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A Look Back at the History of Team 1 Plastics

As part of the year-long celebration of its 30th anniversary, Team 1 Plastics, a plastic injection molding company for the automotive industry, is highlighting different milestones in its history through a series of articles. This month’s article features the Recession of 2008 and how Team 1 Plastics survived this financial storm.

On December 30, 2008, a U.S. News and World Report article stated, “Finally, the U.S. auto industry can claim to be number one at something.” The article, Auto Industry Hardest Hit by Recession, continued, “Unfortunately, that number one position is as the industry hardest hit by the economic downturn.”

Dramatic drops in automobile sales had greatly affected the big three U.S. automobile manufacturing companies, General Motors (GM), Ford Motor Company, and Chrysler, and had caused many automotive suppliers to experience the effects of the Recession in early 2008. However, that wasn’t the case for Team 1 Plastics.

Craig Carrel, President and Co-owner of Team 1 Plastics, recalled that Team 1 hadn’t experienced reduced sales in early 2008 because most of the company’s business was with the Japanese automotive companies, and the Japanese companies were doing better than the U.S. companies. In fact, Carrel said, “We were still expecting a strong and profitable year when we paid one of our quarterly bonuses in August 2008.” But, things changed dramatically just a few weeks later when Lehman Brothers declared bankruptcy in September.

“Once they went bankrupt,” Carrel said, “The whole economy ground to a halt, and we started to see our orders dropping immediately. Once this happened, Gary [Grigowski, Vice President and Co-owner of Team 1 Plastics} and I met daily to analyze the situation and to develop a plan to address this dramatic sales drop. We spent a few weeks developing our plan. Our top priority was to maintain the company’s top technical talent and its best team, knowing that the recession would pass. We knew that we needed a strong team to help us through the recession and, when the recession ended, we would need them to help us grow again.”

Carrel and Grigowski implemented a layoff as well as pay cuts for all positions except for entry-level Team Members. Pay cuts ranged from 10-50% with the owners taking the largest pay cuts. The company, which had been running 24/7 for many years, stopped working on Saturdays in an attempt to reduce capacity and to try and match the orders.

“Unfortunately,” Carrel said, “Our orders continued to drop. Sales for the first quarter of 2009 were down 60% in comparison to the first quarter of 2008.” It became evident that the initial reduction of staff was not sufficient, and the company was forced to have another layoff in February 2009. “We went from 40 team members in October 2008 to just 20 after February 2009. We decided to run 24/7 again until our inventories rose to a high level. Then, we would shut down the plant for two to four weeks — instead of just shutting down on Saturdays – and we instituted some rolling shutdowns. This allowed us to be the most efficient when we were running and also allowed our Team Members to receive unemployment benefits during these extended layoffs.”

Carrel said that the company’s open book philosophy played a key role. Each month, since 1999, the owners have shared the company’s financial status with all its Team Members. “When we had to make the initial layoffs, no one was surprised. It was easy to show that layoffs were necessary to minimize the company’s losses. It also allowed the remaining Team Members to see exactly how the company was doing and why the second layoffs in February 2009 were necessary.”

Carrel said that he and Grigowski communicated to everyone that the goal was for Team 1 to break even. They were not looking for a profit — breaking even would allow the business to stay open indefinitely. Of course, Carrel said that if the company was losing money, he and Grigowski would have to react because losing money would endanger the company’s long-term survival.

In 2010, the company finally began to see an improvement in sales. “As a Just-in-Time (JIT) automotive supplier,” Carrel said, “we had seen the order reduction in 2008 happen very quickly. Likewise, we saw the sales growth happen the same way. It was not a long delay.” The company began to realize consistent profitability and in late 2010, was able to reinstate wages to the pre-Recession amounts. “We were starting to be optimistic about our future and then the Japanese tsunami occurred in March 2011 which caused us to react again to decreasing sales until early 2012.” (Use this link to read about the impact of the Japanese tsunami on Team 1 Plastics.)

Carrel believes that the quick reactions and responses at the beginning of the Recession, along with Team 1’s constant monitoring of orders and adjusting production accordingly, ensured that the company was never in serious trouble nor was it ever close to shutting down. He also noted that the company had entered the Recession with significant cash reserves and its lowest debt load in its history. The financial health of the company gave it more flexibility and enabled the company to secure a loan from the Albion Economic Development Corporation (EDC) to help with liquidity during the worst months of the Recession.

Carrel said that the Recession demonstrated that agility is a critical characteristic. “You need to remain agile to whatever the market does. The Recession showed how quickly things can change from normal to a severe downturn.”

Using the lessons learned from the Recession, Carrel said that Team 1 continues to focus on its financial health, trying to maintain a proper debt load and to have credit availability in order to be flexible for positive and negative market conditions. “We have also improved our sales forecasting and are constantly monitoring our capacity to our current and future sales.”

And Carrel expects the future to have some challenges. “We are anticipating that in the next two to three years, there may be a slowdown in the automotive market. We are hoping for only a minor sales reduction (about five to ten percent) but are also trying to make plans if it is larger (ten to twenty-five percent). Therefore, we will proceed cautiously and make sure that we maintain a strong financial company that allows for options if things do slow down while also taking advantage of opportunities for smart growth.”

Finally, in reflection of the Recession, Carrel said, “I believe we reacted properly and would not make major changes to what we did and how we responded. I just hope we never have to implement such drastic measures again.”