Grede Foundries, Inc.

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Grede Foundries, Inc.

9898 West Bluemound Road
Milwaukee, Wisconsin 53202
U.S.A.
Telephone: (414) 257-3600
Fax: (414) 256-9399
Web site: http://www.grede.com

Private Company
Incorporated: 1940
Employees: 4,000
Sales: $600 million (1999 est.)
NAIC: 331511 Iron Foundries

Grede Foundries, Inc. is one of the largest foundry companies in North America. Grede specializes in casting parts from ferrous metals, which includes steel, gray iron, and ductile iron. The company makes components for several key industries, including the automotive industry and the compressor and pump industry, and makes parts for construction machinery and equipment, farm machinery and equipment, and for appliances, air conditioners, oil field equipment, and many other products. Some typical products Grede casts at its several foundries are axles, compressor parts, exhaust manifolds, spool valves, brake parts, water pumps, crankshafts, and various cases, carriers, and housings. The company provides its customers with design assistance, machining, sub-assembly, and custom packaging, beyond its basic service of manufacturing castings. Grede operates 12 foundries in the United States, located in Wisconsin, Michigan, Indiana, Kansas, Minnesota, Oklahoma, Kentucky, and South Carolina. The company operates one foundry in Tipton, England, and has a joint venture with a Mexican foundry to build a new plant in Monterrey, Mexico. In addition, Grede has been involved in a technology exchange program with the largest European independent foundry, the Swiss company Georg Fischer Foundries Group. Some of Grede’s major customers include automakers Ford and DaimlerChrysler, General Electric Company, Rockwell International, J.I. Case Company, and Caterpillar Inc. The company is privately owned and still run by members of the Grede family. Grede Foundries Inc. was built up from a single Milwaukee foundry, and prospered even when other companies in the industry cut back. Growth was particularly strong in the 1990s, when the company’s sales rose from $250 million to over $600 million by the end of the decade.

Early Years

Grede Foundries Inc. was put together out of foundries bought and expanded by an ambitious Milwaukee man, William J. Grede. Grede’s introduction to the metal business seems to have come about when he took a job as a cookware salesman as he worked his way through college. The young Grede was peddling aluminum pots and pans beginning around 1914. By the time Grede was 23, in 1920, he had put aside enough money to buy a small iron foundry in a suburb of Milwaukee. He made only a modest down payment for Liberty Foundry, in Wau-watosa, Wisconsin, and his investment soon paid off. The foundry employed 40 people at the time Grede bought it, and in its first year under Grede’s management, it produced 1,000 tons of gray iron castings. The foundry quickly expanded, adding on new facilities beginning in 1923. By 1930, the original plant had been added onto seven times.

Building on his success with Liberty Foundry, William Grede bought another foundry, in nearby Waukesha, Wisconsin, in 1927. Spring City Foundry was larger than Liberty had been in 1923, with 150 employees. It produced gray iron castings. In its first year under Grede’s management, Spring City Foundry tripled its production.

The Great Depression began in 1929, but apparently Grede was able to keep his businesses afloat despite the economic downturn. Other area businesses were not as fortunate. In 1932, Grede entered into a venture with a struggling Milwaukee firm, Milwaukee Steel Foundry Company. Milwaukee Steel was a good-sized business, with 100 employees, but in the midst of the Depression, it was operating at only ten percent of capacity. Grede’s management turned things around, and brought the company back to profitability.

William Grede was involved in three businesses—Liberty Foundry and Spring City Foundry, which he owned, and Milwaukee Steel Foundry. In 1940, Grede brought together the three foundries as one corporate entity. This was Grede Foundries, Inc. The new company benefited from centralized management, and from the sharp growth in the metal castings market with the outbreak of World War II. When the United States entered the war in 1942, the Milwaukee Steel division of Grede Foundries was producing at record levels. Grede Foundries added capacity to its steel castings division by acquiring another Milwaukee foundry, the Smith Steel Foundry Co.

Acquisitions and Expansion After World War II

William Grede continued to build his company after World War II. In 1947, Grede Foundries built a new foundry in the Upper Peninsula of Michigan. This was called Iron Mountain Foundry, in Kingsford, Michigan. It specialized in gray iron casting. It started out with 64 foundry workers, and gradually increased its capacity. Grede Foundries was producing gray iron castings and steel castings as its major products. But the company became interested in producing ductile iron, a new product that was more malleable than gray iron, and could be drawn out or hammered into thin pieces. Grede Foundries was at the forefront of the industry in producing ductile iron by 1950. In 1951, the company purchased a gray iron foundry in Reedsburg, Wisconsin, and converted this to a ductile iron facility.

