Big Gun For Hire - Industry Overview - Statistical Data Included

Automotive Industries,  May, 2000  by John McCormick

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New MSX boss Tom Stallkamp aims for growth beyond automotive, from NASA to healthcare and biotech.

When engineers build systems to manage enormous pressure, they usually design in points of release known as safety valves. Anyone working in the automotive community today knows about pressure. Quicker times to market, flexible engineering on a smaller number of platforms, cost reductions and a consumer market that can literally change product demand with the click of a mouse all contribute to this pressure.

MSX International, a contract engineering firm based in Auburn Hills, Mich., has developed into one of the largest safety valves for the OEM community. Outsourced engineering and staffing is nothing new in the auto industry. But the enormous size of MSX -- $760 million in sales worldwide last year -- and the recent appointment of former DaimlerChrysler President Tom Stallkamp as vice chairman and CEO, makes it one of the highest-profile engineering talent pools outside of the automakers themselves. Stallkamp says that's something you don't see every day.

"We're an unusual company. We're the largest company in the world that does what we do. We have almost every OEM in the world as a client," he explains. "It's really an outsourcing of engineering. It's usually done because the workload is so enormous. It might not be a total vehicle. It may just be the doors or the bumpers. And that's usually done because there are so many projects now and the speed to market is so high at the OEMs that they're tapped out."

Currently, Ford is MSX International's single largest client, followed by General Motors and DaimlerChrysler. With the recent addition of Fiat Auto to the GM family, the pie chart may change a bit, but Stallkamp points out that MSX already was working for the Italian automaker anyway. That group, other automakers and suppliers including Fiat, represents about 18% of MSX International's 1999 business.

The former DC president joined MSX late in 1999, bringing a valuable perspective on the entire supply chain to the company. Stallkamp says that everyone is looking for engineering work throughout the industry, including lower-tier suppliers. But what's perhaps more important is Stallkamp's experience and understanding of the supply chain itself, how people work up and down that path and how it is changing.

"My relationships in the industry are pretty good and I can bring that here. And while the automotive industry is leading the way in supply-chain development, MSX can bring that into other industries. I came here because we don't make any parts and I like that. It's service only. Service is the fastest growing segment in the economy. We have lots of businesses but we're also technologically related. It's a fun company."

In addition to the pure engineering fun, MSX also provides staffing solutions to companies. Ford alone has about 4,000 contract MSX employees. Job functions range from technical engineering to information technology and business development.

Being the go-to company for engineers during one of the tightest labor markets on record is no small feat. MSX scours the globe with more than 150 recruiters, visiting every technical school from Belgrade to Brazil.

"Unfortunately engineering schools are not all turning out mechanical engineers. They all want to be computer science engineers and zoom to California. So we need to go to lots of different countries and look for people. We were involved in an experiment of using Brazilian engineers up here (in the U.S.) and sending them back down after they're trained. Once they get back down there, we're going to use telecommunications."

MSX International's 1999 revenue isn't exclusively the result of higher billing to the OEs. Recent acquisitions, five so far this year, have trumped up the numbers, bringing in another 3,000 people to the program.

Additional acquisition plans will continue to float the revenue bar. But they also are structured to diversify the company. In 1998, only 5% of MSX International's revenue came from non-automotive customers. Last year that total jumped to 15 percent, with interest from agriculture and other transportation industries.

"I see us being better balanced between automotive and non-automotive. I see us still being in a technically-related business but flowing out," says Stallkamp. "I would like to see us balance 50% U.S. and 50% elsewhere. We're probably not going to be big in five years in Asia, but we might have 10% there and 40% in Europe. Hopefully we'll be doing around-the-clock engineering between Australia, and Malaysia, the Philippines and Taiwan. But I think to be pragmatic with Renault buying into Nissan, I would be happy to have our customer base half here, 40% in Europe and the rest in Asia."

Stallkamp predicts that the company's long-standing experience in the automotive industry will lend it the credibility it needs to pursue every type of client, from NASA to healthcare and biotech.

MSX also is looking to diversify its engineering portfolio. Right now, the company has a strong focus on body and chassis engineering. Stallkamp says the company also has a large base of computer programmers with proficiency across at least five programming languages. This capacity is essential, given the broad and often proprietary computer systems that MSX handles.