1. Docs have
room if State of West
Medicaid Michigan
expands Philanthropy
PAGE 16 PAGE 17
FEBRUARY 4, 2013 • VOL. 26/NO. 9 • $1.50 SERVING WESTERN MICHIGAN BUSINESS SINCE 1988 www.mibiz.com
Breaking VC on the rise
News State bucks national trend,
sees investments increase
By MARK SANCHEZ | MiBiz
msanchez@mibiz.com
MICHIGAN — Venture capital investing in
Michigan had one of its best years ever in
Dunlap Irwin 2012, setting the stage for what one venture
investor sees as “another very big year” for
Huntington gets further growth.
new local leader Investors put $232.31 million into 47
deals in Michigan last year, surpassing
Huntington Bank has a new pre-recession levels and easily exceeding
lead executive over its West the $84.75 million invested in 36 deals in
Michigan market. 2011, according to the quarterly MoneyTree
As Regional President report from the National Venture Capital
Jim Dunlap focuse s on t he Association and PricewaterhouseCoopers.
Huntington’s statewide oper- The 2012 activity positions the state well
ations, veteran banker John PHOTO: JOE BOOMGAARD for the future, said Dale Grogan, co-manag-
Irwin steps into the role as West
Michigan market leader. Irwin ing director of the $15.1 million Michigan
has been in banking for 32 years, Accelerator Fund I in Grand Rapids.
the last 11 years with Huntington. “There are several funds that have money
REV UP!
He most recently worked as With a pick up in pickups, to invest, which means that capital is avail-
Huntington’s corporate regional able. There is some really great innovation
banking manager. growth in the luxury segment, that is coming from all three sectors of pub-
“Huntington’s proven support lic institutions, existing companies and
for business to drive economic and the rebirth of an icon, startup companies. That trend should con-
per formance, par ticularly in
Michigan, makes taking on my Detroit is ready to tinue for 2013,” Grogan said.
The 2012 totals represent the third best
new role a welcome challenge,”
Irwin said. “It is rewarding to rep- year for venture investing in Michigan
since the quarterly MoneyTree report
resent a bank that is so intensely
dedicated to its customers and
Read our comprehensive reports from the 2013 North American started in 1995. The year was exceeded only
communities.”
Irwin reports to Dunlap and
International Auto Show and the Society of Automotive by the $356.44 million put into 55 deals in
2000 and, in terms of just dollar value, the
will collaborate with his counter- Analysts annual outlook conference. $253.47 million invested in 44 deals in 1999.
part in eastern Michigan, Steve More than half of the money invested
Fezzey, to build the bank’s state- in Michigan last year went into three com-
wide focus.
He takes over operations of AUTO OUTLOOK: PAGES 4-5 ■ NAIAS OVERVIEW: PAGES 18-20 panies: $72.64 million for Protean Electric
one of the leading banks in the See RISE IN VC on page 2
region, particularly in the Grand
Rapids area, where the Columbus,
Ohio-based Huntington ranked
fourth out of 29 banks in the 2012
FDIC Summary of Deposits and
has 22 offices.
Metro sells cancer center to NYC-based REIT
Statewide, Huntington ranks By MARK SANCHEZ | MiBiz of the cancer center, Triangle Associates Inc. and went for medical equipment. A 15-year lease on
seventh out of 160 banks with
msanchez@mibiz.com a group of physicians, said Mike Faas, CEO of the facility runs through June 2022 and will ini-
$9.09 billion in deposits through
Metro Health. tially generate $600,000 annually for the REIT,
140 offices and a 5.46 percent
market share. WYOMING — One local health care system has “They kind of wanted to get out and we were according to a quarterly financial report filed
“I have every confidence in opted to sell and lease back one of its key facilities fine with it,” Faas said. “We’re not in the mood with federal securities regulators.
