2. Jim Teets, president and CEO, ADAC Automotive. PHOTO: JEFF HAGE
Déjà vu all over again
ADAC invests in growth amid auto industry volatility
By Joe Boomgaard | MiBiz ADAC is known for its door handles, it also be housed at the facility and the retrofits through-
jboomgaard@mibiz.com recently returned to the exterior mirror business out the company to handle the new processes.
after a decade out of that market. The new process will help the company reduce
GRAND RAPIDS —— Coming out of one of ADAC traces its roots to 1972 with the for- scrap in the paint process by allowing for better
the most tumultuous periods in the history of mation of A-Line Plastics, a small Grand Rapids paint coverage and preventing dirt or other con-
the automotive industry, ADAC Automotive is shop that started with three molding machines taminants from entering the process.
aggressively investing in new facilities and tech- and six employees. In 1975, the company incorpo- ““The bar is being raised,”” Teets said of the
nology to position it to diversify into new clients rated as ADAC Plastics Inc. and today does busi- competition for painted parts.
and new industries. ness as ADAC Automotive. The original paint line at ADAC’’s Port City
From essentially a break-even year in 2009, the ADAC is privately owned by the Teets family Boulevard plant came online in 1995, while
company returned to record profitability in 2010 —— President Jim and Patricia (Lacks) Teets —— and the Keating line started in 2000. Given the age
and experienced sales growth of 13.5 percent in the Hungerford family, including Chairman of both lines, Teets said the company decided
2011 as the automotive industry regained its legs. Ken Hungerford and his son, VP of Vision against retrofitting its systems and opted
But that growth didn’’t come easy. Just ask Jim Systems Peter Hungerford. Richard Lacks Jr. and instead to build the new plant and buy the new
Teets, president and CEO at ADAC. In the 19 years Kurt Lacks also have minority ownership posi- equipment.
he’’s been with the company, he’’s experienced two tions in ADAC. Teets said the company spent some time and
major periods of industry upheaval that have money in looking for the right way forward. It
taken their toll on many suppliers. Yet, despite Investments to hedge against competition hired some consultants from Detroit to help in
the challenges, ADAC has come out the other To ensure that ADAC remains competitive in that process.
side and is in the process of major investments the automotive business, the company is investing ““We realized that, technology-wise, we were
that will ensure it remains globally competitive. about $20 million in a new paint facility adjacent falling behind in the paint processing part of it,
Since its beginning, ADAC Automotive has to its Keating Avenue plant in Muskegon. About and we wanted to try to regain a dominant posi-
been decidedly auto-centric: About 99 percent of $4.7 million of that investment will go to the tion within our products in North America when
its business is currently in the automotive sup- building itself, with the remaining $15 million it comes to paint. That’’s what we hope to do with
ply chain, primarily as a Tier I supplier. While going toward the new high-tech paint systems to this new system,”” he said.
2 ACG-WESTERN MICHIGAN 2012 OUTSTANDING GROWTH AWARD REPRINTED COURTESY OF MIBIZ
3. About the Outstanding Growth Awards
T he annual Outstanding Growth Award honors a local company that demonstrates
sustained growth in sales, protability, employment and community involvement.
Past winners include Wolverine World Wide Inc., National Heritage Academies, Rockford
Construction Co., Herman Miller, Elan Nutrition, Butterball Farms Inc. and Perrigo.
The 2012 winner is ADAC Automotive.
Eligibility requirements include:
•• $10 million minimum in annual sales
•• Demonstrated growth in sales, protability and employment as well as continuing
community involvement.
Each year, the Outstanding Growth Award winner is asked to provide a 45-minute
presentation on the challenges faced —— and strategies used —— to build a track record of
growth. The presentation is delivered to a sell-out crowd of approximately 400 of the
area’’s top executives, business owners and nanciers.
The award itself is actually two awards: a large perpetual trophy the winner gets
temporarily and a smaller replica that the winner gets to keep. ACG decided to take the
““Stanley Cup approach”” —— the winning company gets its name imprinted on the large tro-
phy and they get to keep it for a year before turning it over to the next winner.
The winner of the Western Michigan chapter’’s Outstanding Growth Award may also be
submitted for nomination for the ACG’’s National Outstanding Growth Award, given annu-
ally by ACG Global at its prestigious Intergrowth Conference.
Past winners:
2004: Wolverine World Wide Inc. 2008: Elan Nutrition
2005: National Heritage Academies Inc. 2009: Butterball Farms Inc.
2006: Rockford Construction Company 2010: Perrigo
2007: Herman Miller Inc. 2011: Service Express Inc.
