Managing Bankruptcy Through the Eyes of the OEM, Molder and Moldmaker

Obtaining accurate information of closely-held companies and corporations is difficult.

Obtaining accurate information of closely-held companies and corporations is difficult. If you buy resin, your buying history is in a database maintained by the Tarnell Company, LLC (Tarnell.com). This information is available to anyone for a fee. It’s valuable to an OEM to know how financially stable their molder is and it’s valuable to a moldmaker to know how financially stable their customer is. It’s a tragedy if a moldmaker delivers a $500,000 mold to his customer and 30 days later the customer declares bankruptcy. It is far more prudent to maintain a timely credit watch on all customers in this volatile market. It’s valuable to any company to keep track of their credit rating. A bad credit rating is a barrier to getting new business. Obtaining accurate information of publicly-held corporations is much easier.

From an OEM perspective, what happens when the molder’s plant has been padlocked? If an OEM goes into a padlocked plant with the sheriff armed with P.O.s and canceled checks to prove ownership of the molds, the sheriff will refer him to a judge. The OEM will not be able to retrieve his molds until the judge establishes ownership. A better solution is to have every mold engraved with company name, address, phone number and Web site. Now when an OEM goes into a padlocked plant with the sheriff, there is physical proof of ownership and the sheriff will probably release the molds on the spot.

From the molder’s perspective, his set-up sheets are his intellectual property, which must be protected. These sheets can have even more value if they are expanded to define the plastic conditions in the mold: conditions that the plastic melt sees and experiences. The plastic experiences temperature, time, pressure and velocity. If the plastic conditions are defined correctly for the current press, then they can be duplicated in any other press—whether it be a hydraulic, toggle, electric or accumulator press. The molder can then move molds seamlessly from press to press within his plant with decreased set-up times, start-up times and reject rates, making his operation more profitable.

Enhanced set-up sheets are extremely valuable to an OEM. They would allow the OEM to start up a new molder seamlessly. It saves the OEM from investing in a costly hedge inventory of 3 to 6 months.

A typical scenario for an OEM is one where he sees a molder is in trouble and builds a hedge inventory (without telling the molder) and immediately moves the molds to another molder.

A typical scenario for the molder is one where he doesn’t want to tell the OEM of the problem, which could trigger the OEM to take immediate action. Any loss of business at this point might/will plunge the molder into bankruptcy.

A New Option: The molder places all the enhanced process set-up information with a third-party (attorney) in escrow with the stipulation that it is only to be delivered to the OEM in the event of bankruptcy. The molder and OEM negotiate a cash fee to be paid when the information is established in the escrow account.

The molder gets immediate cash to get over the crisis. The OEM saves money by not investing in a large-hedge inventory, but may want inventory to cover a short transition period.

The plastic conditions can be duplicated by applying engineering knowledge to the enhanced set-up sheets. From an OEM perspective, there needs to be belief in the engineering expertise of the molder. The OEM may want to see a demo of a mold changing from one press to another to verify that the enhanced data sheets can do what is advertised. There may also be a situation where the OEM wants a disinterested third-party to review the data for completeness, who would be bound by a secrecy agreement not to disclose any data to the OEM.

From the molder’s perspective, he needs a strong relationship with the OEM based on mutual trust and past performance. He needs to be comfortable in approaching OEM management.

In summary, this new option generates immediate cash for the molder and saves money, time and effort for the OEM.