Reed City Tool plans to double in size under new owners

Reed City, Mich. — The last year has brought big changes to the ownership, operations and direction of Reed City Tool, and the next few years will bring more as the company looks to double in size and expand its injection molding division into another facility.

Founded in 1959 in Reed City, a small Michigan city about 70 miles north of Grand Rapids, the business offers mold building, hydraulic press and automation equipment, and plastic injection molding to the automotive, consumer goods and medical markets.

With total sales of about $24 million a year, each of the three business units is poised for growth under its new owners, Argosy Private Equity and Stone River Capital, President and CEO John Barnett said.

The two firms have invested about $2 million into Reed City Tool since buying it in May 2017 and bringing Barnett on board. There's also a heightened emphasis on 5S and lean manufacturing initiatives, as well as filling key positions for staff and trades.

"The shop looks, feels and functions very differently than it did eight months ago," Barnett said during an interview at the company. "It took some investment in machinery, equipment, technology and foundational business processes to get here. We have best practices in place, and our team is well-positioned to take on new challenges while remaining a high-quality and competitive partner."

About $1.5 million of new equipment was installed in the fourth quarter of 2017 to increase throughput on the mold building and automated equipment side, which got a five-axis CNC machining center and a six-axis vertical milling machine.

"That technology separates the run-of-the-mill mold builders from the high-end mold builders," said Ron Marek, Reed City Tool sales program manager.

The company's tooling services led to the startup of the injection molding unit along with growth in the auto sector.

"Being a mold builder, it's necessary to sample the tools after you build them, so we ended up buying some injection molding presses," Marek said. "At some point, an automotive customer said, 'You have th epresses. Why don't you run me a small sample of 5,000 parts?' We did that, and they said, 'Why don't you just keep running it?' We realized that was a good area to expand in, and the owners got a few more presses and a few more presses."

Martinrea International Inc., a previous owner of Reed City Tool, is the company's largest automotive injection molding customer, but Barnett said other near-term opportunities can change that mix going forward.

"Our design staff plays an integral part of the prototype and development process for our customers, and that puts us in a great position to produce the injection molded production parts," Barnett said. "In fact, it's the staff and strong workforce that make the possibilities endless at Reed City Tool. We have been a hidden gem, and I want to make sure the market knows what we can do."

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Currently, about 65 percent of Reed City Tool's injection molding business is in auto parts like functional plastics and exterior components, while the remaining 35 percent is in consumer goods. Company officials want to continue to expand the injection molding customer base in markets like consumer goods and medical products, which are industries already serviced by the mold building and automated equipment side of their business.

Reed City Tool has 22 injection molding machines ranging in size from 30-725 tons as well as its mold and equipment building units in an 80,000-square-foot facility that has been updated and reorganized according to lean manufacturing principles that were implemented after the acquisition.

The current facility still has some capacity for new injection molding business but not enough for the opportunities that the new owners and management see. To handle expected growth, the company purchased another 80,000-square-foot building in the same industrial park.

"We're only a small player in this huge plastics market, so our potential for growth is significant," Barnett said. "Owning a vacant 80,000-square-foot building across the street and having our ownership's commitment to create a state-of-the-art manufacturing facility provides us a unique and exciting future. We think we'll be making a significant investment across the street in the next 12 to 18 months."

Reed City Tool is rapidly gaining new customers, Barnett said. By the end of 2019, he expects sales in the injection molding unit to increase more than 70 percent.

A few weeks ago, a procurement director for a global auto supplier visited the plant in the rural town of 2,400 residents, located a three-hour drive northwest of Detroit.

"I was so appreciative he took the time to come to this little town," Barnett said. "When he went out on the floor, he was blown away by our capabilities. We supply one of their facilities with a large amount of injection molds, but our team can do so much more for them. I'd like to partner with them to supply parts and systems and to expand our reach into more of their facilities. We're now taking the necessary next steps to determine how we can help them."

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In addition, Reed City Tool is building out a 3D printing department with 14 3D printers of varying capabilities to service customers.

The department will also be able to create its own filament to print a customer's product.

"We'll be able to take a manufacturer's pellets, or our own, and make the filament required to 3D print their parts," Barnett said. "Being able to use the exact material that a customer requests will provide a good advantage for us and our customers."

Barnett expects 3D printing to become the fourth leg of the Reed City Tool stool as the company finds new ways to help customers get their designs to market quicker.

The company is also making molds through 3D printing.

"We can print a mold in 24-36 hours and shoot that with the proper plastic and have a fully functional part for our customers to test," Barnett said. This will be a real game-changer for our customers and accelerate the product development cycle. The opportunity to help our customers gain business and capture new markets is significant."

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Also significant? The need to grow the workforce, which is now at 90 employees. That's up five workers, including a continuous improvement director, since the acquisition.

Reed City Tool offers a state-registered apprenticeship program and works with the nearby Ferris State University to make sure the curriculum meets business needs. The company has a room set aside for on-site instruction and training. Marek said this journeyman's mold making program can open a lot of doors for apprentices as they hone their skills in the trade.

The company has also found success getting the sons, daughters and relatives of employees, as well as local high school graduates, to take an interest in the skilled trades and "nurture them to the point they're interested in apprenticeships," Marek said.

The business is bringing in local junior high students in April for a facilitywide tour to introduce them to the different technologies for tooling and machine building, the 3D printing capabilities, and engineering and management opportunities available in their backyard.

"We think having the kids see what we do, and how our business touches the many things they see every day, will resonate and excite them," Barnett said.

Reed City Tool is also going to need to staff other areas, he added, like warehouse and materials management, accounting and the increasing sales force.

"We'll need the right team to support the growth," Barnett said. "From my perspective, it's not a question of if will occur, but when. The energy we sense when customers come through the facility and meet our team has been terrific."

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Reed City Tool was founded in 1959 by Frank Werth, and it operated primarily as a tooling facility for about 30 years. Pilot Industries, a former fuel tank supplier, bought the business and added injection molding machines to manufacture clips, connectors and components for fluid routing systems.

In 2002, Martinrea purchased Reed City Tool, but about seven years later, during the economic downturn, the company's owners didn't see it as core to their business. Rod Weck, who was general manager at the time, and Fred Youngs, who was the lead sales engineer, saw an opportunity.

"Rod didn't want the 70 employees or so to lose their jobs, so he got his assets together and, along with Fred, were able to purchase the company," Barnett said. "From 2009-17 they continued to grow the company."

When Stone River Capital Partners found out Reed City Tool was available, it partnered with Argosy Private Equity, which focuses on lower middle-market businesses that meet certain financial criteria.

Argosy Private Equity and Stone River Capital Partners acquired the company from Weck and Youngs. Youngs still works there as a senior sales engineer, and Barnett said he drives a lot of sales through the mold building business.

Argosy and Stone River have a long-term vision for the company, which alleviates a lot of concerns for employees, management and customers, Barnett said.