After World War II, members of the next generation of the Grede family began joining the company. These were actually William Grede’s two sons-in-law. Betty Grede married Walter Davis, an attorney, who eventually became vice-president and general counsel of Grede Foundries. Grede’s other daughter, Janet, married Burleigh Jacobs. Jacobs began working for Grede Foundries in 1945, and in 1947 he took over management of the new foundry the company built in Kingsford, Michigan. By 1950, Jacobs was back in Milwaukee, heading the Milwaukee Steel division. He held many different positions in Grede Foundries before becoming president in 1960.

The company made several more acquisitions and expansions in the 1960s and 1970s. Grede moved beyond its Wisconsin/Michigan home grounds in 1966, buying Wichita Midwest Foundry, in Wichita, Kansas. This plant specialized in ductile iron, and later moved into making special silicon-molybdenum alloy iron castings. In the mid-1970s, Grede expanded its Iron Mountain Foundry division by entering into a unique relationship with General Motors Corp. The carmaker’s Allison Division signed a contract with Grede to fund expansion of the Michigan plant and build a dedicated casting manufacturing line. General Motors paid for the production equipment in return for its exclusive use of Allison Division’s parts. This gave the Allison Division quick turnaround on its orders, which had to be shipped as needed to its plant in Indianapolis. Grede benefited by having a secure buyer for its output.

One way Grede managed its growth was through careful marketing. The company’s founder, William Grede, was described as an avid salesman, and his son-in-law and successor Burleigh Jacobs also believed marketing was key to keeping the company on track. Jacobs hired Jack Steele in 1966 as the company’s full-time marketing director. Steele believed in careful planning, and in following up the financial impact of product changes. He instituted a program to mail Grede’s customers a detailed questionnaire every 18 months. The feedback was used to analyze the past year’s sales data, and help chart improvements for the future. Grede also marketed its products particularly to the top ten companies in the ten industries that made greatest use of iron and steel castings. Grede aimed high, hoping to be the number one supplier for each of these large customers. These were companies such as General Motors and Caterpillar—the well-known giants of American industry.

In the mid-1970s, Grede Foundries set up a new facility next to its existing Milwaukee Steel plant to specialize in short runs. This plant produced steel, gray iron, and ductile iron castings on special orders. It bought the land for this in 1974, paying $1.5 million for a parcel of real estate adjacent to Milwaukee Steel. By that time, Grede had grown to be one of the largest foundry companies in the United States. It built new corporate headquarters in 1975. Its total employment in Wisconsin alone was abut 1,200 people. Then in 1977, Grede bought another foundry in Kansas, the Hartmann Manufacturing Co. of Hutchinson, Kansas. This plant made gray iron castings, with an annual production capacity of 5,000 tons. The plant employed 110 people, and brought in over $2 million annually near the time of the sale to Grede. Grede had grown by the late 1970s to a complex of eight foundries in three states, with a total annual capacity of about 95,000 tons of iron and steel castings. Sales in the late 1970s were around $70 million and growing.

Company Perspectives:

Grede Foundries, Inc. was founded in 1920 by William J. Grede. The Company specializes in ferrous metals: gray iron, ductile iron, and steel castings. Grede has helped our customers build the backbone of civilization by providing castings for many of the products they are famous for throughout the world.

Persevering, Despite Poor Economic Conditions: 1980s

By 1980, Grede’s sales stood at just under $100 million. The firm was not finished growing yet. It was already one of the largest foundry companies in the country, and it planned to put significant money back into its facilities to both increase production and keep the technology up to date. In 1981 the company announced that it would spend $34 million on upgrades and expansion at all its plants. The United States entered a recession beginning in the middle of 1981, and by 1982, the business downturn was threatening other players in the foundry industry. Due to the poor economic outlook, Grede delayed some of its upgrading. Because the company was still privately owned, it did not have to concern itself with wary investors, who expected short-term profits. The company instead continued to focus on its long-term goals, according to an interview with Burleigh Jacobs in the July 1989 Foundry Management & Technology. “[We] can make business planning decisions based on the long haul,” Jacobs told the magazine. “We don’t concern ourselves with daily changes in the price of our stock and quarterly profit reports as officers in publicly held companies do.” So the company went ahead with its capital improvements, though at a slightly slower pace, and by 1984, when the business downturn seemed to be ending, the company was ready to make acquisitions again.

