Custom wheel maker American Racing Equipment Inc. (ARE) has completed its acquisition of the bulk of the assets of Weld Wheel Industries Inc. and committed to continuing production of wheels at Weld's Kansas City, Mo., plant.
American Racing, a unit of Platinum Equity Advisors L.L.C., paid $24.4 million for the assets of Weld Wheel, which filed for Chapter 11 bankruptcy protection Aug. 17, according to court documents.
Bob Swelgin, president and CEO of ARE, called Weld Wheel and its brands ``vital additions'' to ARE's family of products.
``We are committed to ensuring the financial and operational stability of Weld and providing customers with the highest level of service and quality products,'' Mr. Swelgin said in a prepared statement.
ARE said the acquisition will increase its market share in the aftermarket wheel industry and add ``important capabilities'' in the manufacture and distribution of high-performance forged wheels.
``The combination of American Racing and Weld Wheels creates a powerful market leader with a fundamental commitment to providing the highest quality products and service to customers,'' Mr. Swelgin said. ``The integration of American Racing and Weld will strengthen both businesses, expand our offerings to customers and solidify our position as a leading provider of forged wheels to the automotive aftermarket and racing industries.''
Mr. Swelgin confirmed that ARE is committed to continuing operations in Kansas City and working closely with Weld's employees, suppliers and companies to stabilize the business and integrate it seamlessly with American Racing.
``We are making a significant investment in Weld because we believe in the company's products and its brand,'' Mr. Swelgin said. ``We will take immediate steps to ensure the stability of Weld's operations and then integrate the company seamlessly into the American Racing family.''
ARE did not disclose the amount of its investment but said it would be used to reconfigure the plant's layout for lean production methodologies.
Weld Wheel generated $46.1 million in sales last year but suffered a $1.3 million loss, according to court documents. Weld Wheel founder Greg Weld will continue with ARE as an executive vice president, responsible for customer relationships, creative design and partnerships, ARE said.
Weld Wheel, which sells wheels under the Weld Racing, Evo, Rubicon, Sovereign and AFX brands, sought Chapter 11 protection earlier because of financial difficulties caused by:
* An ``ill-advised'' move into importing cast aluminum wheels from China;
* A 40-percent rise in raw aluminum costs; and
* A slowdown in sales of wheels for trucks and sport-utility vehicles, driven by the recent high gasoline prices.
This is Platinum Equity's second acquisition in the wheel business this year, following its purchase in May of the assets of Boyd Coddington specialty wheels from NRG Motorsports Inc., an automotive aftermarket parts and accessories firm, for an undisclosed price.
At the time, Platinum-which acquired ARE in July 2005 from Canada's Noranda Aluminum Inc. for $40.5 million-said ARE would offer Coddington's wheel lines through its existing distribution network. Platinum/ARE also struck a deal with company founder and custom street rod icon Boyd Coddington Sr. to consult on wheel design, sales and marketing and event appearance/promotion.
``Platinum has now acquired two strong brands and businesses in the automotive wheel aftermarket,'' Platinum Executive Vice President Bob Wentworth said at the time. ``We intend to position them to leverage each other's strengths and capitalize on complementing synergies.''
Mr. Wentworth said the strategy is to take advantage of American Racing's extensive distribution network and strong operating infrastructure and Coddington's innovation in wheel design, grassroots credibility with the auto enthusiast community and the power of the Boyd Coddington nameplate.
To help get the strategy off the ground, Platinum hired Mr. Swelgin, formerly vice president of operations for Panasonic Automotive Systems, as CEO of American Racing.
``We're committed to growing and diversifying American Racing, and Bob Swelgin is a leader who can make that happen,'' said Rob Joubran, chief operating officer and treasurer for Platinum Equity.
``Bob's past achievements speak volumes about his operational expertise and leadership abilities.''
Rancho Dominguez-based ARE employs 1,400 at plants in Los Angeles and Tijuana, Mexico, as well as in 44 distribution centers across the U.S. and Canada. It is celebrating its 50th anniversary this year. ARE has capacity for about 1.5 million wheels a year, according to Noranda documents.