Coastcast can't beat Chinese, so sells last unit to Fu Sheng.

To get an understanding of how Chinese competitors have gained the upper hand on U.S. companies, look no further than Coastcast Corp., a former supplier of metal golf club heads to Callaway Golf Co., Ping and Titleist.

After years of struggling to compete with lower-cost manufacturers in China, Taiwan and Hong Kong, Coastcast had to abandon its golf club heads business entirely in July because it had so few remaining customers.

Hans Buehler, Coastcast's founder, chairman and chief executive, went so far as to cancel the annual shareholder meeting in April to cut costs. Though Coastcast had tried to diversify by making orthopedic implants, surgical tools and specialized automotive parts, it was never able to fully recover from the demise of its golf business.

Last month, Coastcast sold its non-golf precision metal castings business, including the lease and inventory on its state-of-the-art Rancho Dominguez plant, for roughly $8 million to FS-Precision Tech Co. LLC, a unit of Fu Sheng Industrial Co. of Taipei, Taiwan.

With the sale of its last operating unit, the company Buehler founded in 1980 ceased operations. FS-Precision recruited Mike Wellman, a former senior vice president of Coastcast, to be president of its new unit.

"Historically, over 90 percent of the company's business was golf club heads and that changed over time because the golf business waned as a result of competition from China," said Robert Goons, a Coastcast director. "The golf business has basically gone to China, like a lot of American industry."

Coastcast, which once boasted 1,500 employees and $150 million in revenues, recognized its own struggle for survival. (Fu Sheng is rehiring most of the employees at the Rancho Dominguez plant.) In April, the board voted to set up a special committee to examine whether it was in the company's best interests to remain public and review strategic alternatives.

In August, Coastcast distributed a proxy statement to shareholders to approve the asset sale to FS-Precision.

The proxy stated: "The board of directors has determined to wind up the remaining business of the company. Management does not believe that the company can operate profitably at the current sales volume."

In the proxy, Coastcast reported a loss of $9.6 million in 2003, compared with a reported loss of $10.6 million in 2002. Sales fell to $45.1 million from $62.5 million. For the first six months of 2004, Coastcast lost about $400,000 on sales of $27.1 million. The company no longer reports to the SEC.

In the past months, Coastcast has been liquidating its non-cash assets. The company still has between $17 million and $23 million in cash, according to its proxy. Its board is expected to decide whether Coastcast should be liquidated and dissolved, with proceeds distributed to shareholders, or if it should find a third-party acquirer to take over its public listing on the Pink Sheets as a shell corporation.

William Kerins, managing director of Lombard Asian Private Investment Company Ltd., a San Francisco private equity fund, said the Coastcast acquisition will help Fu Sheng diversify into the U.S. market. Lombard is a major investor in Fu Sheng and was involved in the negotiations for Coastcast's assets.

Fu Sheng, the world's largest golf club head manufacturer, has a $1 billion market capitalization and is listed on the Taiwan Stock Exchange. It has 13 manufacturing facilities and 13,000 employees. In addition to golf club heads, Fu Sheng is the largest distributor of air compressors in China. Last year, it bought an air compressor division of Pittsburgh-based Elliott Co.

The acquisition of Coastcast's remaining assets is expected to help Fu Sheng's FS-Precision unit make inroads into the U.S. market, where specialty metal parts in the medical and automotive markets sell for much higher profit margins than golf club heads.

In the medical market in particular, where tolerances are very strict for high-tech alloy products, Chinese companies have heretofore had limited success.

Coastcast Corp.

[GRAPHIC OMITTED]

YEAR (Dec. 31)                2002 *        2001

Revenue (millions)           $62.5      $115.5
Total Expenses (millions)     73.1       119.1
Operating Loss (millions)    (10.6)       (3.6)
Net Loss (millions)          (10.6)       (2.3)
Loss Per Share               ($1.40)     ($0.30)

SUMMARY

Business: Precision metal castings
Headquarters: Rancho Dominguez
CEO: Hans Beuhler
Market Cap: $19.1 million    Dividend Yield: None
Total Liabilities: $6.9 million    P/E Ratio: N/A **

* Latest audited financials reported to the Securities and Exchange
Commission. In sale proxy, company reports loss of $9.6 million for
2003 on sales of $45.1 million, and loss of $400,000 for first six
months of 2004, on sales of $27.1 million.

** Company is not profitable.

Staff reporter Kate Berry can be reached at [phone], ext. 228, or at [e-mail].