Safety Components International, Inc. History

Company Perspectives:

Safety Components International, Inc. is a leading, low-cost supplier of automotive airbag fabric and cushions with operations in North America and Europe. The Company is also a leading manufacturer of value-added synthetic fabrics used in a variety of niche industrial and commercial applications. In addition, Safety Components supplies metal airbag components utilizing its machining and stamping capabilities gained from years of experience as a military ordnance manufacturer.

Key Dates:

1994:

Safety Components International (SCI), a subsidiary of defense contractor Valentec, is spun off in an initial public offering.

1996:

SCI buys Germany's Phoenix Airbag GmbH.

1997:

JPS Automotive airbag unit, as well as Valentec International, are acquired.

2000:

SCI divests non-automotive units during prearranged bankruptcy reorganization.

2004:

Zapata Corporation acquires controlling interest in SCI.

Company History:

Safety Components International, Inc. (SCI) is a major supplier of components for automotive airbags. SCI sells airbag fabric in the United States and sells cushions to airbag module integrators around the world. The company's products, which include cushions for passenger, driver, and side impact airbags and knee protection curtains, are found in over 200 models of cars and trucks. Airbag products account for about 90 percent of sales.

The company also produces a variety of specialized synthetic fabrics for use in defense, aerospace, oil, and other industries. Applications include filtration, military tents, high-end luggage (used in Hartman and Tumi brands), and clothing for firefighters.

U.S. manufacturing facilities account for half of sales; Safety Components also has plants in Mexico, the United Kingdom, Germany, and the Czech Republic, and farms out some work to contractors in Germany and Romania. It produces about two million airbag cushions per month. The company maintains technical centers in South Carolina, Mexico, and Germany. Safety Components underwent a prearranged Chapter 11 bankruptcy in 2000, selling off ammunition supplier Valentec Systems, Inc.

Origins

Safety Components International, Inc. (SCI) was formed on January 12, 1994, as a wholly owned subsidiary of Valentec International Corporation, a contractor for the defense, aerospace, and automotive industries. Valentec CEO Robert A. Zummo became SCI's first chairman, president, and CEO.

Zummo had in 1993 bought Valentec International Corp. from Insilco Corp., a Big Board-listed U.S. defense contractor based in Meriden, Connecticut, that had acquired Valentec eight years earlier. Based in St. Louis with subsidiaries in Florida and Ohio, Valentec produced metal components such as ammunition cartridges, link belts, and projectiles used by the military, mostly for target practice.

Valentec also made miniature parachutes for ordnance. This experience led to a contract supplying TRW with fabric for automotive airbags. After Zummo acquired the company, the airbag business was spun off as Safety Components International. The company completed an initial public offering on the NASDAQ (ticker: ABAG) in May 1994.

SCI was based in Costa Mesa, California. It produced projectiles and other ammunition components at a factory in Galion, Ohio. In September 1994, SCI won a two-year, $65 million contract to supply the U.S. Army with 120 mm mortar cartridges as a prime contractor.

SCI grew rapidly. Eventually the company began sewing the airbag fabric into airbag cushions itself. Sales were $7 million in 1992. For an 11-month fiscal year ended March 31, 1994, they were up to $22.4 million. Sales reached $51.8 million in 1995, with net income of $2.1 million. Sales for the automotive division nearly tripled to $43 million.

Although SCI faced increasing competition, demand for airbags was growing considerably in world markets. The introduction of side impact airbags produced more demand for SCI's components. TRW was the company's only automotive airbag customer until September 1995, when SCI won a large contract to supply airbag material to Delphi Interior and Lighting for passenger side airbags in GM trucks. Neither of these were exclusive arrangements; both TRW and Delphi supplied a portion of their own airbag fabric.

Growing Globally in the Mid-1990s

The company's Mexican plant was producing 2.6 million airbag cushions a year. A research and development center was set up there in 1995. A joint venture was established in China in 1995 but was ended after four years. SCI also had a U.K. facility in Gwent, Wales, which subcontracted work to a plant in the Czech Republic; these operations produced 800,000 airbags a year.

In 1996 the company established its own direct sales force. It had retained an outside marketing firm, Champion Sales & Service Co., since 1992. At this time, SCI had nearly 800 employees in the Automotive Division and 100 in the Defense Division.

An 80 percent share of Phoenix Airbag GmbH, based in Hildesheim, Germany, was acquired in 1996 for about $22 million, plus up to an additional $7.5 million if it met certain financial targets. The remaining shares were to be acquired later. Phoenix had sales of $30 million a year.

The deal made SCI Europe's leading independent airbag producer. Building its low cost manufacturing capacity, in April 1996 the company began work on a 100,000-square-foot office and manufacturing facility in the Czech Republic.

Valentec International Corporation, SCI's largest shareholder since its founding, was acquired in May 1997. Valentec made stamped and machined metal parts used in airbag inflators as well as in ammunition for the military.

Later in 1997, SCI bought the airbag fabrics business of Collins & Aikman Corp.'s JPS Automotive L.P. Unit for $56.3 million plus assumption of $650,000 in debt. Collins & Aikman had acquired JPS only a few months earlier. JPS's Air Restraint and Technical Fabrics Group dominated the airbags fabric business in North America, with 40 percent of the market; chief customers included TRW (which accounted for 47 percent of fiscal 1997 sales), AlliedSignal, and AutoLiv Inc. It was renamed Safety Components Fabric Technologies after the purchase.

SCI also bought a 350,000-square-foot building next to the JPS site in Greenville, South Carolina, for about $1.25 million. The company also relocated its headquarters to Greenville from Costa Mesa, California.

