Stern Rubber expects to expand under new owner

STAPLES, Minn.—Zhongli North America Inc., the North American unit of Zhongli Corp., has purchased Stern Rubber Co. as the Chinese company looks to grow in North America.

Terms of the deal, closed in November, were not disclosed.

Zhongli said in a news release that acquiring the Staples-based manufacturer of custom molded and extruded rubber products is the first step in its strategy to establish a manufacturing presence in North America for its automotive products.

Currently, the Shanghai-based company operates its North American unit out of Troy, Mich., which houses a 33,000-sq.-ft. parts storage and re-packaging warehouse facility used to distribute its automotive-related rubber products manufactured in Shanghai and Wuhu, China. It also operates a 13,000-sq.-ft. technical center in Madison Heights, Mich., that performs sales, engineering, logistics and quality control functions.

Zhongli does not currently have a manufacturing presence in North American and plans to bring over production from China and establish it at Stern's operations in Minnesota, according to Stern Rubber President Bob Jackson.

Zhongli's main product lines include suspension components such as bushings, engine mounts and transmission mounts.

Kenneth Rohan, vice president of operations for Zhongli North America, said in a statement that the firm ultimately plans to expand its capabilities for other automotive related components to reach customers it couldn't reach without having a manufacturing presence in North America. That's where Stern Rubber comes in. The company is not present in the automotive industry but uses the kind of rubber-to-metal bonding processes Zhongli was targeting.

Stern Rubber mainly focuses on non-automotive industries with three facilities in the Minnesota area—two at its main complex in Staples and one in Aitkin that focuses exclusively on gate valves, one of the firm's largest businesses.

“We don't do a lot in the auto world, so it's definitely going to be a change for us,” Jackson said. “It's going to give us a significant opportunity into the auto world. Zhongli wants to move all of the product currently made in China over here and have us manufacture it, which is a significant amount of business.”

To accommodate the influx of automotive production, Jackson said Stern's facility in Staples is going to expand, likely sometime in the spring of 2016. An expansion to Stern's Aitkin facility also is likely.

Jackson said Stern's non-automotive business won't be affected by the transaction.

“We're going to continue to focus on our current industries,” he said. “This also gives them an opportunity to diversify their portfolio so it's not all automotive. They're very interested in our current customer base and growing our current customer base.”

Stern employs about 85 at the three combined facilities, and Jackson said that number is projected to grow with the influx of new production. “They're looking to make us significantly larger than what we are now,” he said, adding that he wouldn't be surprised to see employment double in the next couple of years.

Currently, Stern Rubber operates six injection and 27 compression presses at its main facility, with the extrusion operation consisting of two lines. It also operates three compression presses in Aitkin.

Stern Rubber uses almost every kind of elastomer—including natural rubber, EPDM, SBR, molded silicone and fluoroelastomers—using compression, transfer and injection molding as well as some extrusion. Part of the reason for the growth is the company's willingness to try almost anything, Jackson said.

Its main facility spans about 50,000 square feet and specializes in custom molded parts. Its extrusion business operates out of the second facility at Staples, a 14,000-sq.-ft. building with two extrusion lines. The two units rest on 40 acres of land.

Stern Rubber recently completed a 1,200-sq.-ft. addition to its main facility, also adding three new pieces of equipment to its manufacturing operation. The expansion and the additional equipment represented a $1.45 million investment.