The company plans to retrofit the Keating customers would hopefully be able to offset any percent of ADAC’’s business —— and worked on
plant in 2013 and decommission the Port City industry decline. projects for Nissan, it still needs to work at broad-
paint line in late 2014. The approximately 20,000 ““We can’’t just hang our hat on this new paint ening its customer base, including with Toyota,
square feet of space will be absorbed by the com- system. We obviously have to execute and do a Teets said.
pany’’s molding or assembly operations. lot of other things well. This new paint facility, ADAC does some business with the European
““This whole thing is really a three-year pro- we hope, is going to be a door-opener to a lot of automakers, mostly through its Vehicle Access
cess, but the real heavy capital investment is this additional opportunities over and above what we Systems Technology (VAST) Alliance. Teets said
year. We’’re dumping in right around $17 mil- have today.”” the alliance, with its global presence, is help-
lion of the $20 million in this year. Our cap ex ing ADAC better reach global automakers, and
is the highest its ever been in the history of the Push for diversication particularly those with operations in North
company,”” he said, noting that in addition, the The new paint facility is a major part of America.
company has also invested in a new ERP system, ADAC’’s push for better product diversity and Teets said ideally, ADAC would be able to
which it is implementing in 2012. customer diversity. The investment in the new diversify both in terms of customers and indus-
Given the large investments in the new facil- paint systems will help both the company’’s try to avoid some of the dramatic cycles in the
ity, Teets said the company has to keep its finan- bread-and-butter door handle business as well automotive industry. Currently about 70 percent
cials under strict control. He said the company as its efforts in mirrors and elsewhere on the of ADAC’’s business is in door handles.
remains confident in industry growth projec- vehicle. The company has tried to translate its techno-
tions of U.S. light vehicle sales around the 14 mil- The new technology will expand the size logical molding and painting capabilities to other
lion unit range, up from 12.7 million in 2011. range of exterior parts the company can paint, industries. One success is a contract with American
““Some people in our company said it’’s too bad and it helps ADAC improve the quality of its Seating Co. to mold urban bus seats at ADAC’’s
we didn’’t do (the paint system) a year ago so we paint coverage on injection molded products to Saranac plant. The company is also pursuing busi-
could be enjoying the fruits of the rebound. But we meet or exceed what customers are expecting, ness in the appliance and electronics fields.
really did it the West Michigan conservative way. Teets said. ““I’’d love it, within five to six years from now,
We couldn’’t do it in ’’09, and in ’’10 we were still in In particular, ADAC has its sights set on woo- if we could have between 10 and 15 percent of
recovery mode building back up the muscle that ing more relationships with more Asian auto- our total sales be in non-automotive to help buf-
we cut out of the organization,”” Teets said. makers. Currently, the company does about 85 fer that rollercoaster you get within automo-
““Here we are breaking ground on a new percent of its business with the Detroit Three. tive,”” Teets said. ““It’’s so easy to make a manage-
72,000-square-foot paint system and dumping Ford and Fiat-Chrysler were nearly tied in 2011 ment by objective statement like that, but how
in $20 million. If somebody said I’’d be doing that as ADAC’’s largest sales volumes. do you do it? If you want to call on a Whirlpool
back in July of 2009, I’’d say you’’re crazy,”” he said. ““That’’s a very heavy concentration in Ford, or an Electrolux, what you might be making for
Even if the industry were to decline, he said Chrysler and GM, but that’’s OK. Right now, them has to fit your core competencies and your
ADAC would benefit from the new line because they’’re riding the crest up,”” he said. process capabilities. Or you have to expand and
it is more efficient and can accept larger prod- While the company has ““made some inroads””
ucts. Moreover, the planned targeting of new with Honda —— which accounts for about 10 Continued on page 4
REPRINTED COURTESY OF MIBIZ ACG-WESTERN MICHIGAN 2012 OUTSTANDING GROWTH AWARD 3
4. ADAC AUTOMOTIVE
Continued from page 3
spend more money and invest in some different
technology, different processes.””
Diversification would help the company to
avoid steep dips in sales in favor of more trough-
like declines —— which are much easier to manage
through, Teets said.
““We’’re just trying to avoid the deep peaks and
the deep valleys that we’’ve experienced in the
past,”” said Teets of the diversification plan.
While industry diversification will likely be
a slow process, Teets said he’’s optimistic that the
company can work faster to achieve customer
diversification. Getting ADAC’’s designs into the
hands of automakers before they’’re designing
new vehicles is key to that success, he said.
Strategic partnerships
Outside of the acquisition in 1999 of Dura
Automotive’’s door handle and trim division,
Teets said the company has chosen to grow
organically and to strengthen its operation
through various partnerships. In the middle of
the last decade, ADAC went looking for a global
business partner to better reach new markets. and adding value for customers. In ADAC’’s case, with people smarter than you are. You need to be
In Mexico, for example, ADAC formed a joint that’’s meant offering more technological solu- engaged and involved at a very high level, other-
venture with Milwaukee-based STRATTEC tions, particularly with door handles, which wise you shouldn’’t be in the position you’’re in.””
