Volume 9 | Issue 4 | Year 2006

When you’ve been in business for more than a century, you have to change with the times. And while success depends on meeting your customers’ needs, there comes a time when you have to evaluate whether customer needs and the needs of the company can remain sustainable. As Red Spot, a family-owned and managed manufacturer of coatings for automotive plastics based in Evansville, Ind., discovered, sometimes there is such a thing as being too focused on the customer. “We had become so customer-centric, we were servicing business lines at increasing levels without corresponding increases in revenue,” explains Mike Merkel, vice president of commercial products. “Finally, we took a hard look at where we could best create value for ourselves and our customers and concentrated our efforts there. For business that wasn’t profitable or was low volume, we either exited the market entirely or we sold the technology to smaller paint companies with different cost structures that were better suited to the business.”

Red Spot, by the way, has nothing to do with dripping paint. Founder Harry Doakes Bourland took the name from a riverboat docked on the Ohio River; he also developed the company logo long before that of a certain retail chain, to which it bears resemblance. However, until a few years ago the Red Spot company name included “paint and varnish” as part of its corporate identity. It was shortened to Red Spot after it discarded its consumer products and retail business lines. “Today we focus on our core competency, which is coatings for plastics. About 95 percent of those parts are in the automotive industry,” Merkel points out. “We continue to grow our diversification strategy but must increase the growth curve.”

Even while it sheds products that had helped build the business, Red Spot was hardly reinventing itself in concentrating on plastic coatings. In fact, it was building on its legacy. Back in 1937, Red Spot was first to develop a process to make paint adhere to plastic. That was in the days when cars were mostly made out of metal. Of course, today much of the auto body and interiors are made primarily of plastic. Two areas of focus for Red Spot are ultraviolet (UV)-curables and thermal cured products for both interior and exterior components.

High intensity UV lamps cure in a fraction of the time required by conventional coatings; such a rapid cure schedule results in production savings of up to 80 percent; in addition, less floor space is required and less energy is used. Moreover, the UV-cured finish provides exceptional hardness, durability and clarity unmatched by conventional means, and complies with low volatile organic compound (VOC) emission standards. Red Spot’s unique UV technology enables curing of three-dimensional part applications as well as traditional flat-line production. Such flexibility allows parts to be at varied distances from lamps, rather than at specific focal points.

Red Spot owns about 70 percent of the global market for UV-curables for use on headlights. “Used to be that headlights were a purely functional device, but today they’re more part of the aesthetic design,” Merkel says. “Where the typical headlight positioning was at a 70-or 90-degree angle, today it’s typically a 45 degree angle that’s integrated into the nose of the car. Consequently, the finish has to be as good as the surrounding metal. This presents certain challenges in balancing scratch resistance and weathering resistance with hardness to achieve long lasting durability. In fact, we’ll be launching a new UV curable product in the next 12 to 18 months that far exceed current products for performance.”

“UV curable technology has immense opportunity outside of the automotive market and we are executing plans to exploit our expertise to gain market share in markets such as cosmetics, recreational vehicles, building products, and propane tanks to name a few. We have the technical capability and are adding the resources to support growth in this area,” Merkel says.

Thermal Cured Products
Red Spot offers a range of primers, adhesion promoters, 2k basecoats (used on fascia, grilles, spoilers, rocker panels, side moldings, wheel trim and overlay applications), 1k basecoats (for fascia and other exterior components) and 2k clearcoat (for weathering and chemical resistance) for exterior plastic-molded parts.

Interior automotive high touch areas also demand an array of high performance coatings. Red Spot coatings cover every surface, from antimicrobial compound coatings, matte to textured to high gloss surfaces, laser-etch and soft feel. The majority of these products are available in waterborne and solventborne technologies. An example of a Red Spot application is a waterborne in-mold coating on the diamond grained Cadillac CTS interior. “That’s something that is going to be touched frequently, and the quality of the vehicle is going to be reflected in the fact that the finish doesn’t dull or worse, wear out, over time,” Merkel says.

