As a result of a recent management change, Depco International Inc. plans to become more aggressive as an automotive supplier by buying another company and opening a new plant.
Dualex Enterprises Inc. a Depco subsidiary that makes exterior moldings, wants to acquire an auto-parts molder in the $25 million to $60 million sales range, said Depco CEO Mario Forgione. The company hopes to complete the purchase within 18 months, he said. Depco is based in Etobicoke, Ontario.
The company's Canadian division, based in Rexdale, Ontario, will open a 150,000-square-foot plastics extrusion and molding plant by September 1999, Forgione said. Preliminary plans call for the plant to be in Brampton, Ontario.
Dualex will shift its Dualex Canadian division headquarters to the site - more than twice the size of its current 70,000-square-foot building. Ideally, the new plant will have room to grow to 200,000 square feet, Forgione said.
Those growth plans come on the heels of the February retirement of Depco CEO Richard Motyl. Forgione, formerly the company's COO, was given a mandate by the shareholders of the privately held company to pursue expansion opportunities.
'EAT OR BE EATEN'
'We need to build critical mass to survive,' Forgione said. 'For a company our size in the automotive industry, it's either eat or be eaten. If we don't get aggressive, our long-term viability could be in question.'
To do that, the company hopes to buy an automotive supplier that could quickly double Dualex's $60 million in 1997 sales.
The expansion is partly the result of two major contracts from General Motors, Dualex's main customer. The contracts will start within a year, Forgione said. The company specializes in moldings and trim work for GM's higher-end vehicles.
The company's expansion strategy is one adopted by many auto suppliers with sales under $100 million, said Dennis Virag of Automotive Consulting Group Inc. in Ann Arbor, Mich. It is difficult for companies in that mid-level sales range to compete with the manufacturing and marketing resources of a megasupplier, he said.
However, Dualex's acquisition strategy could be easier said than accomplished, he added. Fewer companies are on the sales block due to the flurry of buyouts the past few years.
FEW BARGAINS LEFT
'Everybody would love to find a bargain, but there are few high-value players anymore because of the industry's dynamics,' Virag said. 'There have been so many acquisitions that companies are selling for a premium now. The question is whether they could afford to pay it.'
Dualex's main competitors are larger companies. They include Decoma International Inc., a unit of industry colossus Magna International Inc. based in Concord, Ontario; GenCorp Inc. of Fairlawn, Ohio; and Triam Automotive Inc., also of Concord.
Last month, Magna said it planned to purchase Triam for $50.1 million.
Allowing a larger company to buy Dualex might be the easier route for the company to take, Virag said.
Yet, Dualex's first priority is to expand the 35-year-old company on its own, Forgione said. Within five years, Dualex would like to record $200 million in annual sales, which would put it in loftier sales company.