Bolstered by the JPS buy, SCI's sales rose from $84 million in 1997 to more than $200 million in 1998. SCI claimed about 50 percent of the North American market for both outsourced airbag fabric and outsourced airbag cushions.

Research firm Tier One reported that 87.7 million airbag modules were sold worldwide in 1997, versus 3.6 million in 1991. Increasing airbag use in Europe and Asia was expected to push demand to 158 million modules by 2000. In addition, U.S. legislation required the installation of driver and passenger side airbags in all new passenger cars by model year 1998, and in light trucks and other vehicles by model year 1999.

The market was also growing increasingly competitive, however, and the company began to lose money--$48.7 million in the 1999 and 2000 fiscal years. SCI's common stock was delisted from the NASDAQ in February 2000. The company then began trading shares over the counter.

Reorganized 2000

Safety Components filed for bankruptcy protection in April 2000 and emerged from the prearranged Chapter 11 reorganization six months later. In September 2000, the company sold defense contractor Valentec Systems, Inc. to an investor group led by its president, Victor Guadagno, for $4.15 million. Valentec Systems, picked up in the 1997 purchase of Valentec International, had been SCI's only non-automotive unit.

SCI resolved to dispose of its metal and defense businesses in October 2000. Valentec Wells, LLC, a metal belt link business, was sold to an Alliant Techsystems ((ATK) subsidiary in September 2001 for about $5 million. Valentec Wells had earlier in the year relocated from Costa Mesa, to plants in Ohio and Missouri, partly due to problems with California's power supply. Galion, Inc., an Ohio-based defense business, was sold to an affiliate of The Diversified Group Incorporated in December 2002 for $454,000.

In November 2001, Safety Components, through its U.K. subsidiary Automotive Safety Components International Limited, acquired Woodville Airbag Engineering from Smiths Group plc subsidiary TISPP UK Limited in November 2001. SCI paid £3 million for it. Woodville, based in South Derbyshire, England, was losing more than £1 million a year but had a large backlog. SCI soon transferred much of Woodville's work to the Czech Republic and other locations with lower wage costs. A plan to close SCI's plant in Crumlin, Wales, was announced in August 2002.

SCI then had two main divisions. The North American Automotive Group was made up of Safety Component Fabric Technologies, Inc. (SCFTI) and Automotive Safety Components International, Inc. (ASCI). The European Automotive Group included Automotive Safety Components International Limited (Wales, U.K.), Automotive Safety Components International GmbH & Co. KG (Hildesheim, Germany), and Automotive Safety Components International s.r.o. (Jevicko, Czech Republic).

SCI reported sales of $244.3 million for the fiscal year ended March 31, 2003. Holding company Zapata Corporation accumulated an 83 percent interest in Safety Components in 2004. SCI subsequently changed its fiscal year to coincide with that of Zapata, ending December 31.

Principal Subsidiaries: Automotive Safety Components International Inc.; Automotive Safety Components International Limited (U.K.); Automotive Safety Components International RO S.R.L. (Romania); Automotive Safety Components International S.A. de C.V. (Mexico); Automotive Safety Components International sro (Czech Republic); Automotive Safety Components International Verwaltungs GmbH (Germany); Safety Components Fabric Technologies, Inc.

Principal Operating Units: European Automotive Group; North American Automotive Group.

Principal Competitors: Autoliv, Inc.; Highland Industries, Inc.; Key Safety Systems, Inc.; Milliken & Company Inc.

Further Reading:

• Apodaca, Patrice, "O.C. Air Bag Maker to Buy Fabric Supplier for $56 Million," Los Angeles Times, July 2, 1997, p. D1.
• Couretas, John, "Collins & Aikman Corp. Sells Airbag Fabric Operations," Automotive News, July 7, 1997, p. 26.
• "First Safety Deal Soon," High Yield Report, July 7, 1997, p. 1.
• Gowrie, David, "Sewing Up the Air Bag Business," Record (New Jersey), October 30, 1998.
• Hinman, Catherine, "Contractor Wins Air Force Project; Valentec to Boost Employment After Receiving Contracts," Orlando Sentinel, September 5, 1988, p. 10.
• "Insilco Corp. to Acquire Valentec International," PR Newswire, January 7, 1985.
• McGhie, Tom, "British Official Fights to Stop Carolina Firm from Shutting Airbag Factory," Daily Mail, November 18, 2001.
• ------, "U.S. Company Announces Job Cuts After Buying British Airbag Business," Daily Mail, November 11, 2001.
• O'Dell, John, "Safety Components Acquires Shareholder," Los Angeles Times, June 2, 1997, p. D9.
• Robertson, Joe, "New Company Creates Jobs at Lake City," Kansas City Star, May 4, 2001, p. C3.
• "Safety Components Closes JPS Airbag Unit Purchase," Autoparts Report, August 1, 1997.
• "Safety Components Gets GM Delphi Airbag Contract," Autoparts Report, October 3, 1995.
• "Safety Components International Inc. Announces Initial Public Offering," Wall Street Transcript, May 16, 1994.
• "Safety Components Sets Acquisition of Air Bag Unit," New York Times, Bus. Sec., July 26, 1997, p. 35.
• "Safety Components Stock Gets Delisted from Nasdaq," Dow Jones Business News, February 2, 2000.
• "38 Jobs Lost As Airbag Maker Ceases Production," Western Mail (Cardiff, Wales), Bus. Sec., August 13, 2002, p. 12.
• Vyas, Rajiv, "Power Proves Final Straw for Some," Orange County Business Journal, July 9, 2001, p. 1.

Source: International Directory of Company Histories, Vol.63. St. James Press, 2004.

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