Husky injection molding systems case

Harvard Business School 9-799-157 Rev. March 28, 2008

Assistant Professor Jan Rivkin prepared this case as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.

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Husky Injection Molding Systems

From his second-story office, Robert Schad looked out over the production bays below where new Husky plastic injection molding machines were going through their paces. Since founding Husky in 1953, Schad had built the Canadian company into one of the world’s premier manufacturers of plastic injection molding equipment. Customers used Husky equipment to make plastic products ranging from soft drink bottles and yogurt cups to automotive components and computer housings. Husky was known for building the highest-performance machines in the business…and charging a hefty premium for them.

In the early 1990s, Husky had enjoyed explosive growth and profitability. Revenue had grown from $250 million in 1992 to more than $600 million in 1995, net income had quadrupled, and the company registered a return on equity approaching 40%.1 Then suddenly, in late 1995, everything seemed to fall apart. Competitors entered Husky’s most lucrative markets with equipment sold at very low prices. At the same time, a shortage developed for certain of the resins used to make plastic products, and machine demand plummeted. The resulting excess capacity triggered a market share battle among machine competitors. It looked like 1996 was going to be a tough year financially.

Schad and the rest of Husky’s management team struggled with how to respond. Some members of the team argued that the company had to stand and defend its traditional markets, while others favored fighting fire with fire and expanding into competitors’ markets. Some advocated slashing expenditures aggressively, while others argued that generous funding of engineering, development, and service was money well spent. And all of the managers looked to Schad—at 67, still the driving force in the company and deeply involved in day-to-day operating decisions—for clear direction.

The Market for Injection Molding Equipment2

The market for plastic injection molding equipment and related services, in which Husky participated, was part of the larger, roughly trillion-dollar global plastics sector. Three types of players comprised the plastics sector: processors, resin makers, and equipment manufacturers. (See Figure 1.) Processors manufactured thousands upon thousands of plastic items and sold them to downstream manufacturers, retailers, and end-consumers. Common plastic products included automobile dash boards and bumpers, food packaging, synthetic fibers, catheters and syringes,

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799-157 Husky Injection Molding Systems

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electrical connectors, trash barrels, toys, piping, and computer keyboards. Processors ranged from Plastipak, which made soda bottles and other containers, to Motorola, which produced cellular telephones, to General Motors, which made plastic automotive parts.

Figure 1 The Plastics Sector

Petrochemical producers

(e.g., Exxon)

Resin makers (e.g., Dow Chemicals)

Equipment manufacturers (e.g., Husky)

Processors (e.g., Plastipak)

Downstream manufacturers,

retailers, consumers

To make this diverse array of products, processors bought resins and capital equipment. Sold as tiny pellets, often by the tankerful, resin was the raw material that was melted down and reshaped into plastic products. Resin makers such as BASF, Dow Chemicals, and Du Pont produced plastic resin from petrochemicals. Resin came in various chemical forms, with polyethylene, polypropylene, polyethylene terephthalate (PET), and polyvinyl chloride (PVC) among the most common. Equipment manufacturers, including Husky and many others, made the machinery that converted resin into products.

Because of its favorable performance characteristics and its low cost, plastic was displacing glass, metal, wood, and paper in numerous applications. From 1982 to 1996, the global volume of plastic resin consumed grew at an average clip of 6% per year. Growth was expected to continue at a comparable rate, especially as plastic became more heavily used in countries that traditionally employed little. Per capita consumption exceeded 80 kilograms per year in North America and Western Europe while in other areas, annual consumption per person was less than 15 kilograms.

Processors used a variety of techniques, including extrusion, blow molding, and injection molding, to form products from resin. Most products were clearly best produced by one of these techniques. In the extrusion process, plastic resin was melted and fed through a die to produce a thin shape such as a film, sheet, or tube. Blow molding involved blowing hot resin into a mold to make a hollow shape such as a container.

Injection molding. Many of the most complicated plastic shapes required injection molding, the process for which Husky made equipment. A basic injection molding system consisted of two components: a mold and a machine. (See Figures 2 and 3). The mold included two pieces of machined metal with cavities between the pieces in the shape of the desired plastic parts. One half of the mold (the “hot half”) rested in the stationary platen of the machine, and the other (the “cold half”) was attached to the moving platen. While a clamp on the machine held the halves of the mold together under high pressure, a barrel on the machine melted the resin and a piston injected the molten resin into the mold cavity. Seconds later, when the resin was cooled and the plastic parts solidified, the clamp opened and released the parts. A set of controls synchronized the system’s actions.

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This document is authorized for use only by Baikang Yuan in Strategy In Action Spring 2018 taught by Lefevre, Northeastern University from January 2018 to July 2018.

Husky Injection Molding Systems 799-157

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Figure 2 Injection Molding System

Clamp base

Resin pellets in hopper

Arm that opens and closes clamp

Injection piston

Stationary platen holding hot half of mold

Clamp motor

Injection unit base

Moving platen holding cold half of mold Barrel to

melt resin Motor

Molten resin

Figure 3 An Injection Mold

Source: Husky

Advanced injection molding systems incorporated other pieces of equipment. Robotic devices removed cooled products from the mold. Highly engineered “hot runners,” built into molds

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This document is authorized for use only by Baikang Yuan in Strategy In Action Spring 2018 taught by Lefevre, Northeastern University from January 2018 to July 2018.

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themselves, heated the often intricate distribution channels between the pump and the mold cavity, making sure that the resin waiting in the channels remained molten while the part in the cavity solidified. Hot runners improved the quality of parts and reduced resin waste.

The force which the machine clamp could exert on a mold affected the type of product which a machine-mold combination could manufacture. Consequently, injection molding machines were sometimes categorized by the force they could exert. Small, 60-tonne machines made simple products such as electronic components, syringes, and computer keyboard keys.1 Large, 4,000-tonne machines were employed to produce big items such as car bumpers or to make multiple items in a single mold. Still on the drawing boards were 8,000-tonne machines which could mold entire plastic car bodies in a single piece. Prices ranged from $20,000 for small, standard machines to as much as $6,000,000 for massive, customized equipment.

Processors spent $19.0 billion on injection molding equipment and services in 1995. Exhibit 1 shows one breakdown of the market by end application. Exhibit 2 divides the market by the type of equipment or service purchased.