Grede Foundries Inc., which battled through financial troubles that eventually forced it into bankruptcy, has been combined with Citation Corp. to form a larger, more diversified iron castings manufacturer.
Although the deal will preserve Grede’s Liberty foundry in Wauwatosa, it has led to the loss of another corporate headquarters for the Milwaukee area
“It was the best deal available in the marketplace,” Grede chairman Richard Koenings said. The move to combine Wauwatosa-based Grede and Citation stemmed from a series of transactions that included the purchase of certain Grede assets by an entity controlled by Wayzata Investment Partners LLC, Wayzata, Minn. The deal closed Feb. 4. Specific terms of the transaction weren’t disclosed.
“At the depths, last May and June, the company was looking at just having to plain lock its doors, cease operations, period, and turn everybody away. At this point, while we’ve had to reduce our capacity, we still have a very viable and profitable business. The issue was how profitable, so we could interest more people to bid higher.”
Koenings said he would rather have had Grede Foundries remain an independent company, which would have assured that the corporate headquarters would have remained in the Milwaukee area.
“While we had people interested, based upon their judgment of the company’s assets to perform going forward, this was the best deal we could get,” he said. “It’s a good deal.”
The new entity, known as Grede Holdings LLC, has 2,700 employees, 14 foundries with nearly 600,000 tons of iron casting capacity and two machining facilities.
The “new” Grede’s corporate headquarters is in Novi, Mich., a suburb of Detroit, where Citation had been based. The company is being led by Doug Grimm, Citation’s former chief executive officer.
Some of the 80 employees at the former Grede Foundries headquarters likely will relocate to Michigan while others will be moved to Menomonee Falls, where Citation has a machining operation and a surplus of office space, Grimm said.
The Wauwatosa corporate building, 9898 W. Blue Mound Road, is expected to close some time this year and be put up for sale, Grimm said.
The combined companies are expected to generate about $600 million in revenue in 2010. Significant equity investment from Wayzata and GSC Group, Citation’s largest shareholder, has reduced the total combined debt of the two companies to $26 million from about $130 million, Grimm said.
“The combination of Citation and Grede creates, what we believe is, the most diversified foundry company in North America with one of the strongest balance sheets in the industry,” he said
Maintaining area operations
The deal keeps five of the six former Grede foundries in operation, including the Liberty foundry at 6332 W. State St., which has about 120 employees, and a foundry in Reedsburg in Sauk County, which had been the largest in the Grede Foundries’ system.
The Liberty foundry, established in 1920, was Grede’s first foundry. It produces castings mainly used to produce parts for large trucks as well as agricultural and construction equipment.
The deal also includes Grede foundries in St. Cloud, Minn.; Wichita, Kan.; New Castle, Ind.; and Iron Mountain/Kingsford, Mich. The new ownership projects moving forward with previously announced plans to close the Wichita foundry. Some of the work performed in Wichita is expected to shift to the Liberty foundry, Koenings said.
Through the combination with Citation, the new Grede has an additional eight foundries, including two in Wisconsin (Berlin and Browntown) and five in Alabama (Brewton, Bessemer, Marion, Columbiana and Selma), as well as another in Biscoe, N.C. Machining facilities in Menomonee Falls and Oconomowoc also are part of the new company.
A large portion of the new company’s business comes from the beleaguered automotive industry, which has shown signs of recovery in recent months, Grimm said.
Combining Grede and Citation will lead to long-term cost savings tied to capacity utilization and purchasing, Grimm said. Grede also had outsourced most of its machining operations, which now can be handled at the former Citation facilities, he added.
