Crain’s Detroit Business
Dec. 15, 2022
Two woman-owned manufacturing companies in Auburn Hills have come together in a deal that Lucerne International CEO Mary Buchzeiger says will help disentangle her supply chain from China and create jobs in Michigan.
Lucerne’s acquisition of Morgan Machining LLC is the first part of an ambitious onshoring goal that also includes opening a new hot aluminum forging plant, possibly in Michigan.
The plans are the latest step in rebuilding a tier one and tier two supplier that has had a turbulent past few years, Buchzeiger said.
Terms of the machine shop purchase, finalized last month and announced Thursday, were not disclosed.
The acquisition gives Lucerne its first domestic machining capability in 20 years with the addition of a machine shop and 10 employees, bringing total headcount to around 45.
It will allow the company to bring back machining work from China, home to 85 percent of its manufacturing, and add 10-15 jobs to start, Buchzeiger said.
“It will increase our capabilities tenfold here on this side of the ocean,” she said. “The goal is to go where our customers need us, and right now, there’s a huge need in North America.”
Automakers and suppliers have quickened the pace of localizing manufacturing since the COVID-19 pandemic exposed the fragility of global supply chains. At the same time, policies such as the United States-Mexico-Canada Agreement (USMCA) free trade agreement, and incentives in the recently passed Inflation Reduction Act legislation, are pressuring original equipment makers to onshore.
Lucerne, founded in 1993, casts, stamps and forges components primarily for the automotive industry, with major customers including General Motors Co., Meritor Inc. and Harley-Davidson Inc.
As a large importer of foreign goods, its business model is at the mercy of geopolitics. Five years ago, the company grabbed national attention for speaking out about the potentially devastating consequences of U.S. tariffs on Chinese imports for small manufacturers.
Now, lingering supply chain issues are the driving force behind restructuring the company’s footprint, Buchzeiger said. Lucerne is doing on a smaller scale what manufacturers of all sizes are trying to do: lessen their reliance on the Far East.
Exiting China entirely is not the endgame, nor is it practical. Lucerne supplies companies around the globe, so it makes sense to maintain at least some manufacturing abroad, Buchzeiger said.
However, there’s a good business case for onshoring some parts. Brackets for commercial vehicles — about 10 percent of its total business — is a good example. Today, all brackets are cast in China, and half of them are also machined there.
The acquisition of Morgan Machining will allow Lucerne to do all of its machining in the U.S., which will allow it to bypass a 27.5 percent tariff on those parts.
“Now at least we are saving a small portion of that and giving our customers a cost savings opportunity,” Buchzeiger said. “That’s just the first program that we’re looking to onshore. There’s going to be several others behind that.”
Bringing parts production back to metro Detroit could also mean significant savings on transportation costs. In the wake of the pandemic, the cost to ship a container from Shanghai to Los Angeles climbed as high as $20,000, according to the Drewry World Container Index. The price has since fallen back down to earth — $2,100 as of earlier this month — but still fluctuates widely.
Buchzeiger said it remains to be seen what financial benefit the Inflation Reduction Act will have on her business.
“We are hoping that we see a benefit in our energy costs as we continue to invest in clean energy resources as part of our ESG planning for our new facility,” she said.
After integrating the machine shop, Lucerne plans to open an aluminum forging plant with capacity for two 4,000-ton presses and a production start goal of 2025, Buchzeiger said. The company has not determined where it would locate the plant and is discussing plans with the Michigan Economic Development Corp., she said.
Morgan Machining was founded nearly 20 years ago and does mainly small-volume runs with custom CNC turning and milling inside a 15,000-square-foot plant. Its customers include Ford Motor Co. and American Axle & Manufacturing Inc.
The shop was taken over by Patti Mobley after her husband died several years ago. Buchzeiger said protecting its status as a woman-owned enterprise was important for business and personal reasons.
“That was the real highlight for us was not just acquiring any old machine shop, it was acquiring another woman business enterprise,” she said. “Diversity inside and out of the automotive industry is important.”
Buchzeiger declined to offer financial figures for Lucerne or Morgan Machining.
Business at Morgan Machining shrunk considerably as a result of the pandemic, Buchzeiger said.
Lucerne is familiar with downsizing. In the aftermath of a lawsuit with a major customer four years ago, the company shrunk from more than 50 employees to just 15. It forced Lucerne to “tighten the ship,” which positioned it to withstand the pandemic, Buchzeiger said.
“One thing I always tell my team: There may be chaos, but in chaos, there is opportunity,” she said.