Lunt warns of closure

Chinese magnesium, a U.S. trade ruling and Detroit automakers rocked an entire metallic industry in recent years and may combine to fell one of this area's jewels of manufacturing.

Lunt Manufacturing Co. Inc. confirms it may liquidate if it does not find a buyer by the end of the year.

A magnesium die caster for the automotive and tool industries, Lunt officials revealed layoffs are under way and closures of its Schaumburg and Hampshire plants may be imminent.

Lunt told the state it employs 169 workers in Hampshire and 74 in Schaumburg.

"They are one of the leading magnesium die casters in the country -- one of the leading die casters globally," said Greg Patzer, president of International Magnesium Association, a group representing the magnesium industry, based in Wauconda.

The story of Lunt's troubles starts far from its three, 4,000-ton die casting machines in Hampshire.

Globalization hit the magnesium industry particularly hard as China increased its output 70 percent from 2000 to 2005.

A U.S. producer cried foul and successfully got the U.S. International Trade Court to rule China dumped its magnesium in U.S. markets at unfair prices. Consequently, trade sanctions in 2005 doubled the price of Chinese magnesium.

The court's ruling shook the already weakened magnesium industry to its core.

Chinese magnesium virtually dried up in U.S. markets but continued to give a price edge to outside countries.

U.S. manufacturers were forced to use more expensive magnesium, and Detroit automakers balked at the price increase and labeled magnesium a "volatile" product and switched to other heavier metals.

Magnesium is among the top three structural metals, after steel and aluminum. Magnesium alloys, or mixed metals, are used in a wide variety of products including beverage cans and mag wheels.

However, just as automakers began switching to metals one-third heavier than magnesium, they got caught with heavier cars when gas prices rose and gas mileage became a buying consideration again.

"They made a short-sighted decision," said Holger Brandt, president of the family owned Lunt Manufacturing and son of founder Helmut Brandt.

Chrysler, BMW, Delphi and General Motors are among the auto industry clients that once generated 80 percent of Lunt's revenues.

Making instrument panels, steering wheel parts and car roof structures, Lunt's profits were already squeezed by the bottom line dictates of the powerful automakers. As contracts slowed, Lunt cut production. Holger Brandt estimates Lunt plants are working below their capacity by a factor of more than 50 percent.

Founded in 1973, the company is operating under the rules of "general assignment for the benefit of creditors," in which an assignee makes sure assets are preserved for creditors while the company seeks a way out of its financial crisis. It is a less legalistic and expensive version of bankruptcy protection.

The plight of a high-quality die caster like Lunt is being felt throughout the magnesium industry, an industry whose own health "is in question," Patzer said.

Still, Holger Brandt said a few companies seem interested in buying Lunt, going through the due-diligence process.

"There's still hope," he said. "You can never give up hope."

China dominates magnesium

After the U.S. made a magnesium dumping ruling against China in 2005, imports here dried up but China kept selling in other countries.

Magnesium production*

2001 2003 2005

China 195 354 470

U.S. 43 43 43

* In thousands of tons

Source: International Magnesium Association