FRANKLIN, Tenn.—The new owner of CTP Transportation Products L.L.C.—formerly Carlisle Companies Inc.'s tire, wheel and belting business—is focusing efforts on growing the operation sig-nificantly.
“We want to be a billion-dollar company,” Kev-in Forster, CTP's president and CEO, said earlier this year. “We're just under $800 million now, and we feel like we can grow to a billion dollars.”
Private equity firm American Industrial Partners (AIP) bought the CTP businesses from Car-lisle Dec. 31 for $375 million.
The CTP unit comprises Carlisle Tire & Wheel—which makes and distributes bias-ply and radial trailer and small off-road tires, stamped and roll-formed steel and alloy wheels, and tire and wheel assemblies to non-automotive customers—and Carlisle's power-transmission belting operations, producing and selling transmission belts and related components.
New York-based AIP describes itself as a middle-market private-equity firm that invests in North American-based industrial businesses serving domestic and global markets. In business since 1989, AIP manages a portfolio totaling more than $1 billion in committed capital, including Allied Specialty Vehicles and Heil Trailer International Co.
CTP produces tires at plants in Clinton and Jackson, Tenn., and Meizhou, China; wheels in Aiken, S.C., and Ontario, Calif.; and belts in Fort Scott, Kan., and Springfield, Mo. The unit also consists of 10 distribution centers in the U.S. and Canada, along with ones in Roosendaal, Netherlands, and Meizhou.
The business, based in Franklin, will continue to offer tires under the Carlisle and ITP brand names and wheels under the Black Rock, Cragar, Intrepid, Phantom and Star brand names.
Mr. Forster said he is not concerned about profit margins, even though that was a key reason Carlisle cited in putting CTP on the market in the first place.
Carlisle Chairman, CEO and President David Roberts outlined a standard earnings margin of 15 percent for Carlisle business units during a conference call in July 2013. CTP reported a 6.7 earnings margin in 2012, prompting Mr. Roberts to tell investors at that time that CTP no longer was “core to Carlisle's growth strategy.”
Under Carlisle, the CTP business reported sales of $768 million last year—a drop of 1.3 percent—and was profitable on an operating basis. Carlisle took an after-tax loss of $25.5 million related to the divestiture: $66.1 million for “goodwill impairment” offset by CTP's operating earnings plus a net fourth quarter after-tax gain of $6.2 million.
Divesting the tire business separated Carlisle from its original business purpose. The company was founded in 1917 in Carlisle, Pa., as a tube producer.
The tire and wheel business represented an estimated $375 million to $400 million of the company's revenue total. Mr. Forster said the margins are acceptable, but the firm feels like it can increase them over the next few years.
In doing so, Mr. Forster said AIP will make significant investments focusing on manufacturing systems. He said the firm plans on investing in new manufacturing technology for lean production and add more automation in its wheel plants.
“I think AIP has folks who understand manufacturing,” Mr. Forster said. “They've got operations specialists inside their group. I think their perception is this company is pretty well run, and they want to make investments to improve and grow the business.
“Carlisle had invested more to 'right size' the business,” he said. “Now under AIP, we can invest for growth.”
Justin Fish, a partner with AIP, said of CTP: “Working alongside an exceptional management team and talented collection of employees, we plan to drive operational enhancements that will allow CTP to more efficiently and effectively serve the needs of our global customers.”
Mr. Forster said CTP is in a position to focus on growth after Carlisle spent the last few years cutting costs. The firm reduced its footprint by closing some plants and distribution centers.
From 2010 through last year, Carlisle consolidated some of CTP's manufacturing in the U.S. The company spent $65 million to refurbish and convert a former Whirlpool Corp. factory into its Jackson tire plant. It relocated tire production from its plant in Carlisle, Pa., to the Jackson site and closed the Pennsylvania facility at year-end 2010.
It also moved tire production to its Jackson facility from factories in Buji, China, and Bowden, Ga., the latter of which was destroyed by fire in 2008.
Carlisle later closed the Buji plant, moving Chinese tire production to the Meizhou factory and belt manufacturing back to factories in Kansas and Missouri.
During that span, the firm also consolidated 19 distribution centers in the U.S. and Canada to nine—opening a center in McDonough, Ga., in the process—and merged its three wheel plants in California into one.
“I think we've got the footprint right now,” Mr. Forster said. “We're basically investing for growth. We're looking for improved efficiencies and growth of the business.”
He sees growth opportunities on both sides of CTP's portfolio with opportunities mainly in the agricultural, construction and original equipment sides of the tire business.
The construction market is one of the larger markets. Mr. Forster said the firm has a small share in this segment and believes CTP can increase it. He also sees opportunities in the speed trailer market for both tires and wheels despite CTP having a significant section of that market.
In the ag market, for example, CTP offers bias-ply drive-axle tires in rim diameters up to 38 inches in its Farm Specialist line. In the construction sector, CTP has developed a “Guard Dog” line of tires in the premium skid-steer market to go with its Trac Chief line of standard skid-steer tires.
On the belt side of the business, Mr. Forster said the company sees growth opportunities in the power sport segment and industrial distribution.
Mr. Forster, president and CEO of CTP since August 2011, said there are no plans to change CTP's leadership and that the management team transferred with the business.
He started with Carlisle in 1990 when it acquired the off-highway brake and friction business from BFGoodrich Co. He ran that company until he was promoted to president of Carlisle Asia-Pacific for six years.
Mr. Forster returned to the U.S. in 2002 as vice president of corporate development until 2008. In 2009, he returned to his position as president of Asia-Pacific before assuming his current role.
This report appeared in Rubber & Plastics News, an Akron-based sister publication of Tire Business.