In 2012, CSP started looking for a partner in China and in late 2014 signed a deal for a 50/50 joint venture with Qingdao Victall Railway (Group) Co. Ltd. The partnership aims to capitalize on CSP's light-weighting innovations and technology and the Chinese company's customer relationships and local market expertise.
Quingdao makes components for railcars, including passenger interiors that use a structural composite material similar to automotive exteriors.
“There was a logical connection for them and for us,” Smith said. “They got somebody to work with that actually makes the material they need as opposed to having to buy it 100 percent outsourced. For us, it was a connection to domestic automotive manufacturers they are familiar with in that area. And, we got an introduction into mass transit railway systems. That isn't our initial focus but we will get there.”
In October, the partners opened a 322,000-square-foot facility in Tangshan to make lightweight composite materials. Some equipment still is being installed and “earnest production” of pending orders will begin this year.
“This was an important step for us because CSP has historically been North American centric,” Smith said. “If we're going to be a global player, we knew we had to be in China and we had to be in Europe.”
In Europe, CSP has a facility in France for research and development that is equipped and partially staffed with experts in carbon fiber hybrid-type applications. CSP is working on sales and production capabilities next.
The management team looks at R&D as an investment in the future instead of an expense and that's translating into growth opportunities for the next five to seven years, Smith said.
“Where do we want the company to go?” he asked. “It's not just about selling the same stuff but what is the customer really looking for? You need to anticipate where the market is going so you have the R&D activity that will have you there with the right materials at the right time because if you wait for the customer to tell you, you're probably going to be late.”
By becoming more disciplined about cost and cost controls, CSP freed up money for R&D efforts, according to Zitny.
“Before the company was barely surviving as a commodity supplier,” she wrote. “Now it's recognized as an industry technology leader with profitable growth.”
A certain level of budget consciousness also is expected of the R&D staffs, Smith said, but the management looks at it differently from selling, general and administrative (SG&A) expenses.
“This is not a requirement to run the business; this is a requirement to guarantee the future of the company.”
Prior to CSP, Smith was CFO of RathGibson and before that he was senior director of finance for Magna Powertrain. In July 2014, he worked on CPS's acquisition of five sheet molding compound facilities from the exterior unit of Magna International Inc. The deal included three facilities in North Carolina and one each in Indiana and Saltillo, Mexico.
“It helped us diversify our sales product base a bit so we're now more heavily into heavy truck applications, industrial applications and marine where we were not before,” Smith said. “It broadened our customer base and helped us geographically in the North Carolina area, which is important for the heavy truck business.”
Smith said the acquired facilities weren't performing well at first but have improved with a focus on product quality and limiting rejects.
“We knew that would make them more successful,” he said. “They're not quite where we want but it's not an overnight process. They're getting there and we're proud of the results and what folks locally have done.”
The progress is another example of how the change in expectation across CSP helped change its outlook.
“The financials aren't just something we hand off to the accountants in the backroom,” Smith said. “This is something everyone has a part in.”