A tsunami of growth: An inside look at the CSP/Teijin merger

I had the opportunity to meet and interview the top executives of Continental Structural Plastics (CSP, Auburn Hills, MI, US) and Teijin Ltd. (Tokyo, Japan) last week. The occasion was an open house and celebration of the acquisition of CSP by Teijin, which CW has reported on (here’s a link to the latest news story: http://www.compositesworld.com/news/teijin-completes-acquisition-of-continental-structural-plastics; earlier stories are also available). Before the festivities got underway, the leaders of both companies answered my questions about what the merger means for the future.

I first sat with Dr. Jun Suzuki, president and CEO of Teijn Ltd., as well as Akio Nakaishi, who is general manager of the carbon fibers and composites business unit of Teijin, as well as president of Toho Tenax Co. Ltd. When I asked why CSP was their acquisition target, Suzuki explained that several reasons drove the choice: “The first is that CSP is the largest such company in North America. Another reason is that they have many automotive customers, including the US Big Three, Toyota North America, and Honda North America, for example. And, the company is growing. CSP’s Class A automotive outer panels technology is currently the best, even before they introduced their new TCA Ultra Lite product. Their customers have accepted the SMC body panels, and trust CSP’s reliability, in volume.”

Are more composites-related acquisitions coming, I asked, and what’s your take on growth of composites and carbon fiber SMC, both in North America and globally? Suzuki answers, “Of course we would think about more acquisitions, if the right opportunities arise. Look at the synergy between Teijin and CSP: SCP is strong in the US, while Teijin’s marketplace is Asia and our aramid fiber base is Europe. Globally, we have a good fit. So we would think about new acquisitions that would fit into this global footprint.” As to growth, he adds, “It is very difficult to come up with specific numbers, but this market is going to grow, for sure. The reason I say this is that I believe that composites are the best means for automotive weight reduction or lightweighting. In terms of our future growth, CSP will play a big part in our transformation and growth strategies, for automotive. The two companies will work together to make various parts for lightweight solutions; we will do everything we can, working together.” Nakaishi says “Carbon fiber SMC will be growing. On the other hand, the combination of performance and cost makes hybrid forms of SMC a good option, where carbon fiber can be combined with other fibers, including glass and aramid.”

I then asked about Sereebo, Teijin’s chopped carbon/thermoplastic material brand and process (here’s link to a recent CW story about Sereebo: http://www.compositesworld.com/news/teijin-sheds-more-light-on-sereebo-manufacturing-process). “Sereebo is a new material, and in line with our new organizational strategy, it will become part of CSP’s “playground” of materials as the two companies move forward. Teijin’s Advanced Composites America group already established here in Michigan will be combined with CSP. As we have pointed out in our Medium-Term Management Plan, we are transforming the business model from supplying customers with materials, to close-to-customer businesses to develop composites that incorporate multiple materials, which we hope allows composites to gain market share in competition with other materials,” answered Suzuki.

With regard to CSP’s long list of companies that it works with on research and development, I queried whether those companies will stay in place and continue to be part of CSP’s projects. Suzuki says “Yes. As I have said several times before, in September 2016 and January, CSP stays the same and continues as they are, because that is very important. Teijin is not trying to reduce people nor technology — we are going to add to them. Teijin and CSP are moving in the same direction; we are the “dream team.” We, Teijin, have carbon fiber, aramid and thermoplastics, and CSP has glass fiber and thermoset SMC, a synergistic combination. When we think about R&D, especially for us, creating a future world and future markets are very important. In order to do that, we are going to create things in which people will find value. To achieve that, we will not reduce R&D, we will grow it.”

