Stadco comes out fighting

inset image shows Stadco’s Paul Meeson and Chris Fisher between a pressed assembly and a Jaguar XK, to which the company supplies parts)

Three things struck me about the press visit to Stadco’s new Telford factory last week.

1) The essence of survival of the fittest, and of making tough decisions in difficult times.
2) The articulation and solidarity of the management. To a man, the managers that presented this story could explain very clearly how manufacturing works, why their company suffered and why they had hit back.
3) The fundamental importance of investment, a refrain that UK companies are often accused of not doing.*

Stadco is an automotive manufacturer, the biggest independent supplier of body-in-white parts to vehicle OEMs in the UK. The company has just opened an 18-acre total area – 24,000m2 internal space – facility in Telford to accommodate more growth. It needed the site, as orders are romping in from a handsome roll-call of UK-based automotive OEMs, including Jaguar Land Rover, Ford, JCB and Vauxhall. The directors got the keys to the plant on February 7th, and last Thursday local MPs and senior auto industry academics came to cut the red tape on Stadco’s two new 2,000 tonne press lines.

But two years ago things were very different. Stadco had a miserable recession. When the downturn became a recession, people stopped buying cars. The effect on suppliers like Stadco, says marketing director Dinos Andreou, was almost immediate – very sharp and absolute in the loss of business. He emphasises the effect of this scale of loss on the supply chain, where the firm’s suppliers imposed restricted trading terms and little visibility from the OEMs, making managing the supply chain virtually impossible.

“At the end of 2008 into 2009, I had the heartbreaking task of explaining to groups of employees that our numbers had to reduce by 40 per cent, it was a very difficult time,” says Dermot Sterne, Stadco Ltd’s managing director. “At that time our numbers were about 950, which dropped to about 550 employees. And yet today we’re back up to 970 employees, a higher headcount now than those difficult days in 2009.”

The publishing industry had a tough recession; I recall many anxious days reflected in the short phone calls of our sales team. But the car industry took a proper beating. Seasoned automotive employees like Stadco’s advanced engineering manager Paul Meeson and operations director Mark Hemming relay how they had never seen anything like this before. “In effect, we had orders on the Friday but by the Tuesday we had nothing,” says Mr Meeson. “It stayed like that for four or five months. How do you actually run a business with no orders?”

Many tough decisions were made. Stadco downsized its Coventry plant, which employs manual presses and provides services like prototype / tool machining and design engineering, considerably. Apart from the job cuts, the business terminated its electro-plating capability. The whole UK operation went down to a single shift – consider that three shifts were normal pre-2008. While Stadco management tell the press conference that industrial relations were good, in private over a sandwich, one director tells me relations were strained at times. And who can blame them?

But the changes Stadco made prepared the company for the upswing, and when it came, they were ready.

Anyone tracking the good fortunes of Jaguar Land Rover will know its extraordinary recovery story. Behind them in percentage terms, if not aggregate numbers, came BMW Mini, GM Vauxhall, JCB, maker of Massey Ferguson tractors Agco, and more. Stadco’s 2010 sales volumes rose to pre-recession levels and Sterne and team had to hunt for a new site. The ex-GKN and Ogihara facility was perfect (and at 18 acres of commercial real estate, how much competition did they have?).

Project Chelsea – the project to get Telford working inside five months – leader Chris Fisher explains how close they were to losing the site and some highly valuable plant. When Ogihara close the facility in 2007, an asset stripping process began. As Stadco recovered, the decision to expand the business rested on one or two key contracts. The decision to acquire Telford came in the nick of time; had the decision come just two weeks later, the two fully automated modern press lines including a 4.3m bed with a 2,000 tonne lead, would have been dismantled and shipped to Asia.

