Albion buys Volvo plant

Lancashire.

The Farington Components plant employs 400 people, has annual sales of

around #18m and is currently running at a profit.

As part of the purchase arrangement, Albion has signed contracts to

continue supplying Volvo with parts from the factory for the next five

years.

This will provide a secure base for expanding the business in a way

that Volvo was unable to do. Albion, as an independent manufacturer,

plans to find new customers for Farington's products outwith the Volvo

group.

Financial details of the sale were not disclosed, but the deal does

not involve any hefty up-front payments by Albion, which was rescued

from receivership only two years ago.

''There is a small cash payment, but it is over a period of time and

related to the contracts we have with Volvo,'' said Albion marketing

manager Elaine Catton.

The deal boosts Albion Automotive's annual turnover to #70m and its

total workforce to 1160.

Volvo said its sale of Farington Components did not imply any threat

to its bus and truck factory at Irvine, the Swedish company's only other

manufacturing plant in the UK.

A spokesman for Volvo's truck and bus division noted that the company

had invested a further #6m in Irvine this year to boost production from

5500 vehicles a year to 8500.

Albion Automotive currently makes truck axles at Scotstoun in Glasgow

and chassis components at Leyland, less than a mile from its new

Farington plant.

All three factories formed part of the Leyland DAF group before its

collapse in February 1993.

Farington was sold to Volvo in 1988, but the two Albion Automotive

factories remained part of the Leyland DAF until the bitter end.

Albion Automotive was created in November 1993 through an innovative

deal put together by receiver Arthur Andersen.

Arthur Andersen brought in a new management team led by chief

executive Dan Wright and persuaded creditors to take equity holdings in

Albion Automotive to help restore the two factories to financial health.

The new company exceeded all expectations by breaking into profit in

March this year -- two years ahead of schedule.

So spectacular was its success that in July its creditors sold their

equity stake to venture capital firm Candover Investments and the

company announced a #20m investment programme.

This could be boosted to #37m as Albion Automotive reinvests profits

from its rapidly expanding operations over the next five years.

Commenting on yesterday's acquisition, Mr Wright said: ''What we have

done in Glasgow and at the Leyland components plant we can do again at

Farington.

''We have made this commitment because we believe we can turn the

operation into a successful, profitable and competitive part of the

international components business.''

Mr Wright added that he did not forsee any redundancies at Farington,

whose workforce only learned about the change of ownership yesterday,

but he refused to give any job guarantees.

The plant will concentrate on manufacturing transmission products,

such as gears, gearboxes and flanges, and engine components such as oil

and water pumps.

The key to success will be expanding sales by diversifying away from

dependence on one customer in the same way that Albion Automotive's

other two factories already have done.

At the time of Leyland DAF's collapse, Albion Automotive supplied

parts to four other factories, all of which were part of the same group.

Today it has 13 customers and although 90% of sales still go to former

Leyland DAF subsidiaries, the company is rapidly expanding business with

completely new buyers such as Perkins, JCB, and Artix.

Volvo had difficulty finding external sales outlets for Farington

because Volvo was a large vehicle manufacturer in its own right and

competitors were unwilling to buy parts from it, but 20% of the

factory's current production already goes to non-Volvo clients such as

Rolls Royce.

Mr Wright said that because of the Volvo name, it had an excellent

reputation for quality, but while it was under Volvo control, other

vehicle builders such as Ford had been unwilling to buy from it.

''The perception of ownership is what matters,'' he said.

The plant will be run through a holding company called Albion Auto

Industries and its management will remain separate from that of the

nearby chassis components factory.

But Ms Catton said the two plants would complement each other and

there was plenty of scope for synergy.

The Leyland factory, for instance, would have access to Farington's

gear cutting machinery, she noted.

The acquisition of Farington should also help drum up more business

for Albion Automotive as a whole, since the group will be able to offer

a wider range of products to vehicle builders.

''It puts us in a better position to get further business from other

people we are already talking to,'' Ms Catton said.