Sales passed the $100 million mark by 1984, and Grede looked around for smaller companies it could buy. In 1984, the company purchased the Roberts Foundry division of White Consolidated Industries, Inc., a plant located in Greenwood, South Carolina. Many of Grede’s customers had moved southeastward, and this purchase gave the company its first plant in that area. The acquisition of Roberts was the first of a string of buys in the late 1980s. In 1986, Grede bought two foundries from the Eaton Corp. These were Perm Cast, in Cynthiana, Kentucky, and Vassar, in Vassar, Michigan. The Perm Cast plant gave Grede access to another market area with its mid-southern location, as did Vassar, located in the lower peninsula of Michigan, the heart of the auto industry. Closer to home, Grede bought a Fredonia, Wisconsin company, Fredonia Foundry, in 1988. Fredonia made castings by a process called the lost foam process, also known as the evaporative pattern casting process. This technology had received considerable industry interest in the 1980s, and it was Grede’s first foray into this process. Then in 1989, Grede made a bid for a shuttered iron foundry in New Castle, Indiana, owned by Dana Corp. It was a large plant, with total production capacity of 30,000 tons of ductile iron castings. The acquisition of the New Castle plant gave Grede a ten percent boost in its total casting capacity.

Along with the investment in acquired facilities, Grede continued to pour money into improvements to its existing plants. During the latter half of the 1980s, the company spent over $90 million on technology upgrades. Much of the money went to new machinery, such as state-of-the-art molding machines, water cooling systems, and new furnaces. A significant investment also went to computerization of a broad array of plant processes. By the end of the 1980s, most of Grede’s plants were equipped with computer-aided design and computer-aided manufacturing (CAD/CAM) systems. The technological upgrades worked to increase the company’s manufacturing capacity, and in many cases, to speed manufacturing processes. Bruce E. Jacobs, son of Burleigh Jacobs and grandson of founder William Grede, became president of the company in 1987. By the end of the 1980s, Grede’s annual sales were over $250 million, and the company was the second largest independent ferrous casting company in the United States.

The 1990s and Beyond

Recessionary conditions affected the foundry industry again in the early 1990s, but again, poor conditions had little impact on Grede. The company lost sales, and some plants ran at reduced capacity, but Grede was able to retain most of its workers. Grede began making a heavier investment in worker training in the early 1990s, as its plants became increasingly technologically sophisticated. The company paired up with a Milwaukee technical college to boost workers’ literacy and English skills, and instituted specialized courses, such as a class to teach about spotting casting defects. Management personnel were also required to take college-level management courses, as training and retaining skilled workers became increasingly important to the successful operation of Grede’s foundries.

The company had some export business, selling castings to the Far East and to European markets. In 1990 Grede became involved with a large European foundry company, the Swiss firm Georg Fischer Foundry Group. The Swiss firm wanted to expand into the U.S. market, and Grede became the company’s exclusive North American trading partner. The principal benefit to both companies was an exchange of technology and information. Later in the 1990s Grede bought a foundry in the United Kingdom, giving it its first plant abroad.

By the mid-1990s, many foundry companies were facing difficulties as customers switched from using heavy iron and steel castings to lighter-weight components made from aluminum or magnesium. However, Grede continued to prosper. In 1995, Grede bought a steel foundry in St. Cloud, Minnesota, and converted it to a ductile iron shop. Grede used the new plant to make components for cars and farm equipment. Sales continued to grow, rising from $461 million in 1995 to a peak of $633 million in 1998. As competitors stumbled, Grede found more opportunities. In 1999, a foundry owned by one of Grede’s chief competitors, Intermet Co., announced it would shut its doors, forcing DaimlerChrysler, a large customer, to look elsewhere for its parts. The Intermet foundry had made engine bedplates using compacted graphite iron (CGI), a lighter-weight iron. Intermet and another company had jointly developed the CGI technology. DaimlerChrysler then contracted with Grede’s Tipton, England foundry to make the CGI bedplates. This was a coup for Grede, which only had the one European outpost.

In 2000, Grede began construction of a new foundry in Mexico, to be operated as a joint venture with a Mexican firm, Proeza S.A. de C.V. of Monterrey. The new foundry expected to sell ductile iron castings to the automotive industry, agricultural industry, and to construction customers worldwide. Grede continued as a family-owned business, with the founder’s grandson in control. It had successfully grown to serve diverse markets, its customers major corporations in North America, Europe, and Asia. Even as some customers turned to lighter-weight components, Grede prospered and increased its production.

Principal Competitors

Intermet Corp.; Citation Corp.; Waupaca Foundry, Inc.

Key Dates:

1920:: William Grede buys first foundry.
1940:: Grede Foundries, Inc. is formed out of Grede’s three Wisconsin foundries.
1960:: Burleigh Jacobs, founder’s son-in-law, becomes president.
1966:: Grede buys foundry in Wichita.
1984:: Company moves into the Southeast with purchase of South Carolina foundry.
1987:: Bruce Jacobs becomes president.
1999:: Grede’s British branch takes over key DaimlerChrysler contract.