The merger of Solvay SA and Companie Plastic Omnium SA's global fuel-system operations will create the world's undisputed largest maker of plastic fuel tanks.
Solvay Automotive Inc., a unit of chemical giant Solvay SA, now battles with several others for the top position in fuel tanks.
Plastic Omnium is a leading player in Europe and has a growing presence in North America, where it nearly has tripled sales in the past year.
The partners each will own 50 percent of the yet-unnamed company. The combined operations will have global sales this year of A800 million and will employ 3,000, company officials said.
'It really comes down to economies of scale and global business,' said Keith Banks, president and chief executive officer of Plastic Omnium's North American operations, based in Rochester Hills, Michigan.
The merger, scheduled to be completed by June, strengthens the financial wherewithal of both companies and gives them global reach, Banks said.
The company will have about 30 production sites in 15 countries, including sites in Europe, North America and Latin America. No immediate job cuts are expected, Banks said.
The deal is seen by analysts as needed in the face of global consolidation, tighter competition and new regulatory challenges facing fuel-tank blow molders in the USA and Europe.
'Now it is a race for size,' said Michel Costes, chief executive of Mavel SA, a European automotive consulting firm based in Paris. 'This is very important because of the new regulations on permeability of fuel tanks. Some stringent standards have already been introduced in the USA but they are still to come in Europe.'
The increased number of plants will help the suppliers dramatically reduce expensive fuel-tank freight costs, said Joel Kopinsky, principal of automotive plastic consulting firm ITB Group Inc. of Novi, Michigan.
'A big issue will be taking logistics out of the equation,' he said. 'They'll have the size and facilities to cut some corners there.'
The merger also gives Plastic Omnium access to DaimlerChrysler AG, a major Solvay customer, and Solvay greater penetration at General Motors Corp., where Plastic Omnium does business, Banks said.
Brussels-based Solvay and Plastic Omnium, based in Levallois, France, are part of a small group of plastic fuel-tank makers.
Competitors include TI Group Automotive Systems, Visteon Automotive Systems and Kautex Textron, a division of Textron Automotive Co. Inc.
The capital-intensive nature of the business has kept other suppliers from entering the field, said automotive consultant Phillip Sar-nacke of Omnitech International Inc. of Midland, Michigan.
'Because of the high capital investment, the opportunity to get the best return comes from combining resources,' Sarnacke said. 'It's an interesting move for a fairly profitable application.'
The companies also will share technological innovations and command better pricing for materials and equipment, Banks said. Solvay, a major chemical company, also makes high-density polyethylene resin used for fuel tanks.
Plastic Omnium will continue to produce exterior automotive systems separate from the merger, Banks said.
The company makes such products as bumper fascias, plastic fenders and body moldings. Solvay's production of plastic air-intake manifolds also will not be affected by the announcement.
Richard Higgs contributed to this story