Through it all, Cadon Plating & Coatings survived. “We retooled, came back and overcame all that,” said Ensign, a 29-year Cadon veteran. “Over the years—through several expansions—we put in new, bigger lines, focused on efficiency, and we were still able to be competitive.”
So, what is it about the latest challenge facing the Detroit finishing industry that’s tempering Cadon Plating & Coatings’ outlook on business? As it turns out, it’s precisely the issue that has impacted the “down-river” Michigan industrial community at large: the precarious plight of the “Big Three” automakers and the subsequent effects on virtually every player across the entire supply/finishing chain.
“A lot of companies in the Detroit area are falling by the wayside, and we’ve personally lost several customers over the years,” Ensign reports. And the erosion continues. By Ensign’s count, an average of two companies file for bankruptcy every year. In fact, he said that number might have been higher in 2006—a period he refers to as a “banner year” for industrial bankruptcy filings.
Some of the plating/finishing casualties: Inshield Die, Taylor Machine, Michigan Rivet, M&S, Solar, among others. Ensign says his company was also impacted by the 2005 Chapter 11 filing of Delphi, once GM’s largest parts supplier. “Our customer base is drying up,” he said.
The Livonia area is especially depressed, according to Ensign. The area, he notes, used to be lined with rows and rows of industrial outfits. “We had customers along those rows at one time, but now a lot of those buildings are empty,” he said. “Some are still doing well, but a lot of the old-school automotive shops are getting replaced.”
Another troubling sign, according to Don Houston, account manager for Cadon Plating & Coating, is the lost work doesn’t appear to be getting scooped up by local plating shops. He speculates that some jobs might be going out of state or even offshore, namely China, but there’s no way to be certain. “You would expect that when somebody goes under, that that work would get outsourced to somebody else,” he explained. “At the least you would expect to see some RFQs coming in, but we’re not even seeing those.”
Ensign concurred. “We can’t say it’s China for sure—everybody wants to blame China—but certainly I don’t think the work is staying in the Detroit metro area.”
Indeed, the loss of some key local accounts is a big concern for Cadon these days—but it’s not the only vexing issue. Like other platers and finishers, Cadon is contending with rising metals and chemical prices, as well as higher energy and utility costs. At the same time, the company’s customers are seeking price reductions. “One of our biggest problems right now is commodity pricing,” Ensign said. “Zinc and hydrochloric acid are way up, with zinc is up more than 300% in the last three years. That makes it very difficult to get cost-downs to our customers.”
Rising to the Challenge
Just as it did in previous years when tough times called for both reactive and proactive measures, Cadon Plating & Coating is responding to challenges via a variety of initiatives. For one, the company is applying its tried-and-true formula of continually striving for operational efficiencies. This ranges from focusing on virtually every aspect of its business to eke out cost savings wherever possible to taking a more innovative approach to traditional problem solving.
“We’re actually looking at ordering larger quantities of zinc,” Ensign said. “We’re also looking at different ways we can use zinc relative to our load weights.” In other words, he says, making sure that if you’ve got a part that calls for 3/10 zinc that you’re not putting on 6/10.
Achieving savings through co-op purchasing is another alternative. “We’ve had one customer approach us about pooling zinc suppliers and purchasing for them,” Houston explained. “I don’t know if it’s something that’s going to come to fruition, but it’s something that they’re looking at.”
In the interim, Cadon is looking at equipment modifications to achieve greater efficiencies and, subsequently, cost savings to their customers. Specifically, that might entail upgrading from a four-foot barrel, off-line baking operation to five-foot barrels with automatic, in-line baking capabilities. “The lines that are being built now are bigger than the lines that were made 10 years ago,” Houston observed. “Obviously we need to head in that direction.”
Cadon is also seeking out opportunities to ramp up its paint line operations. Ensign hints at experimenting with zinc plating different chromates and dip coatings as well. In fact, he said the company has actually submitted samples to some of the automotive manufacturers, and that they have expressed genuine interest. “They’ve found that these coatings exceed some of the salt spray hours that they’re achieving with other finishes,” he noted.
New equipment and upgrades notwithstanding, it all goes back to incoming orders. “Our equipment is designed to chew up a larger volume of work, but if you don’t have the work to feed the line then you have a lot of wasted time and utilities,” Ensign stressed. “We need the larger volume to stay profitable, but sometimes we get below that line.”
Applying Its Advantages
For Cadon Plating & Coating, staying competitive means much more than tweaking equipment and processes. Competing effectively also entails leveraging the company’s capabilities to ensure customer satisfaction among its existing client base while simultaneously luring potential new business.
One of those competitive advantages is the company’s intense focus on process improvement and quality control. According to Ensign, Cadon was one of the first platers in the country to achieve the TS16949 certification—the next step up after QS90000. In short, TS16949 forces companies to look more closely at everything they do, requiring them to set goals to get better at those things. “We weren’t required to do that, but we decided to go that far anyway,” Ensign said. “The old ISO said, ‘Do what you say, say what you do and right it down.’ Well, you could have a flawed system and still pass the audit. The TS16949 certification really helped us, especially in the beginning, and I just think that’s a better system than ISO.”
