Two of the largest automotive seating suppliers are building out new plants in Detroit and looking to joint ventures to capture more business from automakers increasingly conscious of their spending with minority-owned companies.
Magna International Inc. formed a joint venture with LAN Manufacturing Group LLC called LN Manufacturing LLC, which plans to open a plant in southwest Detroit next year to make seats for Ford Motor Co. trucks and SUVs.
On the city’s east side, Lear Corp. is expected to open its plant at the former Cadillac Stamping site later this year to make seats for General Motors and is exploring a joint venture.
“It’s competition, in one word,” said Michelle Sourie Robinson, president and CEO of the Michigan Minority Supplier Development Council, which certifies minority companies and JVs. “They’re all trying to prove that they have the greatest competitive advantage and can do that work and provide the most value to the customer, and (minority certification) actually just adds to that level of value.”
John Wyskiel, president of Magna Seating, said its new joint venture with Detroit-based LAN Manufacturing aligns with the company’s diversity and inclusion initiatives and provides an avenue for more business at the same time.
“From a bigger picture, for us it’s a way to give back to Detroit in a sense, to be a good corporate citizen,” Wyskiel said. “All of the OEMs are active in this space. I would think having this set up would hopefully lead to other opportunities.”
Lear declined to comment on specifics related to discussions about minority JVs but said in a statement that it is committed to spending with minority suppliers.
“Lear Corp. is always considering ways to expand our business with minority suppliers,” the company said in the statement. “While Lear has no specific announcement regarding a minority JV, we remain committed to doing business with minority suppliers.”
In 2020, the diversity, equity and inclusion practices of corporations across industries were put under a microscope amid heightened racial tensions resulting from the police killing of George Floyd in Minneapolis and Black Lives Matter protests. Executives pledged to create more inclusive companies.
Whether or not that materialized in the way that was promised is up for debate, but Robinson believes many executives are missing the target of having a long-term, sustainable impact on communities.”Many of them overlooked that right in their wheelhouse, the best way to do that, to create jobs in communities that ensure all people get to thrive, is through supplier diversity,” she said.
Since the MMSDC’s inception in 1977 as an affiliate of the National Minority Supplier Development Council, the number of minority businesses has increased by 1,000 percent, but gross revenues among those companies have remained largely stagnant, according to the council.
A study commissioned by the council last year asserted that at current growth rates, it would take Minority Business Enterprises more than 330 years to achieve revenue equity with white-owned businesses.
In the past couple of years, Ford, GM, Stellantis and other automakers and suppliers have faced general scrutiny of spending practices, prompting many of them to emphasize procurement diversification.
“And that’s why I think companies like Magna are seizing the opportunity to say, ‘If you want to make a difference, we can help you make a difference. Now, we’re certainly going to benefit from it, but we’ll make sure that communities of color also benefit,'” Robinson said.
The key to a successful joint venture is mutual benefit, Robinson said, and when the arrangement stops working for either side, it’s time to dissolve the partnership and make room for the next one. Minority business enterprises must also be legitimate on paper and in practice, she added.
What constitutes a legitimately certified MBE is a question that came into focus last year when Vinnie Johnson’s Piston Group, the largest Black-owned automotive supplier in the U.S., was stripped of its MBE status by the MMSDC. A judge has since reinstated the lucrative certification as the legal battle works its way through the court.
Robinson declined to comment on the Piston Group case due to ongoing litigation.
“When they’re done well, minority business enterprise certainly wins,” Robinson said. “Typically in JVs, the issue is the control. Many companies don’t go down that path because they don’t want to relinquish that control.”
Magna called on automotive and logistics veteran Sylvester Hester to lead the joint venture with LAN Manufacturing because of his expertise in manufacturing and engagement in Detroit, Wyskiel said.
Hester has been president of LM Manufacturing since 2019 and spent the past two decades in the C-suite of procurement and logistics provider Global Automotive Alliance. He will have a 51 percent ownership stake in LAN Manufacturing and oversee operations, while Magna provides funding for the $18 million build-out of the seating plant.
Hester said the JV is an opportunity to put his broad manufacturing skill-set to work while also providing 390 new jobs paying an average of $900 per week plus benefits.
“The transition, the pivot that (Magna) made, which I thought was brilliant in terms of, ‘Hey we’re not just manufacturing car parts, we’re actually a mobility company’ — that aligned with my vision and how I think the city and also the state is trying to maintain its leadership position in those areas,” Hester said. “So to me, I saw a golden opportunity.”
The new jobs are expected to come with union representation, Magna confirmed. The company is not required to prioritize Detroit residents for the roles, but it has worked closely with Detroit Mayor Mike Duggan and Detroit at Work to recruit residents, Hester said.
“It’s not a requirement, but it’s something we value,” he said. “We feel very strong, very pro-Detroit. We believe that we can go get the talent we need from Detroit.”
Additionally, Magna and LAN Manufacturing are hosting robotics clinics at a handful of Detroit public high schools and aiming to create a manufacturing entrepreneurial club, Hester said.
Detroit has become a more attractive place to do manufacturing because of Duggan’s courting of automakers and suppliers, access to a large talent pool and some localization of supply chain in light of disruptions from the COVID-19 pandemic to war in Ukraine, Wyskiel said.
“I don’t think anyone would have predicted all that to happen the way it has,” he said. “It’ll probably reshape to some extent the supplier community. It’ll always be a balance between cost, making sure you have a stable supplier, and one that can maintain quality. But the equation could change and perhaps the advantage for Detroit is the proximity of really good tier ones and tier twos, really good leaders, really good people.”