Powder Play

The head of powder metal parts manufacturer GKN Sinter Metals says the buying binge by parent GKN plc will continue. In the last three years, GKN has acquired 20 companies, including a controversial purchase of the largest U.S. powder metal material producer, Hoeganaes Corp.

"Our objective is to create a global company," says Seifi Ghasemi, president and chief executive officer of GKN Sinter Metals, "because our customers are going global."

That business posture has sparked dissent because GKN already dominates the world market for powder metals, which are used often to replace forged or cast auto parts, such as connecting rods, main bearing caps and transmission components.

About half of the connecting rods in the U.S. are produced with powder metal, Mr. Ghasemi says. The worldwide market for powder metal parts stands at an estimated $5 billion, and about 75% of that is automotive. Mr. Ghasemi says a powder metal connecting rod can cut costs by up to 40% when compared to a conventional rod.

GKN claims a 16.1% market share compared to 4.4% claimed by its closest competitor, Federal-Mogul Corp. It's a dominant position made better when you consider that even GKN's rivals are fattening its pocketbook. Since it purchased Hoeganaes in 1999 to secure its own steady source of ferrous powders, GKN has been a top material supplier to its U.S.competitors.

The U.S. Dept. of Justice angered some industry insiders by approving the deal, which paired the top powder metal materials supplier with the largest producer of powder metal parts. Others predicted that GKN competitors supplied by Hoeganaes prior to the transaction would switch to another source for ferrous powders.

"We were determined to have our own material source," says Mr. Ghasemi, explaining the Hoeganaes deal. "And there was a significant uproar. But we have demonstrated we are going to run the company in a very professional manner. I think our customers are happy. We haven't lost any."

Part of the displeasure aimed at GKN likely comes from its speedy consolidation of an industry personified for decades by small independent businesses.

But Mr. Ghasemi says GKN's moves are improving an industry that slowed its own growth because it could not meet the demands of the global economy. Even with GKN's buying binge, more than 200 manufacturers make up 47.4% of the market. "The weakness of the industry is that not enough money is being spent on innovation," Mr. Ghasemi argues, "often because the companies are too small."

That's not a problem facing GKN. It has 35 plants in 11 countries and will increase those numbers. "We are very interested in the Far East," says Mr. Ghasemi, specifically mentioning interest in China. "In time, we have to have substantial operations there." He says GKN has invested $100 million in expanded capacity for Hoeganaes over the past two years.

With its global reach and $20 million spent annually on research and development, GKN believes it will be a primary player increasing automotive use of powder metal parts in the U.S. from 30 lbs. (14 kg) per vehicle in 1998 to 40 lbs. (18 kg) per vehicle by 2002.

Predicted growth in Europe and Asia is slower because those markets have fewer 4-wheel-drive vehicles than the U.S., and GKN is counting on making most of its gains in transmission parts and driveline components.

GKN Sinter Metals reports $1.1 billion in sales, including $850 million in powder metal parts and $250 million in powder metal materials through the Hoeganaes acquisition.

Imagine not having to worry about volatile organic compounds spewing from your paint shop. Or better yet, imagine getting rid of the paint shop entirely. GE Plastics is developing a new thermoplastic - codenamed W4 - that it says can be used for, among other things, vehicle exteriors and truck tonneau covers.

The high-gloss W4 provides long-term weatherability and better surface hardness than other weatherable polymers, GE says, which also has the potential to save carmakers hundreds of millions of dollars by entirely eliminating the need to paint.

W4 has properties that also could eliminate the need for clear coat. Eliminating paint solvent emissions could reduce manufacturing costs and trim assembly time and tooling costs.

Using an engineering thermoplastic in place of metal body panels could allow styling that up to now has not been possible. W4 also could reduce vehicle weight and cost, while improving functionality.

Mike Brown, general manager of marketing, says W4 has properties that go beyond Xenoy, a GE Plastics resin (polycarbonate/polybutylene terephthalate) used in the DaimlerChrysler Smart car. The Xenoy utilized in the Smart car still requires painting and a hard coat.

GE Plastics says the potential U.S. market for W4 could amount to 500 million lbs. (227 million kg) annually just for fascias. Its use in exterior panels could double that amount. Mr. Brown forecasts that the global market for W4 is about 3 billion lbs. (1.4 billion kg) annually.

But W4 is not cheap. It will be priced above $2 a pound when released next year. GE Plastics will bring W4 to market in 2002. Prototype car hoods and housings for side view mirrors are among the test applications.