John’s abilities to continue the rather than continue to maintain the property itself. particularly to tie up our cash in real estate. The acquisition of the facility is the third in
work that Huntington is doing American Realty Capital Healthcare Trust Whenever we can do this, we will.” Michigan for American Realty Capital, which
in West Michigan, that he has Inc., a New York City-based real estate investment The deal is structured similarly to the sale since forming in 2011 has been buying medical
already so significantly sup- trust (REIT), closed on the $6.2 million acquisi- years ago of Metro’s 13 outpatient centers in the office buildings, outpatient centers and senior
ported,” Dunlap said. “I am look- tion last month of the Cancer Center at Metro Grand Rapids area that the health system leases housing facilities across the country and leasing
ing forward to having even more Health Village as part of a much larger $214 mil- back. them back to care providers. The REIT owns 43
resources committed to Michigan
lion deal for 14 medical facilities in nine states. Metro Health and its partners developed the health care properties in 16 states.
that will continue to drive con-
sistent positive outcomes across Metro Health will continue to provide radia- 21,502-square-foot radiation oncology center in In September 2012, the REIT acquired the two-
the board in the state’s diverse tion therapy through a joint venture with the 2008 for $7.3 million, a good portion of which story, 100,321-square-foot, fully leased LakeView
communities.” University of Michigan Health System at the cen- Outpatient Center in Paw Paw for $30.4 mil-
— Mark Sanchez, MiBiz ter following the facility’s sale. RELATED STORY: Industrial firms seek sale- lion from Bronson Healthcare Group. Bronson
The deal came together when the REIT leaseback agreements to free up capital. PAGE 11 acquired the outpatient center in 2007 when it
approached the health system and the co-owners acquired LakeView Community Hospital.
P E R I O D I C A L S
Auto collapse
spurs firm’s
diversification GVSU expects
PAGE 6 longer payback
MADE IN on future green
MICHIGAN projects
Sponsored by:
CHEMICAL BANK
PAGE 15
2. RISE IN VC the $10 million range, basically B or C rounds Venture Capital Association’s 2011 annual
Continued from page 1 of funding.” report. Another seven firms based elsewhere
Hogg attributes that to “an increasingly have an office in Michigan. Michigan venture capital
in Auburn Hills that’s developing drive sys- vibrant technology and talent landscape in In the life sciences sector alone, VC invest- Here’s a look at venture capital activity in
tems for electric and hybrid vehicles; $32.5 Michigan that can be linked back to the state ments in Michigan totaled $107.1 million Michigan going back to 1995
million to EcoMotors Inc. in Allen Park; and really investing in technology businesses five, through 16 deals last year, which compares
$16.44 million to medical device company 10 years ago via the 21st Century Jobs Fund.” to $30.8 million in 16 deals in 2011, accord-
YEAR DEALS DOLLAR VALUE
CertoPherx Inc. in Ann Arbor. “Every state wants a technology indus- ing to Cleveland-based BioEnterprise, a bio-
2012 47 $232.31 million
West Michigan-based companies that try but few are willing to invest and wait the medical accelerator that tracks biotech and
received venture funding in the fourth quar- length of time it takes for it to take shape. I health care venture investing in the Midwest. 2011 36 $84.75 million
ter were: think we are seeing just that here in Michigan, In terms of dollar value, the amount was the 2010 31 $151.66 million
• Tolera Therapeutics, a Kalamazoo drug so kudos to the folks that fought hard for those best year for VC investing in life sciences in 2009 36 $178.45 million
development company that received $5.41 programs then,” Hogg said. Michigan since before the recession.
