BENTON HARBOR, MICH. (Oct. 28, 9 a.m. EDT) — Back in 1949, Modern Plastics Corp. began production of a transfer molded, thermoset handle for Ruud Manufacturing Co.'s water heaters.
Fifty-three years later, Ruud now is part of Rheem Manufacturing Co. — itself owned by Paloma Industries of Nagoya, Japan — but the eight-cavity mold still is in operation, still producing 80,000 parts per year.
Modern Plastics, though, nearly disappeared.
In June 2001, management of the family-owned company closed its books for the fiscal year with a loss of nearly $2 million on sales of $24 million. A month later the red ink still was flowing and Victor Miller, president and son of company founder Walter Miller, was facing the very real threat of seeing the firm slip away like so many other old-line manufacturers.
“You don't devote your lifetime to business with the idea of seeing it disintegrate,” Miller said during an Oct. 10 interview at the Benton Harbor company. “We weren't raised to give up, and there's a cussed streak in us, too.”
So rather than shut down or sell out, the company turned to turnaround consultants Mag-na Partners LLC. A year later, Modern Plastics is leaner but healthy, ending the 2002 fiscal year with a profit of $230,000 — its first profit since 1996.
The company has new equipment on order and is in talks with the local community college about training for future employees.
“There's something very special about Modern Plastics,” said Timothy Czmiel, president of Magna Partners and chief executive officer of Modern Plastics. “I've been involved in fixing troubled companies for many, many years, and it's very rare to come across these companies, small in size, where there is a spirit that you can't quantify.”
Now the company is gaining international notice, winning the Turnaround Management Association's award for small-company turnaround of the year. It is, Czmiel said, a notice that celebrates the tough decisions made at one molding business, and shows exactly what can be done to save small, family-owned manufacturers across the United States.
“We are at war, economically and ideologically,” Czmiel said. “We can talk about how the Japanese do this or the Chinese have that, about how good of producers they are. I'm here to tell you that with the right leadership and working with local communities, that this country and these companies can fight and win.”
The company opened in 1937 in the same building that today houses its corporate office and one of its two plants.
The firm has been a leader in new technology development, working with fellow Benton Harbor giant Whirlpool Corp. to develop plastic washer agitators, then the first poly-propylene agitators.
It has made distributor caps for Ford Motor Co. and is one of only four suppliers of phenolic brake pistons in the United States. It made pot handles and coffee machine bases for West Bend Co.
It works in a variety of molding techniques — injection molding of thermoplastics, and injection molding, transfer molding and compression molding of thermosets in Benton Harbor. It opened its blow molding operation in nearby Coloma, Mich., in 1969. Its blow molded footboards for Hill-Rom Co. Inc.'s hospital beds won a top award in 2000 from the Society of the Plastics Industry's Structural Plastics Division.
But the changing economy hurt the company.
Whirlpool and West Bend, which now is part of Illinois Tool Works Inc., have moved the bulk of their manufacturing and selected new suppliers in new locations.
The auto industry, responsible for about 60 percent of Modern Plastics' sales, is pushing more and more cost cuts down the supply chain. By 2001, people inside and outside the company began fearing the worst. Employees were having off-site meetings, exchanging phone numbers and taking photos on the line for mementos of their time at Modern Plastics.
Creditors, suppliers and customers all were pushing hard at the corporate door.
Miller said he knows that many firms facing the same concerns have had to sell out or close.
“I won't fault the people who do that,” he said. “It's very difficult to maintain a family business.”
But an old acquaintance pointed him to Magna Partners, a turnaround group in Oak Brook, Ill., that works extensively with small manufacturers.
“[The Miller family] checked their egos at the door, and I give all credit to Vic,” Czmiel said. “I always tell him that I don't know how he did it, but he was able to attract and retain a talent base in a company that was way beyond what we normally are used to seeing at a $20 million, $25 million sales level.
“This company was a gem. It is a gem. It would have been a tragedy for this company to go out of business.”
