One Client’s Perspective: How E&E Manufacturing Has Remained Successful
Universal Advisor, 2007 Issue No. 1

Plante & Moran recently conducted a study in tandem with Wayne State University regarding the strengths and weaknesses inherent in the Great Lakes Region. 102 CEOs were surveyed regarding their perspectives. As you might expect, one of the biggest concerns cited about doing business in the region pertained to the decline of the automotive and manufacturing sectors. However, these macro trends don’t stop medium-sized businesses from moving forward. Headquartered in Plymouth, Michigan, E&E Manufacturing Co. is a premier niche supplier of metal stampings, assemblies, and fasteners to the North American automotive market. E&E President, Wes Smith, recently offered his insights regarding the state of the industry and what his company is doing to remain competitive and profitable.

What’s your outlook on the state of automotive manufacturing in the Midwest?

I’m guardedly optimistic. The United States is still producing approximately the same amount of vehicles domestically as we’ve historically produced. The big difference is that manufacturers are changing. The new domestics are rising, and traditional domestics continue to fight for market share. A significant concern for manufactures who’ve historically catered to the traditional domestics is that these new domestics aren’t waiting with open arms to welcome them into their supply base.

They aren’t adding new suppliers?

Not many. If you do happen to be fortunate enough to be chosen as a new supplier, the new domestics tend to grow you very cautiously — you have to prove yourself before they trust you. This has lead to a lot of overcapacity and disaster pricing in the traditional OEM supply chain. Certain suppliers are taking work at marginal prices just to keep their doors open.

Given the expected consolidation of lower-tier suppliers, what steps have you taken to assure that E&E continues to be successful?

We’ve revalidated and added resources to support our business model, which is to be an engineered solutions provider. Every supplier — and I don’t care who you talk to — believes they have niche products or processes. And they all do to a certain extent. But when you have consolidation, you don’t have consolidation of niche processes; general equipment capacity just falls away. Many suppliers are competing aggressively for commodity work to increase their sales and contribution margin. We’re just going to stick with what we’re doing and wait for opportunities to present themselves: like Craig [Fitzgerald] says, “Keep your powder dry, and don’t jump at the first opportunity. There will be plenty.”

I don’t really worry about the consolidation of the lower tiers. I don’t see consolidation as a competitive force or a force that will dominate the marketplace. It can pose problems initially in terms of pricing pressure, but eventually prices will return to rational and sustainable levels.

What’s your most significant challenge given the current business climate?

Staying on task with our business plan and not allowing ourselves to get swept up by some of the craziness going on out there.

Craziness?

I define craziness as resource work at marginal prices or situations where customers try to commoditize even highly engineered and innovation-rich products.

How have you overcome these challenges?

Although our business plan is to be an engineered solutions provider, we still have to find innovative products to present to our customers that will allow us to place the lowest cost solutions before them. This is not necessarily being a low-cost manufacturer. You have to be sure that your customers appreciate engineering activities that drive part costs down. If your customers change or no longer appreciate your engineered solutions model, then you have to find customers who do. Everybody is looking to drive cost out of their products — not just traditional domestics. There are customers out there that do appreciate these efforts.

If your customer’s business plan is to be the low-cost producer, they probably aren’t going to embrace an engineered solutions supplier. They’ll be looking for cheap guys where cost is king and quality is a secondary priority.

One thing that Craig has emphasized in recent years is that you need to make wise investments, and that doesn’t always mean plant and equipment. These investments really need to be in people and processes, so when the opportunities come, you have the horsepower to execute.

So the success of your organization ultimately comes down to people.

Absolutely. We work very hard to select talented people who are compatible with our culture — to get the right people on the bus, and in the right seats. That’s one of the things that I tell everyone here: it doesn’t matter if you’re selling burgers or stampings, it’s a people business, and it’s important that we don’t lose sight of that.