Thanks for all of your comments. I was surprised to read about these buys, Rob. I think Alex's and Beth's point is well taken and we need to remember how differently things work in the military sector. I agree, this looks like a military version of consolidation, which means not very much, and it's to control supply more than anything else. In the case of Kaman's purchase of Vermont, and Vaupell's purchase of Russell, it looks pretty straightforward and more like synergy. In the case of GrafTech and FMI, it looks more to me like access to different markets.
I think it makes sense that companies in this area would merge for just the reasons Alex notes: This is an expensive product to manufacture and there is a limited customer base, so by combining forces, you expand your targets.
Beyond working the automotive sector for new growth, wind turbine blades are another bright spot for composite providers. Not sure that has the scale to replace spending opportunities in the defense sector, however.
Do you know what's driving the acquisitions? Are the buyers seeking technology, new markets, or marketshare? I'm also curious about the global nature of this market. Are their major players in Europe and Asia?
I find the recent consolodation interesting. With the coming wind down in defense spending, these companies may need to find other markets fo their products to ensure growth. The automotive industry may be one such.
Many years ago, in the aerospace industry I witnessed an interesting phenomenom related to this situation. I worked for a spacecraft manufacturer that made it's own composites. We're talking about taking in raw materials and baking the stuff ourselves. It was very cool, and our materials scientists came up with some amazing structures. Needless to say, though, the quantity of manufacture was tiny and we were never going to sell this stuff outside. At the time, our parent bought another company with a competing spacecraft plant some 60 miles away. We had been bitter competitors for decades. They had a totally different approach. Their compsites were made by a company whose main market was railcars. Who would have thought.
This is an unusual dynamic because typically, you'll see consolidation when a technology is further along the road toward commoditization. However, with composites, you're talking about a hugely expensive manufacturing process. Thus I submit we will never see commoditization in the traditional sense where the price comes down. What we're seeing here I think is the defense analog of consolidation, where only a few players can afford to produce what's at its core a high end technology. And since there are only a few producers, the price to end users stays high. The one fly in the ointment here is that automakers have far more of an interest than aerospace customers is getting the costs down, so that may have an impact somewhere, somehow.
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