With just two minutes remaining, I took a chance and asked about the status of Teijin’s new carbon fiber plant in South Carolina (announced a few months ago, with CW’s story here: http://www.compositesworld.com/news/teijin-to-build-600-million-carbon-fiber-production-plant-in-south-carolina- ). Suzuki and Nakaishi told me that by the end of 2017, they will make decisions about fiber tow size, modulus and other specifics. The plant, although it’s clearly designed to produce fiber, may also be used to produce “intermediate material” for composites. Suzuki added “And, we are not excluding the possibility of large tow production at the plant. As for applications, we are pretty sure we’ll be making products for aircraft. How much product for automotive applications we are going to include is what we have to discuss and decide. Obviously, carbon fiber composites growth in the market is something we have to watch carefully, because as I said, the market is growing, but we don’t know the speed.”

In a separate interview, CSP’s chairman and CEO Frank Macher and executive vice president Eric Haiss explained that by acquiring CSP, Teijin is now in a Tier 1 position with regard to automotive parts. Says Frank Macher, “We’ve always been a Tier 1 supplier, that’s our game. But what we have done as part of that game is that we produce, compound, formulate, invent and tailor materials, mostly sheet molding compound (SMC), to allow our customers to meet their mechanical and performance needs for their product, with a reduction in weight. We have always consumed our materials in making parts for our customers, parts we design and engineer using that material. We do sell some materials as a Tier 2 to other parts makers, but those generally aren’t our “strategic” materials, which we don’t sell, such as TCA Ultra Lite SMC, with a very low 1.25 specific gravity, which is almost 40% lighter than the previous material.” He goes on to say “Teijin has been, in many ways, a Tier 2 supplier, in that they sell raw materials, except in the medical market, of course. They sell resins and fibers, polyesters, polycarbonate, aramids. Now, with the acquisition, they have become Tier 1. Now what they intend to do is utilize those Tier 2 materials to increase our flexibility by providing those same materials they sold to others, to us, so that we can now start conversions to parts and expand the Tier 1 position that we’re currently in.”

Eric Haiss adds “Teijin has done a lot of work around Sereebo, which is a thermoplastic/carbon fiber brand. So Teijin’s goal with Sereebo all along was to become a Tier 1 parts supplier, and was well on the way to doing that, but the opportunity with CSP came up, which allowed us to jump-start that process. So that makes a great fit, and as you saw in the Teijin Medium-Term Management Plan, it’s a core focus, and we’re looking forward to the next three years.”

I asked Macher and Haiss for some more insight on Sereebo, and how it might be combined with sheet molding compound (SMC), or used in hybrid applications within the portfolio of advanced materials that the combined companies now possess. Says Macher, “They are currently separate and distinct applications, but what you’re going to see in the future are combinations, where for example materials have to go through a paint oven at the assembly plant. Those solutions will likely be thermoset, because they can withstand the temperatures, so far. But for after-paint applications, that don’t need to go through the ovens, yet you need a very high-performing material, in many cases we can make that a thermoplastic, and can provide properties even superior than a thermoset. Sereebo has phenomenal performance characteristics in terms of structural integrity and in terms of impact strength, so we see its application coming more than likely in functional areas where the product is installed after E-coat ovens. But we’ll do combinations.” Eric Haiss agrees, saying “Sereebo is produced in Japan as a sheet product combining carbon fiber and thermoplastic resin. And because it’s a thermoplastic, it’s a hard sheet when handled. We create a blank or preform, heat it up, then press it into the part shape, in a hot stamping/compression molding process. Even though we might not want to believe it, carbon fiber doesn’t solve all issues. So CSP is very strong in glass, and has worked with carbon fiber, and as Frank said, mixed-material solutions or hybrids are necessary and really important going forward. Long term, we think carbon fiber has a great growth trajectory, but it’s going to take time to get past that gap between glass and carbon, and mixed-material solutions are going to help us bridge that gap.” 

