Crain's Detroit Business - 25th Anniversary Issue, May 3, 2010 - (Page E48)

Page E48 CRAIN’S DETROIT BUSINESS May 3, 2010 25 Years of Change: Automotive Suppliers After near-collapse, suppliers gain ground BY RYAN BEENE CRAIN’S DETROIT BUSINESS LARGEST LOCAL AUTO SUPPLIERS, THEN AND NOW Listed by revenue from sales to automakers. B efore the crash in the fourth quarter of 2008 and the havoc of 2009 — the red ink, the bankruptcies, the job losses, the plant closures — auto suppliers were already on thin ice. Parts makers needed to run factories full tilt to have a shot at being healthy. Throughout the industry, companies faced high operating costs and balance sheets loaded with debt. When sales went down, losses went up. But after the years of pain, the future is looking brighter. High-profile suppliers such as Johnson Controls Inc., BorgWarner Inc., Lear Corp. and American Axle & Manufacturing Holdings Inc. are in the black and expect to stay there, although car and truck sales are well below the last decade. But to get there, it took a nearcollapse of the industry. “It just took us 20, 25 years to address (the problems in the supply base) in a meaningful way,” said Tim Leuliette, executive chairman of Rochester Hills-based Dura Automotive Systems Inc. and former CEO of several local suppliers. “Eventually, we ran out of run- 1985 1. Allied Automotive: $3.4 billion 2. The Budd Co.: $1.4 billion 3. TRW: $300 million 4. Douglas & Lomason: $266 million 5. ASC: $175 million 2000 1. Delphi: $26.4 billion 2. Visteon: $19.5 billion 3. Lear: $14.1 billion 4. Johnson Controls: $11.9 billion 5. TRW: $11 billion 1990 1. AlliedSignal: $4.2 billion 2. DuPont Automotive: $3 billion 3. ITT Automotive: $2.9 billion 4. United Technologies: $2.5 billion 5. Siemens: $2 billion 2005 1. Delphi: $22.6 billion 2. Johnson Controls: $19.3 billion 3. Lear: $17.1 billion 4. Visteon Corp.: $15.9 billion 5. TRW: $11.7 billion 1995 1. Delphi: $26.4 billion 2. TRW: $6.5 billion 3. ITT Automotive: $5.6 billion 4. AlliedSignal: $5.55 billion 5. Lear Corp.: $4.7 billion way, we ran out of excuses and we ran out of cash.” The local supply base of the mid1980s was a fragmented industry. The largest supplier in 1985 was Allied Automotive, a division of the industrial conglomerate Allied Corp., 2008 (latest available) 1. Johnson Controls: $19.3 billion 2. Delphi: $18.1 billion 3. TRW: $15 billion 4. Lear: $13.6 billion 5. Visteon: $9.1 billion which posted revenue of $3.43 billion that year. Allied was one of many automotive parts-making divisions of national industrial conglomerates that were generally the biggest players in town, outside of the parts divisions of Ford Motor Co., General Motors Corp. and Chrysler Corp. Suppliers were order-takers, supplying whatever the automakers wanted, built to their specifications. Dave Cole, chairman of the Center for Automotive Research in Ann Arbor, said back then that the supply base accounted for less than 10 percent of the research and development spending in the auto industry, compared with about 40 percent today. But in the late 1980s, as foreign automakers opened factories in North America, their foreign suppliers emerged as a force in the local supply base. “That was a period when globalization and the issue of foreign competition, which had been theoretical, started to become real,” Leuliette said. Japanese automakers and suppliers did business differently. Every year, American suppliers were granted price increases from automakers as labor and material costs grew. The automakers then passed those costs on to consumers when they announced vehicle price increases every fall. “These competitors operated on the basis of continuous improve- ments, and they looked for price reductions every year,” said Neil De Koker, CEO of the Troy-based Original Equipment Suppliers Association. This put “tremendous pressure” on the domestic automakers, De Koker said, “and they subsequently put pressure on their suppliers to reduce costs rather than continue the practice of accepting cost increases.” Ray Campbell, former director of purchasing in GM’s ChevroletPontiac-Canada unit from 1984 to 1992, said GM issued requests for qualified bids from a pre-selected handful of companies for contracts to supply noncommodity parts and worked closely with a select group. “It was increasingly more collaborative beginning in the late ’80s,” Campbell said. “But then as GM got into trouble in the early ’90s, then it became a street fight because it became survival.” But Campbell acknowledged that GM had far too many suppliers. In 1992, with the arrival of J. Ignacio Lopez as vice president of worldwide purchasing at GM, the first major shakeout began. Lopez was the first to install a centralized, global purchasing orSee Next Page ® www.crainsdetroit.com Vol. 26, No. 16 ©Entire contents copyright 2010 by Crain Communications Inc. All rights reserved APRIL 19 – 25, 2010 $2 a copy; $59 a year Page 3 Metro Airport revises ethics policy: What does it mean? Longtime health insurer American Community Mutual placed into rehabilitation Inside Bing budget plan unveiled, but ‘devil is in the details,’ Page 5 Tacom sees big hiring ahead Base transfers put 700 jobs in play BY CHAD HALCOM CRAIN’S DETROIT BUSINESS Second Stage Extra The U.S. Army Tacom Life Cycle Management Command has added 280 new local jobs in recent months and could hire 700 more people in Southeast Michigan by next summer, when it wraps up $120 million in new building construction to accommodate personnel moves. Consolidation is in full swing at the Warrenbased Detroit Arsenal, headquarters for the Army’s network of weapons and ground vehicle research and development, procurement, deployment, repair and maintenance. Tacom, with more than 23,000 military and CHAD HALCOM/CRAIN’S DETROIT BUSINESS Maj. Gen. Kurt Stein said he expects Tacom to hire at least 700 people, “hopefully right here from the local community.” civilian employees