A drive for diversification

DETROIT — Leaky sunroofs helped launch Leon Richardson's chemical management empire.

Frank Venegas Jr. got the seed money for his company, which handles auto plant construction projects, by winning a Cadillac in a raffle.

The aerosol company that Amish Shah's father started in an Indiana garage turned its focus to the automotive industry after getting a contract to provide glass cleaner to General Motors dealerships.

The time a young Terri Chapman spent playing under her father's desk and talking business with him at dinner led her to eventually take over his automotive fastener company.

But in addition to some fortunate breaks and plenty of hard work, these entrepreneurs have been helped along by automakers' longstanding efforts to nurture an ecosystem of diverse suppliers. Just getting a foot in the door is plenty difficult, but for those who get that far, demand for suppliers owned by minorities, women and members of the LGBT community can swing it open much wider.

GM says automakers sometimes recommend suppliers with diverse ownership to one another, understanding that the growth of these companies helps keep all of them alive while benefiting the business cases of the automakers that rely on their services.

Richardson, a Marine veteran with a business degree and a passion for chemistry, traces his success directly to GM giving Chemico, the company he founded in 1989, a shot at fixing a staining issue that popped up during the leak discovery process for Cadillac Sevilles.

"I wouldn't exist," he said. "Not only did GM allow us to get started, GM supported us, GM nurtured us, GM developed us, GM gave us the opportunity to have access to the industry."

GM was the first automaker to begin a minority supplier program, in 1968, and now has a roster of around 300 diverse suppliers it does business with. Ford Motor Co. began its supplier diversity development operation in 1978. Chrysler followed five years later, and it has spent around $62 billion with diverse suppliers since 1983.

Reginald Humphrey, GM's supplier diversity senior manager, considers himself a bridge builder for diverse suppliers. Once they get in the door, he'll take a step back and do some coaching along the journey as they begin to meet with decision-makers. He said he may tell them to "Take this turn, take that turn. Ask this question, don't ask that."

His role, which he assumed in 2012, is no longer about just finding someone a contract, but rather to put suppliers on the playing field and prepare them for long-term viability.

Humphrey said GM has done training for diverse suppliers in five main areas where these companies have failed historically: financial literacy, operational excellence, talent acquisition, Tier 2 inclusion and understanding GM processes. Other training areas over the years have included intellectual property protection and available tax benefits for investment in new technologies.

In some instances, a company may end up never working directly with GM, but the relationship could help it find a spot farther down the chain where it delivers services and products to GM's Tier 1 suppliers. If a supplier manages to work with one automaker, that can lead to connections with others.

Humphrey said GM worked with a diverse supplier that handled supply chain crisis management for the company but had little exposure to other automakers. So GM brought the supplier to a minority procurement fair in Michigan about two years ago so it could showcase what it could do. "My peers said, 'We have to do business with them,' " he recalled. "It just made sense."

GM typically awards 25 to 30 scholarships for $5,000 each year for a business development program at Dartmouth College's Tuck School of Business. The program, which centers on finance management, marketing, leadership and business growth, traditionally has been aimed at minority entrepreneurs, but it's also open to women, members of the LGBT community and veterans.

Outside the Tuck partnership, GM pairs diverse suppliers with purchasing executives for two-year periods as part of its supplier development program. They meet quarterly to discuss the health of the supplier's business and other topics. Those include whether the supplier has any new technology GM doesn't know about so the automaker can help navigate it through its supply chain. Ford has a similar program called Mentor Me that lets "high potential diverse suppliers" interact with Ford executives and get feedback about their businesses.

A Toyota spokesperson said the automaker has an "open-door policy" and that it always is available to hear from any potential supplier that can assist in its pursuit of "ever-better cars." This includes "competitive level, innovative ideas, new technologies, etc."

The Michigan Minority Supplier Development Council says it is in the development stages of building a mobility incubator for minority businesses.

