DETROIT -- Honda Motor Co.'s North American operations represent the largest automaker customer for Grede Holdings, a suburban Detroit castings company. But Grede (GRAY'-dee) isn't worried about Honda's plans to curtail production in the second quarter in the wake of the Japanese earthquake disaster.
"It will affect one foundry" of the company's 15, says Grede CEO Doug Grimm. Any canceled or deferred production will represent "no significant gain or loss."
Grede's case may be somewhat unusual among suppliers. Automotive customers make up only half of its business, with the rest split about evenly between industrial customers and makers of medium- and heavy-duty trucks and equipment. Honda and heavy-equipment maker Caterpillar Inc. each account for 8 percent of Grede's sales.
But Grimm's calm response to Honda's proposed production cuts shows how some suppliers, already stretched thin by a rebounding auto industry, are taking the impact of the Japan quake in stride.
Grede, which estimates its 2011 sales at $875 million, all in North America, is working flat-out. Of the company's 15 foundries, 12 are running at 90 percent of capacity or more -- essentially full up. The other three will be filled by year end, Grimm says.
How busy is Grede? Asked what keeps him awake at night, Grimm replies: "Maintenance on the machines. At what point do I shut down for a weekend or a week and do maintenance?"
In that context, a slackening of demand from Honda is no problem.
Indeed, Grimm is contemplating "rationalizing customers." Grede, along with many other suppliers, chased a lot of low- or no-profit contracts before the recession. The rationale was that incremental business, even if unprofitable by itself, could keep the foundries running at high capacity and thus keep the company in the black.
But then surging raw-materials prices walloped the castings business.
Grede was formed in 2010 from three foundries that together had gone through bankruptcy three times in the previous six years.
Now, the company's motto is "Don't repeat history," Grimm says. With capacity almost maxed out, Grede is much more selective about which contracts it wants to renew -- or drop.
As Grimm says: "We have some dogs" among the current contracts.