nationwide, already has transferred 55 employees from the Rock Island Arsenal in Illinois to its Warren headquarters since late last year and has added 224 new local jobs to replace employees who will not transfer, said Maj. Gen. Kurt Stein. Stein, who became commanding general at Tacom in late January, and his staff expect to add around 1,200 local employees by June 2011 under the Rock Island consolidation, mandated by the federal Base Realignment and Closure Commission law enacted in 2005. Based on employee participation and interest thus far, the Tacom administration expects as much as 35 percent to 40 percent of the Rock Island personnel to move with their jobs to Southeast Michigan, including a projected 243 position transfers expected between late April and December. That’s above the average of 30 percent the Army has reported in past BRCC personnel moves. The base does not expect a final headcount on transfers until March. See Tacom, Page 31 Honigman is proud of its association with Med suppliers feel threat Coalition fights Medicare bidding regulation BY JAY GREENE CRAIN’S DETROIT BUSINESS Fifty for the future: Companies to watch, Page 9 This Just In UM Dearborn to transfer ownership of Ford Estate The University of MichiganDearborn voted late last week to transfer the Henry Ford Estate in Dearborn at no cost to the Edsel & Eleanor Ford House in Grosse Pointe Shores in July 2011. The transfer of the estate will allow UM Dearborn to concentrate its efforts on its core mission of education and research, while at the same time improving one of the area’s cultural treasures, said Ken Kettenbeil, director of communications for UM Dearborn. Under the agreement, the See This Just In, Page 2 A booming senior population and a desire to integrate inpatient care with home health services are spurring growth at hospitalbased medical product subsidiaries of Henry Ford Health System and the University of Michigan Health System. But a regulatory change by the Centers for Medicare and Medicaid Services that goes into effect in 2012 for Michigan could put a crimp on hospital-based medical home product subsidiaries and hundreds of other Michiganbased vendors. Home medical equipment vendors provide a variety of supplies, such as hospital beds, portable oxygen systems, diabetic products, knee braces, commodes, walkers and blood pressure monitors. The regulation — which establishes a competitive bidding process for companies that provide medical home equipment to Medicare patients and also limits the number of companies under contract — could drive out of business up to 90 percent of the roughly 500 Michigan home health supply vendors, several company executives tell Crain’s. National firms make moves in Ann Arbor real estate BY DANIEL DUGGAN CRAIN’S DETROIT BUSINESS NATHAN SKID/CRAIN’S DETROIT BUSINESS Steve Serra, vice president of Henry Ford Health Products in Southfield, stands with a truck being loaded with in-house hospice materials and equipment. For hospital-based companies, Durable Medical Equipment — to losing Medicare business could lobby for changes in CMS rules or delay patient discharges and dri- possibly to seek federal legislave up overall health care costs in tion to change the regulations. the Medicare program, said Steve The coalition includes the UM Serra, vice presihealth system, dent of Henry Ford William Beaumont Health Products. Hospitals, St. John “Medicare is Health System, being shortsightOakwood Healthed and not seeing care, McLaren the impact on Health Care, the costs from the Cleveland Clinic, continuum of the University of health care serPittsburgh Medvices,” Serra ical Center, Steve Serra, said. “When our Chicago-based Henry Ford Health Products patients are disAdvocate Health charged, we have home medical Care, and Providence Health and equipment waiting for them and Services in Seattle. there is no delay.” Medicare’s competitive bidding Last year, Serra formed a grass- program, which was mandated by roots organization of 85 hospital- Congress in 2003 and later modified based home health suppliers — See Suppliers, Page 32 the National Hospital Coalition on Medicare is being shortsighted and not seeing the impact on costs. “ ” The Detroit office of the Jones Lang LaSalle commercial real estate firm has hired two well-known Ann Arbor brokers, giving the firm a foothold in the city. The move represents yet another national real estate firm targeting a real estate market typically dominated by local firms. Ann Arbor has been generating interest from national real estate firms recently, including Chicago-based Jones Lang LaSalle’s national competitors CB Richard Ellis and Colliers International. “In the past, we haven’t had anyone on the ground in Ann Arbor, but it’s something we’ve wanted to target,” said Gantner Ron Gantner, executive vice president in the Detroit office of Jones Lang LaSalle. “With the university, the growth there, it’s important to have something established in Ann Arbor.” Jones Lang LaSalle hired Neal Warling and Newcombe Clark, the two top brokers with Ann Arborbased Bluestone Realty Advisors L.L.C. Most important, the roughly See Ann Arbor, Page 30 over the past 25 years and wishes the company great success in the years ahead! and Honigman Miller Schwartz Cohn llp Detroit Lansing Oakland County Ann Arbor Kalamazoo www.honigman.com  http://www.honigman.com http://www.honigman.com

Table of Contents for the Digital Edition of Crain's Detroit Business - 25th Anniversary Issue, May 3, 2010

Crain's Detroit Business 25th Anniversary
Looking Forward
25 Companies to Watch
25 Mainstays
25 People Then and Now
25 Scandals and Dubious Deeds.
25 Philanthropic Gifts
25 Newsmakers of the Year
25 Big Stories
25 Innovations
25 Gone But Not Forgotten
Health Care
Defense
Suppliers
The Internet and Communication
Energy
Finance
Signs of the Times

Crain's Detroit Business - 25th Anniversary Issue, May 3, 2010

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