As we go through the business plan for Telford, and the whole UK operation of five sites – Castle Bromwich, Coventry, Powys, Telford and the biggest plant in Shrewsbury – the five senior members of the management team display total solidarity. Like a finely tuned press brake, they nod and interject to each other’s presentations at perfect intervals, completely in tune with the company restructure, harmonious in their support and knowledge of the change process. These people really get manufacturing in the modern age. Every pillar of Stadco’s new business has a justified case. Yes, that revolves around customer service and driving out cost, which is predictable enough for a manufacturer.

But stick around and you learn a lot about how this British company is developing a competitive advantage in a process that looks so automated as to be driven almost entirely by the cost of capex and energy prices. A manufacturing novice might see a series of highly automated press stamps banging out pressed parts to a prescriptive, invariable schedule. But take a closer look.

Paul Meeson’s job is to forecast the future and be prepared for it. Car panels and brackets are normally made of steel with some aluminium parts – Stadco UK gets through 50,000 tonnes and 11,000 tonnes of each respectively, per year. Mr Meeson assesses what the OEMs will want next year and the following year from their body-in-white parts, measured by cost, durability, structural integrity and that enigmatic variable, weight. His department – Stadco has a full capability for production design engineering, in UK, Germany and Chennai, India – has worked with Ford to develop a range of assemblies on all Ford Focus variants since 1997, culminating in a contract to supply BIW assemblies for the new Focus III, the C346.

Stadco’s advanced manufacturing strategy to 2016 rests on three pillars; being a centre of excellence in using lightweight materials, running the smartest flexible manufacturing process while adopting the lowest investment options. It’s a tricky puzzle to solve. Meeson and Hemming work in sync with project engineering boss Paul Jagger to execute a three-pronged strategy; development & planning, manufacturing engineering and operations. For Meeson, high innovation alongside high levels of operation efficiency is Stadco’s only future.
Materials science is important, and they are working closely with Tata Steel, Arcelor Mittal and Novelis (aluminium) to move from a mild steel material to a more advanced high tensile strength AHSS material with low elongation properties. The next process that is evolving requires mastering hot stamping, where European companies have become world leaders. The outcome is a hot-formed boron, or LWB, product, which matches the AHSS material in strength but is up to 20% lighter, a huge differentiator for a car OEM.

There is little time to even mention Stadco’s R&D in the latest phase in material research, into warm aluminium forming technology, with the wonderful acronym WAFT.

Lean is big at Stadco, as you would expect from an automotive tier one. Operations director Mark Hemming explains that work on quality management has led to a 60% improvement in PPM (parts per million) rejects in the last three years. And, by devoting to the assessment of the right process for the right product, productivity has improved 50% in the same period – another knock-on benefit of a restructure born of necessity. Now, says Hemming, 300 mainly adult/non-apprentice employees will be trained through the audit apprenticeship scheme in Business Improvement (NVQ-BIT) from 2011 to 2013.
So did their OEM customers learn anything from the worst recession in memory? Yes. The management says that communication is far better now, meetings and inspections at Stadco sites are more frequent and signs are that, come the next big hiatus in demand, their customers will try to both co-plan for contingencies better and share their market intelligence more freely.
The Stadco management are the first to admit that the brutal recession produced winners and losers. Along the way, as it shrank and shed weight, then beefed up again, some of its competitors fell and the company has capitalised on their failings.
With the fortunes of all its OEM customers today much brighter than 12-24 months ago, Stadco’s future is looking strong – revenues for FY2011 are expected to reach just short of Eu220m. As a metaphor for UK manufacturing becoming lean in a famine, and fighting its way to the top through good management, good engineering capabilities and having the pockets and the courage to invest, Stadco fits the bill.

To see the interview with Dermot Sterne, go here.

* In fact, I would add a fourth impression: The whole PR exercise, from the story itself, the trade press dinner the night before to the attendance of the local MPs and automotive academic experts at the new site opening. This typified the type of engagement with manufacturing that the Government talks about and trade associations want to see. So if you’re intrigued, please, call Dermot, Dinos et al and try to visit the Telford factory or find out more about Stadco’s story.