For more than 50 years, Modern Engineering's forte has been helping automakers design and build new cars and trucks. But the latest task for George Kubicke, 52, Modern's president since March, is somewhat different - rebuilding customers' confidence in the company's stability and capabilities.
In June, the Warren, Mich., contract engineering firm said it wanted to concentrate on three core business units: contract labor, product engineering, and manufacturing engineering and design.
As such, Modern will continue to provide engineers to automakers and suppliers that need additional personnel to complete development projects, and it will help design assembly lines and fixtures.
The announcement marked an about-face from a strategy Modern had staked out in January 1996 under then-president Jose Dedeurwaerder, the former chairman of American Motors. Modern would emulate its parent, CDI Corp. of Philadelphia, a staffing services company, and just be a source of engineering 'temps.'
So Modern put its prototype and stamping engineering, manufacturing engineering and design, and product engineering units up for sale. Rumored buyers included MSX International, the newly formed and rapidly growing competitor headed by Ralph Miller, a former Modern executive. But no deal was ever announced.
TALKS FELL APART
Last January, Modern's advanced design studio in Warren, Mich., and its vehicle development center in Dearborn, Mich., were added to the package. Talks narrowed down to one buyer (that Modern won't identify) by early February, but were called off in April.
The talks fell apart because 'we couldn't agree on the real value of the divestiture,' said Kubicke. There were still strong links between the units Modern wanted to sell and the business it would keep, he said.
Modern then had another problem. The waffling over direction, and the lack of a sale 'created a lot of anxiety among our customers and our employees,' Kubicke said. Among the 'very nervous,' according to Kubicke, were the Big 3, which account for about 70 percent of Modern's business.
It also opened the door to Modern's competitors.
Modern Engineering posted $212 million in original equipment sales to North America in 1996. That placed it 118th on the Automotive News list of Top 150 OEM suppliers. But sales were down almost 13 percent from 1995.
At the same time, MSX International grew rapidly. Formed in 1996 by the combination of the engineering services groups of MascoTech and APX International, MSX posted $310 million in sales for 1996.
'We hurt ourselves in the market by not moving fast enough with the divestiture,' Kubicke said. 'It allowed others to plant seeds of questions about us.'
2 NEAR-TERM GOALS
So Kubicke's near-term agenda has two items:
1. Complete the sale of Modern's prototype and stamping engineering unit, the advanced design studio and the vehicle build shop. Kubicke said he expects to narrow a field of three interested candidates - he wouldn't name them but said all are prominent, Detroit-area companies - down to one by the end of this month. He expects the sale to be completed by Oct. 31.
2. Launch a marketing campaign to rebuild trust in Modern Engineering among its customers and employees. That campaign will eventually include some advertising, Kubicke said, but it also focuses on getting employees to tout the company to the automakers.
But if Modern's customers had misgivings, Kubicke is the only one to acknowledge it publicly.
Ford Motor Co. uses Modern to supplement its own core areas of expertise, a Ford spokeswoman said, and Modern continues to be one of Ford's preferred long-term suppliers. That status gives Modern some protection as Ford continues to trim its roster of suppliers.
And despite its lost business, Modern hasn't been a big drain on CDI Corp., said John Walthausen, an analyst with C.L. King and Associates in Albany, N.Y., that follows the company. Modern 'is not a paramount operation for them,' Walthausen said. CDI, which is traded on the New York Stock Exchange, bought a stake in Modern Engineering in 1969 and took the rest of the company in 1972.
Kubicke was working for Grumman Aerospace in London in the late 1970s when he met Walter Garrison, CDI's chairman. CDI provided maintenance workers for the Grumman facility.
In 1985, Garrison saw the auto industry's desire to outsource more engineering and production work, Kubicke said, and recruited him to join a new management team for Modern that was being built around then president Ralph Miller.
Kubicke headed Modern's contract services unit before becoming president in March. He replaced Richard Puricelli, who left to run Jack Industries, a maker of roof racks.
Kubicke sees an opportunity for Modern as automakers shift more engineering and design work to Tier 1 suppliers.
Automakers have placed a lot of confidence in suppliers to design and build large chunks of vehicles, such as complete interiors, Kubicke said. 'But the challenge is in integrating all the pieces so that they come together seamlessly. The process is not in place yet for that to happen.'
Some top suppliers, such as Johnson Controls Inc. and the Becker Group, have responded to that challenge by buying engineering firms, giving them the systems engineering capability in-house. But Kubicke says there is a place for independents.
Automakers seem to agree. Two U.S. firms have located engineering teams within Modern's headquarters, mixing automaker employees with contract employees from Modern. One team is working on the interior for a forthcoming mid-sized sedan, the other on a future compact sport-utility.