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Morton’s Musone Out to Bag Bigger Overseas Sales

May 1, 1995

CHICAGO (AP) _ Fred J. Musone looks like an aging halfback and talks like an operations geek. He lays out his game plan for Morton International Inc.’s automobile air bag division with glee, smacking his lips on phrases like ``constraint management″ and ``capability-driven environment.″

Musone’s broad-shouldered geniality and obsession with efficiency may be just the right combination for a job requiring aggressive salesmanship, continental charm and the cold eye of a cost-cutter.

Morton drafted Musone in January to build up its air bag business in Europe and the Far East, where demand for the safety devices lags behind the United States and competition among manufacturers is stiffer.

Morton, known to generations of consumers for its salt (``When it rains, it pours″), is the leading supplier of air bags to the automobile industry, with a global market share of at least 55 percent.

The Chicago-based company practically invented the air bag, and has reaped more than $500 million in profits from the technology. Morton’s air bag sales have risen nearly six-fold and its air bag profits have soared nearly 1,000 percent since 1990, driven largely by consumer demand for safer cars.

But the U.S. market is approaching saturation. Virtually all new passenger vehicles sold in the United States will have driver- and passenger-side front-seat air bags by the 1996 model year, two years before federal law requires them.

Side-impact bags and other budding applications are years away, so Morton and U.S. rivals TRW Inc. and Breed Technologies Inc. must push into Europe and the Far East, where four out of five new cars still lack air bags.

``The market is at an earlier stage, so there are much more market growth opportunities,″ Musone said.

Morton faces a rougher road overseas against manufacturers including Japan’s Daicel and Nippon Kayaku, Bayern Chemie of Germany, Autoliv of Sweden, and SNPE of France. Morton has about a quarter of the European domestic market and is aiming for 30 percent.

``You have a lot more competition in Europe than in the United States _ and you have to start dealing with politics,″ said securities analyst Robert Ottenstein, who follows Morton for Prudential Securities Inc.

Musone, who headed worldwide manufacturing for car parts maker Federal-Mogul Corp. before joining Morton, said differences between U.S. and European business styles are fading.

``It used to be `the club.′ Germans bought from Germans, French people bought from French,″ he said. ``But the pressure from competitiveness is so great in the automotive industry that ... you have got to be the low-cost producer and supplier. If you don’t do that, and you’re very politically connected, I don’t think you can do business. If you can do that and are politically connected, I think you can do business. You’ve got to do both″

At Federal-Mogul, Musone lowered manufacturing costs and increased output and product quality by constantly refining manufacturing processes. Morton should benefit from his experience, Ottenstein said.

``He’s got a tremendous reputation in international manufacturing, which is what they need at this point to keep driving the cost down. He’s the right guy at this stage,″ the analyst said.

Already, Musone said he has cut labor hours by 20 percent and inventory by 36 percent at a Morton plant in Ogden, Utah, headquarters for the air bag division, which employs about 5,200 people.

Lowering costs is a key to Morton’s strategy for keeping air bag profits up while it builds business overseas and waits for side-impact bags to catch on. Mercedes-Benz will offer side bags on some 1996 models and General Motors plans to introduce them in the 1997 model year, but analysts say widespread demand is years away.

``I think it comes very late, toward the end of the decade, before it’s a meaningful contributor to the air bag business,″ said Jaine Mehring of Smith Barney Inc.

She said the prospect of declining U.S. auto production clouds Morton’s future. Rapid air bag growth was the engine of Morton’s sparkling corporate financial performance in fiscal 1994: operating income up 78 percent to $226.5 million on sales of $2.85 billion, a 23 percent increase.

Morton grew at a less torrid pace the first three quarters of the current fiscal year, which ends June 30. Net income rose 34 percent to $224.5 million and sales climbed 19 percent to $2.5 billion.

``You want to be cautious until we figure out what auto production in the United States is going to be,″ Mehring said. But she added: ``This is not a management team you want to bet against.″

End adv for PMs Tuesday May 2

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