2008 44 $204.03 million
million from Hopen Life Science Ventures Eight of the 47 deals in Michigan were for Most Midwest markets saw increases in
in Grand Rapids, the Kalamazoo-based $9 million or more, including the $9.2 mil- VC investing in life sciences during the year, 2007 23 $109.70 million
Southwest Michigan Life Science Venture lion that five investors put into Kalamazoo- a contrast to the sector nationally. 2006 24 $131.25 million
Fund, and Cincinnati, Ohio-based Triathlon based Vestaron Corp., which has developed “As with the rest of the country, Midwest 2005 21 $93.32 million
Medical Ventures. an insecticide using spider venom. health care investing fell dramatically in 2004 17 $134.25 million
Despite the gains over the 2009 after strong years in 2007 and 2008, but
2003 18 $95.17 million
years, VC investing in Michigan it appears investors are again optimistic
remains in what Grogan calls about Midwest deals. 2013 should be an inter- 2002 27 $109.42 million
“Every state wants a technology industry a “nascent” stage compared esting year to watch,” BioEnterprise interim 2001 22 $154.92 million
but few are willing to invest and wait the to other states, especially on President Aram Nerpouni said. 2000 55 $356.44 million
length of time it takes for it to take shape. the coasts, because “we simply Nationally, VC investing in life sciences 1999 44 $253.47 million
don’t have as much money to declined to 466 deals for $4.1 billion, a 15-per-
I think we are seeing just that here in put to work.” cent decline in dollar value and flat deal vol-
1998 30 $122.64 million
Michigan, so kudos to the folks that Still, Grogan said, there is ume. Much of the decline occurred in first- 1997 28 $106.22 million
more venture funding available time financings for young companies, an 1996 21 $79.39 million
fought hard for those programs then.”
in Michigan than ever before. area that saw the lowest activity since 1995, 1995 12 $65.70 million
—SAM HOGG Investors have increased con- according to the MoneyTree report.
Partner at Open Prairie Ventures SOURCE: MONEYTREE REPORT
fidence in Michigan’s eco- Tracy Lefteroff, global managing part-
nomic resilience, and “there is ner of the venture capital practice at
an awaking of entrepreneurs PricewaterhouseCoopers, attributes the activity came as the venture capital industry
and outside investors alike that decline to regulatory uncertainty, plus the overall declined nationally.
• Intervention Insights Inc., a Grand now is a good time to nurture Michigan invest- heavy amount of capital and the decade or Across the U.S., venture capitalists
Rapids company that provides genetic tests ments,” he said. more it takes to move a life science innovation invested $26.5 billion in 3,698 deals, a 10-per-
that are designed to match cancer patients Grogan noted the growing number of ven- from concept to the marketplace. cent decline in dollar value and a 6-percent
with drugs that will best treat their tumor. The ture funds from outside of Michigan, Open “All of these factors have been taking their decline in deals from 2011, according to the
company, spun out of the Van Andel Institute, Prairie included, that now have offices in the toll on investing in this space, even though MoneyTree report.
received $1.6 million from undisclosed inves- state. everybody acknowledges there’s still tremen- Venture investing nationally in the fourth
tors, according to the MoneyTree report. “They are here for a simple reason: There dous opportunity,” Lefterhoff said. quarter alone declined 3 percent to 968 com-
In reviewing the 2012 MoneyTree data, Sam are opportunities in Michigan that are attrac- Investing in the medical device industry panies, although the dollar value increased 5
Hogg, a partner at Open Prairie Ventures that tive,” Grogan said. alone declined 13 percent nationwide to $2.4 percent to $6.4 billion.
manages the Southwest Michigan Life Science As of a year ago, Michigan was home to 20 billion through 313 deals, which was down 15 “General economic uncertainty continues to
Venture Fund, noted a “very noticeable uptick venture capital firms, up from 15 just three percent from 2011. hinder capital investments, and venture capi-
in the number and quality of investments in years earlier, according to the Michigan In Michigan, the increased investment talists are no different,” Lefteroff said.
