Riviera Tool Company

views updated

Riviera Tool Company

5460 Executive Parkway SE
Grand Rapids, Michigan 49512
U.S.A .
Telephone: (616) 698-2100
Fax: (616) 698-2470
Web site: http://www.rivieratool.com

Public Company
Incorporated: 1967
Employees: 140
Sales: $24.04 million (2006)
Stock Exchanges: Pink Sheets
Ticker Symbol: RTC
NAIC: 333513 Machine Tool (Metal Forming Types) Manufacturing

BEGINNINGS

INITIAL PUBLIC OFFERING IN 1997

SELECTION OF RIVIERA AS MERCEDES-BENZ PROJECT MANAGER: 2002

PRINCIPAL COMPETITORS

BEGINNINGS

Riviera Tool dates its start to December 1967, when James Rieth bought the assets of a tool and die company. Over the next several years the Grand Rapids, Michigan-based firm would specialize in performing work for the auto industry, which relied on many small companies such as Riviera to supply it with metal stamping dies that were used to form vehicle components.

In 1980 Rieth was killed in a plane crash in Alaska and his 21-year-old son, Kenneth K. Rieth, assumed ownership of Riviera and took the title of president. Eight years later the firm was incorporated and half of its common stock was sold to Motor Wheel Corp. of Okemos, Michigan, a unit of Hayes Wheel International. Riviera’s work would include the production of stamping dies for Motor Wheel.

In 1989 the company moved into a new facility that gave it nearly 100,000 square feet of die production space and 28,000 square feet of office and engineering space, with another 52,000 square feet subleased to another firm.

In July 1992 Riviera helped form a plastic injection-molding joint venture called Leap Technologies, Inc., to which it contributed equipment and inventory worth $5.4 million. Leap folded the following year, however, and Riviera wrote off more than $2 million in losses. The firm later sued partner Durametallic Corp. and its principals, alleging fraud and seeking more than $3 million in damages.

Production of stamped metal parts was a complicated, multipart process. An initial die cut a metal blank out of a larger sheet of metal and further ones defined a part’s contours, bent corners, trimmed off excess metal, and cut out holes. To speed production, some dies also incorporated automated features. Riviera worked closely with its clients to develop prototypes and used computer-assisted design and cutting equipment to speed the production process, which in earlier years had required craftsmen to develop steel dies from wood and plaster models. Die-making took ten months or more from the awarding of a contract to final delivery, with a single set usually durable enough to complete an entire model year’s production. The cost of a set was between $250,000 and $2 million, depending on their size and complexity.

During the 1980s and 1990s Riviera’s revenues grew steadily at about 8 percent per year, with sales for 1995 reaching $22.2 million. By this time the firm had won a reputation for quality and was awarded Preferred Supplier status by both Chrysler and Ford. In addition to using companies including Riviera, the automakers also produced some dies in-house.

INITIAL PUBLIC OFFERING IN 1997

When Chrysler Corporation asked the firm to produce dies for a larger portion of its vehicles and reduce their development time, Riviera sought additional funding to help buy the new software, hardware, and other equipment it would need to handle the additional work. In late 1996 the firm filed papers for a public stock offering, and on March 4, 1997, its stock began trading on the American Stock Exchange (AMEX), with one million shares sold for $7 each. Just under half of the proceeds were used to retire the common stock of Motor Wheel, leaving CEO Rieth the firm’s largest individual shareholder. Later, Riviera also completed an offering of convertible preferred stock worth $8 million.

New contracts for the year included one worth $4.5 million from truck maker Navistar International, and another from General Motors unit Saturn for $3.1 million. For the fiscal year ended in late August, the firm reported sales of $22 million and net income of $1.2 million.

In the summer of 1998 Riviera launched an expansion program that would enable it to build the largest dies needed by the auto industry. The three-year, $10.6 million project included the purchase of new machining centers, prototype presses, and computer hardware and software. The firm received a 12-year, 50 percent tax abatement from Cascade Township to help fund the expansion, which would create up to 40 additional jobs. Riviera soon signed $11.5 million worth of new contracts, many of them with Chrysler and some from foreign concerns such as BMW. For 1998 the company’s largest customer was General Motors, however, which accounted for 50 percent of sales, while Ford made up 26 percent and Chrysler 17 percent.