Diverse suppliers should have an eye on the future, Humphrey said. GM's goal of zero crashes, zero emissions and zero congestion opens a new world for innovators with game-changing technology, he said, whereas there's less opportunity in more traditional areas such as stamping, logistics and construction management. Companies can stand out by coming to the table with autonomous sensors, cybersecurity acumen and ways to improve mobility solutions, Humphrey said.

"If I have a supplier that says, 'I have technology that will improve what you offer for OnStar for congestion' or 'assist Maven in terms of managing fleet or managing the software of the customer interface experiences' — anybody that can tell me something to support 'zero-zero-zero,' I'm all open," Humphrey said.

It was the late 1980s, and GM was finding leaks in Cadillac Seville sunroofs. The leaks alone were a problem, but the chemical GM used to detect the leaks with a black light was creating another issue by sometimes leaving stains in the carpet.

Richardson, who knew a GM environmental manager, happened to be sitting in on a meeting one day when the chemical supplier said it wouldn't change the formula that was causing the stains, but it would sell GM a new product to address it. That didn't sound right to Richardson, who later approached the manager and offered a solution to take care of the stains.

"We came up with a new chemistry. It was a blockbuster for us," Richardson said. "I took that formula and added a simple soap to this water solution that allowed us to rinse this material out. That was our first order to General Motors. That was our first order, period."

With GM's backing as a foundation, Chemico picked up automotive clients including Toyota Motor Corp., Fiat Chrysler Automobiles and Honda Motor Co. over the years. Chemico also has moved into aerospace, with clients such as Boeing, and defense, with a customer list that includes Honeywell and Corpus Christi Army Depot in Texas.

GM remains a key client for the Southfield, Mich., company, which provides metalworking chemicals, paint-stripping services and sanitation and facility maintenance products. Its chemical management engineers help GM plants reduce their environmental footprint, lower employees' exposure to toxic byproducts and control costs.

Frank Venegas Jr.'s family roots trace to Ford, but a Cadillac changed his life.

His grandparents immigrated to Detroit from Mexico in 1917, lured by Ford's $5-a-day jobs. His grandfather worked at a Ford stamping plant for 41 years, and his father 39 years. At one point, Venegas said, the two were stationed just three machines away from each other.

Venegas, who was working in the homebuilding business, entered a raffle to win a 1979 Cadillac Coupe DeVille at a builders ball. He won — but drove the car for just nine days before selling it for $12,000 to start Ideal Steel & Builder's Supplies Inc. in 1979. Ideal initially sold steel culverts for homes, but after the housing market slowed, Venegas had to sell wood-burning stoves as well to get through the rough patch.

As the economy recovered, he noticed homebuilders were taking on small commercial building contracts while awaiting a comeback in residential construction. So he dove into the commercial world. His first structural steel job was a doughnut shop expansion.

Venegas scored his first job with Ford in the early 1990s, building and installing crossover stairs for assembly plants. Ford approached Venegas and asked if Ideal would get certified as a minority business enterprise.

"It gave me the opportunity to work for them, understand how to bill, how to do things, safety procedures, union things," Venegas said. "I started on small jobs. They kept on growing and growing. I did a lot of work at Ford."

Venegas later made inroads with GM, too. He moved his company to southwest Detroit in 1995 to create the Hispanic Manufacturing Center with suppliers Gonzalez Design Engineering and Uni Boring.

Venegas has made community building and mentorship a critical piece of Ideal's mission.

He met with gang leaders in the tough Detroit neighborhood to ask that they leave his operations alone. He thought they'd request money to stay away, but the gangs said they wanted jobs, so he hired 80 of the members. According to the company, Venegas became a founding member of the Gang Retirement and Continuing Education and Employment initiative that helped youth transition from gang life to employment.

Venegas was instrumental in the formation of robotics teams at local schools. He also has helped GM repurpose shipping crates from Korea as garden beds for the Cadillac Urban Gardens, once a parking lot for GM executives.

Venegas said he built his operation by being an eager student of the auto business. The Ideal Group, established in 2000, is made up of Ideal Steel, Ideal Contracting, Ideal Shield, Ideal Setech, Ideal Utility Services and Ideal Surplus Sales.