2 FEBRUARY 4, 2013 / MiBiz Visit www.mibiz.com
4. MANUFACTURING
IN BRIEF Stability returns to auto outlook
By JOE BOOMGAARD | MiBiz
Associated Rack jboomgaard@mibiz.com
continues GR
A
fter a half-decade on the roller
expansion coaster, U.S. automakers are pre-
paring for a slow, steady ride
GRAND RAPIDS — Although that could yield strong profits for
Associated Rack just moved carmakers and their suppliers
to Grand Rapids in October, throughout the rest of the decade.
t he c o mp any ha s alr e ad y The automotive industry could be settling
expanded locally with a strate- into a sustainable period for the foreseeable
gic acquisition. future, a period perhaps defined by its stabil-
ity rather than any dramatic peaks and valleys.
The Chicago-based Associ- Auto sales beat most analysts’ expectations
ated Rack Corp., a man- last year by about 1 million units. U.S. light
ufacturer primarily of racks vehicle sales rose 13.4 percent in 2012 to nearly
and equipment for the materi- 14.5 million units, compared to about 12.8 mil-
als coating industry, acquired lion units in the prior year. The Detroit Three
Globe of Michigan Inc., a automakers, the main customers for many auto
Grand Rapids-based metal suppliers in West Michigan, had a market share
fabricator and manufacturer of of 44.8 percent last year, an erosion of 2.3 per-
materials handling equipment. cent from the prior year.
Although analysts expect light vehicle sales
A report in MiBiz about the to grow this year, they say that growth will be
expansion actually served as much more contained. That’s good news for a
a catalyst behind this new- supply chain that’s been struggling to keep up
e s t a c q ui s i t i o n , s ai d D o n with double-digit growth in the last couple of
Bauer, engineering manager at years.
Associated Rack. After reading But the forecast for slow, steady growth fails
about Associated Rack’s expan- to tell the whole story, analysts said.
sion into West Michigan, Globe While automakers have focused on the
of Michigan President Dennis growth of smaller, more fuel-efficient cars dur-
Velie reached out to the manu- ing the past few years, most analysts agree the
facturer to discuss a potential automotive market will soon see resurgence in
partnership. a somewhat unlikely segment: full-size pickup
trucks, which are being bolstered by an improv-
“Dennis saw the article in MiBiz ing housing market. These high-volume, highly
and was looking to align with profitable models, coupled with growth in the
another company to improve his premium vehicle segment, should help buoy
product line,” Bauer said. automakers’ balance sheets even consider- Analysts believe the U.S. full-size pickup truck market is poised for a resurgence over the next
Associated Rack and Globe of ing that overall sales are expected to flatten three to five years. That should translate into good news for many West Michigan automotive
Michigan finalized the deal over through 2019. suppliers, which have long had strong concentrations in the full-size pickup segment, including
the holidays. “I think 2013 could be characterized as the on the Ram 1500. The Ram was selected by automotive journalists as the North American Truck/
year of pickup trucks and the rebounding pre- Utility of the Year before the 2013 North American International Auto Show in Detroit.
Operations for Globe of mium market, and I don’t think many of us PHOTO: JOE BOOMGAARD
Michigan were moved from its would have thought that just a couple short
facility at 1731 Michigan Street years ago,” said Jeff Schuster, senior vice pres- and rental buyers come back. All this starts to
to Associated Rack’s newly ident of forecasting at LMC Automotive, in a build a healthier outlook,” Wall said.
acquired plant at 4910 Kraft speech at the Society of Automotive Analysts SOCIETY OF AUTOMOTIVE LMC Automotive’s Schuster said improve-
Avenue SE, near the Gerald Ford annual outlook conference in Detroit on Jan. 13. ANALYSTS 2013 OUTLOOK, ments in the general economy should continue
What’s more, the local automotive supply to drive growth this year, as should the avail-
International Airport.
chain has another potential source of opti-
AT A GLANCE ability of credit for vehicle buyers.
