By Kirk Johannesen and Boris Ladwig, The Republic
johannesen@therepublic.com; bladwig@therepublic.com
THE owners of Columbus Components Group have closed at least 10 manufacturing plants in North America in the last decade and eliminated at least 1,500 jobs.
A former CCG executive said many of the companies did not generate a profit - but produced enough revenues to pay the owners a management fee.
Cleveland, Ohio-area businessmen Patrick K. James, Jay L. Schabel and Michael D. Klinginsmith bought the former Arvin-Meritor Inc. plant on 17th Street in 2004.
In the last decade, James, now CCG's sole owner, has owned at least 16 automotive-related companies in five states and two countries. At least 10 of those have closed.
One of the companies, Cleveland-based Dickey-Grabler, had operated for 125 years when James bought it in March 2007. Ten months later, it folded.
An 11th company, Pennsylvania-based Hood & Co., was closed and the employees let go before assets were sold to another company, which reopened the facility and rehired the employees.
Four companies are still operating: Cleveland area-based Hawthorn Manufacturing LLC, Detroit-based International Specialty Tube LLC, Columbus Components Group LLC and Madison-based Century Tube LLC, which James bought in February.
Columbus Components Group sent a Worker Adjustment and Retraining Notification notice to Indiana Department of Workforce Development on March 23, stating that the withdrawal of sales orders by clients would result in layoffs and possible closure.
James, who often purchases other companies through his principal companies, Hawthorn and Viking, could not be reached despite repeated attempts.
James, Schabel and Klinginsmith formed Hawthorn Manufacturing Corp. in 2006 and Hawthorn Manufacturing LLC in 2007.
Schabel, who lives in Chagrin Falls, Ohio, said he left Hawthorn about 1½ years ago.
He now runs a farm with his wife and is chief operating officer of Polyflow Corp., an Akron, Ohio-based Clean Technology startup.
Klinginsmith also has left the company, according to Rick Bohn, Hawthorn's former chief operating officer. Klinginsmith also could not be reached.
Local CCG officials repeatedly have declined to be interviewed.
Employment decline
Employment at CCG has fallen from 520 in 2004, when Schabel, Klinginsmith and James bought it, to about 140. On April 9, the company laid off 123.
Bohn said that James, Schabel and Klinginsmith, bought the former Arvin-Meritor plant because it fit a profile of companies they desired.
"Their strategy was to ... try to purchase businesses that were stressed," Bohn said.
That allowed the purchasers to obtain the companies with relatively low startup costs, Bohn said.
Some of the companies that Viking/Hawthorn bought had just gone through bankruptcy or changed ownership or were struggling like many other companies in the automotive business, Bohn said.
"Every one was a challenge," he said.
Bohn, who lives in Ohio and said that he left the company under good terms, said that the Viking/Hawthorn principals tried to acquire related businesses to give them more of a strategic foothold. For example, if they acquired an exhaust system supplier, they would try to acquire other similar suppliers.
Bohn said James' strength in marketing and business development allowed the company to establish a sizable network through which it would find out about possible acquisitions.
Sometimes the customers of a business that was being sold or about to close asked the Viking/Hawthorne principals to take over, because the customers did not want to lose their suppliers, Bohn said.
"I don't think there was any other strategy than that," he said.
While Bohn was with the company, it owned auto suppliers in locations including New York, Pennsylvania, Ohio and Ontario, Canada.
"During my (tenure) ... something happened to every one of them," Bohn said.
All of the companies had struggled previously, though, he said, and capital was limited.
"The shining star actually was CCG," he said.
The former ArvinMeritor plant had good equipment and was relatively healthy and therefore did not require a substantial capital infusion, Bohn said.
ArvinMeritor sold the plant, which stamped exhaust systems components, as part of a larger strategy to shed operations that it did not consider its main focus.
Breaking even
Bohn also said that the companies bought by Hawthorn and Viking often generated no profit.
At fiscal year's end, sometime the income was zero or negative, he said.
However, the businesses generated enough revenues to make bank loan payments and pay utility bills, suppliers and employees.
And, Bohn said, "There (was) enough revenue to draw some kind of management fee or salary (for the principals)."
Typically the new owners would try to secure commitments from existing customers and then find new customers to keep the business going, Bohn said.
"Unfortunately, in almost every case it required things that weren't necessarily controllable," he said.
Schabel said Hawthorn was a private, entrepreneurial company that was fairly diversified and that its business strategy evolved over the years. Schabel said he worked for the company four years.
He said he could not discuss details about the business because he signed a non-disclosure agreement when he left.
He said he has not had contact with James for about 10 months.
James was born in 1965, according to a Data Universal Numbering System report, which provides background information on companies. The DUNS report stated that James has been employed in the automotive industry since 1986.