Riviera Stems The Economic Tide
But Riviera Tool Co. scrambled, too, in an equally memorable way that established it as one of the Business Journal's top 10 Newsmaker of the Year finalists. On Monday, the Journal announced DeVos Place as the recipient of the honor.
Riviera started the century facing the same multi-whammy that was threatening all tool and die firms: recession, low-wage foreign competition, inflated steel prices, murderous OEM price pressure, and mega-banks indifferent to small manufacturers.
Riviera, however, resorted to a business model that paid off big time. Last month, the company reported its net sales rose 229 percent to $11.5 million for the fiscal fourth quarter, compared with net sales of $3.5 million for the same quarter last year.
The West Michigan tooling firms
collaborating with Riviera Tool
Co. on the Mercedes 251 and
M-class vehicle programs are:
And beyond leading West Michigan out of recession, Riviera was a Newsmaker finalist because its new model involved working in lockstep with 10 of its topnotch West Michigan competitors.
Riviera's president and CEO, Kenneth Rieth, told the Business Journal he believes collaborations probably are the tool and die industry's future in overcoming challenges such as low wages in China.
When Riviera landed contracts for two Mercedes lines, the firm took on the role of lead program manager, managing the work of 10 collaborating tooling suppliers. Riviera itself brought aboard 40 engineers, toolmakers and machinists to handle the increased workload.
Rieth said he was especially proud of the fact that collaboration not only gave tool shops here a chance to show their abilities, but it also preserved and is creating jobs. Because the 11 collaborators work so closely, he said, Mercedes' perspective is that it's working with a single company.
As program manager, Riviera takes full responsibility for product quality and the logistics of getting parts to their destination on time.
Rieth stressed that Riviera doesn't micromanage its collaborators. "What we really do is oversee the results." He said Riviera sought collaborators that "know how to run a good show."
"We have to make sure all the parts are there at the right time in the right place, and that the whole module comes together properly."
Rieth said the arrangement — a first for Riviera — is similar to the way European tool and die makers support the European auto industry.
Riviera had developed a working relationship with BMW when the German automaker started bringing production to a partner plant in the United States, Rieth said. Then Mercedes saw Riviera's work for BMW, and Mercedes' U.S. operation had Riviera take the lead in tooling for the Mercedes 251 and M-class vehicles.
Riviera had tried to move into collaboration for years, according to Rieth.
Prior to the multi-threat onset of the 21st century, however, many domestic tooling shops weren't receptive. "We picked companies that had very progressive attitudes, that had an ongoing focus on technology and process improvement design, and that were willing to try something new," he said.
Rieth acknowledged that some companies declined the offer, preferring to get their business directly from the stamping companies. Some, he recalled, found the idea of collaboration somewhat threatening. But he said that didn't turn out to be the case, and collaboration does not impinge upon other customer relationships the tool and die shops have developed over the years.
"What we did was bring another source or another channel for them to obtain work," Rieth explained. "It doesn't alter their business; it's just another customer. It's just part of change.
"We see this as very encouraging, not only to our company, but to numerous good quality, smaller and medium-sized shops in West Michigan," Rieth said.
"We've got some fantastic suppliers in West Michigan, and all we're doing through this program management channel is creating another source of work that maybe some of the smaller companies may not have otherwise been able to participate in."
Rieth said perhaps the only disadvantage West Michigan has is labor rates, because even small shops paying $20 to $25 an hour have a tough time competing with 60-cent-an-hour rates overseas. To combat that, he said, the American tool and die industry has to do things better with more technology and keep prices competitive globally.
Collectively, all the Mercedes work Riviera is overseeing is valued at just under $40 million and the contract runs through roughly May or June of next year. Riviera has outsourced slightly more than $10 million to participating tooling shops.
But that's just on the tooling side.
Rieth said Riviera also is working with lots of other suppliers in Grand Rapids and throughout West Michigan to perform additional services for customers. The project management role, he observed, has allowed Riviera more in-depth involvement in everything from process planning, to design and construction, to prototype coordinating.
"We feel very blessed to have this kind of program and honored to work with these very fine companies in West Michigan to get it done. Collectively, if we do a very good job — and we will — I think this will become a pattern that is emulated into the future."