'High cost of doing business' part of pressures on Proper Tooling

Proper Group Holdings LLC's announcement it would close its Proper Tooling tooling and molding plant in Warren, Mich., is just the latest of businesses hit by financial pressures and industry demands.

Tooling suppliers "spend most of their time chasing money," said Laurie Harbour, president and CEO of Harbour Results Inc.

Proper will end 130 jobs when the Warren plant closes.

In August, New Hampshire-based Resonetics LLC moved to end operations at Tru Tech Systems Inc. in Mount Clemens. That same month, Romeo, Mich.-based Cammand Machining LLC filed for Chapter 11 bankruptcy.

Proper Tooling will close its manufacturing plant by March 31, Crain's Detroit Business first reported, after a series of employee terminations — unless it can find an investor or buyer to rescue it, Robert Hamood, president of Proper Tooling, a division of Proper Group, said.

"It's pretty sad because Proper is known in the industry as one of the most capable, high technology builders of complex tooling," said Hamood, who has worked at the company 30 years.

The layoffs will be permanent and are the result of "financial difficulties which were not reasonably foreseeable," according to a Nov. 21 WARN notice filed to the state.

Hamood said the tooling company's collapse was the result of last-minute changes to a deal between Florida-based private equity firm New Water Capital and Proper Group, which also has plants in Tennessee, South Carolina and Ontario. The PE firm initially agreed to buy more of the business than it ultimately ended up taking.

New Water's portfolio includes automotive lighting suppliers Myotek and Sealink International, which together form Luxit Group. Luxit purchased Proper Group's manufacturing site in Pulaski, Tenn., in December.

"They, at the end of the agreement, sort of reneged and wanted to purchase only one small part of the offer they had made," Hamood said. "So that left us in a position to scramble to sell other pieces of the company and really a situation where we're left with too much debt on the remaining company."

Liquidity problems due to supply chain pressures and inflation, coupled with a lack of bank support, left the company no choice but to brace for a mass layoff, Hamood said.

The COVID-19 pandemic and subsequent supply chain crisis "created … such a high cost of doing business" across industries, Harbour told Plastics News.

Those market forces "have been a challenge to deal with for any tool supplier," Harbour said. "It delayed programs [for toolmakers]. When you delay programs, you delay cash.

"COVID wasn't a massive impact in terms of demand for tooling," she said. "Demand was just slower … we've always had dips in demand."

Automotive OEMs had "launched so much [product] in the back half of the prior decade," Harbour said. "They were kind of taking a breath and prepping all these battery electric vehicles that are coming."

While OEMs still aren't launching a ton of new vehicles this year, she said, "as we go into 2024, '25 and '26 [demand] grows dramatically because we're at … an eight-year cycle."

2017 and 2018 were huge years with "lots of new product," Harbour said. "Eight years later in 2025, we're going to launch again, lots of tools in the market, all these new battery electric vehicle entrants coming into tooling."

"The future is bright in terms of opportunities and demand, but we're in the funk that's ... product-cadence related," she said.

Supply chain issues with products coming from China should be a "good story" for North American tool makers, Harbour said.

But Proper still faced "increasing pressure from the OEM community to source in China for cheaper prices," Hamood said. "The financial pressure also comes from very poor payment terms from OEMs."

Proper Tooling makes moldings for headlights, tail lights and grills for Tier 1 suppliers including Grupo Antolin, NYX LLC and ABC Technologies.