Iron casting giant Grede was founded 100 years ago by its namesake William J. Grede, an individual known for a keen entrepreneurial and marketing sense who saw his company grow through acquisitions and expansions over the years. After 90 years of independent ownership, the company merged with another casting juggernaut, Citation Corp., which launched a decade of ownership changes, more acquisitions, reorganizations and plant consolidations. In December 2019, Grede announced it is once again under private ownership.

“As an independent company, we can reprioritize for the foundry industry, concentrate on safety, people, quality, continuous improvement, cost and growth,” said Cary Wood, Grede’s CEO.
Private investment firm Gamut Capital Management bought Grede from American Axle and Manufacturing Holdings Inc. (AAM) last December. AAM is a global Tier 1 automotive supplier and had acquired Grede through the acquisition of parent company Metaldyne Performance Group (MPG) in November 2017. 

Now no longer part of a large automotive conglomerate, Grede is returning to its entrepreneurial roots and shifting to achieve a balance of customers and markets served.

“I think we are in a better spot as a standalone entity, able to be a leaner company,” said Tony Lovell, president-head of commercial at Grede. “When we were at AAM, some of our key customers were actually competitors with AAM and that made it difficult in the marketplace.”

With the backing of Gamut, which manages $1.2 billion in assets with a focus on mid-market companies, Grede is poised for growth both through investment in current plants as well as the acquisitions of other businesses, when conditions are right. (The company already purchased assets from RMG Waukesha in June.)

“We have established a capital structure to be opportunistic to combine our business with others,” Wood said. “We are being thoughtful, strategic, and ready for growth as we reengage and approach the market with a more whole-service mindset.”

In the first half of the 2010s, through the Great Recession, the merger of Grede and Citation Corp. helped those companies weather the business climate of surplus capacity. Now, Wood said, Grede is primed to return to its pre-AAM strengths. 

“The catalyst that brought Grede and Citation together in 2009 to consolidate for efficiencies … we are back in that same place,” he said. “We have the capital structure to reinvest in the business and to be acquisitive if other opportunities were to come up. We are going to reengage with markets and customers that previous ownership deemphasized—heavy truck and industrial. We can bring our resources together and grow organically.”

Currently, Grede is made up of eight iron foundries and two machining centers. The company’s strength, according to Paul Suber, COO, is its diverse footprint.

“We cover the upper Midwest, the southeast, a lot of new OEMs and Tier 1 customers. We operate 27 molding lines using various types of molding processes and we can make parts from 1-2,000 lbs.,” Suber said. “We provide gray, ductile and high silicon moly alloys. As a result of all that, we have nice diversity in customers and markets, and our business is segmented fairly equal across them all.”

“Now that we are back in an independent environment, we don’t have any market or channel conflicts and we are free to sell on the broad marketplace,” Suber said. “We went back to our roots.”

Each plant at Grede operates as its own entity, with its own P&L accountability. Plant managers run the individual locations and report to Suber, but they have independence to make decisions within boundaries, he said. “They are accountable for their balance sheet; they have a voice on how they go to market on price.”

While each plant is mostly autonomous, the corporate Grede entity exists to support each plant’s goals. 

“Each individual facility is a profit center and corporate is support,” Lovell said. “We have to make sure they have the proper tools to succeed. We have enhanced our engineering and quality teams and put in a robust quality system for launches and overall quality to help us bridge between plants so we can understand best practices and use the breadth of our capabilities.”

Grede’s sales department is segmented by markets, with individual teams focused on automotive, industrial and commercial vehicle industries. Quoting is managed through a centralized system.

“When we get a quote opportunity, the cool thing about it is we will put it in our quote system and send it to two or more [Grede] plants,” Lovell said. “They do a market study and a review of the cost at each plant, the yield, and how that could be complemented with our internal machine shop.”

Following the change in ownership, Grede did not waste time pivoting its focus from mainly automotive to other markets that fit its capabilities. 

“We are always looking for more and always questioning who we can talk to for new quoting opportunities,” Lovell said. “To continue to combat the high and low points of the market, we are more cognizant of our costs and who is a right fit.”

Lovell sees opportunity in finding customers who are open to redesigning for lower cost or weight, such as conversions from weldments, and reshoring for shorter lead times and risk aversion.

“With Gamut, we have a finance team that continues to support investment in our facilities for better efficiencies,” Lovell said. “It’s a perfect storm to line up to combat the revenue ebbs.” 

Part of the strategy to balance its market portfolio is hinged on Grede plants reinvesting in operations to improve efficiencies and lead times. Exiting from a giant, diverse conglomerate allowed the company to refocus on core foundry principles. 

“The foundry industry is unique and while I am not disparaging previous ownership, it was a different industry for them and the approach was not compatible [with foundry operations],” Wood said. “I get to apply round pieces to round holes. We can organically grow, we can reinvest, and we can grow through mergers and acquisitions. For me, these are the levers to optimize our business.”

The first few months of 2020 looked promising for Grede to meet its initial goals, until COVID-19 halted momentum.

“We were really starting to see movement on the operating side—I was pleased with our uptime, throughput and cost reduction,” Woods said. “COVID comes, and it’s like a punch in the gut. It’s hard to judge our year in comparison to prior years. Automotive came to a screeching halt in April and May, so the majority of our business basically stopped. The silver lining is because we had some other market exposures, that has helped balance us.”

Currently, half of Grede’s business is automotive and the remaining half is heavy truck and industrial. Its strategy is to organically grow the heavy truck and industrial side over time. 

“We are starting to see progress operationally and have done a lot of heavy lifting on the commercial/heavy truck side,” Wood said. “I have a great deal of optimism going into next year. Overall, our business engagements have greatly increased, and our commercial funnel is exponentially larger.”

Moving forward, as COVID-19’s effect on manufacturing continues to ease, more changes could be coming for Grede as it looks to expand further into the commercial and heavy truck markets.

“We are going to continue down the path of what we have been—gray and ductile iron,” Wood said. “Our shifts are going to be in end market exposure, and we could open up the size capabilities. We could also add to our already impressive machining capabilities. We are not leading with that strategy but that is a value add that augments our strategy.” 

Despite the disruption of COVID-19, Grede has made significant business decisions. It consolidated a plant in Columbiana, Alabama, in August—a move that Wood said helped Grede align its assets with demand—and purchased the assets of the recently shut down RMG Waukesha plant in Wisconsin.

Now, as Grede’s markets begin to heat back up, Wood feels positive about the company’s status moving forward.

“COVID reinforced that we are well positioned to take advantage of volatility in the space,” he said. “It can be challenging when you have an aggressively, over-sized capital structure. Coming into this, I reminded our sponsors we should be thoughtful about our capital structure. We ultimately were strategic with our leverage profile. This allowed us to come through difficult months and affords us the opportunity to deploy capital into strategic investments, including M&A. We are well positioned and bullish on our outlook.”      

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