Lacks Enterprises Inc.

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Lacks Enterprises Inc.

5460 Cascade Road, S.E.
Grand Rapids, Michigan 49546
U.S.A.
Telephone: (616) 949-6570
Fax: (616) 285-2367
Web site: http://www.lacksenterprises.com

Private Company
Incorporated: 1972 as Lacks Industries Inc.
Sales: $286.8 million (2003 est.)
NAIC: 332813 Electroplating, Plating, Polishing, Anodizing, and Coloring

Lacks Enterprises Inc. is a privately owned company based in Grand Rapids, Michigan, which produces molded, painted, or plated plastic products (in lieu of die-cast and stainless steel) for three separate business segments. Subsidiary Lacks Wheel Trim Systems, Inc. manufactures automotive wheel covers. The automotive trim sector of the Lacks business is handled by Lacks Trim Systems, Inc., which makes trim for both the interior and exterior of vehicles. Products include grills, molding, and rocker panels. Although most of the unit's facilities are located in western Michigan, Lacks Trim also operates plants in Fountain Inn, South Carolina, and Germany, as well as a sales and engineering office in Sweden. Lacks's third business area involves consumer electronics, primarily the production of cell phone covers, which is the province of subsidiary Plastic-Plate, Inc. Lacks also maintains a research and development facility, which has been successful in developing important proprietary technologies, such as the high-impact plated plastic (HIPP) process, Chromtec Wheels, Platinum Chrome, and Spinelle Metal Finishes. As a result of these advances, Lacks is able to offer products that are lighter and less expensive than older materials, as well as being more resistant to dents and rust.

Father and Son Launching the Business in 1961

The elder of the father-and-son duo that founded Lacks Enterprises was John P. Lacks, who emigrated with his family from Germany in 1910 when he was just five years old. Although-he never graduated from college, he harbored a dream to own his own business. In the meantime he worked as a truck driver, and also spent time in the decorative hardware industry and tool and die making. He was in his mid-20s in 1941 when he moved to western Michigan and became involved in the zinc cast business in both manufacturing and sales. In his late 50s, he was working as a sales representative for the Dutch zinc die-casting firm, REM Die Casting, when he convinced his son, Richard Lacks, Sr., who was a paint salesman, to form their own business. They started out acting as sales representatives for REM, and then in 1961 formed Metalac Corp. to provide basic machining for REM products. They eventually became involved in manufacturing their own die cast products for the automotive industry. The father focused on the manufacturing side of the business, while the son, with a more aggressive personality, handled the sales responsibilities. Over the next three years, Metalac added other metal finishing companies: Ace Plating and Dec-o-lac.

In 1972 the Lacks family incorporated their growing business, forming Lacks Industries. At this stage, the company was generating $6 million in annual sales. The following year a third generation of the family became involved when Richard Lacks, Jr., joined the business. His inclination, however, was not to carry on the Lacks tradition. Having graduated from Western Michigan University as a marketing major, he accepted a position with an auto manufacturer because Lacks was simply not yet large enough to justify having a marketing department. In a 2003 article published by the Grand Rapids Press, he recalled, "My father sent some of his business associates to convince me I had a better alternative. He kept sending them. Ultimately, I broke." He was soon joined by his younger brother, Kurt. "Each generation brought its own unique skill levels," he also told the Press. "My grandfather was an entrepreneur, my father was an entrepreneur and a salesman. I fit more the mold of a pure business strategist."

The three generations of the Lacks family steadily grew their business, by nature both visionary and conservative. Early on, the Lackses recognized that plastic components would eventually supersede die cast, and in the 1970s began to transform the company into a maker of plastic parts and assemblies. Richard Lacks, Jr., outlined the family's cautious side in a 1994 article that appeared in the Grand Rapids Business Journal: "The thing I learned from both my father and grandfather is that if you can't pay for it, don't buy it or build it. … Don't ever overextend yourself or go out on a limb where you can't pay a debt back. The other thing is that they expect total loyalty from the people that work for them, and they give it back tenfold in return. There's a real loyalty here, and that's made this company successful, too."

