July 31, 2008

Foundry Lands Daimler Order

By Rick Barrett, Milwaukee Journal Sentinel

Jul. 31--Grede Foundries Inc. has received a $45 million order to build truck axle castings for Daimler Truck assembly plants in Germany, even as Grede eliminates about 90 jobs at its Reedsburg foundry, where some of the work will be done.

The Milwaukee-based company also anticipates finalizing another $20 million in sales from European customers in coming weeks. Combined, the contracts would represent a significant portion of Grede's approximately $500 million in annual sales.

"The opportunity to export profitably couldn't come at a better time," said Bruce Jacobs, Grede president. "The market is extremely difficult for the foundry industry as we try to manage volatile costs and reduced demand. The new Daimler work will help fill open capacity at our plants in Wisconsin, Indiana and Minnesota, and our hope is that additional work fills some of the gaps at our other plants."

Like many other manufacturers, Grede has seen a rapid increase in the cost of its raw materials. The company's costs have gone up about 40% in recent months, while domestic demand for foundry products has fallen about 25%, Jacobs said.

"It's been a difficult time for everyone in our industry," he said. "While our company has been able to remain financially stable amid market swings, it hasn't been easy and it's involved difficult decisions to curtail some operations and employment."

The Reedsburg foundry is in the process of reducing its work force from about 900 employees to 800 employees. Those cuts would be deeper if not for the European contracts, said Stew Davis, a Grede executive vice president.

"The new work coming in will keep us from having to lay off more than 90 people," Davis said.

Grede and other U.S. foundries have been able to land European contracts because of the weak U.S. dollar and a shortage of foundry capacity in Europe. It's a change from recent years when foundries here didn't do much exporting.

"The European foundry industry did a fair amount of downsizing over the last several years and have taken a lot of their capacity offline," Davis said. "We were definitely aware that more Europeans were coming to the United States to look for sources of parts because of the lack of foundry capacity in Europe."

Grede Foundries Inc. was founded in 1920 by William J. Grede. The company specializes in ferrous metals: gray iron, ductile iron, stainless steel and specialty iron castings.

The job cuts in Reedsburg, while they could be temporary, are tied to the slumping U.S. automotive industry -- including the General Motors plant in Janesville.

"There is just not enough other work going on," Davis said.

Grede will produce 14 different part numbers for Daimler Truck, ranging in size from 50 to 120 pounds each. The orders are expected to last several years with options to continue the work after that, according to the company.

Shipping the parts to Germany is expensive, but a favorable currency exchange rate tipped the scale in Grede's favor, Davis said.

There are more foundries in the Midwest than anywhere else in the nation. In Wisconsin, the plants produce a variety of parts, from brake rotors used on automobiles to huge gears used in mining machines.

"I think the industry is doing quite well, considering that manufacturing overall is in a bit of a slump," said Brian Mitchell, secretary of the Wisconsin Cast Metals Association, based in Oconomowoc.

Demand for metal castings is tied largely to the automotive industry, which accounts for more than one-third of reported total U.S. castings shipments.

In response to competitive pressures from foreign producers, U.S. foundries have increasingly focused on higher value-added products and delivery times for U.S. customers.

Still, much of the work has gone overseas, especially to China and India.


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