Auto industry suppliers plan for survival
Gill Industries of Grand Rapids has been an automotive supplier since 1964, according to president and COO Richard Perreault. Soon the company's operations in Michigan will be about 50 percent automotive and 50 percent non-automotive, he said.
Now more than ever, diversification is what many manufacturers in Michigan desperately need.
"We have a good plan," said Perreault, adding that the year ahead is "going to be painful. But we have a good plan."
At Agapé Plastics Inc. in Talmadge Township, just west of Walker, president and CEO Dave Cornelius said in early December the company does have a plan for 2009, but "it's constantly changing."
"The automotive schedules we are receiving are in a huge state of flux," he said. One of the company’s customers, Mercedes, announced it would be closed Dec. 11 to Jan. 20, and then it will be on a 30-hour work week during the first quarter of the year.
"We just take those things as they come," said Cornelius, adding that the first quarter of the year is the most uncertain timeframe ahead.
Agapé had a voluntary layoff earlier in the fall and tightened up its employee roster. In November, the work force there was down to fewer than 40 hours a week.
"We're back (to 40 hours), but things will slow down dramatically around Christmas time," said Cornelius.
"Our immediate plan is just watching the production schedules as closely as we can," he said. "It's changing very rapidly. But we're also watching our receivables big time."
A year ago, Cornelius said Agapé's business was "probably 95 percent automotive," although the company has been working since then to diversify its market.
Gill Industries also has been working to diversify its markets. In early December, Perreault told the Business Journal that Gill Industries was "feeling the effects of the latest events" in the national economy, starting in September. He said the company is feeling a financial pinch but is prepared for it.
"We have been preparing for a major downturn for about four years now," he said. "Financially, we have a very strong balance sheet, ready to get through this downturn. And unfortunately, I think some of my competitors and colleagues will not be ready for that. But we will be ready."
Over the last decade, Gill Industries has taken steps to become less dependent on the Big Three, according to Perreault. Now the majority of its automotive business is with Tier One companies such as Lear, JCI and Magna. Gill has "very minimal" direct sales to General Motors, he said.
"Ten years ago, we were 95 percent GM. Today, we're 5 percent," he said.
The downturn in the auto industry shouldn't come as a surprise to anyone in the business in Michigan, Perreault said. Gill Industries anticipated it: "We just didn’t know when it was going to happen.”
"The automotive manufacturers have been in trouble in Michigan for quite a while. Certainly, this change in the economy made it worse," he said.
Perreault said that since the late 1990s, there has been a migration of automotive industry manufacturers to the southern U.S. states, creating an overcapacity in Michigan. “That's not a recent event. It's just basically been reinforced by this major downturn that came very quickly."
Gill Industries has been concerned about that migration for quite a few years, he said.
“This is why we opened a plant in the South to participate in the automotive industry down there as well, but we also came up with this strategy of diversification" to help determine "what we are going to do in Michigan. Certainly automotive is still in the forefront of the strategy."
Gill Industries now specializes in the design and manufacture of metal components used in the automotive, office and medical furniture, and utility vehicle industries. Its products involve seating mechanisms, headrests, seat frames, latches and in-console assemblies. The company currently employs about 700 people. In addition to Grand Rapids, Gill Industries has manufacturing facilities in Wixom, Mich., and in Trenton, Ga., and Naucalpan, Mexico.
The acquisition of the Georgia plant a few years ago was part of the company’s diversification strategy, he said. In Michigan, Gill Industries diversified into furniture for offices and medical facilities; in Georgia, the company got into production of components for low-speed utility vehicles, commonly known as "club cars" or "golf cars," as opposed to "carts." Club cars evolved from golf carts and are being seen more frequently, especially on farms and in retirement communities, on college campuses where they are used by maintenance, security and other staff departments, and in apartment complexes, resorts, airports and manufacturing facilities.
Club cars are gradually "getting closer to a car-like type of product," said Perreault. There are three main manufacturers in the U.S.: Club Car Inc., Easygo and Yamaha.
At its Georgia plant, Gill Industries is ramping up automated production of steel frames for a new series of rough-terrain utility vehicles that Club Car Inc. is planning to market to the agricultural and outdoor recreation markets. Club Car is based in Augusta, Ga.
The Gill Industries Georgia facility will have the capacity to produce up to 30 frames a day for the Club Car XRT950 utility vehicle, designed to meet a demand for more horsepower and versatility for the mid-sized utility vehicle market, said Scott Cronan, regional business development manager for Gill Industries in charge of the Club Car account. Introduced by Club Car in October, the XRT950 offers a twin-cylinder, 14-horsepower engine, the largest in its vehicle class. It also has independent suspension, four-wheel hydraulic disc brakes, locking rear differential and nine inches of ground clearance for farm work and off-road touring. Hunters are one of the markets targeted by XRT950 management.
“We are very excited to be supplying this critical component for the XRT950,” said Jacques Saint Denis, director of operations of the Gill Industries Georgia facility. “It fits in perfectly with our mission at Trenton as a center for excellence in precision tube bending and welding.” Saint Denis said the plant employs about 115 people, and the XRT950 work will help to offset a potential downturn in orders from automotive customers. While he doesn’t expect the line to create new jobs in the near future, he said the new business creates a solid foundation for potential job growth in the long term.
Technical personnel at the Georgia plant worked closely with Club Car during the initial design of the frame to determine the most cost-effective way to manufacture it. Gill Industries was able to design, install and debug an entire production line in about 10 months — one of the fastest implementations of a production line in its history. The line employs hydraulic presses, machining centers and robotic welding units to precisely bend and weld 2-by-3-inch rectangular steel tubing to make the XRT950 frames.
“One particular challenge is the remarkable amount of welding we do on each frame — about 47 feet total,” Cronan said. “All of the vehicle components connect to the frame, so everything — bends, brackets, holes — have to be just right for smooth assembly. There isn’t a lot of room for error.” After fabrication, the frames are electrostatically painted and powder coated before being shipped to Club Car’s assembly plant in Augusta.
A subsidiary of the Ingersoll-Rand Co., Club Car was founded in 1958. A company official said that its overall revenues rose about 10 percent last year due in part to the increased sales of its utility vehicles. Ingersoll-Rand is a $17 billion global industrial company with 64,000 employees and manufacturing or assembly operations in 29 U.S. factories, plus 31 in Europe, 14 in Asia, 6 in Latin America and one in Canada.