Accelerating Growth in the Mid-1980s

Because of Lacks's conservative business approach it remained profitable despite lean times in the highly cyclical auto industry. During difficult economic conditions in the late 1970s, early 1980s, the late 1980s, and again in the early 1990s, Lacks was in a position to grow. While competitors were forced to cut back and wait for better days ahead, Lacks cut back and remained profitable. Those profits were then invested in property and buildings, so that when the economy and the auto industry recovered, Lacks was able to carve out an ever increasing market share. It was in the mid-1980s that the company began an accelerated pattern of growth that made it a $200 million company by the early 1990s. A good deal of this growth was attributed to a growing amount of business Lacks did with foreign automakers who had begun constructing manufacturing plants in the United States. For the auto model year 1990, Lacks attributed 2 percent of its sales to these so-called transplants. Two years later that amount topped 10 percent, as Lacks furnished an increasing number of front-end grills, wheel covers, and body side moldings to Mazda, Toyota, Nissan, and Subaru. Lacks also achieved some diversification by fashioning products for other industries, such as appliances, plumbing, and computers. To accommodate the growing demand for its products, Lacks built several factories, all located within a five-mile area in Grand Rapids. But even during good economic times in the 1990s, when other companies were constructing massive factories, Lacks coupled caution with a desire for expansion. The company built small plants, none larger than 150 employees, linked together by underground tunnels. This modular approach afforded Lacks, should it ever need to downsize because of tough economic times or the loss of a major customer, the ability to sell off plants piecemeal.

Lacks received some adverse publicity during the mid-1980s and into the early 1990s because of air pollution caused by its painting plants and environmental concerns regarding sludge lagoons in Cascade County that were part of the electroplating process. Although the lagoon system had a state permit, the company was pressed by Michigan to clean up the lagoons that were contaminating area groundwater and residential wells. Early in 1989, Michigan's Department of Natural Resources filed a lawsuit against the company, charging that it had violated environmental laws, only days after Lacks had offered a $5.5 million cleanup plan. The company maintained that the state had needlessly delayed the work by filing the suit, but state officials insisted that litigation was necessary because the company had been "continually dragging [its] feet." According to the state's attorney general's office, Lacks had been aware of the problems at the Cascade plant since 1968, yet had made no effort to address the problem. In the end the two parties settled on a $7.5 million cleanup program.

During the 1990s the company made a concerted effort to improve its reputation regarding the environment and went beyond mere compliance and ultimately achieved an excellent reputation in both environmental and ergonomic matters. Sludge from its plating operations, for instance, was now dried and sold to a recycler. Lacks became the first automotive supplier, and one of a select number of U.S. manufacturers, to receive certification in the ISO 14001 environmental management standard and the Occupational Health and Safety Assessment Series (OHSAS) 1800a specification.

Although the Lacks family was very devoted to the Grand Rapids area, starting in the 1980s it began to look for opportunities to open plants in the Sunbelt states. In 1988 it considered expanding into Florida, sending a team to scout the cities of Gainesville, Jacksonville, Lake City, Orlando, and Tallahassee. The site group concluded that there was no major advantage to doing business in Florida, and the company ultimately backed away. Five years later, however, Lacks established a six-person group, eschewing the help of outside consultants, to look at sites in Kentucky, North Carolina, South Carolina, and Tennessee. A major factor in this effort was the belief that Michigan was taking Lacks for granted and was unwilling to offer the same financial incentives it made to much smaller concerns officials were ardently courting to relocate to the state. Eventually the site group settled on two promising communities—Lexington, Kentucky, and Greenville/Spartanburg, South Carolina—both of which offered economic incentives and met other criteria important to Lacks. Nevertheless, it was a difficult decision for the company to open a plant hundreds of miles away from its headquarters, especially for John P. Lacks, now almost 90 years old yet very active in the business. In mid-1994 the board of directors voted to expand in Greenville, land was bought, and construction was begun on a 60,000-square-foot plasticinjection molding plant. For its part, South Carolina offered help in finding an appropriate industrial site, and with the screening and hiring of employees. It also issued tax credits for newly created jobs and $400,000 in grant money. Two years later, when Lacks was once again ready to expand as part of a $40 million capital investment program, the state of Michigan stepped in with an economic incentive package that Richard Lacks, Jr., called "hard to resist."

