Solvay SA and Cie. Plastic Omnium SA plan to merge their global fuel system operations, creating the world's largest maker of plastic fuel tanks.
Solvay Automotive Inc., a unit of chemical giant Solvay SA, now spars with several others for the top position in fuel tanks. Plastic Omnium is a leading player in Europe and has a growing presence in North America, where it has nearly tripled its sales in the past year.
Each of the partners will own 50 percent of the yet-unnamed company. The combined operations will have global sales this year of $820 million and will employ 3,000, company officials said.
'It really comes down to economies of scale and global business,' said Keith Banks, president and CEO of Plastic Omnium's North American operations, based in Rochester Hills, Mich.
The merger, scheduled to be completed by June, strengthens both companies financially and gives them global reach, he said in a telephone interview.
The company will have about 30 production sites in 15 countries, including Europe, North America and Latin America. No immediate job cuts are expected, Banks said.
Analysts see the deal as necessary in the face of global consolidation, tighter competition and new regulatory challenges that face fuel tank blow molders in the United States and Europe.
'Now, it is a race for size,' said Michel Costes, CEO of Mavel SA, a European automotive consulting firm based in Paris. 'This is very important because of the new regulations on permeability of fuel tanks. Some stringent standards have already been introduced in the United States, but they are still to come in Europe.'
The increased number of plants will help the suppliers reduce fuel-tank freight costs substantially, said Joel Kopinsky, principal of ITB Group Inc. of Novi, Mich., an automotive plastic consulting firm.
'A big issue will be taking logistics out of the equation,' he said. 'They'll have the size and facilities to cut some corners there.'
The merger also gives Plastic Omnium access to DaimlerChrysler, a major Solvay customer. It gives Solvay greater penetration at General Motors, where Plastic Omnium does business, Banks said.
Solvay, based in Brussels, Belgium, and Plastic Omnium, based in Levallois, France, are part of a small fraternity of plastic fuel tank makers.
Competitors include TI Group Automotive Systems, Visteon Automotive Systems and Kautex Textron, a division of Textron Automotive Co. Inc.
The capital-intensive nature of the business has kept other suppliers from entering the field, said automotive consultant Phillip Sarnacke of Omnitech International Inc. of Midland, Mich.