Sommer-Allibert S.A.

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Sommer-Allibert S.A.

2, rue de l’Egalité
92748 Nanterre Cedex
France
(01) 41 20 40 40
Fax: (01) 47 21 49 09

Public Company
Incorporated: 1972
Employees: 18,000
Sales: Ffr 14.04 billion (1996)
Stock Exchanges: Paris
SICs: 6719 Holding Companies, Not Elsewhere

Classified; 3069 Fabricated Rubber Products, Not Elsewhere Classified; 3089 Plastics Products, Not Elsewhere Classified; 2519 Household Furniture, Not Elsewhere Classified

Since the early 1990s, the European plastics giant Sommer-Allibert S.A. has transformed itself from a maker of primarily household-oriented products—such as resin outdoor furniture, plastic bathroom fixtures, and vinyl wall and floor coverings—into one of the leading plastic components suppliers to the worldwide automobile industry. In 1996, sales to the automotive industry accounted for more than 56 percent of Sommer-Allibert’s total revenue of Ffr 14 billion, compared to just 38 percent at the start of the decade. The company’s automotive division (except in France), grouped under publicly-traded German subsidiary SAI Automotive AG (formerly Sommer-Allibert Industries), is also its strongest performer, contributing 60.5 percent of the parent company’s operating profit.

Sommer-Allibert designs and builds dashboards, door panels, floor coverings, sound-proofing and insulation installations, and other molded plastic parts for passenger car interiors for clients such as Renault, Peugeot, and Citroen in France, but also worldwide clients such as Volkswagen, Skoda, Toyota, BMW, Audi, Mercedes, Ford, General Motors, and Volvo. In the mid-1990s, Sommer-Allibert pioneered the development of interior cockpit modules—supplying everything but the seats—for early adopters such as the Volkswagen Polo, the BMW Z3, the Ford-Volkswagen line of minivans, and the Citroen Berlingo. A chief factor in the success of Sommer-Allibert’s automobile products has been the company’s willingness to locate its plants close to its clients’ factories.

Through the 1990s, Sommer-Allibert pursued an aggressive international expansion program, building or acquiring production facilities throughout Europe and North America, as well as locations in the growing Asian and Latin American markets. In 1997, Sommer-Allibert began construction on a new facility in Pueblo, Mexico, to supply instrument panels for the much-anticipated return of the Volkswagen Beetle. The company operated 31 plastics production facilities supplying the automotive industry, as well as a number of joint-venture facilities, and approximately 20 additional facilities providing production, warehousing, and distribution for the company’s other product divisions.

Despite the financial strength of its automotive products, Sommer-Allibert was perhaps best known to consumers for its wide range of household products, such as resin outdoor and garden furniture, storage products, and interior decoration accessories, categories upon which the company built much of its early growth. Yet by 1996, furniture sales had been scaled back to just under 8 percent of the total turnover; in early 1997 the company sold off its bathroom fixtures division—in part to ease the heavy debt load brought on by its aggressive expansion in the automotive market—and suggested the possibility of selling off not only its smaller Qualipac packaging division (1.7 percent of sales), but also its household furniture activities, either into a joint venture or as an outright sale.

If the sales came to fruition, Sommer-Allibert would continue to focus on automotive supplies and wall and floor coverings, and to a lesser degree on containers for industrial use. The company sold wall and floor coverings under the Sommer, Azrock, and other brand names and through partnerships with manufacturers, including Canada’s Domco and Japan’s Milliken. The wall and floor coverings division contributed nearly 30 percent of Sommer-Allibert’s 1996 sales; this division’s main strength is in vinyl coverings, which represents some 75 percent of the division’s activity, compared to textiles, which accounted for approximately 25 percent of sales. The company’s equipment sales, a segment in which the company has been active for more than three decades, included containers for fruit and vegetable distributors, industrial containers, palettes, and transport containers. During the 1990s, the company pushed into the growing rubbish bin market, selling recycling and other waste disposal containers to the community and private sectors.

In the 1990s, Sommer-Allibert was led by chairman Marc Assa, who took over the company’s leadership from Bernard Deconninck. The longtime architect of the company’s growth, Deconninck continued to hold more than 35 percent of Sommer-Allibert’s shares, with nearly 48 percent of the voting rights through the holding company Societe Industrie de Trans-formation (SIT).

Merging Two Businesses in the 1970s

Both Allibert, which specialized in plastic products, and Sommer, which specialized in floor and wall coverings, had been active for several decades when they merged in 1972 to form Sommer-Allibert. Since the late 1940s, Allibert’s direction was led by Bernard Deconninck, who would remain at the head of the company into the 1990s. Originally, Deconninck had planned to enter medicine, but the war scuttled his plans. He instead entered manufacturing, making in-soles for shoes. While he manufactured these in-soles, he saw the future for plastics. As Deconninck told the Financial Times, “At the time we were buying plastic shoehorns from another manufacturer and I suddenly had a revelation about the possibilities which plastic processing could offer.” Deconninck developed Allibert into three primary lines of business, developing plastics products for bathrooms, the automobile industry, and containers and packaging. In the early 1970s, Deconninck saw an opportunity to further diversify his company’s operations by acquiring then-struggling Sommer’s plastics, textile flooring, and wall covering operations. The merger was effected in 1972 and the company incorporated as Sommer-Allibert.