Security Corp. to use one of its facilities for non- increasingly feature high-tech touch-sensitive
painted, low-value-added products for OEMs parts. A drive to strengthen its technological Auto boom and bust
in Mexico or in the southern states. The move capabilities led to ADAC in 2011 making a strate- Teets found himself tested just weeks after
forms ADAC’’s low-cost country strategy for the gic with a local tough-sensing technology com- being named president of the company in 2001.
North American market. pany that Teets declined to name. ADAC spends It would be the first of two great periods of chal-
In 2006, ADAC joined with STRATTEC and about $15 million per year on electronics. lenge for him and ADAC.
German company Witte Automotive to form He took the helm in mid-2001 when the auto-
the Vehicle Access Systems Technology (VAST) Execution motive industry was already showing signs of
Alliance. VAST operates as a single-source global All the new investments in facilities and weakness. The company was set to announce
supplier with plants in the United States, Mexico, equipment, coupled with changing dynamics his promotion in mid-September, and then 9/11
Germany, Czech Republic, China and Brazil. of the automotive industry have forced Teets hit. The country came to a stop and the economy
In just 10 years, the alliance has allowed and his colleagues to be masters of process and veered into recession. People stopped buying
ADAC to do business on a global scale, although execution. As well, the company is bumping cars, and ADAC’’s profitability dropped as cus-
ADAC had operations in the UK in the early into some capacity constraints within its West tomers’’ orders stalled.
2000s. Today, through the VAST alliance, the Michigan operations. Any misstep now could Within his first six months on the job, he had
company has three operations in China and sales really impact the company, he said. to make the tough decision to make layoffs. ““We
and engineering offices in Tokyo, Japan and in ““Our mantra for ’’12 is control our capacity, had never done a right-sizing up to that point (in
Seoul, South Korea. It also has a joint venture conversion of sales over budget to the bottom 2001),”” Teets said.
with a company in São Paolo, Brazil. ADAC and line, and execution,”” Teets said. ““Obviously, To combat the slowdown, ADAC reorganized
VAST are in talks with partners in India for a execution is really the capstone to the two prior into business units —— one for door components
potential manufacturing footprint there to things. If you don’’t execute, you don’’t convert and another for automotive trim —— and com-
meet demands of Volkswagen, Ford and GM. your excess sales to the bottom line and your pleted the shuffle in 2002. Midway through the
““Where we’’re at today just blows my mind,”” capacity is going to get out of control, too. We’’ve last decade, company sales were in the $150 mil-
Teets said. got a lot of balls in the air. I try to tell all of our lion to $160 million range, and management had
But he added that being an effective supplier people here: Let’’s concentrate on what’’s in front its eyes set on the $200 million milestone. The
in the modern automotive industry necessitates of us. We’’re multitasking and we need everyone company built up capacity in equipment, facili-
that companies like ADAC serve OEMs on a to multitask …… the best they can.”” ties and human resources to continue growing
global scale. Through it all, Teets said he’’s learned to sur- up to that mark. But in retrospect, Teets said the
““We are trying to call on Hyundai-Kia in round himself with smart people and to trust company capacitized too much and ran at ““fairly
South Korea and in North America. We really his gut instinct. high debt levels,”” all of which hurt profitability.
have to be talking to them in stereo,”” he said. ““We ““I’’ve been with the company for 19 years, but ““We really did think we were heading toward
joined with (VAST) to protect the home market. I learn something new every week,”” he said. ““To the promised land of $200 million in sales,”” he said.
If you can’’t quote globally, you can’’t defend and say that you stop learning is the time that you But ADAC never got there. The industry started
protect jobs at home.”” should retire. …… I learned that if you want to be an to slide once again in the tail end of 2007 and
The supply chain also must keep innovating intelligent CEO, you have to surround yourself throughout the next two years. The company took
4 ACG-WESTERN MICHIGAN 2012 OUTSTANDING GROWTH AWARD REPRINTED COURTESY OF MIBIZ
5. The West Michigan Chapter of the Association for Corporate Growth held its ninth annual Outstanding Growth Award reception on March 13 at Frederik Meijer
Gardens. The sold-out event with about 400 executives from around the region featured networking over hors d’’oeuvres followed by the presentation of the presti-
gious ACG Cup to a team of students from Western Michigan University. Grand Valley State University’’s team finished second. The main draw was the hour-long
presentation by ADAC Automotive CEO Jim Teets about his company’’s growth since the dark days of 2009. Teets detailed the auto supplier’’s growth strategy and
recent investment in a new paint facility and equipment in Muskegon, which is expected to help the company diversify its customer and product base.
a ““significant loss”” in 2008, resulting in a complete on June 1, 2009, ADAC realized it needed to scale percentage of sales, but that was more an aberra-
internal restructuring. In 2009 within the span of a back even further and instituted a four-day tion attributed to the company being so lean in
month, two of ADAC’’s largest customers, General workweek —— for workers, another 20 percent cut its headcount and operations.
