Two minority suppliers break the Tier 1 ranks

The value of partnerships
Global suppliers and minority firms see mutual benefits from joint ventures.

  • The minority supplier gets its foot into the door with manufacturers.

  • The large partner satisfies automaker demands for Tier 1 suppliers to deliver content from minority suppliers.

  • The minority firm gets access to new technology and processes.

  • The larger company qualifies for business under automaker minority purchasing targets.

  • COVINGTON, Ky. - Finding qualified, minority-owned suppliers has been a challenge for the Big 3 and import-brand automakers in the United States.

    But the growing fortunes of two minority-owned U.S. suppliers - Ernie Green Industries Inc. of Dayton, Ohio, and Jackson Plastics Inc. of Georgetown, Ky. - may point the way for other minority parts makers longing to break into the ranks of U.S. Tier 1 suppliers.

    Both companies are beginning to rack up sales with North America's two biggest transplants, Toyota Motor Manufacturing North America Inc. and Honda of America Manufacturing Inc.

    Their strategy: partnering with global Tier 1 firms in small ventures that give them an inside track to sales.

    This year, Jackson has launched two joint ventures: Synova Plastics LLC, a Morristown, Ind., partnership with Textron Automotive and Millennium Steel Service, a Princeton, Ind., venture with Toyota Tsusho America Inc.

    The Synova venture, which this year began supplying interior plastic trim for the 2002 Toyota Camry, was recommended to Textron by Toyota's U.S. purchasing officials. It will generate about $14 million in revenue this year.

    Millennium Steel, which opened in April, pairs Jackson with the U.S. subsidiary of Toyota Tsusho, the automaker's affiliated logistics and services company.

    Millennium is starting small by Tier 1 standards, generating $1 million in sales annually to store and prepare the steel that goes into the production of Toyota Tundra pickups and Sequoia sport-utilities in Princeton, Ind. But there are bigger plans, said Henry Jackson, president of the parent company. The venture is adding a slitting line to cut the coiled steel, and Jackson says the long-term plan is to move into steel stamping and logistics services.

    The ventures have begun to balloon Jackson's auto volume. Since opening his first venture in Danville, Ill., in 1994 to supply plastics on a Tier 2 basis, his revenues have grown from $3 million in 1998 to $25 million this year, to an expected $40 million next year, Jackson says.

    "My primary goal is to make this a half-a-billion-dollar company," he says. "After that, my next goal will be to make it

    a billion-dollar company. First, I want to expand the business with other Japanese automakers, like Honda, and then to win business with the Big 3. What Toyota Tsusho has really given me is a base business that allows me to go out and build."

    Hitting targets

    Such ambition is music to the ears of U.S. automakers who have faced a tough job in shifting more Tier 1 spending to minority vendors. The standard auto industry pledge is to award 5 percent or 6 percent of original equipment purchasing to qualified minority companies. Purchasing managers are seeking minority-owned companies who want to grow into business lines where they may not have expertise. The effort is all the more difficult in an era of supplier industry consolidation and the growing industry preference for global sourcing solutions.

    Four years ago, Toyota declared a goal of sourcing 5 percent of its Tier 1 spending with minority firms by 2002. That would have increased its spending purchases tenfold, from $40 million a year to $400 million. But on Nov. 14, at its annual Opportunity Exchange in Covington, Ky., Toyota officials told an audience of some 1,300 minority vendor representatives it will exceed the target next year, placing 6 percent, or about $600 million, of its North American Tier 1 volume with minority businesses.

    Pairing up small, relatively unknown minority firms such as Jackson's with big league suppliers such as Textron has helped. It also has helped some global Tier 1s because they, too, are working toward minority purchasing targets. The automakers now expect it of them.

    Magna International Inc. is an example. Magna has set up two minority joint ventures in recent years to help reach its internal goals and satisfy automakers' minority purchasing directives. One of its ventures, Camaco, uses two former Magna factories to supply all of the seat frames for Magna's North American seating operations. Camaco has sales of $40 million a year, according to Donald Dyke, the supplier's senior coordinator for minority business development.

    The second venture performs assembly work on the modular instrument panels Magna supplies DaimlerChrysler. Magna is setting up a third minority partnership to supply its interior systems business, Dyke says.

    The long courtship

    But Ernie Green, president of Ernie Green Industries, warns other minority entrepreneurs that the wheels of Tier 1 contracts do not turn as fast as they seem. A partnership can be years in the making. "It takes a while to get acquainted," Green said.

    Last January, Green launched Automotive Technology Systems LLC, a partnership with Toyota's affiliated seating supplier, Trim Masters Inc. That venture assembles all seats for the Tundra and Sequoia.

    The partnership came with Toyota's stamp of approval, beginning with meetings in June 1999. Trim Masters approached Green after establishing its own minority content goals. The Harrodsburg, Ky.-based Trim Masters already held the contract to supply the Toyota truck seats. But to establish the minority partnership, it folded that contract and its existing seat assembly plant into the new venture, according to Phillip Ashcraft, Trim Masters senior vice president.

    "Something good has to come out of a partnership for both parties," Ashcraft says. "Companies just don't give away business to other companies. We expect big things from this partnership."

    Old ties

    But as Green tells the story, the making of the relationship goes back further than 1999, to a chance encounter with Toyota in 1988.

    Green had just acquired Florida Production Engineering Inc. In Green's words, the small, struggling supplier of plastic wheel trim was "a horrible company." One night at a dinner, when Green found himself seated next to a Toyota manufacturing executive, Green challenged Toyota to teach him how to run his new company under the lean-operating Toyota Production System.

    Despite the fact that Green had no Toyota business, a Toyota consulting team spent two years of weekly visits reorganizing Florida Production Engineering and training its managers. In the end, according to Green, embracing Toyota's manufacturing philosophies enabled the company to win General Motors business and snag a GM Supplier of the Year award.

    Meanwhile, Green's rising presence was noted by Honda of America. The wheel trim business won a small-volume contract to supply Honda in Marysville, Ohio. That relationship, in turn, led Honda to ask Green to acquire and run a plastics supplier with which Honda was having trouble. Two years ago, Honda repaid the favor: The automaker decided to outsource the U.S. production of its front and rear suspension systems. Green's organization had no experience in the field, but the supplier spent a year inside Honda, learning how to produce suspensions Honda's way.

    Launched last year as Marion Industries in Marion, Ohio, that business now represents $260 million a year in sales.

    You can reach Lindsay Chappell at

    ATTENTION COMMENTERS: Automotive News has monitored a significant increase in the number of personal attacks and abusive comments on our site. We encourage our readers to voice their opinions and argue their points. We expect disagreement. We do not expect our readers to turn on each other. We will be aggressively deleting all comments that personally attack another poster, or an article author, even if the comment is otherwise a well-argued observation. If we see repeated behavior, we will ban the commenter. Please help us maintain a civil level of discourse.

    Email Newsletters
    • General newsletters
    • (Weekdays)
    • (Mondays)
    • (As needed)
    • Video newscasts
    • (Weekdays)
    • (Weekdays)
    • (Saturdays)
    • Special interest newsletters
    • (Thursdays)
    • (Tuesdays)
    • (Monthly)
    • (Monthly)
    • (Wednesdays)
    • (Bimonthly)
    • Special reports
    • (As needed)
    • (As needed)
    • Communication preferences
    • You can unsubscribe at any time through links in these emails. For more information, see our Privacy Policy.