In terms of where on an automobile Sereebo will be used in the future, neither would give details, because of client confidentiality agreements. But Macher told me “Just imagine areas where you have heavy loads, and heavy impact.” Haiss elaborated, adding “We’ve designed Sereebo to be a material suitable for primary structures of mainstream automobiles. It may not take the place of ultra-high-performance thermoset prepreg, with really high fiber volumes, but because it’s a one-minute tack time, with very good properties, better than other thermoplastics in the market today, it is suitable for those higher-volume applications So we can go into a major OEM and set up one set of tools to essentially run a complete factory for whatever components they’re designing the material in. And that’s a huge advantage. If you’re in other composites processes, even in many cases SMC, the cycle times are a little longer, and it’s difficult to do that unless the volumes are smaller. That’s an advantage of Sereebo — because it is thermoplastic, cycle times are fairly similar to what you find in injection molding, because how the part is made is not that different. You’re taking heat out, and it’s about how fast you can take that heat out to set the part. So 1 minute is within the realm of what we’re doing. We see a lot of opportunities for Sereebo in energy absorption, things like crush cans or even rockers, areas where we have to absorb energy from impacts or other sources. The way Sereebo acts in those conditions is really phenomenal. In fact, we see 2 to 3 times more energy absorption per gram, joules/gram, than we see in aluminum and other metals. So very, very high capability with these materials. There’s a lot interest from various companies in that aspect as well.”

I then quizzed both about the future of SMC for automotive, including carbon fiber SMC. Both pointed out a very key aspect of CSP’s SMC products. Macher says “Last year at the JEC World event, we won an award for a recycled carbon fiber SMC inner on an automotive deck lid. I want to stress that our thermoset SMC is able to go through an E-coat oven. We paint it with a conductive primer, and then it goes through E-coat at 400 degrees, and the assembly process doesn’t know the difference between that and a metal part. It goes thru body paint, and it provides a Class A finish, with dimensional stability, and with virtually the same orange peel ratings as a steel or aluminum part. So, carbon fiber SMC gives the lightest weight solution for that application, and gives you a cost profile that is equal or less – in that case, it turned out to cost 13% less than aluminum – because of the use of recycled fiber. Now, the next step is, how much of that carbon fiber do you really need? Do we need 50%, do we need 30%, do you modify it slightly to create a hybrid of glass and carbon fiber, which reduces the cost but also adds a little weight?”

Haiss drives home the point: “Other materials can survive in E-coat, but they undergo dimensional change and they’re not stable after that, which creates problems.  CSP has worked with some OEMs in improving that capability through their E-coat ovens, and that’s a significant advantage.” Both point out that if a composite part is made with, for example, thermoplastic olefin (TPO), it simply can’t survive the ovens and has to be painted offline. Macher explains, “So now you have added complexity. The assembly plant, now instead of having one liftgate or decklid, now they have 10 or 12, in different colors, which have to be put on in some sequence, and they have inventory issues, and OEMS have to readjust their lines – it’s a big deal. We can give them one, and they put it on the same way, every day.”

Macher describes something that the combined companies are working on: a material matrix that will allow customers to easily choose various composite materials for their application: “We’re ultimately going to come up with a ‘plug and play’ concept, wherein along one scale you will have aramid, carbon fiber, and glass, and with the resins defined, after we’ve done all of our testing. So a customer can say, I want 50% carbon fiber, so we can say, OK, here’s what it will weigh and here’s what it will cost. So they may say, no, no, we don’t want that much cost, what if we put in 10% glass and take out some carbon? So we dial it up, and say here’s what it will weigh, here’s what it will cost, and here’s the performance characteristics you get. So we’re trying to create that matrix, which gives virtually an infinite number of approaches to the mix. They’ve tried to do this in the metal regime, mixing different metals together for different applications or different casting requirements, or adding molybdenum for example to achieve certain properties. But in our case, we will have scientific, analytical data that show that if you know the fiber characteristics, you know how homogeneous the fiber distribution is, and you know the wetout capability of a resin, you could quickly identify a series of mechanical properties and then we can design the part to meet that specific requirement using that material.

That’s where we’re going. Now, are we there yet? Heck no, that was one of things we kicked around with Teijin, when we said, you guys have a lot of information, for instance, on sizing technology, what kind of coating do you put on a fiber so that it attaches to this particular resin? We’ve got sizing capability in glass, which helped us develop Ultra Lite, where we put a sizing technology on microscopic glass bubbles, which gave us adhesion between the resin and the bubbles, such that we have microscopic spheres inside the composite, to lighten it. Our laboratory is now at a point where, well, I don’t think anyone has analytical tools like we do. We’ve been investing in those for five years as we’ve hired more and more chemical Ph.Ds, working specifically on light weight and strength.”

