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Wednesday, 18 May 2016 20:00

Evolving and Surviving: A look back at Donnelly Corp.

Written by  Melissa Anderson, Owner, Melissa Anderson Consulting LLC
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While browsing the automotive news site Just-Auto.com recently, we noticed an interview with Frank O’Brien, the executive vice president of Asia for Magna International Inc.

This sparked a moment of nostalgia, since O’Brien was a contact point during the time we did consulting work at Donnelly Corp. in Holland some 25 years ago — well before it became part of Magna.

It is somewhat unusual these days to find someone working at the same company for more than 25 years, particularly when the company has gone through an ownership change like that one did.

Donnelly went from a family-founded, independent company to being a division of what is currently the third-largest global parts supplier. What was lost was a locally-owned company with an unusual management philosophy, but this allowed Donnelly’s business to achieve lasting competitiveness on the global stage. A look through past news articles and public information tells the story.

Donnelly Corp. had a long history of evolving with changing conditions. It was founded in Holland in 1905 by Bernard P. Donnelly as a manufacturer of mirrors for the furniture industry. After supplying the war effort in World War II, the company shifted to the new growth market of automotive components and continued to deepen its competencies in glass fabrication and coating.

In the early 1950s, John F. Donnelly adopted a participative management system based on the Scanlon Plan that espoused the sharing of information and profits as the key to a productive, fair work environment — a very unusual approach at the time.

Eventually extending its skill set to plastics, the company developed new products such as exterior door handles, mirrors and trim delivered in pre-assembled modules, as well as window glass encapsulated in a frame for easy installation on the assembly line. Donnelly added lighting and electronics to its portfolio in the 1980s and 1990s, also exploring non-automotive markets where it could apply these core competencies.

In the latter part of the 20th century, however, the automotive industry was becoming much more complicated. Globalization heightened the competitive intensity of the industry. Foreign-owned automakers began manufacturing on foreign soil, exemplified by the growth of Japanese assembly plants in the U.S. from 1985 on.

Pressure on the Detroit Three became pressure on suppliers for reduced prices, turning long-term customer relationships into adversarial power struggles.

In this environment, component suppliers were increasingly expected to support customers around the world, preferably from geographically close facilities and at a globally-competitive price. Declining to expand, refusing to comply with a price reduction request, or failing to update product technology could open the door to competitors, so suppliers constantly weighed how best to deploy their assets and deal with resource constraints.

Donnelly Corp. did well for itself during this period. It was successful in winning business with the Japanese-owned automakers in North America and European-based OEMs. Its automotive sales grew organically and via acquisitions from around $40 million in the early 1980s to about $850 million in 2001, according to Automotive News.

The paradox for automotive suppliers is that success breeds success, but it also breeds more demands. Donnelly needed to continue extending its product line into ever more advanced technology, such as rear-vision camera systems.
It needed to deepen the bench in multiple areas, such as hiring a Ford executive as its new director of electronic product integration in 2000 to get a better understanding of sophisticated vehicle architecture. Servicing its customer base had led to employment of more than 6,100 people in 12 countries by 2001.

Finally, in 2002, the announcement came that Magna International would acquire Donnelly. Magna had been assessing whether to try to grow or exit its mirror business, so the opportunity to gain the critical mass of Donnelly in exterior rearview mirrors was decisive.

O’Brien, who served as vice president of corporate development at the time, was quoted as saying that Donnelly was hindered in its ability to supply product modules by its lack of metals capabilities, and that it lacked the size to compete as the automakers began sourcing complete modules from just-in-time locations.

For Donnelly, joining the much larger Magna made it possible to continue meeting customer demands and was quite possibly the answer to a question of long-term survival.

As Magna Mirror Systems, the former Donnelly has remained a strong presence in terms of employment, with about 3,500 employees in West Michigan, if not so much as a unique pillar of the community.

Read 1919 times Last modified on Tuesday, 17 May 2016 13:40

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