Picking up the pace
Grand Rapids Spring & Stamping, one of West Michigan’s best-known auto parts makers, is investing almost $1.6 million in new production equipment that will result in several new jobs, according to Jim Zawacki, chairman of the privately held company.
“We’re adding at least four new jobs in the Grand Rapids plant, and probably several in the Walker plant,” said Zawacki.
Originally, the investment, which creates jobs and thus qualifies for a city personal property tax exemption, was going to be about $1 million for a 1,000-ton press, but the company expanded its plan with the decision to order a supporting piece of automated equipment that will cost about $575,000, according to Zawacki. The machinery that will safely move completed parts out of the press is being built to order in Ohio.
Zawacki said the transfer machinery should be ready for installation at the Bond Street GRSS plant in June, “and I’m sure we’ll be in production by September.”
Although technically a used piece of equipment, the press itself was “brand new — hardly used,” said Zawacki, and was acquired from a Detroit area factory. This is a great time to find industrial equipment in Michigan at bargain basement prices, according to Zawacki.
“I feel sorry for new equipment manufacturers because there’s just a glut of equipment on the market, used,” he said.
The press is “huge, by our standards,” he said. It can accommodate pieces of blank steel 6 feet long; the bed of the press is 20 feet wide.
The press will enable GRSS to produce large parts: specifically, covers for automobile exhaust systems and gas tank protectors.
Although GRSS took its lumps along with virtually all other automotive parts manufacturers during 2008 and 2009, it has survived by diligently cutting costs and trying to function as leanly as possible.
Zawacki said financing the purchase of the new press and transfer equipment was not a problem for GRSS because the company has “a good balance sheet. I have personally worked with Old Kent Bank — now Fifth Third — for 25 years, and they have been very good with us. We have a good relationship.”
He said he recently told his main contact at Fifth Third about a concern of the GRSS management: “We have such a new book of business coming that we might outgrow our line” of credit if GRSS has to invest in further expansion.
He said the banker replied, “Don’t worry about it. We’ll adjust accordingly.”
Zawacki quickly added that he doesn’t want that to sound like things are easy for GRSS.
“You’ve got to have the equity and the wherewithal to pay back your debt today,” he said, adding that a lot of financial problems facing businesses today happen when “they get out of covenant or they haven’t got the coverage on their debt. Banks can’t afford to carry risky loans.”
Bank regulators now look very closely at the amount of risk every bank is carrying, he said. As that amount of risk increases, so does the government-required level of that bank’s cash reserves, “so they can’t loan as much,” said Zawacki.
In addition to its stamping plant on Bond Street just north of downtown and on Alpine Avenue in Walker, GRSS has a tool-and-die shop in Comstock Park that Zawacki said is busy around the clock. All told, there are about 225 GRSS employees in the Grand Rapids area. The company also has a plant in Kentucky that employs about 80 and one in Mexico that employs 50 “and going up,” he said.
“Fortunately, all our plants are busy,” he said. In fact, it wasn’t certain at first if the new press would be installed in Grand Rapids or Kentucky.
“It was a hard decision. Let’s just say, the political climate in Kentucky toward us manufacturers is better than it is in Michigan — but we decided to keep it here.”
GRSS is picking up some work from a Canadian auto parts manufacturer that is in bankruptcy. “It’s a nice shot in the arm, but even without that, we have a good book of business going forward,” he said.
Although GRSS does not provide parts directly to the Big Three — “the Detroit Three, we call them now,” he noted — it does some work for Tier 1 companies that supply Ford, GM and Chrysler. GRSS directly supplies BMW, Toyota, Nissan, Volkswagen and, indirectly, Honda.
The erstwhile Big Three are stronger now than a year ago, he noted. Ford, of course, is doing quite well but even GM and Chrysler are showing signs of improvement.
GRSS does some business in medical parts and office furniture, “but yes, we are automotive,” he said. “In bad times, what you do is try to increase your market penetration. I’d like to have some farm equipment, some of this, some of that.”
The problem in Michigan is the unemployment, said Zawacki. Although the state’s auto industry is “much stronger” than a year ago, the expert predictions are that North American production won’t return to the previous levels of 15 or 16 million vehicles for three or four years.
“We let automotive die and manufacturing die. And so we’ve gone green; we’ve created maybe 30,000 jobs in the state of Michigan” in alternative energy equipment and green products, “and lost maybe 500,000. That’s wrong,” he said.
“Anything we do to replace the auto industry” will fall short on jobs, he said. “It’s a shame that unions and management and the state couldn’t get together in the ’90s and say, ‘Look, we’ve got to work together. We’ve got to learn to be lean.”