While the idea of getting into mism: Automakers are continuing to increase ■ Industry growth will be more manage- Schuster said the long-term trends are look-
materials handling equipment production in North America, which is lead- able through the end of the decade. ing favorable for the U.S. market.
was not foreign to Associated ing to more import substitution as models that LMC projects U.S. light vehicle sales to sta-
Rack, Bauer said the company ■ Any housing rebound should jumpstart
had been imported to North America get pro- bilize and reach about 17 million units by 2018,
never had enough experience the lucrative pickup truck market.
duced here. Analysts say every gain for North although Schuster notes there is “more upside
in the field to effectively expand America opens up new sourcing opportunities, ■ North America has become a preferred potential than there is downside risk.”
into that industry. which translates into more potential business place to manufacture vehicles, includ- Another positive factor: Myriad new prod-
and jobs in the supply chain. ing for export. ucts will bring more people into the show-
“We kind of dabbled in mate-
rooms. While 40 new or redesigned vehicles hit
rials handling equipment, but
the market in 2012, that number is expected to
we wanted to par tner with CONTROLLED GROWTH top out at around 83 million units, said LMC jump to 61 in 2013, Schuster said.
someone with experience,”
Speakers at the SAA conference, held on the Automotive’s Schuster. “That’s a pretty pronounced increase in
Bauer said. “Our goal is to
eve of the North American International Auto “I would dare use the word stable,” Schuster model activity,” he said.
expand our base and get more Show in Detroit, generally expected 2013 U.S. said of the global automotive forecast. While North America and Asia remain the
involved in the materials han- light vehicle sales to reach about 15 million In North America, where both sales and pro- bright spots for the global automotive indus-
dling and transport aspect of units, with a range of 14.9 million to 15.3 mil- duction have been climbing since 2009, IHS try, Europe is projected to continue to be a drag,
our business.” lion units. Automotive has already revised its production with sales expected to fall 2 percent next year.
All Globe of Michigan employ- That slow growth of about 4 percent comes forecast for the year to 15.9 million units, up Sales in Japan are also expected to drop 11 per-
ees will retain their positions after a string of years that saw the industry grow about 440,000 units from its previous forecast cent, according to LMC.
with Associated Rack. Velie will at a break-neck pace since 2008 and the depths at the end of last year. The European crisis has the potential to
also stay on with the company, of the recession. “What’s baked into that is a rosier sales out- affect West Michigan suppliers, sources said.
“It’s a great [respite] after three years of look,” Mike Wall, automotive analyst at IHS Many suppliers have plants or joint ventures
Bauer said.
double-digit sales growth,” said Ellen Hughes Automotive based in Grand Rapids, told MiBiz. in Europe to service the European market, or
— Carl Dunker, MiBiz Cromwick, chief economist at Ford Motor Co., “We’ve been plodding along in this slow-but- ship product from the U.S. to be installed at
who presented at the SAA conference. steady recovery, but we’re starting to see us European facilities.
Meanwhile, global vehicle sales should tick finally make that pivot.” For example, Zeeland-based Gentex Corp.
up a “very modest” 3 percent this year and “Leasing has come back. We’ve seen the fleet said in its earnings report on Jan. 29 that it
4 FEBRUARY 4, 2013 / MiBiz Visit www.mibiz.com
5. NORTH AMERICAN PRODUCTION AND CAPACITY
NA Production Underutilized Capacity Utilization
25M 100%
20M 80%
1.6 1.5 1.4 1.4
BAUER
1.4
3.6 3.8 3.7 1.5
2.2 1.8
6.0
15M 5.3 4.3 60%
10M 9.2 40% sheet metal & fabricating
17.4 17.9 18.3 18.4 18.4
15.7 15.2 15.9 16.6
15.0 15.4
12.6 11.8 13.1
5M 20% EST. 1932
8.5
0 0%
5
6
07
8
9
10
11
12
13
14
15
16
17
18
19
0
0
0
0
20
20
20
20
20
20
20
20
20
20
20
20
20
20
20
SOURCE: LMC AUTOMOTIVE
expects sales to decline between 5 and 10 per- “I think we could get even a little bit higher decade, Schuster expects to see an increase of
cent in its first quarter of 2013. That’s because than (our forecast),” Wall said. “I think we around 4 million units in production capac-
“unstable macroeconomic factors continue have the capacity, and as housing starts to ity in North America, resulting in a 76 per-
to be a concern, especially the sovereign debt come back, I think we could see that pick up a cent rise in North American production
crisis in Europe, as it is the company’s largest bit further. But more importantly, I think we across non-domestic automakers including
shipping destination,” Gentex reported. could see some sustainability in the 2.1 (mil- Daimler, Honda, Hyundai, Nissan, Toyota and
Schuster said the recovery in Western lion) to 2.2 (million) threshold for a while.” Volkswagen.
