7/24/2014

Editorial: Diversification no longer dirty word in industry

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By Rubber & Plastics News Report Follow Author

Business typically runs in cycles. What's deemed the best way to do things today may be vastly different than what is perceived as a best practice one or five years into the future.

In the early years of the rubber industry, businesses tended to try to be all things to all people. The U.S. Rubbers, Firestones, B.F. Goodriches and Goodyears tended to have wide ranging enterprises.

But over time, that thinking evolved. The prevailing school of thought became that diversity wasn't such a good thing. It was better to define what your core business is and stick to that. The evolution came naturally in some cases, but was brought on by circumstances in others.

Goodyear, for example, was forced to shed many of its businesses in the late 1980s after being the target of corporate raider Sir James Goldsmith. The Akron-based firm sharpened its focus further earlier this century when it shed its Engineered Products Division.

Now diversity has somewhat come back in fashion—at least for some firms.

Take AirBoss of America. The Canadian firm long has been played in a dual-course arena in the rubber industry: supplying rubber materials as one of the largest custom compounders in the business and also making end goods, particularly defense products.

For 2013, compounding still accounted for 65 percent of revenues even after seeing sales for that unit decrease 18.1 percent from 2012.

But AirBoss' management knew it was time to alter the company's makeup. They saw trends that started in 2012 such as declines in defense and mining carried over into 2013.

That was one of the reasons that prompted AirBoss last fall to purchase Flexible Products Co., a Detroit area firm that specialized in supplying anti-vibration products for the automotive industry.

At a cost of $51 million, Flexible is expected to increase AirBoss' revenues by a projected $110 million this year, boost the bottom line by $10 million and bring growth opportunities with new auto platforms, new products and a chance for AirBoss to extend its reach globally.

In other words, success brought on by diversification, 2014 style.