Automotive News Canada - June 2018 - v2 - 16

* JUNE 2018

Martinrea is bigger, but the goal is to be better
Executives say
they'll be choosier
about acquisitions
and put a priority
on operating margin
By JOHN IRWIN
TORONTO BUREAU

VAUGHAN, ONT. -
Martinrea International Inc.'s
years-long acquisition spree
has cooled.
The supplier, which quickly grew to become Canada's
third-largest auto supplier by
acquiring companies in aluminum, metallics and fluid-management systems, is content
with what it has, Martinrea
Chairman Rob Wildeboer told
Automotive News Canada.
"We get a lot of acquisition
approaches, but we've been
focused on improving our
business," he said. "If a deal
came along that we couldn't
turn down, we wouldn't refuse
it. But it's got to make sense."
Wildeboer and the company's top executives said any
deals would have to work in
the context of their ambitious
operating-margin goal: nine
per cent, up from about 6.4 in
2017.
The company, which reported record first-quarter 2018
earnings of $56 million on
revenue of $964 million, was
founded in 2001 and made
acquisitions a key driver.
But over the past two years,
Martinrea has focused on
natural growth through cost

reductions, inventory control
through flexible manufacturing and more centralized leadership.
CEO Pat D'Eramo, a former vice-president of manufacturing at Toyota Motor
Manufacturing in the United
States, said that approach has
paid off for Martinrea in its
earnings and its share prices, which in May were trading
at levels not seen since 2007.
As of this writing, the stock -
MRE, Toronto Stock Exchange
- was trading in the $15.50
range.
Still, D'Eramo said the
Martinrea's transformation
into a more "lean" manufacturer is ongoing. At the same
time, the company's top brass
has been more hands-on with
plant operations.

If a deal came along that
we couldn't turn down, we
wouldn't refuse it. But it's
got to make sense.
ROB WILDEBOER

chairman, Martinrea

CHANGES BRING CHALLENGES
D'Eramo said those changes have not been without challenges. About one-quarter of
the company's leadership at
its various plants in North
America have left Martinrea in
the past few years.
"The hardest part was getting people on board with the
operational piece," he said.
"We had been very decentralized. I always tell the story. I'll
never forget my second day on
the job when I was talking with
someone from one of the [automakers], and he said, 'Which
Martinrea are you from?'
Because we were so dispersed.
"So our message was,
you have to keep your independence and be the cap-

tain of your ship. But your
decision-making also has
to be about what's best for
Martinrea."
D'Eramo said Martinrea
has new business lined up with
BMW, Daimler and Toyota.
Combined with the launches
of the high-volume Chevrolet
Silverado and Ram pickup -
for which the company supplies components - that will
help Martinrea achieve the
nine-per-cent margin goal.
"Getting into a wider customer base is big for us, and
it'll help us as we move forward," D'Eramo said.
That focus on new business
and on operational improvements means Martinrea can be

more discerning when it comes
to acquisitions, company CFO
Fred Di Tosto said.
"We're committed
to growth, don't get
me wrong, but we're
more selective. We're
not turning down
business if it makes
sense. But we want to
make sure that with
what we do have, the
margins are there."
More from
Automotive News Canada's
interview with Wildeboer,
D'Eramo and Di Tosto:

ON TURNOVER IN LEADERSHIP
D'ERAMO: "Some people
couldn't get on board, not

because they couldn't perform,
but because they didn't understand or support the way we
wanted to do things. If we do
things right, we're going to get
results. But you can get results
the wrong way."
DI TOSTO: "The lean transformation has been huge.
That buy-in was important. It
took me time to understand
it, to learn that it's really not
about the tools, it's about the
mindset, a cultural
change in the way
you think."
D'ERAMO: "We
changed the pay
structure in terms of
bonuses. In the past,
general management
was given a bonus
based on the performance of their plant
and their plant only. Now, half
their bonus is on their plant,
but the rest is shared as part
of the whole business unit and
focusing on other things like
cash and reducing inventory to improve cash flow. And
there's a portion that's their

Martinrea shifts Ontario employees to new U.S. research centre
By JOHN IRWIN

He said Martinrea will move
equipment from one of its Torontoarea engineering facilities and from
one in southeast Michigan to the
SOME TORONTO-BASED
Auburn Hills building. As part of
Martinrea International employees
that move, some Canadian employees
will relocate to the United States as
will move to Michigan, though many
the supplier moves into
might move to one of the
its new US $26 million
company's Toronto-area
($33.7 million) technifluids plants.
cal centre in suburban
"We wanted to get the
Detroit.
equipment with the engiThe 108,000-squareneering folks all under
foot (10,000-square-meone building," D'Eramo
tre) tech centre in
said, adding that many
Auburn Hills, Mich., for
Toronto employees travwhich Martinrea held
el frequently over the
an opening ceremony
Canada-U.S. border.
in May, will allow the
The move comes as
company to do more
Martinrea looks to grow
research and developvia new business with
ment on fluid-manageMartinrea executives
customers and shifts
ment systems, chassis
say the supplier is
away from its previous
moving its r&d to the
and other components
growth-by-acquisition
Detroit area to be near
for its customers, comstrategy. D'Eramo said
pany CEO Pat D'Eramo customers.
having a strong r&d presP
H
O
T
O
:
M
A
R
T
I
N
R
E
A
said.
ence in the Detroit area
"We had a couple
was crucial to securing
of buildings in the area, and those
new business and building stronger
leases were getting ready to expire,"
relationships with customers, the largD'Eramo told Automotive News
est of which include General Motors,
Canada. "They were separate faciliFord Motor Co. and Toyota Motor
ties, and the lab we had was not big
Corp.
enough to get into the r&d we felt we
"We wanted to be near our cusneeded to get into. We needed sometomers," he said. "Even though it's
thing bigger."
the home of the Detroit Three, every
TORONTO BUREAU

Martinrea CEO Pat D'Eramo, left, talks with Michigan Gov. Rick Snyder,
right, at the opening of the supplier's new technical centre in suburban
Detroit. P H O T O : S TAT E O F M I C H I G A N

customer, every significant customer in the world, has an office there of
some sort."
The Auburn Hills facility had 156
employees as of late May, with others expected to start later this year
as Martinrea moves its engineering
equipment into the building.
The company received a US
$420,000 ($545,000) performance-based
grant from Michigan and an eightyear property tax abatement valued
at US $852,000 ($1.1 million).

"Certainly, incentives for our
industry are very important,"
D'Eramo said. "But in this particular
case, it was more about being around
the customer and their engineering offices than anything else. We
would've had to locate in that area,
someplace within drivable distance
[of] their engineering centres, or else
you lose that piece." - ANC
Alexa St. John of Automotive
News contributed to this report.

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