Company Perspectives:

We know our future lies in listening—and responding—to our customers' needs and expectations, and our success depends entirely on the people we hire.

A major factor in Lacks's growth during the 1990s was the result of the company's strong investment in research and development. In 1992 it opened a 25,000-square-foot Research & Development Center to pursue plastics product innovations and processes. One of the unit's early successes was the development of HIPP-140, a high-impact, high-temperature plastic, able to withstand 14 footpounds of impact and hold its shape to temperatures in excess of 230 degrees Fahrenheit. The material was specially treated to be chrome-plated. HIPP-140 was introduced as the world's first flexible chrome grill with the 1994 Chrysler New Yorker. The HIPP name was then copyrighted and the process applied to a larger number of auto trim products, replacing stainless steel, die cast, and glass-filled materials. The process held other advantages for automakers. The coppernickel chrome-plating process was able to reach into difficultto-reach crevices, through providing greater protection from corrosion and an extended part life. The parts were lighter, helping to create more fuel-efficient cars. HIPP-140 also allowed for the creation of more complex shapes, offering greater freedom to car designers. Moreover, such items as snap tabs and fasteners could be molded into parts using the process, allowing automakers to reduce inventories. Eventually all of Lacks's trim products incorporated the HIPP-140 process. Lacks's R&D efforts also led to the creation of its Chromtec process. Instead of bonding plate to plastic, it bonded plate to aluminum and steel wheel, resulting in the so-called chrome-clad wheel.

Deaths of Founders: 1999

By the mid-1990s the Lacks family business was composed of two divisions, Lacks Industries, which was entirely devoted to the automotive industry, and Plastic-Plate, which did 85 percent of its business with automakers and the remainder with the appliance, computer, plumbing, and, more recently, the telecommunications industries (in particular the cell phone enclosure business). Both divisions were now under the umbrella corporation, Lacks Enterprises. The company continued to be run by three generations of the Lacks family, a situation that Kurt Lacks described as "four cooks in the kitchen." Because the company structure was becoming too unwieldy, the Lackses reorganized the business in early 1999, creating the company's current three business units. According to Richard Lacks, Jr., "We were becoming way too bureaucratic. … We were at a crossroads. We lacked strategic focus and we couldn't keep a hand on the business."

Other changes were also soon at hand. Richard Lacks, Sr., was diagnosed with a rampant form of cancer, news that proved hard on his father. On April 14, 1999, at the age of 94, John P. Lacks died. Just one month later, on May 13, 1999, Richard Lacks, Sr., also died, leaving the running of Lacks Enterprises in the hands of Richard Lacks, Jr., and Kurt Lacks.

Lacks continued to grow into the new century. By the close of 2003 it was generating sales in the neighborhood of $300 million. The company was looking to increase its cell phone business as well as taking steps to forge a joint venture in China as part of an effort to make Lacks more competitive in the world marketplace. In addition, a fourth generation of the Lacks family was on the verge of becoming involved in the business. Both Richard and Kurt Lacks had sons majoring in business at the University of Indiana. According to the Grand Rapids Press, "Dick and Kurt agreed they will try to get out of their heirs' way sooner than their grandfather did—but it won't be easy. 'It's pretty hard to give up the ship,' Dick said. 'My grandfather kept control until he was 94. I'm never going to do that to my kids.' He sets age 70 as his deadline for stepping aside, assuming the fourth generation is on board with the culture of the business—and they aren't spending too much money."