Europe could take longer than a decade, Wall said growth in the pickup truck seg- Secondly, North America is increas-
which compares to the five-year recovery ment coupled with recent (Dodge) or very ingly becoming an export hub. Some of the
from the recession that occurred there in the near-term (GM and Ford) truck redesigns European automakers are looking to source
early 1990s. By 2020, LMC expects European
sales to cross the 14-million-unit mark —
“still 500,000 units below the level it was at in
2007,” Schuster said. He expects production Where is pent-up demand more apparent?
in Europe to have declined about 6 percent in
2012 and to continue to dip another 4.2 per-
cent for 2013.
Estimated production levels for Europe are
about 18.5 million units for 2013, which com-
■ Average age: less than 11 years ■ Average age: less than 13 years
pares to 22 million in 2007.
■ Population down since 2007 ■ Population up since 2007
■ Scrap rate higher than trend ■ Scrap rate less than trend (light trucks)
RETURN OF PICKUPS ■ Solid used vehicle values ■ Solid/better used vehicle values
Among the new vehicles set to launch this ■ Product cycles mostly complete ■ GM has 41% of full-size pickups on road
year are the 2014 Chevrolet Silverado and
■ Varied segment loyalty ■ Highest segment loyalty
GMC Sierra full-size pickup trucks. And,
according to Itay Michaeli, vice president at ■ Prone to declining density ■ Geographically advantaged
Citi Investment Research and Analysis, they SOURCE: CITI RESEARCH
couldn’t be hitting the market at a better time.
Michaeli, speaking at the SAA conference,
said he believes the U.S. market is “on the cusp
of a major unlocking of pent-up demand” for
full-size pickup trucks over the next three to
could have “huge implications” for the supply
chain in West Michigan.
“For a lot of suppliers on this side of the
vehicles for the global market from just one
plant. BMW sees its North American plants
as its one global source for crossovers, for
68 years of
five years. state, a healthy chunk of their business is com- example, while Honda plans to “grow exports
“What’s astonishing is that every pent-up
demand indicator we look at — and I mean
every one — screens much more positively for
prised of that full-size truck and SUV lineup,”
he said. “The beauty of all this is that the hous-
ing market is starting to turn. There is a very
significantly” by sourcing several Honda
and Acura vehicles exclusively from North
America.
sheet metal
pickup trucks than it does for cars,” Michaeli solid correlation between housing starts and “This is using a lot of that capacity that’s
said. “I think it’s analytically almost impos-
sible to be very optimistic or bullish on auto
sales, but to be pessimistic or not equally as
pickup truck sales.” come in,” Schuster said.