By 2000 revenues had grown to a record $25.2 million, but the U.S. economy was starting to falter, and the auto industry began to cut back on die orders. In 2001 Riviera’s sales plummeted by more than half to $12 million, with a net loss of $3.9 million, making it the company’s worst year since 1969.

In response to this crisis the firm began aggressively cutting costs while reconfiguring its business model and focusing only on procuring contracts that were likely to be profitable. By the start of 2002 Riviera had laid off 75 employees and asked the remainder to take pay cuts or reduce their weekly hours.

SELECTION OF RIVIERA AS MERCEDES-BENZ PROJECT MANAGER: 2002

Business improved during 2002, however, and contracts worth $21 million were signed with BMW, Nissan Motors, and Mercedes-Benz. The latter made Riviera its program manager for the dies for a new SUV-like “tall wagon.” Part of the company’s revised business model was to increase collaboration with other tool and die shops, and to fulfill this contract it would partner with ten area companies.

COMPANY PERSPECTIVES

Committed to Stamping Die solutions which enhance our Customers prosperity through: Faster Turnaround, Single-Source Capability, Improved Quality, and Reduced Costs.

Riviera Tool Company is a leader in the production of integrated, complex stamping die systems for the high speed mass production of automobile and truck body parts. We design and manufacture die systems for the production of underbody panels, inter-structural panels, outer body panels, and bumper systems. We are currently integrating advanced technologies throughout all of our manufacturing processes, while adding the capacity to manufacture dies for very large body panels.

For 2002 sales rose to $14.1 million and losses narrowed to $3 million, but auditor Deloitte & Touche voiced doubts that Riviera could remain a going concern in its annual report, citing problems that included an inability to meet loan covenants. Late in the year the firm began to rehire workers as its business continued to pick up, while it also won a new $9.5 million loan from Comerica Bank.

During 2003 more new orders rolled in from such companies as International Truck and Freightliner, and Riviera brought back more workers and hired others to boost its total employment to 150. The firm returned to profitability during the year, earning $900,000 on record sales of $34.1 million.

In March 2004 Riviera sold $1.5 million worth of stock in a private placement, and soon afterward Comerica boosted its revolving credit line to $12.5 million. The firm also borrowed an additional $500,000 to buy new laser-cutting and high-speed machining equipment.

The company was wrapping up two major projects for Mercedes-Benz that were worth a total of $40 million ($10 million of which went to subcontractors). Cost overruns due to changes in deadlines and materials specifications forced the firm to outsource work worth $4 million and pay $3.5 million in overtime wages, and it delayed filing its annual report for several weeks before revealing a loss of $8.24 million on sales of $25 million. Auditor Deloitte & Touche again warned that the company might not be viable as a going concern, but Riviera was able to work out issues with its lenders and saw orders begin to pick up during early 2005. It also received backing from a large Asian automaker to subcontract some of its work to lower-cost Asian die manufacturers, which had lately been taking much work from American ones.

In May 2005 the firm received $13.2 million in new financing from Laurus Funds of New York, its relationship with Comerica having recently ended. For the fiscal year the company continued to struggle, losing $2.5 million on sales of $24.7 million, with Deloitte again voicing worries that it might not be able to remain solvent before resigning its auditing position.

In February 2006 Riviera received notice from the AMEX that its stock was in danger of being delisted because shareholder equity had fallen below $4 million and it had reported losses in three of its last four fiscal years. The company’s stock was trading for less than 75 cents a share. Riviera was subsequently granted an 18-month extension to comply with the exchange’s rules and submitted a plan to improve its operations. The firm continued slashing costs and won several new contracts during the fiscal year ended in August, which saw an improved result of $24 million in sales and a $1.6 million net loss.

Riviera continued to have financial difficulties during 2007, however, and as its stock slipped below 25 cents a share in April the AMEX announced it was delisting the firm before the 18-month extension was up. Soon afterward Ken Rieth retired as president, chairman, and CEO of the company, and a team of executives was appointed to run it on an interim basis until a replacement could be chosen. The firm’s stock soon moved to the Pink Sheets marketplace.

As Riviera Tool marked 40 years in business it was struggling to stay afloat in the face of tough competition and a downsizing U.S. auto industry. Its future viability would depend on a number of factors including finding a strong replacement for longtime CEO Ken Rieth and securing contracts that were reliably profitable.

Frank Uhle