But keeping Modern Plastics as a going concern was a difficult job.
Magna Partners met extensively with creditors, suppliers and customers, using its reputation in working with more than 200 troubled companies to reassure them that the company would make good on its debts and deliveries.
It worked with investment bankers Hindin/Owen/Engelke Inc. of Naperville, Ill., and provided specific dates for Modern Plastics to pay each bill. It requested specific order demands from customers to gauge exactly how many employees would be needed going forward. Once Magna had that number, Modern Plastics scheduled meetings with each shift, and provided the bad news: 30 percent of the workers must go.
“It was difficult. It wasn't a pleasant situation,” said operations director Steven Silcox. “We had people with 40 years in here that we had to lay off, but the consistent message was that it had to be done to preserve the 200 jobs that remain.”
Czmiel said it was important to make a clean, surgical strike, rather than drag it out.
“It's important to communicate, honestly, with the employees, with the vendors, with the governmental entities, with all the various stakeholders to say, 'Ladies and gentlemen, here's where we are and here's what we're going to be doing,'” he said.
“You do a job cut once, because if you don't, then the sword of Damocles hangs over the heads of everybody, affecting morale terribly. The good people begin to leave and the downward spiral quickens.”
Magna also labored to retain Modern Plastics' identity, promoting leadership from within the ranks and bringing in only two managers: Czmiel and Chief Financial Officer Eric Keller.
“It is so critical to maintain the best part of a corporate culture, because if you don't, and you just want to put your own stamp on a company, you can rip the heart right out of it,” Czmiel said. “It cannot continue. The will to win will be gone.”
With the employees keyed in and creditors ready to provide some breathing room, the company turned to the community, working with city, regional and federal officials to secure funding to save jobs and lay out a real future for Modern Plastics.
“Everybody in [city hall] knows about Modern Plastics,” said Benton Harbor Mayor Charles Yarborough.
“There are relatives, friends, husbands and wives working there. It's a part of the community. There would be a big void if Modern Plastics was not there. Benton Harbor wouldn't be the same. We've been like two kids growing up together.
“For us to sit back and watch this city go down — we simply weren't going to do it.”
Cornerstone Alliance, a regional economic development group, met with Magna Partners to weigh out what it could do and determine whether Modern Plastics really intended to continue forward.
Without real outside help and commitment from inside, there is little that community-funded support dollars can do, said President Jeffrey Noel.
“My heart has been wrenched over the past years to see the number of good companies that have disappeared, and yes, we may be able to help, but there are too many [businesses] that come to us and expect us to do everything,” he said. “They think that we alone can come to the rescue.”
Once convinced that all the elements were in place, Cornerstone coordinated a $450,000 loan for Modern Plastics, tapping into a federal program first created to bring plastics molder Atlantic Automotive Components LLC and its 300 jobs to Benton Harbor. The loan is a combination of donated funds, city and federal oversight dollars keyed to urban redevelopment.
Those dollars will purchase a used centerless grinder needed to produce brake pistons. The machine will replace a 1950s-era grinder last refurbished in the early 1980s.
Lake Michigan College stepped forward with training to improve workers' skills. The school also is working with the blow molding division as it labors to attain quality and environmental certificates, including an ongoing effort to attain an ISO 14001 certificate.
All of the work is bringing benefits beyond the bottom line.
“This plant particularly, from department to department, works much better now and much more efficiently than we did in the past,” said Ed Trapp, plant manager for the blow molding division in Coloma, Mich. “The communication is much more clear, especially from corporate to here, than it was in the past. There's a real sharing of resources.”
And there is a real difference that people on the line can understand.
“Morale has gotten much better,” said John Eberhardt, manager of the Benton Harbor plant. “In the beginning, everyone was afraid for their jobs. Three months down the turnaround road, people were afraid for their jobs.
“Now it's gotten a little — I don't want to say 'relaxed.' But there's a little bit of that confidence coming in, that we're going to be here for a long time.”