Another unique technology under development at Red Spot is Powder Capable Primer. This product allows automotive assembly plants to process SMC utilizing powder primer surfacer. “Presently SMC cannot be utilized with powder primer due to vapor boil,” he explains. “Vapor boil occurs due to SMC being inherently hydrophilic. During transport and while the SMC parts are waiting to be finished at the assembly plant they are absorbing moisture. When the powder primer is cured it requires a high temperature and this moisture vaporizes and the result is blistering. Our formulations, however, virtually eliminate vapor boil, which saves money with fewer defects, less waste and greater overall efficiency.”

Global Coverage
Worldwide marketing requires infrastructure, and Red Spot felt that its resources would be best spent creating value for its customers instead of building an international distribution network. Instead, Red Spot in North America, Fujikura Kasei in Asia and Sonneborn & Rieck in Europe and Africa formed The Global Alliance. This alliance allows technology to be shared globally or as some refer to “glocally,” translating to global reach via local supply and service. Red Spot itself sells directly to Canada, Mexico and the U.S., and has another alliance based in South America. According to Merkel, “This approach really gets us in harmony seamlessly with the needs of the OEMs for local manufacturing. You have a technology that an OEM in North America wants but different parts may actually end up getting manufactured in, say, the Czech Republic and China. The parts have to have the same consistency and quality because they’re going on the same vehicle. We’re able to supply that consistency without a huge capital outlay in manufacturing facilities or support staff. The advantage to the customer is they are guaranteed identical coatings from our alliance suppliers, with one-time approval of a single technology that comes with high quality assurance and efficient local supply chain production. Technical service is also closer to the plant where the coatings are applied. The advantage to us is that we get royalties for the use of our licensed technology that enables us to provide global service without a high level of expense.”

Merkel notes that while China is beginning to gear up its auto manufacturing business, the most significant opportunities in Asia are with OEMs that are locating their manufacturing facilities in that region. “But, needless to say, as the local auto manufacturing business grows in China, we hope that becomes a developing business for us, as well.”

In the U.S., the Big Three are having their difficulties. “We’ve taken a hit from the decline in the American auto business over the last three to five years,” Merkel says. “However, it’s being offset by the success of the transplants – the Asian and European companies that manufacture in the U.S. Our goal is to meet or exceed the growth rate of the transplants. So, if the transplants grow to 40 percent market share, we want to grow our sales to them to a corresponding 40 percent of our total sales. Right now, we’re slightly exceeding that goal.”

Manufacturing Excellence
Red Spot operates two manufacturing facilities. A 350,000-square-foot plant in Evansville boasts the world’s highest production of coatings for plastics; an additional 87,000-square-foot facility in Westland, Mich. is located in the Detroit metro area, and also provides coatings for Red Spot’s non-automotive applications, mainly such sporting goods as in-line skates, golf shafts, golf balls, hockey sticks and pool cues. In addition, Red spot has a manufacturing alliance in Brazil to service South American customers.

Both U.S. plants are TS16949 and ISO: 9001 certified. Moreover, they have the flexibility to run orders as small as 10 gallons or as large as 2,500 gallons. Since even customized blendings can be mixed from standard blends, products are manufactured to customer demand, though emergency turnarounds of one to two days can be accommodated.
“For the last two and a half years we’ve been implementing lean manufacturing, and it’s saved us considerably in operating expenses while making us more efficient,” Merkel says, adding, “At the same time, we’ve seen price increases of 7 to 9 percent across the board in our raw material costs. To maintain profitability, some of those increases can’t help but passed on to the customer.” Although pricing seems to have stabilized, Merkel says that “it’s anyone’s guess” whether they’ll continue to rise as they have.

“One thing that has helped us is that last February we entered into a new labor agreement that’s provided us with more flexibility to improve our operating efficiency,” Merkel says. “That’s going to help us provide more security for our business and our people.”

For now, Merkel feels the company is right sized, though the next 12 to 18 months will determine whether expansion is warranted. “We’re noted for our product innovation, and we’re beefing up our product development to continue to set the standard for coating technology. We’re sure our customers will be as excited about it as we are.”
All of this makes Red Spot a top finisher.

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