How a Detroit machine maker wound up in Chinese hands
Editors note: This story is part of a special section on Chinese auto investments in the United States to be published in the Nov. 5 print issue ofAutomotive News.A subscription will be required to access most of the articles.
DETROIT — So how does a company with roots in suburban Detroit end up with Chinese owners?
In the case of VGage, it was more about the demands of automakers in 2006 than decades of corporate twists and turns that pulled the company through a line of owners that included Digital Techniques, Valeron, Cincinnati Milacron, GTE and Swedens Sandvik.
To hear John Malane tell it: "From day one, all the major customers were very concerned about our presence in China."
Day one, in his case, was 2006. And the concern was VGages lack of any presence in China.
Malane, now 56, had been hired by Sandvik to run its Valenite Gaging Systems unit in Oak Park, Mich., and prepare it for sale. He ended up buying it himself.
He quickly found out that he was at a disadvantage. Automakers building engines and transmissions across the globe favored suppliers that had some international chops. Especially in the nation that was on its way to becoming the worlds biggest auto producer, China.
Those expectations even applied to specialists such as VGage, which builds custom machinery that measures with exacting precision the valves, pistons, gears and other parts that go into engines, transmissions and braking systems.
So Malane went to China.
There, he connected with two sales representatives, Sam Jia and Kelly Wu. Together, in 2009, they formed VGage Wuxi, a 50-50 joint venture.
The Chinese-American combination gave VGage a foothold in the worlds two biggest auto markets.
"You cant get on the bid list until you prove you have a global footprint," Malane explained. "It made us stand out versus smaller gauging companies."
VGage produces pricey, software-intensive equipment that has become more critical over the years amid the industrys push for quality. Malane says his typical order tops $200,000. Some units can go for $1 million.
Today, about 60 percent of VGages business is automotive. Thats up from about 50 percent during the Great Recession. Key to its success in the U.S. has been a culture of support.
Customers are encouraged to call around the clock when problems arise. In the U.S., most of the calls go directly to Malane or U.S. CEO Jim Nantais.
One recent Sunday, Nantais fielded a call from an American Axle plant in Bluffton, Ind. A mistake had been made. A gauge was out of order. Nantais immediately dispatched a colleague to travel from Michigan to Indiana, where a software fix was made the next day.
Malane says his Chinese counterparts in Wuxi initially struggled with such a customer-first philosophy but eventually embraced it.
Tides have turned in other ways. Sales for the China arm have risen in step with a booming Chinese auto industry. It now commands more than half of the companys $40 million in revenue and about two-thirds of the 210 employees.
And in the biggest shift, Malane decided to sell. The ownership, as of Jan. 1 this year, is now 100 percent Chinese.
Nantais is the only American to sit on the companys five-member board. The rest are Chinese. Among the directors is a representative from Guojing Capital, a principal investor.
Malane operates without a formal title, but he still comes to work every day and plans to for the foreseeable future.
His main role, he says, is to ensure that common procedures are followed globally at the company he bought from Swedish owners that is now in Chinese hands.