ADAC Automotive investing in Muskegon

February 20, 2012
| By Pete Daly |
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ADAC Automotive is holding a groundbreaking ceremony in Muskegon Feb. 27 on a $20 million investment in expansion and upgrades of its car-door-handle painting process on E. Keating Avenue and Port City Boulevard.

“It’s the start of many opportunities, we hope,” said Jim Teets, president and CEO of ADAC, which has its corporate headquarters and some support operations in southeast Grand Rapids. The company has roughly 1,100 employees (about 1,000 full time), with 700 of them working at the Muskegon facilities.

Teets said the investment in Muskegon is expected to mean the eventual addition of about 130 jobs after the new painting system goes into production in summer 2013. The new facility also will provide a larger “paint window” so the company can produce and paint larger auto parts than the door handles, exterior trim and lighting housings it now sells to automakers.

ADAC is investing about $5 million on construction of a totally new 71,000-square-foot plant on E. Keating Avenue to be built by Rockford Construction, according to Teets. GMB Architecture + Engineering also are involved in the project.

Another $15 million will be spent on acquisition and installation of upgraded painting equipment at the nearby Muskegon facilities.

Teets said the auto industry is in a comeback mode — “and for ADAC, it really started in 2010, after the dark, gloomy days of late 2008 and 2009.” He added that 2010 “was a great year for us because we were extremely lean after 2009,” and sales “bounced back in excess of 30, 40 percent.”

ADAC is a plastic injection molder of automotive parts with the additional expertise of painting those parts to exactly match the paint on the cars they will be installed on or in. The company had its roots in A-Line Plastics that began in Grand Rapids in 1972, with three molding machines and six employees. ADAC Plastics Corp. organized in 1975.

Teets said ADAC’s annual sales right now are about $200 million. The company reportedly had sales of about $225 million and 1,200 employees prior to the abrupt decline in the auto industry starting in 2008.

Eighty percent of ADAC’s business is with what Teets refers to as “the Detroit Three,” which includes Ford Motor Co. and the successors to the two others that went into bankruptcy in early 2009, now known as Fiat-Chrysler, and “new” General Motors. Other automakers that buy parts from ADAC are Honda, Volkswagen and Nissan.

“We are a Tier One,” said Teets, with about 95 percent of its products going to the auto companies.

“We’ve had a really strong, long relationship with Ford Motor Co.,” said Teets. Ford has been ADAC’s No. 1 customer for a number of years now. “We produced our first door handle for Ford back in 1995.”

More than 70 percent of ADAC’s total production is exterior and interior door handles.

Teets noted that with 80 percent of sales being with the Detroit Three and 70 percent of its production being car door handles, “you can see where we need to diversify.”

The Muskegon facilities include a small paint shop used for R&D, where ADAC uses robotics to experiment with prototype parts. “We’re putting money and new robotics into that,” explained Teets.

Teets said he has heard predictions from some experts that North American auto production volumes are “on an upward trend until at least 2016.”

“Things are going good and we just need to make sure they keep going good,” he said. For that reason, ADAC is focused on a strategy of product diversification and improvement of its painting processes to stay ahead of the competition.

“I don’t mind the happy part of the equation ‘dumb, fat and happy,’ but we can do without the dumb and the fat,” he said, laughing.

According to a mid-February report by Business Week, sales of cars and light trucks reached an annualized rate of 14.1 million in January, the highest rate since August 2009, when the Cash-for-Clunkers incentive was at its peak. The highest rate before that was in May 2008. One auto research company, Autodata Corp., said sales averaged 16.4 million in the two years prior to the start of the recession in late 2007.

With the cars on the road being an average of slightly more than 10 years old, many experts are predicting that the pent-up demand will boost U.S. sales in 2012 to possibly 13.6 million vehicles.

ADAC is part of a global alliance with two other companies; STRATTEC Security Corp. of Milwaukee and Witte Automotive in Germany. The partnership includes cross licensing agreements and sales agreements, and the three companies together have three production facilities in China, sales and engineering offices in Tokyo and Seoul, South Korea, and a joint venture in São Paulo, Brazil, involving a small start-up.

It is a privately held company owned by Jim and Pat Teets and the Hungerford family. Kent Hungerford is chairman. The Lacks family also has a minority share in ADAC, according to Teets.

Teets said the potential of the new painting facility to handle larger automobile parts has the company very optimistic — but cautious — about the future. Over the next few years, he said, “the glass is definitely half-full.”

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