ContiTech changes to affect hose, belt production

FAIRLAWN, Ohio—ContiTech A.G. is making two major moves—one in its conveyor belting business and the other in the firm's hose division—that include plans to shutter a conveyor belt plant.

It will close its Bowmanville, Ontario, belt facility by mid-2016 because of the continuing downturn in the mining and coal industry, impacting about 135 workers in the process.

Meanwhile, the firm's Mobile Fluid Systems business plans to halt silicone rubber hose production at its Somersworth, N.H., plant as part of a significant restructuring initiative at the site, which will turn it into a blow molded plastic operation.

Its automotive silicone hose business will be relocated to other ContiTech plants in other countries, a company spokeswoman said, while its industrial silicone hose operation will be discontinued and sold.

ContiTech has been saddled with excess conveyor belt capacity throughout the North American region and across the globe for some time, the company said.

After reviewing its manufacturing footprint and production capabilities, the firm said it decided to close the Bowmanville factory because a recovery of the mining industry market is not expected anytime soon, according to forecasters.

Worldwide, the mining industry has been in a slump for many months primarily because of decreasing demand for products and depressed prices for commodities, according to Hannes Friederichsen, head of the Conveyor Belt Group business unit.

“This is one of the reasons that many mining companies are not investing as much as they did five or 10 years ago,” he said. “In addition, there are political and economic uncertainties in regions that are important markets in the mining world.”

In 2015, he said, 71 major mines around the globe have been forced to close, with 17 of them shutting down operations between July and September alone.

ContiTech plans to relocate production of heavyweight conveyor belts, both steel and fabric reinforced; custom mixing; and rubber-based adhesives from the Bowmanville plant to other underutilized sites within the company over the next several months, the spokeswoman said. A decision has not been made on the locations, she said.

Some equipment may be relocated to other facilities, she said, adding that the fate of the plant has not been determined.

ContiTech purchased the factory in January 2015 as part of the acquisition of Veyance Technologies Inc. However, since that time the mining industry has gone downhill, creating the excess belt capacity situation.

“These decisions aren't taken lightly and are very difficult to make, but unfortunately some restructuring is necessary given the current situation,” Friederichsen said.

Because ContiTech is faced with excess conveyor belt capacity globally, the spokeswoman said, it continues to look at all areas to improve the firm's performance as part of its international strategy. Its aim is to align its capacity with forecasted demand.

On the hose front, the company is moving its industrial rubber silicone hose production overseas and ending automotive hose manufacturing at the Somersworth facility as part of the restructuring to better position the plant for the future, it said.

ContiTech gradually will wind down production of silicone hose at the plant until March 2016, when the move of the automotive silicone hose business—and possibly the sale of the industrial hose unit—should be complete.

It is seeking a buyer for the industrial hose business, according to the firm's spokeswoman. Plans call for the buyer to “take over responsibility for all sales, service, marketing and support for those customers” in the industrial sector, she added.

“At this time we are not able to provide any names while the process is underway,” she said. Equipment—such as calenders, extruders and mandrels—also is expected to be sold.

Jim Hill, CEO of ContiTech's NAFTA operations, said the company was not getting out of silicone hose production in the automotive sector—it was just moving production.

A letter dated Oct. 29 that was sent to customers said the firm will discontinue serial production of silicone hose in North America. It said that if customers had an existing written contract for silicone products produced at the Somersworth factory, “this letter serves as notice of its termination.”

It went on to say ContiTech currently is in negotiations with third parties to transfer local production assets. “Your contact information will be passed on to the buyer for potential continuation of the business once negotiations are complete.”

Its Somersworth facility, which operates as ContiTech Thermopol L.L.C., will be restructured and turned into a high-tech center for plastics and blow molding. The company's blow molded plastic parts will be supplied to the North American automotive industry for segments such as turbocharger lines.

About 220 temporary workers provided to the firm by various staffing agencies will be laid off at the factory over the next few months, the spokeswoman said, reducing the site's work force to about 735.

She said the company did not anticipate that the relocation of the automotive silicone hose business and the sale of the industrial hose operation will result in job losses for any of the facility's full-time employees, who will be integrated into the plastics business.

Hill noted the move will simplify the production operation at the plant, allowing workers there to focus on a key area, blow molded plastic parts.

According to the Shane Stradinger, managing director of ContiTech Thermopol, blow molded plastic products have a great deal of growth potential. “That's why I'm optimistic for the future and for highly trained employees in this area in particular.”

ContiTech wants to develop the Somersworth factory “into a high-tech center of competence for plastics and blow molding,” the spokeswoman said. “That's why we are focusing on that business and plan to build up a sustainable setup.”

ContiTech purchased the Thermopol plant in Somersworth in 2007 and retained the factory's 150 employees. It has continuously invested in the facility since then.

In the last five years alone, the company said, it has poured about $15 million into the factory to create a center of competence for plastics and expand its abilities as an extruder for turbocharger lines.

That created the need to move the silicone hose operation to other locations, Hill said.

“We got too successful too quick at the plant,” he said. “We thought it was better to simplify the operation.”

ContiTech, which took a giant step into the North American sector when it acquired Veyance Technologies in January, produces the silicone hose primarily for the original equipment market, although some is used in the aftermarket.

The integration of Veyance into ContiTech is going smoothly, according to Hill. More changes are likely to come, he said. “It seems to be well accepted. It's about becoming one ContiTech—taking the best of both companies to become one company.”