Automobiles Still In The Cards At RoMan

December 26, 2007
| By Pete Daly |
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GRAND RAPIDS — RoMan Manufacturing Inc. is determined to be part of the automotive industry — regardless of where cars are made in the world. Proof of that is found on the back of Bob Roth’s business card.

Roth, president and CEO of the automotive industry supplier located on 47th Street in Grand Rapids, has his business card printed in English on one side and in Chinese on the other. That helps when he’s in Shanghai on business twice a year.

RoMan makes transformers and power supplies for resistance welding, and most of its products go into robotic welding machinery used in automobile plants.

“Nobody puts more spot welds in anything than a car builder,” noted Roth.

And no other country is ramping up car production as fast as China is now. According to the International Organization for Motor Vehicle Manufacturers, China produced almost 7.2 million motor vehicles (cars and commercial vehicles combined) in 2006, an increase of almost 26 percent over the prior year. That vehicle production put China ahead of Germany (5.8 million) and behind only Japan (11.4 million) and the U.S. (11.2 million).

From 2005 to 2006, motor vehicle production in the U.S. shrank by 6 percent, while it increased 6.3 percent in Japan and 1.1 percent in Germany.

China, despite its huge work force, has embraced automation to spur automobile production.

“Even in China, it’s all robotic” welding in the auto plants — “the latest and greatest” in technology, said Roth. Enter an automobile plant there, and “you wouldn’t know if you were in Stuttgart or Detroit or Nagoya,” he said.

RoMan is a privately held company founded in 1980 by Dietrich Roth and Bob Holman. The name RoMan is derived from their names. The last few years haven’t been easy ones for RoMan and other suppliers to the auto industry in the U.S., but RoMan marked its best year in 2006 with sales of $30 million.

RoMan also got a big pat on the back when the Michigan Manufacturers Association named it Michigan Manufacturer of the Year in 2007 in the Small Tier category, which includes companies with fewer than 500 employees. RoMan Manufacturing employs 110.

“We are the last full-line manufacturer of (resistance welding transformers) in North America,” said Roth.

Through the 1990s, RoMan was locked in a war of consolidation with competing manufacturers of resistance welding transformers, and RoMan won.

“We’ve been growing each and every year,” said Roth. Fifty percent of the company’s business is automotive, selling direct to GM, Ford, Chrysler and a Mercedes plant in Alabama, and also to Tier One auto suppliers in the U.S. The rest of its business is with other industries engaged in resistance welding, such as office furniture and appliance manufacturers, and companies that make crossed-wire products, such as shopping carts or freezer/refrigerator shelves. RoMan also makes transformers for the glass manufacturing industry.

Still, the automotive industry is “who we are,” said Roth. “We’re not looking to abandon it.”

That’s why RoMan bought into a joint venture in Shanghai, China, four years ago, with Welding Technology Corp., also known as WTC, of Carol Stream, Ill. WTC began the joint venture in Shanghai in 1992, leasing manufacturing space from its Chinese partner, Shanghai Electric, a state-owned company that Roth said is “huge,” comparable in size and operation to Westinghouse.

Today the joint venture is called Shanghai Medar Welding Equipment & Co. Ltd. WTC makes the electronic controls for automated welding systems; RoMan makes the transformers. Shanghai Electric is still a partner but no longer the majority owner of the venture: Now WTC and RoMan together own the majority.

Roth said WTC and RoMan are ideal partners in the production of resistance welding transformers for the Chinese automotive industry. “We’re the heart,” he said, while the WTC controls are “the brain.”

Shanghai Medar is the leader in China in resistance welding transformers, said Roth, although its does face competition from Europe and Japan.

Automotive supply markets in Europe, Japan and the U.S. are all mature, with well-entrenched competitors there blocking any newcomers, according to Roth.

“But in China,” he said, “it’s an expanding market, and nobody is the entrenched competitor.”

In China today, when a newcomer gets an order, it is capturing part of the economic expansion. In the United States, however, “If you gain a dollar (in business), a competitor loses a dollar,” said Roth.

The competition in China is tough, Roth said, but added, “It’s a fair fight. I don’t mind a fair fight,” Roth said.

Some of the parts for the Shanghai Medar transformers originate in China, but the primary electrical coil is a critical component, and it is built in Grand Rapids and shipped there — about 11,000 of them in 2006.

Roth said the primary coils are built here because the company cannot find a cost-effective way to have them built in China without compromising the quality.

“If we’re going to have our name on a product, it has to be the right quality level,” he said. And Shanghai is “no longer considered the low-cost place to manufacture.”

“We’re not as motivated by cheap labor as other manufacturers might be,” Roth added.

 Logistics is a big issue in the resistance welding transformer business because the finished product weighs from 40 to 1,500 pounds — and that’s just the transformer, part of a larger robotic welding machine. Due to transportation costs and lead times for delivery, it behooves RoMan and other manufacturers to assemble their products close to the auto companies.

The joint partnership in Shanghai also provides marketing opportunities for RoMan in a new product line it has developed in the last two years: large, specialty welding transformers. This year RoMan manufactured $250,000 worth in Grand Rapids and shipped them to Chinese companies. Roth said the specialty transformers are typically used in welding processes involved in rail car production and other large objects.

But, he said, “We expect (automotive) will continue to be the single-largest” share of RoMan’s business.

RoMan — and virtually all other U.S. automotive suppliers — is working on getting business from Japanese auto manufacturers now producing cars in the U.S. to replace the shrinking production by America’s Big Three. One of the challenges faced by American suppliers is the fact that the Japanese companies setting up shop in the U.S. brought with them production equipment made in Japan.

Roth noted, however, that the Japanese now are starting to source some of their tooling here in the U.S., which indicates the door is opening — and RoMan has gotten some subcontracts with a Japanese supplier working with the Toyota plant in Kentucky.

Another survival strategy adopted by RoMan in 2001 is the creation of a new division called RoMan Engineering Services Inc., to serve as consultants to high-volume manufacturers using resistance welding processes.

RoMan’s electrical and welding engineers have expertise in all aspects of welding processes, metallurgy, electrical engineering, secondary circuits, standards and weld verification.

The engineering services division employs about 70 people, of whom about 40 or more have degrees in engineering.

RoMan Manufacturing sales, including revenue from the consulting division, will come in around $30 million again in 2007. The consulting division is down a little from last year, but the manufacturing division is up, leaving the company at the same gross as last year, said Roth.

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