That increase in North American produc-
tion volume from non-domestic companies
and steel
bullish — if not more — on the pickup truck
IMPORT SUBSTITUTION that used to import vehicles or that are start-
segment.” The same improved economy that’s buoying ing up new products also creates an opportu-
The root of that optimism starts with hous-
ing. The U.S. Census Bureau reported that
pickup truck sales should also translate into
better sales in the premium vehicle and lux-
nity for suppliers, he said. In addition to the
volume increases, many of the non-domestic
fabrication
about 1 million new households were formed ury segment, the analysts said. automakers that build cars in North America
last year, and analysts reported the housing Improved higher-end sales also bode well have less than 50 percent of the content on
inventory stands at about 4.7 months, which is
insufficient to meet increased demand.
for the North American supply chain since
these days, those brands — especially BMW,
those vehicles sourced from suppliers in
North America.
expertise
“We’re starting to see a little more nor- Audi and Mercedes-Benz — are building more Last year, the North American market
mal re-synching up of housing and autos, products in North America instead of import- imported about 3.9 million units, while auto-
in particular, pickups, which are so impor- ing them, what the analysts term import sub- makers exported about 1.3 million units that
tant to the housing recovery,” said Ford’s stitution. And the luxury segment isn’t alone, were produced in North America, according
Hughes-Cromwick. as Honda, Toyota, and Hyundai-Kia all shift to IHS Automotive data.
Other contributing factors, according to production to North America from Asia. Wall from IHS Automotive said import www.bauersheetmetal.com
Citi’s Michaeli: The average age of U.S. pickup “We’re entering into a period that we have substitution should really become noticeable
trucks is about 13 years old, fewer trucks are not seen in several decades where production in 2014 and 2015 as automakers bring online
getting scrapped, used trucks have held their volume outpaces demand in the U.S.,” said new facilities in Mexico.
values, and full-size trucks are just at the start LMC’s Schuster. “Import substitution is huge and … it’s
of the new product cycle. That’s because of two different kinds of going to heat up even further,” Wall said. “As
IHS forecasts sales this year of 2.2 million investment, Schuster said. that heats up, all they do there is basically
full-size pickups, not including some of the One, automakers have already expanded build vehicles here that they formerly had
SUVs that share platforms with those vehicles. capacity by about 600,000 units in the U.S. imported. In many cases, it’s just moving that
That compares to 2009, when pickup truck on top of new capacity of about 1.9 mil- production here. And I think there’s more to
sales hit just 1.3 million units, Wall said. lion units in Mexico. Through the end of the come, too.”
Visit www.mibiz.com MiBiz / FEBRUARY 4, 2013 5
6. MANUFACTURING
BOUNCE BACK
Auto collapse gives Alliance CNC
a reason to branch out
By CARL DUNKER | MiBiz
cdunker@mibiz.com
W
hile it took a big hit from the economic downturn
and near-collapse of the American auto industry,
Alliance CNC bounced back through equal doses of
reinvention and diversification.
Alliance Cutter Grinding Service Inc., commonly
known as Alliance CNC, started life primarily as a supplier to the
automotive industry. But when a key customer moved operations
south and the auto industry collapsed, the small manufacturing
company was forced to look to other industry segments for survival.
Dick Czarniecki, Alliance CNC’s president, said that while
COURTESY PHOTOS
the company came from humble roots, it hit its stride when it
began doing business with Diesel Tech, an auto supplier that Industry-wide, sales for many of Alliance CNC’s peers
was formerly owned by Penske Corp. However, when Diesel stayed flat in 2012 despite starting the year strong, according
Tech was sold and “90 percent of their operations” moved to the Precision Machined Products Association 2012 busi-
south, Alliance lost a significant amount of business and ness trends report released in January. Sales were negatively
needed to make some deep cuts. affected by the “brinksmanship leading up to the election,”
“We lost about half of our business,” Czarniecki said. Miles Free, director of industry research and technology at
The company took a second big hit when the domestic auto PMPA, stated in the report.
industry nosedived. Two of Alliance’s biggest customers, General Free’s outlook for 2013 was “gently optimistic” based on
Motors and Chrysler, went from being among the largest manu- the strength of the auto industry, a resurgence in housing,
facturers of automobiles in the world to getting bailed out by the increased aerospace sales, and strong performance in the
U.S. taxpayers in 2009. medical device industry.
