ADAC Automotive has launched one of the most ambitious capital projects in the manufacturer’s history. The Tier 1 supplier door of handles and exterior mirrors plans to invest roughly $23.5 million to build a new 56,000-square-foot corporate headquarters on Eagle Drive in Cascade Township, as well as expand its research and development facility by 24,000 square feet. With the move, ADAC plans to add 50 high-tech positions. MiBiz spoke with President and CEO Jim Teets about the investment, which comes during a period in which automotive sales are starting to flatten.
What’s driving this new corporate campus project for ADAC?
There’s really two key things. We have realized that we need a more conducive work environment to both retain current employees and also attract new employees, whether they’re Millennials or anyone. We’re building this new corporate campus with a much different work environment. We’re a very traditional company. This new headquarters building and the new R&D building also will be a much more collaborative and open work environment.
What about the timing makes sense from ADAC’s perspective?
We’re very stable and financially healthy. But we’re also realizing the current status of what’s going on in North America. We’re being very cautious and prudent in any decisions we make. We don’t want to bite off more than we can chew. … We’re debt-free. And we want to be very conscientious of that fact. … We’ve actually have been in the planning stages on this for about a little under two years. I personally am very happy and excited to see this project get off the ground.
Given auto sales in North America are plateauing, why is this a good time to invest?
Right now, the market’s still pretty healthy. … We know that the flat-lining that we’re seeing in sales — not only for ADAC but with North American production numbers — is just that: It’s a flat line, a plateau in the sales. It’s really a two- to three-year plateau or flat line of sales, and then it starts increasing again from there.
Why did the site in Cascade Township make sense?
We have looked at other sites in the Grand Rapids and West Michigan area. What brought us back to this site was, obviously, that we already owned the land, plus the natural beauty. We have three lots and it overlooks a ravine. But we chose this site over some other sites off the M-6/East Paris corridor. What we didn’t like out there is the infrastructure and some of the amenities that our employees could tap into. There’s not a lot way out there right now.
How are talent concerns driving ADAC to think differently about employee attraction and retention with the new headquarters?
We’re all very much aware of the talent shortage in automotive, in particular with engineering talent. … We just realized, over the last two to three years, that the work environment we had is not what we wanted for our employees. We’ve poured a lot of money into our manufacturing plants, both Muskegon and Saranac, and it was time to take care of the salaried workforce and the R&D.
We realized that we do definitely need to beef up our R&D spend with the current product portfolio that we’re in right now. If you’re going to be a Tier 1 and you want to stay a Tier 1, you better show the OEM that you not only have the answers to their questions, but you better proactively bring new enhancements, new products to them with greater bells and whistles than they’ve ever seen before. Technology is going at a speed that if you’re not keeping up, if you’re not moving, you’re dying. So we realized that we’ve really got to get our R&D and product technology increased a lot more than it is today.
In announcing the project, you mentioned that ADAC wants to continue to grow its electronics capabilities. What did you mean by that?
Especially with exterior door handles, with the electronics and the passive entry (technology), there’s a lot of things packaged into door handles today that even five years ago weren’t there. The OEMs view a door handle as a great packaging space, so they and all their Tier 1 suppliers are putting more and more technology into it.
Does that change the mix of skills ADAC needs to hire?
We’ve increased our number of electrical engineers over the last five years, up from two to well over 10 people today, and we’re looking to grow that probably up to maybe 15 to 20 (electrical engineers) within the next year or so. We had budgeted a fair amount of new engineering positions for 2018 and we just recently increased that probably by another 50 percent yet this year.
When we talked in December for the MiBiz Crystal Ball edition, you thought the discussions about a trade war and NAFTA were just heated rhetoric. Have the events of the last few weeks changed your mind at all?
I don’t think so. The NAFTA talks — even though they’re not concluded — I still think it’s heading in a manner that is not going to materially affect ADAC. I’m sure if Trump has his way, yeah, a lot of us would be affected. But I still think a lot of things that come out of his mouth is more rhetoric. (It’s different) than what the people who work for him actually are going to have to do and get done.