DETROIT -- Chinese-owned auto supplier Nexteer Automotive, the former Delphi steering unit, is moving its headquarters to suburban Detroit as it seeks to grow its brand recognition.
Currently based in Saginaw, Mich., the company plans to secure a lease in the suburbs north of Detroit in the next few weeks to move roughly 150 employees, including its C-suite, global financial team, human resources, information technology and sales staff, the company told Crain's Detroit Business, an affiliate of Automotive News.
CFO Joe Perkins said the move is triggered by a need to better engage its customer and supply base as well as drum up more media coverage.
"We feel constrained being outside of Detroit in our ability to promote our brand," Perkins said. "This will have a critical positive effect on informing the industry on who Nexteer is, driving our brand and recognition for us in the technology and innovation we provide."
Nexteer's Saginaw production operations, and its 5,000 employees, will remain unchanged following the move, expected early next year.
Jay Baron, CEO of the Center for Automotive Research in Ann Arbor, Mich., said the location is critical to the company's image.
"If you make movies, you are in Hollywood; if you are in automotive, you are in Detroit. Where you are located validates your significance and commitment in an industry, and in an industry with so many new faces, validation is important," Baron said in an e-mail.
A move closer to the auto industry's epicenter will also allow Nexteer to better manage its growth, Perkins said.
Nexteer generated revenue of $2.4 billion in 2013, up from $2 billion in 2010, and has a $9 billion backlog of business over the next 24 to 30 months.
"It's not like we're running looking for growth; our backlog is booked work," said Mike Richardson, chief strategy officer. "But our focus is now how we can deliver efficiently and work more closely with our customers and suppliers."
Seven automakers have global or North American headquarters in metro Detroit, as well as being home to 60 of the top 100 North American auto suppliers, according to industry advocacy group MichAuto.
"Companies have to be where they can execute for strategy," said Glenn Stevens, vice president of MichAuto and strategic development for the Detroit Regional Chamber. "Having a headquarters in Michigan is an advantage, but if Nexteer wants to be in the middle of automotive innovation and talent, they have to be right here in metro Detroit."
Faurecia North America Inc., the North American subsidiary of French supplier Faurecia SA, opened a $30 million headquarters in Auburn Hills, Mich., in July 2013.
Mike Heneka, CEO of Faurecia North America, said a substantial local presence is a "competitive advantage."
"We at Faurecia have found that being local in the hub of the North American auto industry is critical," Heneka said. "We are close to most of the (automakers) and engineering centers. With such a push for refreshing their fleets, it's critical that we can provide rapid and on-site program and engineering support."
Stevens also commended Nexteer for keeping its manufacturing base in Saginaw, as it is critical to maintain employment centers around the state for Michigan's success.
Nexteer hired 90 engineers in Saginaw in 2014 and plans to add an additional 65 employees at that site this year.
But having its C-suite in this region will build its notoriety.
"Detroit is also the center for events around this industry: conferences, seminars, the places you want your executives to be and to be seen," Stevens said. "This is still a relationship business, and you need to make sure you're leveraging that part of the industry."
History of reinvention
Nexteer has a history of reinvention, and the move to suburban Detroit is as much a return to the region as it is a relocation.
Once the main U.S. steering operation of General Motors Co., it was spun out under Delphi in 1999 -- 100 years after the division began operations. As Delphi's steering division, the Saginaw operations supplied huge orders for GM.
But when Delphi entered bankruptcy protection in 2005, the Saginaw steering division was on the brink of closure. Former Nexteer CEO Bob Remenar is largely credited for saving the Saginaw operations after he urged Delphi management to let him try and save the division.
Remenar worked through U.S. Bankruptcy Court in New York to close four plants -- in Spain, Italy, France and Alabama -- and lay off one-third of its salaried workforce. It also was relieved by handing over its pension obligations to the federal Pension Benefit Guaranty Corp.
The plan to clean up its balance sheet didn't attract a buyer, but was enough to get GM to agree to take over the newly named Nexteer in 2009.
In 2010, Remenar and GM worked to renegotiate its union labor contract, down to $12 an hour from $14 an hour. Under Delphi, the starting wage was about $28 an hour.
UAW employees ratified the contract after Nexteer restored family medical coverage to the contract.
Enter the Chinese
A month later, GM sold Nexteer to Chinese investors Pacific Century Motors, a joint venture between Aviation Industry Corp. of China, Beijing-based Tempo International Group Ltd. and state-owned Beijing E-Town International Investment & Development Co., for $440 million. Tempo has since exited to JV.
"We really owe our existence to Bob Remenar," Richardson said. "He pushed to keep this company afloat and make it profitable."
Remenar left Nexteer in 2012 to become CEO of supplier Chassix Inc. He left that position last year.
In 2013, Nexteer launched a $260 million initial public offering on the Hong Kong Stock Exchange.
The supplier has invested $400 million in the U.S. market, of a global total of $840 million, since 2010.
"We've driven our top line, we've completed our capital structure; it's imperative we now focus on driving our brand," Richardson said.