I asked if they could say anything about rumored carbon fiber SMC programs for new pickup beds. Macher reminded me that they already make glass SMC pickup boxes for the Toyota Tacoma and the Honda Ridgeline trucks: “There are a lot of rumors out there about a next-generation SMC concept, and we’re sworn to secrecy. But what I can tell you is that the future will see a dramatic increase in interest in composites for pickup boxes. There are an unbelievable number of studies ongoing, and I can’t be specific because our customers are looking at it as a competitive advantage over the Ford aluminum pickup box. It’s unbelievable. It’s a very, very exciting area for change. We will see significant change over the next five years, it’s something that, it’s almost tsunami-like. It’s really going to be fun."

I then got a quick tour with the other journalists of CSP’s R&D laboratory, led by Mike Siwajek, CSP’s vice president of R&D. He demonstrated how SMC is made using the company’s lab-scale Finn and Fram (North Hills, CA, US) machine, much smaller than CSP’s two SMC production lines in Ohio and Indiana. He explained that the small machine allows for experimentation and development of different SMC versions, using an array of fibers and resins, including epoxy. Watch a video of CSP’s SMC material being produced, and a Class A body panel being molded, on the company’s home page: http://www.cspplastics.com/ (scroll down on the home page to “videos”).

Siwajek told us “Our management wanted more science and engineering applied to our products. We’ve built a world-class polymer composites laboratory here over the past few years, that goes way beyond the SMC machine.”  The equipment we saw includes a 500-ton press for SMC and resin transfer molding (RTM) test parts; an OMAX (Kent, WA, US) waterjet; testing machines that simulate weathering; a scanning electron microscope (SEM); an array of testing capability including differential scanning calorimetry (DSC) and thermogravimetric analysis (TGA); composite testing equipment supplied by Instron (Norwood, MA, US) and Tinius Olsen (Horsham, PA, US); and an oven that simulates E-coat conditions. Also in use was a Fortus 3D printer from Stratasys Inc. (Eden Prairie, MN, US), and Siwajek says “We plan to expand our 3D printing activities and go to a machine that is capable of fiber reinforcement, for printing of tools and other applications.”

By the time the tour was complete, the party was well underway and the presentations about to begin. Local government officials and a representative from the Japanese consulate in Detroit spoke, welcoming the acquisition and the presence of Teijin. I was surprised to learn that 502 Japanese companies already have a presence in Michigan, and provide tens of thousands of jobs. When Frank Macher took the stage, a cheer went up, reflecting his leadership and personality. He told the crowd, “We’ve grown from almost nothing to what we are today over the past 6 to 7 years. With the synergy and technical support we now have from Teijin, we have the opportunity to continue to grow, exponentially, growth that was a challenge under private ownership. Teijin has announced it will spend 300 billion Japanese yen, or roughly $3 billion US dollars, on transforming materials and healthcare, over three years. A significant portion of that investment will be allocated to support automotive programs.” Then Dr. Suzuki took the stage, and spoke of the history of Teijin, starting with the first synthetic fibers in 1918 to today’s value-added solutions for customers, including composites, enabled in part by CSP: “Together with CSP, we are creating the best technical solutions for our customers’ needs, and creating value.”  

The culmination of the evening was a “Kagami-Biraki” ceremony, whereby the wooden lid atop a barrel of saki was broken open with wooden mallets. The lid’s round shape represents harmony, and the ritual takes on a meaning of harmony and good fortune when celebrating auspicious events such as launching a new business. With everyone present shouting a Japanese word of encouragement (“Yoisho!”), the lid was broken by Suzuki and Macher, followed by a champagne toast (water was substituted for saki in the barrel!). It seemed an auspicious event indeed, given that the combined companies appear ready to significantly advance automotive composites.