Thereâ€™s little argument that Detroit is one of the cities hit hardest by the Great Recessionâ€”the city built around the same auto industry that saw two of the â€śBig Threeâ€ť manufacturers spiral into bankruptcy. While the domestic automotive manufacturers jockey to reposition themselves to regain lost market share, Leon C. Richardson is looking to enter new markets.
Richardson, CEO of ChemicoMays L.L.C. (No. 100 on the BE Industrial/Service list with $25 million in revenues), attributes nearly 45% of company revenues to General Motors. Headquartered just a few miles from Detroit in Southfield, Michigan, Richardson maintains that ChemicoMays was spared the worst of the downturn in the auto industry. â€śWeâ€™re an indirect supplier, maintaining the facilities or the equipment or the chemicals. Even though GM had a downturn in production, we still had to maintain the physical facilities,â€ť he says, â€śso that when they came back on line, we were prepared to go.â€ť
Still, thereâ€™s good reason to be concerned about that level of exposure to any one client, so the ChemicoMays team has drafted a diversification strategy. â€śOutside the [auto] industry, we just picked up a couple of new contracts. This time next year, GM wonâ€™t be our largest customer,â€ť claims Richardson, 49. Indeed, the company has landed a multi-year, multimillion-dollar contract with Honeywell. â€śWeâ€™re looking at four other market segments to operate inâ€”defense contractors, pharmaceutical, biotechnology, and aerospaceâ€”and we have a foothold in two of those markets today.â€ť
ChemicoMays is a too-rare example of an African American business partnership. Launched in 2006, the company is a joint venture between Chemico Systems Inc. (a manufacturer of specialty chemical products owned by Richardson) and the nationâ€™s largest black-owned chemical supplier, Mays Chemical Co. Inc. (No. 25 on the BE Industrial/Service list with $183 million in revenues). ChemicoMays provides chemical management servicesâ€”the ordering, application, storage, and disposal of chemicals ranging from cleansers to paint thinners, degreasers, machine coolants, and other solutions used in metalworking, assembly, and other manufacturing processes. Richardson sees a combination of geographical and industry diversity as the future of the business.
Richardson began his career 23 years ago as a laboratory technician at Product Sol, a Detroit-area chemical company that he later acquired. He eventually moved to the manufacturing side of the business and finally sales. A dispute with management over a commission check resulted in Richardsonâ€™s leaving the company and launching Chemico Systems. Richardson and Bill Mays, CEO of Mays Chemical, had known each other for several years prior to forming the partnership. Chemico Systems often purchased from Mays those chemicals it didnâ€™t manufacture on its own.
That business arrangement helped pave the way for the alliance. â€śBill Mays and I developed a great relationship as a result of a customerâ€“supplier relationship. I saw the opportunity to expand using their infrastructure and backbone and our technical competence and efficiencies. Putting these two companies together, it was just a natural extension,â€ť says Richardson. â€śMays Chemical is a distributor, Chemico Systems is a manufacturer, and ChemicoMays is a management provider.â€ť
Since Mays Chemical had the staffing and resources, they would handle the back office functions: payables, collections, receivables. Financing, of course, was needed as well. Mays guaranteed a $2.5 million bank loan, which was paid off in four years. â€śThe partnership has been nothing but positive. And if you can, in the course of four years or whatever, pay off a couple million dollarsâ€™ worth of debt, then thatâ€™s pretty significant,â€ť says Mays, who owns just under 50% of the venture. â€śWeâ€™ve got significant business in other areas outside of the automotive area, which is what I wanted, and Leon got what he needed, which was some money.â€ť
This doesnâ€™t come without its share of challenges. One of them is staffing. â€śYou notice anything about my staff?â€ť Richardson asks after a visit to one of the GM facilities ChemicoMays is contracted to service. â€śNot a single one of them is African American and it kills me.â€ť Richardson, points to his cadre of chemists and chemical engineersâ€”who are predominantly whiteâ€”as a sad testament to the lack of African Americans in the sciences.
Heâ€™s worked with organizations such as the National Association of Black Suppliers to sponsor a $20,000 scholarship for African Americans looking to study chemical sciences at Wayne State University in Detroit and other major universities around the country.
Time to Venture Abroad
In its first three years, ChemicoMays generated enough revenues to be counted among the be 100s. Now itâ€™s focusing on global markets. â€śWe are a major supplier of chemical management services in Mexico. When you look at whatâ€™s happening with NAFTA and a lot of manufacturing moving into regions like Mexico and Brazil, it was just imperative that we look for a strategy that allowed us to go where our customers were going, and our first step was Mexico,â€ť says Richardson. â€śWeâ€™re now looking further into South America and weâ€™re shipping materials to China and Australia. Weâ€™ve been fortunate enough to move wherever our customers are moving on a global basis.â€ť
Contracts with biotech giant Amgen and Eaton Corp., a diversified power management company with 2010 sales of $13.7 billion, will help Richardson and his team reach their goal of growing the business outside of the automotive industry. â€śWhen you look at pharmaceutical and biotech firms, at the end of the day, what they create are blockbuster drugs and therapies,â€ť says Richardson. â€śBut, to develop those materials, they have to bring in a lot of different types and diverse chemistries to actually do the research, which leads to those blockbuster drugs.â€ť
But for now, automotive will continue to be the companyâ€™s bread and butterâ€”with GM as its largest client. â€śWe have a competitive bid process where we select suppliers based on our sourcing activity and we look at your quality, service, price and technology,â€ť says Linda Ware, supplier diversity manager for General Motors, pointing out that the automaker has roughly 400 diverse suppliers. â€śChemicoMays meets or exceeds all of those criteria.â€ť
Looking ahead, Richardson says the companyâ€™s balance sheet looks solid enough to consider potential acquisitions. â€śWeâ€™ll continue to grow our presence in other industries, continue to grow our presence geographically while looking for other regions to grow in,â€ť he says. â€śAnd there may be some inorganic growth here in the next 24 months.â€ťÂ