are aiming to jointly develop high-performance engineering thermoplastics and processing techniques.
"By working together, it will be possible to achieve considerable time and cost savings, while providing automakers with a broader choice of solutions," the companies say. Upon completion of the joint research and development, the parties will manufacture, market and sell the developed materials independently.
"This meets the desire of the automotive industry to have at least two reliable independent suppliers," the release adds, somewhat ominously.
Automotive suppliers have complained bitterly for the past several years that automaker price-cut demands have left them no room in their budgets for research and development. With competition getting tougher and price-cut demands from the OEMs continuing, joint research may unfortunately be the only type of research possible for many suppliers in the future.
However, Cambridge Industries Inc. of Madison Heights, MI, seems very bullish on the exterior body panel market. It confirms it's negotiating to buy the Reinforced Plastics Div. of GenCorp Automotive. GenCorp., among other products, supplies sheet molding composite (SMC) panels on the current GM front-drive minivans (Lumina/TransSport/Silhouette) and the GM Camaro/Firebird F-cars. Cambridge bought Rockwell International Corp.'s Automotive Plastics Div. 18 months ago, which supplies hoods on the Dodge Viper and large panels and assemblies on Class 8 trucks, along with GenCorp. Although the plastic-bodied minivans are scheduled to be replaced by new-generation steel-bodied versions, the overall outlook for SMC still is very good. The SMC Automotive Alliance trade group predicts use of SMC in automotive will increase 15% in 1996, thanks to new high-volume structural components such as the radiator support assembly on the new Taurus/Sable.
The combination of Cambridge and GenCorp -- if finalized -- would make Cambridge one of the largest automotive plastic exterior body panel suppliers in the U.S.
Not bad for a company with only $10 million in revenues in 1991. Founded in 1986 and expanded through acquisitions, Cambridge President Richard S. Crawford wants to buy GenCorp as part of a strategic plan to reach $1 billion in revenues during the next two to three years. Sales were slightly over $300 million in the fiscal year ending September 1995.