Although Cadon can no longer claim sole TS16949-certification status (other local platers have since earned the stringent accreditation), having it still goes a long way in winning bids. “It answers a lot of questions with our customers, and it puts to rest any issues or concerns that they might have about our operations,” Houston explained. “In fact, some haven’t even heard of platers gaining that certification!”
That’s not the only weapon in Cadon’s arsenal. The company also leverages the fact that it offers a variety of metal finishing services (electroplating, mechanical plating, and dip-spin coating) with a turnaround time of 48 hours or less on parts requiring a six-step coating process. The fact that it’s a one-stop shop plays to its advantage as well. “Some customers are using two sources—one shop for the electroplating, then another shop for the top coat, whereas we tell our customers we can do everything in one facility,” Houston said. Another plus to offering a range of finishing services in-house: there’s no blame game. “With us, there’s no one pointing a finger at the other because it’s one company doing the entire process.”
Those are all points not overlooked by Magni International, a Cadon supply partner for more than 10 years. “Cadon does plating and dip-spin and plating under one roof, which is pretty rare,” said Bob Keagy, vice president of sales and marketing of the Birmingham, Mich.–based dip-spin coatings provider. “They’re not the largest applicator—they don’t have the most number of paint lines—but they do a fine job and they certainly have a list of dedicated customers.”
One of those customers is New Hudson, Mich.–based Aero & Auto, a long-time Cadon customer. “They pay attention to the customers, they upgrade their equipment—they’re just fabulous,” said Mike Stanton, Jr., the company’s president. “They’re excellent on price, quality, and delivery.”
That customer-centric mindset is evident in the finisher’s track record on defects. Keith Miller, quality assurance manager, said Cadon checks for torque tension and performs salt-spray testing on every line per shift. Audited three times a year by the American Association for Laboratory Accreditation, Miller reports its defect rate is less than half of 1% (0.65% in house) among customers who report back.
The company’s philosophy in that regard is simple: “We’d rather sort it out here and find nothing than to have a customer sort it out and find something,” Houston said. Furthermore, the firm has reward systems in place for its employees to spot defects, and managers actually encourage them to raise the flag if it means avoiding hassles for the customer.
Cadon isn’t only committed to quality; it’s also disciplined when it comes to environmental stewardship. Relative to air quality, for example, Ensign said the company installed a regenerative thermal oxider (RTO) that’s larger what’s required based on its existing lines. “Yes, it’s overkill, but we obviously wanted to make sure there were no issues with VOCs escaping,” he explained. “In fact, we could add two more lines and not have to invest in another RTO—that’s how big the unit is.”
Ditto for the company’s approach to wastewater treatment. With so much of Cadon’s finishing materials focused on zinc, maintaining a good history of water reports is critical. On top of the EPA and local authorities checking to ensure that zinc levels are below 1.6 parts per million in the water, Cadon also self monitors. “We do a very good job of getting the zinc out of the water,” Ensign said, citing a recent commendation by the city.
All this speaks to the company’s penchant for operational excellence and finish quality. But In a price-driven bidding process, pushing the “quality-over-price” issue can sometimes be dicey. “Whoever has the best price is usually the one who comes up with the job,” Houston explained. And that presents a dilemma for Cadon, he says, since the company isn’t always the cheapest, though it says it offers “decent” prices. “I’ve actually had a lot of people come to me and say, ‘Yeah, quality and delivery is nice, but price is everything.’ "
The Road Ahead
As challenging conditions persist, Cadon is banking on its finishing prowess, the uncanny ability to adapt, and its longevity (about 60 years in the business) to help glide it over the hump. Houston identified some bright spots: a) a trend in the fastener finishing business from electroplating to organic finishing, which plays to its relationships with partner suppliers such as Magni and Metal Coatings International; b) opportunities to expand its boundaries into neighboring states; c) the encouraging acceptance of some experimental specialty coatings by its existing customer base as well as potential clients; d) the potential of emerging niche markets; and e) the repeal of Michigan’s small business tax, which, heretofore, was based on sales instead of profits.
Cadon also points to Michigan’s drive to become the “technology state,” which, if successful, would have some tangible crossover benefits. In the meantime, the game plan is twofold: look at areas beyond the automotive market while simultaneously keeping a sharp eye on trends within the automotive manufacturing arena. “We have been working with Toyota and Honda to try to get more transplant work, and we have some,” Ensign explained. “That certainly helps.”
It’s clear that something is working. Ensign reports sales have hovered “around the $10-million mark” each year for the past few years. “It’s been as high as $11.4 million and as low as $9.8 million,” he said. “Obviously, some of that we caused ourselves because we made some tough business decisions. It’s been up and down, and now we’re going back up.”
Another positive for Cadon Plating & Coatings—as well as the local finishing industry at large—is the Chrysler Group’s recently announced plans to invest $1.78 billion in the Michigan economy. The investment is targeted toward a multi-product “Powertrain Offensive” consisting of $730 million for a new plant in Trenton to produce the “Phoenix” family of V-6 engines; $700 million in Marysville to build a new axle plant; $300 million in the Sterling Heights Assembly Plant to expand its paint shop; and $50 million for retooling of several truck and stamping plants and facilities in Warren.
Whatever comes Cadon’s way, its history and response to challenges demonstrates an impressive knack for adapting and adjusting to change. Ensign expects the same approach moving forward. “In the plating industry we say, ‘Nothing is forever.’ ”