The merger presented a challenge to the company. Sommer had not kept up with capital investments and with development of new products, and the process of merging the two companies’ operations and upgrading the combined company’s floor and wall coverings arm would stretch into the next decade. As Deconninck told the Financial Times, “It took ten years to make Sommer recover as one of the leading manufacturers of plastic floors.” Part of the recovery process involved heavy capital investment into new production facilities and equipment, including automating production processes, as well as modernizing the company’s administration activities. By the mid-1980s, the company had invested some Ffr 1 billion on the renewal operation.

Meanwhile, Sommer-Allibert had begun a era of growth, principally through acquisition. “Our group was formed by a series of mergers and acquisitions of small- and medium-sized companies,” Deconninck told the Financial Times, “The company today is in fact a federation of about 60 small- and medium-sized enterprises.” By the early 1980s, that federation’s sales had swelled to Ffr 3 billion. Nevertheless, the company was only marginally profitable, posting a net income in 1981 of just Ffr 13.6 million, up from only Ffr 3.3 million the year before. And restructuring charges plagued the company’s bottom line, dropping the company into the red with a loss of Ffr 89 million in 1984. With its restructuring largely completed by 1985, Sommer-Allibert was able to boast a strong recovery. Revenue for that year had climbed to Ffr 5 billion, and net profit soared to Ffr 103 million. Domestic sales accounted for about 60 percent of the company’s sales. Sommer-Allibert operated through 43 subsidiaries with 8,700 employees in 16 countries.

Foreign development would become a prime factor in the company’s strategic planning for its next growth phase. Primary targets in Europe included Germany and Spain, while the company also eyed expansion into the crucial North American market and into the booming Asian economies as well. One factor driving the company to globalized sales was its emphasis on household consumer products. The company’s typically low-margin products necessitated heavy investment in automated production capacity to keep down costs, which in turn led the company to seek economies of scale in a wider, principally European market. Appealing to consumers presented its own challenges, however, as the company was forced to respond to country-specific consumer tastes, as well as to customize its marketing activities for each country. By the second half of the 1980s, European sales accounted for approximately 60 percent of the company’s consumer products sales. In contrast, the company’s industrial automotive sales remained primarily within the French market, accounting for 85 percent of these sales.

In 1986, Sommer-Allibert set up a new Netherlands-based subsidiary, Sommer-Allibert International, charged with raising the finances for a new phase of European acquisition and expansion. An early purchase was the acquisition of Compagnie Industrielle de Mecanismes (CIM), formerly part of the Rock-well Group, which made automobile arm rests and dashboards. Production of these products was moved into a newly established plant in the Lorraine valley. On the North American front, the company purchased a 30 percent stake in Domco Industries, the leading Canadian plastic flooring and coverings manufacturer, giving Sommer-Allibert a position from which to launch a drive into the U.S. market. By the following year, the company moved into the United States, building a 100,000 square-foot manufacturing facility in Stanley, North Carolina, for the company’s U.S. subsidiary, Allibert, Inc.

Meanwhile, Sommer-Allibert also developed new product categories, including increasing its presence in the automobile plastic components industry, and expanding into the new category of resin-based outdoor furniture. As the European market for this new, more durable, and more easily maintained furniture expanded and then approached saturation, Sommer-Allibert, with the construction of its Stanley plant, moved to take advantage of the growing interest in the category in the North American market. In 1989, the company teamed up with Rubbermaid Inc. in the United States to form the joint venture Rubbermaid-Allibert Inc., headquartered at the Stanley facility, to dominate the booming U.S. resin-based furniture market. Sommer-Allibert brought its design and manufacturing expertise to the joint venture, while Rubbermaid supplied its brand name and sales and marketing experience for the U.S. market. Sales in 1988 had reached Ffr 8.7 billion, producing a net income of Ffr 363 million.

The company’s attentions did not rest solely on its efforts in the United States. Sommer-Allibert had established two plants in Spain—still a protected market outside of the European Community—and expanded its floor coverings line with the acquisition of the rubber floor coverings line from Italy’s Ilgagoma by 1987. After further investments in Spain, including the outright acquisitions of automobile parts specialists Gunasa, Garcia, and Moltex, Sommer-Allibert turned its attention to entering the British automotive market. The company’s move into Germany began in earnest in 1988 when its publicly traded German subsidiary Sommer-Allibert Industrie acquired, for Ffr 320 million, Besmer Triangel, a maker of wall and floor coverings, but also a carpet and components supplier to the car industry. Following the acquisition, West German sales rose to more than 18 percent of Sommer-Allibert’s total revenue, up from under 8.5 percent prior to the acquisition.

