JENISON — The changing automotive industry is forcing West Michigan manufacturer Dienetics to adjust how it does business.
As the Jenison-based Tier 2 supplier faces disruptions related to competition, technology and customer demands, it’s led to a frenetic pace of change, said Cristian Vasquez, vice president of operations at Dienetics.
From Vasquez’s perspective, he’s “never seen so much craziness” as the industry faces currently.
“You can get scared, actually,” Vasquez told MiBiz. “We hit a big dip last year and we’re coming out of that dip. We are making changes, we’re making investments, (and) we don’t wait until (the change) comes.”
As a manufacturer whose business is 90-percent automotive-based, Dienetics has adjusted to the same headwinds as the global OEMs and Tier 1s, including worker shortages, an upheaval related to new technology and shifting customer demands.
Just two years ago, the manufacturer of sound-deadening materials known as BSR pads started a new sales initiative with the goal of improving its cost structure. Part of that commitment came in the form of a $400,000 investment into a new wire cutter and stamp press.
The investments will keep Dienetics ahead of current disruptions and make the company more “robust in its capabilities,” said Vasquez. The company employs 26 people and generates annual revenue in the range of $6 million to $8 million.
Dienetics also makes die parts for the furniture, medical and commercial industries.
“We’ve been challenged by the customers right now,” said Vasquez, who’s been with the company for 15 years. “One of the things that keeps me up is, are we doing everything we can as a company, in a smart way, to support what’s coming? That’s why we’re restructuring, that’s why we’re investing in different things right now.”
Vasquez understands why OEMs and Tier 1s are demanding more from their suppliers, particularly for engineering. But he also questions how those new pressures are being exerted on the supply chain.
“I think that they need to understand where to apply it,” he said. “A company that is $12 million, $10 million, or $6 million cannot have the same expectation as a $300 million company. They treat everybody the same because they only make one mold in their business model and they have no concessions at all.
“It’s a big balancing act trying to make them understand.”
For example, the process of filling out forms for part validations “takes a good three days,” when before “it was just send the product” to the company, Vazquez said.
“They have been burned in the past with tooling (manufacturers),” Vasquez said. “They want to make sure that nobody takes advantage of them again.”
Even though there’s added pressure for suppliers such as Dienetics, “it’s making us a better company,” Vasquez said.
“We still have a lot of narrow-focused engineers and designers in the automotive industry that continue to use the same thing over and over for the same applications,” he said. “We’re not about that.”
PROJECTS ON HOLD
Because customers have placed a hold on some projects this year, Dienetics expects to have flat sales in 2018. That’s a familiar tune for many Michigan tool and die shops, said Laurie Harbour, president of the Southfield-based Harbour Results Inc.
According to Harbour, the tooling industry experienced a “slower than predicted” first half of 2018. As a result, Harbour’s firm lowered its 2018 forecast in tooling expenditures from $11 billion to a range of $8.5 billion to $9 billion. The downgraded forecast comes as the amount of work on hold climbed 2.5 percent in the second quarter of this year.
Given the program delays, Harbour expects tooling and molding shops will have a busy second half of the year.
“I think we’re going to shove a hundred pounds in a fifty-pound bag in the back half of the year,” Harbour told MiBiz during the Center for Automotive Research Management Briefing Seminars last month. “I’m not really seeing massive programs dropped, but there’s delays (and) things moved.”
Likewise, Dienetics also is experiencing project delays and expects more projects to come online in the next few quarters. So far, the company’s been awarded a number of contracts with the Detroit Three automakers, including trim parts for the Dodge Ram 1500 and foam stuffers for headliners inside the Lincoln Navigator and Ford Explorer.
As more work comes online, Vasquez predicts a 10-percent growth rate for sales by the second quarter of 2019.
“We have the potential for exponential growth,” he said. “It’s very easy to want to grow, but when growth is knocking at your door, you get what you wish for. Now you need to execute. I’ve seen companies going belly up on growth because they don’t know how to manage it. … Now we have to adjust to it. The competition is getting brutal too.”