Aluminum caster Spartan benefits from diversifying aluminum and magnesium

US diecaster Spartan Light Metal Products is seeing strong growth because of business decisions it made during and after the 2009 downturn, including staying diversified in both aluminum and magnesium, President and CEO Don Jubel said in an interview.

While Spartan's magnesium business continues to decline as aluminum grows, it remains committed to diversification of metals and parts, keeping spending under control and running plants when and where it makes sense, Jubel said this week.

Spartan recently announced a $12.5 million expansion of its Mexico, Missouri, plant that the governor's office said would create 42 additional jobs at the 280-employee operation over the next five years.

The company's business looks to be up 15% this year from 2011, if it continues at the pace it's going, Jubel said. "Business was flat from 2010 to 2011" because of the earthquake and tsunami in Japan, he said. "When you do a lot of Honda and Toyota work, it hit us hard." He said that in 2009, business "tanked," but that the company saw a big bump in 2010.

The Mexico, Missouri, plant expansion is the result of new demand, dedicated to components that are value-added and require more machining and assembly.

"Instead of calling ourselves a diecaster, I consider us a manufacturer," Jubel said. "We have some products now where the base material is 10% of the cost and the rest of the component might be 40% of the cost. It's the whole thing of supply chain management; the whole logistics of that is getting more complex. So instead of a part being a $5 casting, it's a $50 assembly."

Jubel explained that automakers have scaled back or are strained on their engineering resources, so they now must rely on suppliers to manage more of the downstream production.

This means that Spartan not only has to manage price volatility for its core materials aluminum and magnesium, but also for materials like steel and copper, where the value may be even higher and it's harder to pass on price increases. They must try to negotiate ahead of time if they want to float the price with the spot market.

"You have to be smarter in how you run your business," he said. Spartan counts among its customers most of the major automakers -- including Toyota, General Motors, Ford, Honda and Volkswagen -- as well as several commercial accounts making power tools or lawn and garden equipment. The Mexico, Missouri, plant runs both aluminum and magnesium parts for automotive and commercial applications. The company's plant in Sparta, Illinois, produces parts made of aluminum and magnesium for both automotive and commercial applications, while its Hannibal, Missouri, plant is all-aluminum, both automotive and commercial, but could run magnesium.

Spartan has made some good business decisions over the years that helped it to weather the downturn where others did not, Jubel said.

For one, it kept open its Hannibal plant with a skeleton crew. "That decision was wise in the long term, because we didn't have to restart and rehire people ... that was what enabled us to respond to our Asian customers' increase in orders," Jubel noted.

Spartan's other business strength is that it is debt free, Jubel said. "We're frugal and conservative financially and have never highly leveraged the company. So when you do have a downturn in sales, we don't have to make loan payments."

Spartan also made a decision to stay US-focused, although it considered adding a plant in Asia before the recession. "People underestimate the resources it takes to launch a manufacturing plant in a foreign country," Jubel said.

The company's decision to remain diversified in both magnesium and aluminum paid off, since its magnesium business has declined. In 2004, 60% of Spartan's business was magnesium, while today magnesium accounts for only 11% and is expected to decline to 4-6% in the next five years, Jubel said. But Spartan wants to remain in magnesium, Jubel said he has "faith that magnesium is going to come back. There's too much of a demand for energy-efficient transportation. You want to keep that technology base so when the worm turns you're there to take advantage of it."

He said it is important to stay diversified not only in different metals but also different alloys, such as aluminum A380 versus B390, and in a variety of products.

"You never want any one customer, one product situations," he said. "If that customer designs away from that metal you've lost not just the product, you've lost the customer."