Motors and Chrysler, filed for bankruptcy. The on top of the previous cuts. ““We had gone from taking fat out of the orga-
company’’s future was less than certain. ““The summer of ’’09 was not a pleasant time nization …… to taking muscle out of it …… to cutting
Aided by the federal government, the two to be in this industry,”” Teets said. ““There were into the bone,”” he said. ““We really were lean.””
automakers emerged from bankruptcy and some pretty serious stress levels.”” As the U.S. light vehicle sales reached 12.7
carried on, reaching profitability in 2011. The In mid-July, the company decision-makers million units in 2011, ADAC experienced a slight
smooth bankruptcy process helped save ADAC reviewed the six-month financials through June decline in profitability as a percentage of sales, a
and others in the supply chain from an even and the outlook for the rest of 2009 and realized it trend which it projects to continue through 2014
more tenuous situation. would lose ““several million dollars”” for the year. as a result of paying for the Muskegon expansion,
““President Obama had his hand all over (the Teets said a loss of that size would have likely Teets said. Profitability should improve by 2014
bankruptcies), and obviously, we being an auto- resulted in the company being thrown into some and 2015, when the paint system is up and running.
motive supplier, are greatly indebted. Because, serious discussions with Fifth Third Bank, as Like many manufacturers, ADAC slowly
if they never came out of it ……”” Teets trailed off, ADAC would have tripped some loan covenants. added workers back in 2010 and 2011, and cur-
pausing a moment. ““They would have come out ““It would have been a very, very difficult rently employs more than 1,100 people, includ-
of it somehow, someway. The United States gov- time for us,”” Teets said, noting that ““thoughts ing about 140 temporary workers. The company
ernment wasn’’t going to allow two major auto- crossed my mind”” that the company might be prefers to keep about 10 percent of its workforce
makers to go under and never come back out.”” forced into some sort of reorganization. ““We as temporary workers to buffer for any major
While the auto industry bailout directly did everything we could. We streamlined opera- programs for customers.
helped the OEMs, it also kept afloat many in the tions. We did everything humanly possible.”” ““We’’ve got to be very careful to avoid the
automotive supply chain as a result. To this day, Slowly, ADAC’’s position started to improve, creep in headcount,”” Teets said.
industry analysts repeatedly say they’’re sur- a situation bolstered by the federal ““Cash For With gains in productivity, the company has
prised more suppliers didn’’t go out of business. Clunkers”” program that helped spur new vehi- to produce on average 20 percent more pieces
Teets, his board of directors and the manage- cle purchases. For 2009, the company ended the today to reach the same sales figures it did just
ment team made tough choices to keep the com- year marginally profitable. five years ago, he added.
pany going. He said to ADAC’’s credit, the company ““I’’ve never been so happy to break even in ““Your productivity and lean equation needs to
was ““a little bit ahead of the curve”” in realizing the my life,”” Teets said. be stronger than ever. The North American auto-
gravity of what was happening in the industry. motive market is back, so our OEM customers are ……
During 2008 and 2009, ADAC let go 50 salaried Light at the end of the tunnel getting back to asking for 2- to 3-percent givebacks
employees and another 125 to 150 hourly people. The company’’s tough choices seemed to per year,”” Teets said. ““If you don’’t have the lean
Following the lead of some of the other West work. Sales rebounded to $163 million in 2010 methods inherent to your company, the continuous
Michigan-based office furniture companies, and $185 million in 2011, and the company is pro- improvement, the Toyota lean manufacturing sys-
the executive team implemented across-the- jecting $187 million in sales for 2012. Improving tem —— you’’re going to be out of business again.
board pay cuts of 10 percent for executives, 7 auto sales caused the company to revise its projec- ““That creep will occur —— and (the company could
percent for the director group and 5 percent for tions upward to $193 million for this year. experience) loss of profitability. It’’s something that
all other salaried workers. In the middle of all the uncertainty, Teets we talk about and strive for every week, every month
But on the heels of GM filing for bankruptcy said 2010 was a record year for profitability as a here: What are we doing better?””
REPRINTED COURTESY OF MIBIZ ACG-WESTERN MICHIGAN 2012 OUTSTANDING GROWTH AWARD 5
