Tiercon, Inc.

Source: Exec Digital Canada

Date :7/31/2007 1:55:51 PM

After being placed into receivership by its former parent company, Tiercon, Inc. reemerges looking buff and well on its way to recovery

Written and produced by James Buchanan & Michael Townsend

Prent companies can be such a mixed blessing. For Tiercon, Inc., this lesson is all too real, as its former parent put the company up for adoption by sending it into receivership.

Fortunately, a suitable foster home was found, allowing Tiercon to emerge in a newly constituted and invigorated form within a strong family of sibling companies. As such, Tiercon has been free to pursue its specialty within the automotive parts manufacturing industry.

“Our focus is on the exterior ornamentation of the car; anything the OEMs [Original Equipment Manufacturers] don’t put on themselves,” says Terry Kotwa, VP of operations for the Stony Creek, Ontario, based company. “Anything they require from the supply base is what we tend to do, such as the rocker panels, body side moldings and so on.

“Primarily we work with plastic, but if metal is a component of what we are producing, then we team up with our sister company AGS Automotive.”

Currently, the company’s largest contract is making parts for, and assembling, the front-end bumper system for the light and heavy versions of the Chevrolet Silverado by General Motors.

Though the company has overseen improvements to its facilities and production methods, it is engaged in primarily the same pursuits as it was in the spring of 2005 when the company reported its best first quarter profit in its history.

However, by April of 2005, Tiercon had entered into bankruptcy, which Kotwa says was not the result of an operational issue.

“The Royal Bank of Canada — which owned the company at the time — had decided it wanted to exit the automotive market, and so it put the company on the block,” he says. “However, it did not receive an acceptable offer, and after a few months the bank felt it could get a better deal if the company was in receivership.”

While in receivership most of Tiercon’s assets were sold to J2. The lone exception was a large plastic facility that was liquidated, a portion of which was also bought by J2.

“We came out of receivership on November 2, 2005, under the operating name Tiercon, Inc.,” says Kotwa.

Importantly, the company came out of receivership with its core asset – Tiercon’s large painting facility in Stony Creek. This means the company is able to continue to provide high-quality work and maintain its excellent reputation, adds Kotwa.

“All in all, the transition has been working extremely well,” he says. “We spent most of 2006 and this year launching the Silverado bumper system, which is probably one of General Motors’ biggest launches in five years.

“We have also put a new facility online to service the Silverado contract. This is a rented facility, but under the lease agreement we have made upgrades to the facility so that we are currently producing 2,500 bumpers per day.”

Kotwa goes on to add, “Overall, I would characterize it as a very successful launch. And as far as the new facility, we took possession of it on May 1, 2006, and on March 1, 2007, we put it at full capacity. So, basically, it took us 12 months to get that building from zero to 100 miles per hour.”

Perhaps one of the biggest benefits related to the company’s new ownership is its relationship with sister company AGS Automotive, which provides steel components for the Silverado bumpers.

According to Kotwa, AGS itself entered into bankruptcy in 2001 and was purchased by J2 management.

“Currently, the two companies have integrated contracts where Tiercon supplies components for an AGS bumper system,” says Kotwa. “To more efficiently work together Tiercon collocates with AGS at its site in order to gain the advantage of being able to supply just-in-time inventory and to reduce shipping costs.”

Further, AGS feeds a lot of com-ponents into Tiercon’s supply chain.

Kotwa goes on to say that the complexity of the bumper system has caused Tiercon to expand on the capabilities and capacity of its manufacturing line.

“Most pickup bumper systems to date have essentially been a plastic top with a steel bottom,” says Kotwa. “This system has a look that is almost like a car fascia. It’s also a hybrid system, in that there is more plastic on this bumper than you would find on most pickup trucks — which requires something in the order of 51 different configurations.

“The complexity of this drives a manufacturing process that wants to make sure you don’t have any errors. Therefore, manufacturing this system is fairly sophisticated,” he says.

The method that has been created at the company’s new facility, says Kotwa, reflects the company’s need for an efficient and qualitative process.

Tiercon installed two lines that operate with computer controlled pallets. The pallets are basically steel rectangles comprised of three inch tube steel. For comparison, picture a window hung by trolleys with clamps and various other holding devices to keep a part in place while it is being attached to the bumper, says Kotwa.

There are 22 pallets per line, and each line is a synchronized system where each pallet is powered and travels independently of one another.

“The advantage to this is that the pallet comes in and it is stopped; it is stationary,” says Kotwa. “In a traditional system - where all the pallets are on one chain and move together - the employee must walk with it, which can be detrimental to doing the job properly.

“A synchronized pallet comes in and stops, and the employee releases it only when he is satisfied that the work has been done properly. It is a very quality positive system,” Kotwa says.

The pallets are also smart enough to know what part should be placed on it, the color, shape and weight, based on information inputted to the computer system at the start of the line, he adds. The pallet can also sense if the part has been attached properly.

“The amount of error-proofing that is required for this bumper is unique, and the number of errors is very, very low,” says Kotwa. “The concept for this line was developed between ourselves and AGS Automotive. They have a lot of experience manufacturing bumpers. Then we targeted a supplier to integrate and fabricate the line.”

Also, as now seems the rule of manufacturing, lean manufacturing is practiced throughout the line and the organization.

“There are a number of lean manufacturing themes we use on this line, which are taken from the Toyota Production System,” says Kotwa. “One core tool we use is Andon, which is Japanese for lantern.

“Andon is designed to give the operators support through the use of a series of lights. If the light is green, that means everything is okay. If the operator is beginning to fall behind, he pulls a chord and an amber light comes on. If he is behind the operator can pull the chord and a red light comes on and he receives help until the station is caught up.”

Tiercon also employs a single piece flow philosophy, which dictates that components requiring preassembly before going onto the bumper are assembled as close to the line as possible. The intent, says Kotwa is to avoid building inventory and keeping pace with the line, which increases efficiency and reduces waste.

With the company appearing to have successfully emerged from receivership, Kotwa says future growth will be achieved via two basic approaches.

The first is to provide OEMs with high-quality painted molded products at very competitive prices. To do this, the company has what Kotwa describes as world-class painting capabilities, which includes robotic application systems; the ability to paint multiple plastic substrates; technology with the capacity to apply prime-coat, base and tri-coat on a single pass; and in-house spectrometry to ensure flawless color matching and the ability to switch colors in mid production in less than 70 seconds.

According to Kotwa, the company is seeing yields of more than 90 percent on its paint line.

“We’ve also got available capacity because our paint line is only about 50 percent full,” he adds. “We have to fill that up and the only way to do that is through very competitive prices.”

The second growth strategy is in the area of product development.

For example, the company is working on producing a strong, light-weight running board.

“The old company had a very large running board contract,” says Kotwa. “Traditionally, running boards had a significant amount of steel in their structure that weighed about 80 to 90 pounds and had high production costs.”

The company has now developed a glass fiber polypropylene structure.

“We can put a decorative cover on it and dress it up,” he says. “Plus, it has less weight and costs 40 percent less to produce. We are essentially finished with the design of that, and we have been talking with an OEM and believe we are near a contract with them.”

Kotwa adds, “Overall, the move to higher gas efficiency requirements means that OEMs are going to be looking for weight reductions to get the MPG ratings of their vehicles higher. We are looking at composites to get the weight out of the vehicle, which we believe is a great opportunity.

“We believe the way we are going to grow is to build a better mouse trap,” Kotwa concludes.