With the work increasingly absorbed by automotive suppliers, Modern Engineering Inc. has decided to sell off its prototyping operation and a portion of its product engineering group, including a plastics-based advanced design studio.
The Warren, Mich., firm will instead concentrate on growing its manufacturing engineering and design business and continue its contract service work performed in-house at client locations.
The sale will include three Modern sites: an advanced design project center in Troy, Mich., that makes prototype parts and tooling for interior trim and seating components; a vehicle-building shop in Dearborn Heights, Mich.; and a sheet-metal stamping and assembly operation in Troy that makes prototype body panels. Together, the three centers employ about 170 and generate sales of more than $65 million, said Modern Engineering President George Kubicke. The locations account for about 28 percent of the company's $225 million sales volume.
The announced sale comes little more than two months after Modern was taken off the sale market by its parent, Philadelphia-based CDI Corp. After deciding to focus on its core staffing-services business, CDI had started negotiations in February with an unnamed buyer, Kubicke said.
However, those talks fell through in late April. The purchaser decided that the sprawling company, which operates on about 1 million square feet of space, would not provide an acceptable return on its investment, Kubicke said.
After finding no other takers, CDI shifted gears. CDI folded Modern into its north central region and used the Warren facility as a base for its contracted services operation. Kubicke was handed the added title of executive vice president for the region.
At the same time, Modern decided to jettison the three facilities. The company found that many large Tier 1 automotive suppliers had bought other prototyping and product engineering firms and taken that business in-house, Kubicke said.
That trend led to a dwindling of demand for those services in recent years, Kubicke said. Modern chose not to be sold to a supplier so that it could continue working with competing clients.
``Otherwise, they would withhold their business,'' Kubicke said. ``We wanted to stay an independent company so no customer would worry whether we'd betray their secrets. This way, we can keep our primary customers and work in an area that they normally outsource.''
Kubicke cited several examples of large suppliers buying product design firms in the past few years. They include Becker Group Inc. of Sterling Heights, Mich., which purchased Megatech Engineering Inc., and Southfield, Mich.-based Lear Corp., which bought Automotive Industries Inc.
Many suppliers continue to go outside for computer-based manufacturing engineering and design services, Kubicke said. The business has its peaks — when vehicles are redesigned or new models are on the drafting board — and valleys when the work is not needed by a supplier.
That end of the business is where Modern plans to make its move. The competition includes behemoth MSX International Corp. of Auburn Hills, Mich., an engineering and technical services firm that recorded more than $400 million in 1996 sales.
For its part, Modern has a cache of computer-aided design and engineering draftspeople that can conduct finite element analyses, feasibility studies, process evaluations and tooling checks, among other services. The company has more than 2,700 employees worldwide.
Besides its Warren location, the work is conducted in Dearborn, Mich., near Ford Motor Co., and in Auburn Hills, Mich., near Chrysler Corp.'s headquarters. The company also has engineering services offices in Europe, Asia, South America and Mexico.
For sale is Modern's 45,000-square-foot project center, a research and design studio that includes a seating laboratory and rapid prototyping technology to make plastic-based interior trim parts. The work includes both a resin transfer molding process and vacuum forming techniques to make molds from fiberglass and epoxy.
The 140,000-square-foot vehicle-build operation up for sale performs prototype assembly for both new and retrofitted vehicles. The prototype body-panel stamping plant is the largest operation on the sales block. The plant has more than 160,000 square feet and generates about $50 million in annual sales, Kubicke said.
Potential buyers are interested in all three facilities, which should be sold by the end of the year, Kubicke said.
