Surging auto sales a 25th birthday present for Autocam
Focus on fuel efficiency has made all the difference in the world.
Making precision parts for high-pressure direct fuel injection systems on automobiles is what drives the growth of Autocam, now celebrating its 25th year, and every time the price of gasoline goes up, it probably adds fuel to that growth.
Autocam is “hiring relatively rapidly,” said CEO John Kennedy, with the last batch of new employees bringing the North American roster to about 700. Some 600 of them are in West Michigan plants in Kentwood, Marshall and Dowagiac. Most of those are at the two Kentwood plants on East Paris Avenue just west of the Gerald R. Ford International Airport, but Autocam also has plants in Brazil, China and Poland, with a total of about 1,500 employees worldwide.
Sales are “right around $300 million” a year, according to Kennedy.
The privately held company, which is controlled by the Kennedy family, was launched as a division of Autodie on Grand Rapids’ north side. At first it was just supplying Autodie, but in the mid-1980s, it got a contract to make high-precision parts for fuel systems for a division of General Motors. By 1986, the new Autodie venture was losing money as it continued to ramp up investment in its fuel systems parts.
During that time, Kennedy, a Detroit native, was CFO at Autodie, even though he was only in his 20s. He was given responsibility for turning the ailing fuel systems division around, with the plan being to then sell it.
“I guess I accomplished both by buying it,” quipped Kennedy.
How that came about was almost an accident. There were two offers to buy the division, but Kennedy told his bosses he thought the business was worth more than either of the offers, and he mentioned a number he thought was fair.
“They said, ‘Would you buy it for that?’” recalls Kennedy.
That got him thinking, and he replied that maybe he would if he could figure out how to finance it. He did, and in 1988, he and his wife, Nancy, who was the controller, found themselves the owners of a small manufacturing company with 50 employees. The Kennedys named the business Autocam and moved it from Autodie to its present location on East Paris Avenue.
What is known today as gasoline direct injection, or the high-pressure direct fuel injection system, was developed by the Japanese in the 1990s. A few years later in Europe — where the cost of gasoline is still much higher than in the U.S. — European automakers further developed GDI for high-volume production. Today, Autocam makes the critical GDI parts.
According to Autocam, GDI can offer from 12 to 15 percent better fuel economy than a comparable non-GDI engine. GDI also allows the engine to produce more torque — 10 to 12 percent more than a non-GDI engine. That means that, in some cases, a 4-cylinder GDI engine can provide the same power as a 6-cylinder non-GDI.
With the federal government still increasing the miles-per-gallon requirements for auto engines under CAFE (corporate average fuel economy) regulations, Autocam has been in the right place at the right time. The GDI technology is “the biggest thing (auto companies) can do to achieve better fuel economy” in many of the engines they make, said Kennedy.
The market for that technology was practically zero in the U.S. just a few years ago, but it is predicted to reach a total value of about $1 billion in a few more years.
“Our strategy has always been to go to fuel savings devices in the cars,” said Kennedy — but it is not limited to fuel injector systems. Autocam also makes energy-saving electronic transmission components and electric-assist power steering systems.
In 2005, Autocam ramped up a sideline business: manufacturing precision parts for medical devices.
“The business has grown very quickly,” said Kennedy, noting it was legally separated from the Autocam automotive division in 2009 and today is a $50 million business with around 150 employees. It has three plants, one on East Paris near the automotive plant and two others in Massachusetts and California.
One thing Autocam is known for is its Learn and Earn program for employees. It starts as an apprenticeship, with the employee typically working four days a week and attending classes at GRCC on the fifth day. Starting pay is $13 an hour and increases each year, so by the end of the apprenticeship, a starting machinist is earning $17.50.
Some continue their education with night classes offered by Ferris State University, which eventually can lead to an engineering degree.
“We pay for all the education so they have no debt” when they complete their education, Kennedy added.
Autocam has offered Learn and Earn to its employees for 20 years, and Kennedy said he sees it as a practical way to improve the public image of manufacturing.
“It’s no secret that we’re having trouble hiring skilled machinists,” he said, as are other manufacturing sectors in the U.S. Kennedy said the problem is that too many parents have witnessed massive layoffs in U.S. industry and don’t encourage their children to consider factory work. He counters that there are still great jobs in manufacturing but mainly for higher-skilled employees.
“We don’t have the unskilled position that paid $20 an hour anymore,” said Kennedy. “If you can learn a skill and have the technical know-how to be able to work in the advanced manufacturing we do, it’s a great job opportunity. Our average hourly W-2 here is $53,000 a year.”
The automotive industry is feeling its oats this year with sales in North America predicted to top out at 15-million-plus vehicles — maybe even touching 16 million. But Kennedy notes that Autocam’s management is “relatively conservative” in its production planning.
“We would rather be pleasantly surprised” by the industry doing better than expected, said Kennedy. “We can do really well” in a North American auto industry with annual sales of 15 million cars and light trucks, he added.
However, Kennedy is not as optimistic about the U.S. economy, in general.
“I think there are a lot of issues going on in our economic system,” that put pressure on the consumer, he said. “I think there are still a lot of temporary jobs, part-time work, a lot of concerns about where the economy is really going.
“I think those concerns tend to keep people a little more conservative in the purchase of large ticket items like an automobile,” he said.