The GM and Chrysler bankruptcy and the “We are guardedly optimistic about our indus-
coinciding loss in sales came at an inopportune try sales for 2013 if Washington can stop para-
time for Alliance CNC: The company had just lyzing the markets we serve,” Free stated in the
purchased $1.5 million in new equipment to report. “Our data suggest that the precision
help improve operations at its Grand Rapids machining industry is well positioned to take
plant. advantage of growth in demand that can be
This lost business caused Czarniecki to reasonably foreseen in automotive, housing, MADE IN MICHIGAN
think creatively about where Alliance CNC MADE IN aerospace and medical devices, if — and this
needed to go next.
“That gave us the reason to diversify and MICHIGAN is a strong if — the pols in D.C. can get the heck
out of the way and let our small business job-
A lliance Cutter Grinding Service Inc, known as Alliance
CNC, is a Grand Rapids-based manufacturer of custom
cutting tools for the automotive, medical device and steel
move out into other industries,” Czarniecki Sponsored by: creator entrepreneurs — and our customers —
industries. What began as a one-man shop in 1995 grew over
said. “We worked with the machines and CHEMICAL BANK have confidence in the year ahead. If not, the
the past 18 years into a company that did $4 million in sales
technology to develop a greater variety of opportunity for growth that is 2013 will go to
last year and employed 20 in its 10,000-square-foot facility.
product offerings.” waste just like it did in 2012.” The small batches that Alliance CNC works with allow the
Alliance is a manufacturer of custom cutting tools primar- At Alliance CNC, Czarniecki said the company continues to company to reduce lead time and allow for customizations
ily for the auto industry, although its product line also includes develop its manufacturing process over years of working with such as the addition of coatings or laser etching and a variety
tools for the medical device and steel markets. Founded in clients to identify the specific needs and how best to serve them. of other edge preparation options.
1995, the Grand Rapids-based company grew from a one-man “We work with the customer to develop the tools and develop
shop and now employs 20 workers in its 10,000-square-foot the process we use to manufacture those tools,” Czarniecki said.
facility just south of 44th Street. Alliance CNC works in small batches to better serve its cus-
The company branched out into serving other industries tomers by reducing lead times. Working in small production skilled labor to fill open positions.
including other second-tier automotive suppliers, medi- batches also allows for a greater variety of product offerings “I guess our biggest challenge is getting the talent, getting
cal device companies and steel manufacturers. For exam- and customization including special coatings and laser etch- those jobs that aren’t necessarily college jobs,” Czarniecki said.
ple, it picked up work with Kentwood-based Autocam Corp., ing as well as multiple options for edge preparation. The challenge with the candidates Alliance CNC does find
Czarniecki said. Additionally, Czarniecki told MiBiz that the company’s is that they are often inexperienced and lack the self-motiva-
This diversification allowed Alliance CNC to survive as the designers use their combined 75 years of experience to develop tion and initiative to be effective workers. Czarniecki hopes to
economy plodded along and helped it bounce back as the econ- the tools best suited to clients’ needs. Quality is assured remedy the problem by working with local colleges to develop
omy rebounded, he said. throughout the manufacturing process though a quality con- the kinds of employees manufacturers need today.
Currently, Czarniecki said he is running two, 50-hour shifts trol department that maintains its objectivity by being inde- “Nobody’s going to be babysitting you. Nobody’s going to
at the 20-person operation. Sales grew by 20 percent in both pendent of the manufacturing department. be handholding. So we need self-motivated, hard-working
2011 and 2012 to reach $4 million, up almost $3 million from As with many West Michigan manufacturers, one of the people who can show up every day and produce,” Czarniecki
the depth of the recession, Czarniecki told MiBiz. greatest obstacles to growth for Alliance CNC is the lack of said.
6 FEBRUARY 4, 2013 / MiBiz Visit www.mibiz.com
7. Monday, March 11, 2013
Radisson Hotel, Lansing
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Visit www.mibiz.com MiBiz / FEBRUARY 4, 2013 7