ContiTech's acquisition of WCCO Belting the right fit for family, farming

FAIRLAWN, Ohio—The recent decision to sell the 68-year-old, family-owned WCCO Belting Inc. to ContiTech USA did not come easily for Tom Shorma, president and CEO of the Wahpeton, N.D.-based company.

Security for the company's 375 employees—the ones who got WCCO Belting Inc. to the successful position it is in today—remained paramount as Shorma negotiated with the conveyance segment of ContiTech, a division of Continental A.G.

"Calling it a 'pretty big step' is an understatement," Shorma told Rubber News. "It is not the first family business to have been started and sold, ... but it is the last of our visible holdings. We felt that with the acquisition—the combination of WCCO and Conti—that we could offer resources for business, accelerate product output and give the team access to chemists and lab facilities to further serve markets and new customers."

Terms of the July 5 acquisition were not disclosed.

"With this acquisition, Continental complements its conveyor belt customer portfolio and strengthens its conveying solutions business in the agricultural and construction industry," said Steve Zenar, director of sales for Conti's conveying solutions segment of the Americas.

"Equipment manufacturers, distributors, dealers, fleet managers and farmers will benefit from a combined product and service portfolio generating a full multi- tier offering that will enable better support and service."

WCCO, a belting manufacturer with its own proprietary compounds and patents on fabrics, either imports or domestically sources the raw materials needed for products for the agricultural market.

The company supplies aftermarket conveyance products as well as custom-engineered products for many of the major farm equipment producers in the world, Shorma said.

"We are unique in that we do both (OEM and aftermarket)," he said.

About 375 employees at WCCO will join ContiTech as the two companies look to leverage each other's reach and product development expertise.

"For Conti, I think it was as much about acquiring our talent—our engineers and our process knowledge—as it was about our facilities or equipment," Shorma said.

While WCCO has 300 employees in North Dakota, there are another 75 at Arlington, Texas-based CSI Calendering Inc., which WCCO acquired in 2006 after deciding to vertically integrate.

With its calendering operations, CSI supplies both synthetic rubbers and fabrics to WCCO for belt manufacturing.

"The employees of WCCO and CSI, with their knowledge, skills and capabilities, helped make WCCO and CSI successful," Zenar told Rubber News. "Continental intends to continue employment of all employees currently employed by WCCO Belting Inc. and its subsidiaries."

WCCO manufactures and distributes farm machinery applications such as draper belts, baler belts, pickup belts, tube conveyor belts, merger belts, as well as industrial belt applications for material and package handling, recycling, forestry and aggregates.

It reaches more than 20 countries with its products, and ContiTech said it expects to widen the global net for WCCO moving forward.

"We want to leverage and grow WCCO's fabrication capability to alleviate Continental's gap in this area and offer a complete technical solution to OEMs and distributors," Zenar said.

Zenar said he expects Conti to maintain the WCCO brand, as it garners name-recognition across the agriculture machining industry where WCCO sees about three-quarters of its sales.

"Continental's strategy is to strengthen its industrial business in three specific growth industries: off-highway, construction and energy management," Zenar said. "WCCO's expertise and portfolio fit perfectly into our ambition to be recognized by our customers as a major contributor in these strategic industries."

As the world's population grows (expected to reach 8.5 billion people by 2030), so grows the food market and agriculture industry.

Experts predict rising living standards, increased protein demand and "climate-change-induced crop pressures." And dietary habits remain diverse as transparency and sustainability gain traction across the world.

"Everybody has heard of the two certainties in life—death and taxes," Shorma said. "I would argue that there are two more: that farmers will plant and farmers will harvest.

"That is what farmers do. That is how we eat .. and that is how we survive."

Though there remains some cyclical nature to the agricultural economy, "the hauling will always be there," Shorma said.

As will WCCO, with its presence in both OEM and aftermarket sales.

"This appealed to Conti, the fact that agriculture can be so cyclical. Even when times are slow, our business stays strong," Shorma said.

As Conti looks toward "Farm 2030," a smart farming mission driven by motorization, digitalization and automation, the company calls intelligent agriculture "the nutrient for the field of the future."

"This strategic acquisition is a threefold perfect fit: portfolio, sales market and people," said Philip Nelles, member of Continental's Executive Board and head of the ContiTech Group Sector. "Moreover, we continue our transformation toward a holistic solutions provider in one of the growing industries, namely the off-highway industry."

WCCO in the past year has secured awards for safety from the North Dakota Safety Council, and for a diverse and "transformational" workplace culture from the Manufacturing Leadership Council, a division of the National Association of Manufacturers.

"We intend to leverage and grow our manufacturing capability to elevate Continental's opportunity in this area and to offer complete technical solutions to manufacturers and distributors with the goal to improve profitability and speed-to-market with new innovations and products," said Jim Hill, president of ContiTech North America.

"We are all delighted to welcome you, the experienced and dedicated WCCO employees, to our Continental team. I am convinced that we will learn from each other and grow together to best serve our customers' needs."

While WCCO may be the most recent acquisition for Conti, it is not likely to be the last.

"We are constantly reviewing our overall portfolio by exploring merger and acquisition opportunities ... to further expand our investments in the agricultural, construction and off-highway markets," Zenar said.

Continental A.G. generated sales of $34.4 billion in 2021 and currently employs more than 190,000 people in 58 countries. The company celebrated its 150th anniversary in 2021.

Shorma confirmed that WCCO had other suitors for the sale.

"But it was not something we were planning to do," he said. "We talked about succession ... and we are always trying to do what is appropriate for our team, trying to take care of the people who helped us become successful.

"That was non-negotiable. We wanted to create the opportunity for greater career and income growth for our employees, beyond what we could offer them as a standalone company. Now they have opportunities beyond North Dakota or Texas. Now they have opportunities to grow their careers and incomes at a level they have not had before."

WCCO Belting, the only North Dakota company to have received the Presidential "E Star" Award for Export Success, has its foundations in a basement shoe repair business.

Edward Shorma, Tom's father, purchased the Wahpeton Shoe Hospital in 1954 using the $1,500 he received from mortgaging his car.

Like any good industrial renaissance man, he branched out, putting his cobbler skills to use in repairing tarps for farm trucks.

WCCO's seminal moment came in 1973, when Canadian farm equipment supplier MacDon Industries requested a quote on canvas belting from the senior Shorma's shoe company.

The rest, as they say, is history.

For his business acumen in developing WCCO over the next decade, Edward Shorma received the National Small Business Award from President Ronald Reagan in 1982—the only North Dakotan ever to receive the award.

"My father never graduated high school, and to this day, he is the best engineer I have ever met," Tom Shorma said.

Tom Shorma said he was asked by ContiTech to remain as an independent adviser through the end of 2022, to consult on the transition and integration. "I will always be available to talk to the team," he said. "I have outside interests, philanthropic interests, as well as other business interests now.

"But I have spent as much time with WCCO colleagues and friends as I have with my own family. I have laughed, cried, stressed and celebrated with them. Watching them develop their careers is one of the greatest pleasures of my life. I will never forget the dedication that they have made to helping make a world-class family business."

Conti also has carved out space in the agriculture industry. Since its foundation in 1871, the company has seen innovations in rubber, plastic, sensor technology and electronics—from hoof buffers for horses through to autonomous field robots.

"We value WCCO's strong passion for its people and their development, which mirrors Continental's values," Zenar said.