Interview: Behind the Wheel Superior Industries Executive Vice President Steven Borick finds doing business in Mexico saves money but is not free of restrictions By SHELLY GARCIA Senior Reporter When Superior Industries was founded in the 1950s as a supplier of aluminum wheels to the automotive aftermarket, its little-known products were bought mostly by car enthusiasts who wanted a high-style look impossible to achieve with steel. A half century later, aluminum accounts for nearly 60 percent of the wheels used on U.S. vehicles, and Superior is an international company with nearly $170 million in sales and a 35-percent to 40-percent share of the market. The Van Nuys-based company operates 12 manufacturing facilities in the U.S., Mexico and Hungary and employs some 6,000 workers. Although 2001 was a challenging year rising energy costs, the strong dollar and startup costs for its new factory and some new products, along with a reduction in interest income, contributed to a 30-percent decline in earnings to $55.3 million or $2.10 per share on a diluted basis Superior seems back on track. This year, the company has given guidance that it expects to post income of $2.35 to $2.40 per share on a 12-percent increase in revenues. Throughout much of the company’s recent growth, Superior executive vice president Steven J. Borick, son of the company’s 78-year-old founder, Louis Borick, made his home in Texas, forging his own career in the oil business. The younger Borick turned down his father’s request to join the family business-turned-public company when he graduated from college. But he returned to the fold in 1999 as the expansion of the company’s first manufacturing facility in Chihuahua, Mexico was nearing completion. A second Mexican facility came on line last year, setting the stage for product diversification and further globalization and creating the backdrop for the next generation of management. When the new plant becomes fully operational, Mexico will account for 30 percent of Superior’s aluminum wheel manufacturing capacity. Question: Why did Superior decide to set up manufacturing operations in Mexico? Answer: There were salary opportunities, there were opportunities with the Mexican government and some of the states in Mexico were courting corporations from all over the world. Q: How do you set wage scales in Mexico? A: Major U.S. corporations had been there for years. Across the street from us is Ford Motor Co., that has a huge operation, so we felt pretty confident that (wages) were not going to be an issue. And by the way, when you talk about disparity in wages compared to America, when you look at all the perks and benefits workers get (in Mexico), it’s not what people think. Q: What benefits do you offer employees in Mexico? A: All of Mexico has a federal union status, but it’s not like what we consider a union. There are requirements that, for instance, there are so many days a year of holidays, certain requirements where you have to supply a minimum of bus transportation. There is a requirement for profit sharing, and it is (that) 10 percent of your profits go back to employees in the form of a profit-sharing program. Some of the other perks are not required, but everybody does it and if you don’t, you just don’t hire employees. We have in our plants in Mexico beautiful cafeterias, beautiful bathrooms with showers, on-site medical and dental. Q: When you add up all these things, what is the disparity between the cost of labor in the U.S. and Mexico? A: It may be 30 percent to 40 percent less. Q: Now that you’ve been operating in Mexico for some time, what other advantages do you think you’ve gained from the move? A: I think there are always costs to look at, but I believe to have the stature that’s important for some people to continue to respect you, whether it be shareholders, investors, institutions, the OEMs (original equipment manufacturers), that it’s important to have global presence. The other thing is that a lot of these customers have plants in Mexico and part of what they need is Mexican (manufactured) content in their product. We’re not a free-trade world by any means, and Mexican content is a big issue for Mexico. Q: What were some of the challenges in setting up operations in Mexico? A: I think what we had to learn was how to deal with foreign builders and rules and regulations. Quite frankly, a lot of the rules and regulations on building and so forth are tougher there than they are here. The environmental rules are tougher in a lot of ways. The customs and duties issues were significant issues to overcome. Those were probably some of the toughest, particularly bringing $40 million, $50 million worth of equipment assets into the country and making sure that they crossed the border on a timely basis, and that you set them up in the manufacturing facilities. Q: What do you think is the most important thing you’ve learned about operating internationally? A: If you just follow the rules and go by the book and don’t take any shortcuts, you can get anything done anywhere in the world. But you have to have a team together and not think you can do it on your own. You must rely on local counsel and local accounting firms and people that are liaisons to the government. I think people who try to do it without that end up failing or end up taking a lot longer to establish themselves. Q: How did your company come to the aluminum wheel business? A: The company got into some after-market aluminum wheels in the late ’60s, and by the early ’70s we were into the first major energy crunch in America, and car makers were looking to lighten the weight of the automobile. So the company went to Ford Motor Co. and showed them that they could manufacture a lightweight wheel, 30 percent lighter than steel, and Ford became the first company we sold aluminum wheels to for the OEM market. At that time, the penetration for aluminum wheels on OEM vehicles was probably under 5 percent. The penetration rate today in America is approaching 60 percent of OEM vehicles. Q: How much of a problem was it when you told your dad you wouldn’t be joining the business? A: I’ll never forget when I came home from college on the seventh of July, the day before my birthday. That night at dinner my father said, ‘I have an interview set up for you with the HR department tomorrow.’ I said, ‘An interview for what?’ He said, ‘For a job at Superior Industries.’ I looked at him and told him I had no interest in working at Superior Industries, and his comment to me was, ‘You can’t have everything handed to you on a silver platter.’ I said I didn’t expect that to be the case, and I went off to do my own thing. I started out as a roughneck on drilling rigs working in North Dakota and learned the oil business from the ground up. Q: Why did you decide to give up the oil business? A: It appeared to me that with (my father’s) entrepreneurial spirit and, as he was getting a little bit older, that there was a need for a developed succession plan. He and I came to the conclusion that, with the family’s position still in this company, it made sense for quote, unquote an insider to be involved in the transition at some point in the future. Q: It must have been difficult to embark on a new career in your 40s. Do you wish you’d come back sooner? A: I quite frankly don’t believe I would have made it coming out of school because my father is challenging. I needed to be my own person, and I needed to be my own boss, and I’m happy for that. Steven J. Borick Title: Executive vice president, Superior Industries International Inc. Age: 49 Education: Bachelor’s degree in finance and economics from Western State College, Gunnison, Colo. Career turning point: “In 1991 when I decided to drill a 16,000-foot well in Texas without any partners, and it was a dry hole. It cost me $3 million of my own hard-earned money. It was very humbling.” Most admired person: (Former GE CEO) Jack Welch Personal: Single
