Two women-owned manufacturing companies in Auburn Hills, Michigan, 38 miles north of Detroit, have cut their supply chain from China and hired workers in Michigan, said Mary Buchzeiger, CEO of Lucerne International. It is said to help create
The acquisition of Morgan Machining LLC in Lucerne is likely the first part of an ambitious onshoring goal that includes opening a new hot aluminum forging plant in Michigan.
According to Buchzeiger, the plan is the latest step in rebuilding Tier 1 and Tier 2 suppliers, which have been in turmoil over the past few years.
Terms of the machine shop purchase, which was finalized last month and announced Thursday, were not disclosed.
The acquisition brings Lucerne to domestic machining for the first time in 20 years, adding a machine shop and 10 employees, bringing the total workforce to about 45.
Buchzeiger said the move would allow the company to take back machining jobs from China, which accounts for 85% of its manufacturing, and add 10 to 15 jobs.
“On this side of the ocean, we are ten times more capable,” she said. “The goal is to go where customers need us, and there is a huge need right now in North America.”
Automakers and suppliers have accelerated the pace of localizing manufacturing since the COVID-19 pandemic exposed vulnerabilities in global supply chains. At the same time, policies such as the U.S.-Mexico-Canada Free Trade Agreement (USMCA) and incentives in the recently passed Inflation Reduction Act are putting pressure on OEMs to go onshore.
Founded in 1993, Lucerne casts, stamps and forges components primarily for the automotive industry, with major customers including General Motors, Meritor and Harley-Davidson.
As a large importer of foreign goods, its business model is at the mercy of geopolitics. Five years ago, the company drew national attention when it spoke out about the potentially devastating consequences of US tariffs on Chinese imports for small manufacturers.
Buchzeiger said lingering supply chain problems are the driving force behind rebuilding the company’s footprint. Lucerne does what manufacturers of all sizes try to do on a small scale. In other words, we are reducing our dependence on the Far East.
A complete withdrawal from China is neither a goal nor realistic. Lucerne supplies companies all over the world, so it makes sense to keep at least some manufacturing abroad, Buchzeiger said.
However, there are good business cases for onshoring some parts. The commercial vehicle bracket (about 10% of the total business) is a good example. Now all brackets are cast in China and half of them are also machined in China.
The acquisition of Morgan Machining allows Lucerne to perform all machining in the United States and avoid the 27.5% tariff on these parts.
“At least now we are saving a small portion of that and offering our customers a cost-saving opportunity,” says Buchzeiger. “This is just the first program we are considering onshore, and there will be several others behind it.”
Moving part production back to Metro Detroit could also lead to significant savings in transportation costs. Due to the pandemic, the cost of shipping a container from Shanghai to Los Angeles has risen to $20,000, according to the Drewry World Container Index. Prices have since dropped back to their original levels (he was $2,100 earlier this month), but are still volatile.
Buchzeiger said it remains to be seen what financial benefits the Inflation Reduction Act will bring to her business.
“We expect to see benefits in energy costs as we continue to invest in clean energy sources as part of our ESG plans for our new facility.
After consolidating the machine shop, Buchzeiger said Lucerne will open an aluminum forging plant that can accommodate two 4,000-tonne presses and will start production in 2025. The company has not decided on a location for the plant and is in discussions with the Michigan Economic Development Corporation about plans, she said.
Founded nearly 20 years ago, Morgan Machining specializes in custom CNC turning and milling in a 15,000 square foot facility, primarily in low volume production. Its customers include Ford Motor Company and American Axle & Manufacturing.
Patti Mobley took over the shop after her husband died a few years ago. Buchzeiger said defending its status as a woman-owned company is important for business and personal reasons.
“It was a real highlight for us to not only acquire an old machine shop, but to acquire another women’s company,” she said. “Diversity inside and outside the automotive industry is important.”
Buchzeiger declined to provide financial figures for Lucerne or Morgan Machining.
Morgan Machining’s business has shrunk significantly as a result of the pandemic, Buchzeiger said.
Lucerne is no stranger to downsizing. The company has shrunk from more than 50 employees to just 15 in the aftermath of a lawsuit with a major customer four years ago. This forced Lucerne to “tighten up the boat” to withstand the pandemic, Buchzeiger said.
“One of the things I always tell my team is that there can be chaos, but in chaos there is opportunity,” she said.