Transforming in the 1990s

Fears of a potential takeover prompted the company to re-structure its capital in 1989, placing 33 percent of the shares, and 45 percent of the voting rights, into the Deconninck family-owned SIT. Deconninck was named chairman of the new organizations, while Marc Assa prepared to take over the leadership of the company. Bigger changes were in store for Sommer-Allibert through the first half of the 1990s, however. The Besmer Triangel acquisition had already strengthened the company’s position in the automotive market, aided by the addition of two new lines, Opel’s Vectra and Ford Germany’s Fiesta, in addition to products for Volkswagen’s Golf, BMW’s Series 3, and Audi. In 1989, the company began production on another German facility, in Peine, in order to supply components for the Volkswagen operations located there. By the end of that year, sales of automotive components topped sales of consumer and household products for the first time in the company’s history, and Deconninck and Assa made plans for the company’s automotive business rather than its consumer product lines to lead future growth. The plans soon came to fruition; in 1990, Sommer-Allibert entered into a joint-venture with Italy’s Fimit, supplier of doors for Fiat, giving the company entry into that area of automotive components as well.

While the rest of the world slumped in the early 1990s, Germany’s automobile industry, buoyed by the German reunification and the increased demand for cars from the former East Germany, saw major increases in production. Sommer-Allibert’s growing position and investment in that country helped it reap the rewards of the German upturn, and Germany became the company’s second-largest source of revenue, behind France. Sommer-Allibert also made plans to improve its position with the U.S. automotive industry, including forming a joint-venture with Milliken, a manufacturer of fabrics for car interiors. In addition the company expanded into the Pacific market, with a joint-venture in China, and sales and distribution activity in Hong Kong, Singapore, Korea, and Australia. As companies worldwide struggled through the recession of the 1990s, Sommer-Allibert’s activities helped the company maintain a solid financial position. Sales neared Ffr 9.9 billion, for a net profit of more than Ffr 207 million in 1992.

With its focus on the automotive industry, Sommer-Allibert began to ease out of the consumer products business. In 1992, Rubbermaid and Sommer-Allibert amicably agreed to end their furniture joint-venture, with Rubbermaid buying out Sommer-Allibert’s assets and the rights to use the Rubbermaid-Allibert brand name. Sommer-Allibert remained in the furniture industry, but only at the top end with its premium-priced Triconfort brand. And in light of a growing worldwide market, the company also returned to supplying the trash disposal container market (the company had previously been a minority partner in a joint-venture with industry leader Otto, of Germany).

Sommer-Allibert decided to build its own plants in the United States to improve its presence in the North American automotive supplies market. In response to a contract with General Motors, Sommer-Allibert began construction on a Ffr 80 million plant in Kansas in 1994, marking the first time the company had built a plant in the United States to supply a U.S. car maker. Until then sales to the United States, excluding the company’s share of Domco, amounted to 2 percent of the company’s total sales.

On the European front, the company built a new plant in Palmelo, Portugal, and two Luxembourg plants, one to produce floor and wall coverings, the second to produce interior car fittings for Ford Fiestas and Escorts in Luxembourg. By then, more than half of the company’s revenues were generated outside of France, primarily in Europe, but with a growing percentage in North America and the Pacific. In 1994, the company passed the Ffr 10 billion mark, earning profits of Ffr 353 million. Of these revenues, more than half came from sales to the automotive industry.

The following year saw further increases in Sommer-Allibert’s automotive capacity, including a thrust into the British market. In March 1995, the company formed a joint venture with U.S.-based Masland Corp. to supply interior trim and acoustic components for Nissan, Peugeot, and Saab, with plans to establish a second plant in order to supply parts for Jaguar. In October, the company formed a 50-50 joint venture with Siemens Automotive, integrating the latter company’s instrument panels into Sommer-Allibert’ s cockpit modules to take advantage of the popularity of such modules in the automotive interior industry. Entering 1996, Sommer-Allibert acquired the plastic parts production plant of Mercedes-Benz in Woerth, Germany, while a joint venture with Japan’s Inoac, formed in Greenville, South Carolina, began supplying BMW in the United States. The company’s North American expansion was further enhanced as the company began construction on a plant in Pueblo, Mexico, to fulfill the newly awarded contract to supply the complete interiors—excluding seats—for the launching of the new Volkswagen Beetle.

Sommer-Allibert’s aggressive expansion in the automotive industry saddled it with a heavy debt burden. In order to reduce debt, the company began plans to divest some of its operating divisions. The Salle de Bains bathroom fixtures division was sold off by the beginning of 1997, and the company began looking into either a joint venture or outright sale for its outdoor furniture segment. The future of the company seemed firmly focused on Sommer-Allibert’s two main revenue generators: automotive interiors and floor and wall covering.

Principal Subsidiaries

Allibert Equipment; Allibert Inc. (United States); Allibert Triconfort; Sommer S.A.; SAI Automotive AG (Germany); Sommer-Allibert Ind. Mexico SA de CV (Mexico); Qualipac; Sommer Masland (United Kingdom; 50%); Allibert Contico (United States; 50%); Allibert Industries Ltd. (Montreal).