July 26, 2016 Retooled Growth

Volume 7 | Issue 4

Atlantic Tool & Die began its life in 1937 under very different market conditions, and underwent a renaissance 40 years ago.

It was a different world Frank Mehwald entered when he took over as president of his father’s business, Atlantic Tool & Die, in 1966: a red curtain was covering China, the Cold War dissolved diplomatic relations with the former Soviet Union as well as Eastern Europe and tool-and-die manufacturing had fully metamorphosed from supplying the war effort to augmenting a growing post-war American industrial base.

Never in his wildest dreams did Mehwald consider the possibility of competing with China, let alone traveling there to establish joint business ventures. But the old terra firma on which U.S. manufacturing built its foundation has undergone a seismic shift, both economically and geo-politically, as new countries enter the global marketplace. What Mehwald and Atlantic Tool & Die have done in the last several years is what many companies have had to do: regroup and refocus and Atlantic, by all measures, has faired better than most.

Atlantic Tool & Die is a tier one and tier two automotive supplier, producing more than 700 different items that go into the production of everything from seat tracks and windows to the exhaust system, chassis and frames. “We probably have parts in every car that’s on the road,” Mehwald says, adding, “We don’t sit around doing wishful thinking; we try to be proactive and integrate with our customers to provide the best solutions.”

Founding father
The company was founded by Mehwald’s father, Ernest, a German immigrant, in 1937; he had entered the country in 1929, the beginning of another pivotal period in American business. It was strictly a tool-and-die operation utilizing high-precision carbide dies that did very well for its first two decades or so, but problems occurred when Ernest Mehwald bought out his partner, the sales and marketing arm of the business, in 1958, and then let his employees buy stock in the company. As Mehwald relates: “Dad was an engineer – not really involved in the sales end of the business – and he never replaced the sales so business fell off 50 percent.” By the time Ernest Mehwald attempted to buy back the stock, business had ebbed even further and he couldn’t pay the banks back.

It was this situation Mehwald confronted when he took over the business as president in 1966. “The company almost went out of business in 1963,” he says. “After that the renaissance started.”

What ensued was a series of strategic moves, including the construction of a new plant in Strongsville, Ohio; the company further transformed itself over the years from contract tool and die to specialized metal stamping for a variety of industries, including plumbing, electrical and appliance.

But as many of the products Atlantic supplied became extinct through technological attrition, Mehwald guided the company toward the auto industry in the late 1980s, at which point GM became 35 percent of the company’s business. With $6-$8 million in sales Mehwald made the decision to begin work for the new Japanese auto transplants and quickly became a supplier to Honda of America manufacturing. Atlantic now has more than 60 customers – 33 of these are Japanese manufacturers – and has received 12 awards from Honda for Quality, Delivery and Productivity. Products manufactured by the company for its automotive base include airbag safety, body frame and brake strut systems; HVAC components as well as electronic, door/window, emission exhaust components; cable hose brackets and steering components. Capabilities include complete design/build, metal stamping from 60-880 tons, welding (spot, projection, robotic MIG/TIG) automated drilling and assembly and automated riveting.

The company maintains five plants, three in Ohio, one each in Texas and Alabama. It boasts in its literature that it ships “good parts on time” which is not just empty boasting. In real terms, Atlantic’s defect rate in 2003 was 1.3ppm.

The steel factor
“The biggest threat to us is external,” Mehwald says frankly, referring mostly to steel price increases, which have had a direct impact on the automotive supplier and which Mehwald credits with quickening the offshore manufacturing pace.

“I’ve been in business since 1966. We’ve survived three recessions, the oil crisis of the 1970s, President Carter’s 22 percent interest rates, and now we’re being faced with steel price increases that are a threat to the survival of many supplier companies” states Mehwald.

When you supply auto parts, he explains, steel is 30 to 70 percent of the cost. “When the tariffs hit it was near suicidal,” he stresses. “Who can absorb those material increases? In the last six weeks our steel prices have gone up 63 percent. Had steel tariffs not taken place the panic move to Asia would have taken longer.”

In addition, Mehwald says, his company is now competing for work against Vietnam, China, Korea and Indonesia, which means Atlantic has had to institute global pricing on all of its material. So a company founded in the industrial Midwest, which had never looked beyond the U.S. mainland for materials or for business, is now stacked against competitors in emerging economies that have, in turn, taken their cue from U.S. industry.

And how has Atlantic Tool & Die kept its head above water – while many others have gone bankrupt? “For the past two years we’ve developed an Asian strategy,” he says, “and we’ve partnered with several Chinese companies. We’re now buying the bulk of our tools from Asian companies.” Mehwald himself has been to China, and he describes the landscape as “one big construction zone.”

With Mehwald’s son, Michael, the third generation to work at Atlantic, the company has been able to weather the global economic storm by sticking to its knitting; in other words, Atlantic Tool & Die minds to keep its direction and strategy ever focused on the customer. By making itself a lean operation, offering world-class systems and processes, Atlantic Tool & Die will no doubt emerge from this latest spate of circumstance more poised to handle whatever else may come its way.

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