Ford "invited us to sit down with the top bosses in the company," he said. "It was incredible some of the tables we got to sit at. We learned how to do things, how to build things. It was the same thing at General Motors. We were students of the system."

Satish Shah, born in 1941 in India, had a world of choices for college.

A village elder had given him a scholarship and said he could go anywhere he wanted. So Shah made a choice that reminded him of home, picking the Indiana Institute of Technology because it sounded like India.

Shah graduated with a chemical engineering degree and began working at a business where he helped formulate hair spray, according to a PBS documentary. He later started an aerosol company, Accra Pac, in 1967 out of a garage in Elkhart, Ind., with a partner, Chuck Reed. Accra Pac grew into one of the largest privately owned contract packagers in the U.S. for hundreds of products, including Febreze and Scope.

Shah also had a breakthrough when he made GM Glass Cleaner, his first large order. In 1979, Shah established Kem Krest as an offshoot company that exclusively distributed to GM dealerships.

GM was an important mentor as Shah's operation continued to expand, said his son Amish, who joined Kem Krest in 1996 after graduating from Indiana University and later became CEO.

"The break for us was not only getting that [GM purchase order], it was the relationship we had with General Motors. You're in a startup business, knocking on doors trying to get a PO. All of a sudden, you get a contract with General Motors," said Amish Shah, who started as a salesman visiting GM dealerships. "You think about validation of your startup concept and the impression it made on other people. That was a huge benefit that got my father from zero to about $400 million in revenue back in his heyday."

Satish Shah, as he neared retirement age, sold Accra Pac Group in 2005, when Kem Krest still generated all of its revenue from GM. His son later bought back Kem Krest in 2008 when GM was heading toward bankruptcy. A bank almost pulled back on the loan for Shah to buy Kem Krest, but GM stepped in to help get the deal closed.

That was the impetus for Amish Shah to form an advisory group on how to build value for car companies and expand. Kem Krest grew to span much of the automotive market with customers such as Audi, Ferrari and Ford, while also homing in on defense, agriculture and power sports.

The company's products include antifreeze, gear oils, motor oil and transmission fluids. It also offers assistance with procurement, manufacturing, packaging, distribution and logistics.

Kem Krest isn't content with just adding to its annual revenue haul, which tops $500 million. The company wants to share its good fortune with others through volunteer work, providing startup capital to young entrepreneurs and investing in downtown Elkhart.

"Being a minority business is a responsibility," Shah said. "You should be responsible for helping others; you should be responsible for helping your community and helping build the brand and integrity" for minority business enterprises.

Terri Chapman didn't just want to be in the family business growing up, she wanted to run it.

Her father, Larry Berman, founded fastener company MNP Corp. in 1970. Its first big contract came from GM around 1974.

The Utica, Mich., company's fasteners are used by clients such as GM, FCA and Ford to fortify engines, bodies and chassis. Around 98 percent of its business is tied to the automotive industry.

Growing up, Chapman said, talking business with her father was just a way of life. She remembers hanging around the MNP compound, where she'd sometimes sit under her father's desk while he was on the phone.

She breathed the business, working in a variety of roles before becoming CEO in 2013, a year before her father died.

"Business is just something that was discussed at the [dinner] table; it was just part of our conversations," Chapman said.

She recognized early in her career that she was in a male-dominated industry and admits the dearth of women made her "hesitant to think that I could be the CEO." But that uncertainty didn't stop her. Chapman has led MNP, which is certified as a Women's Business Enterprise, to multiple GM Supplier of the Year awards, starting in 2015.

Her task now is to maintain the culture her father established over several decades, built on the longevity of its senior ranks. The company celebrated the retirement of the last executive from her father's era, a sales vice president who worked there for 41 years, in November.

"When my father started, there was one person and then two people, then 10 people," Chapman said. "All these people grew up here. I just know our philosophy; I know what we do, so continuing to pass that on to the new people, the young people, to the 1,200 people throughout the organization. We have to do it differently than he did it."