Earthquake Spurs Supplier

Daily News Article — Posted on April 4, 2011

(by Jeff Bennett, The Wall Street Journal, WSJ.com) – The March 11 earthquake and tsunami in Japan has shut down plants at major auto makers and their parts suppliers, slowing production around the world. But the disaster has made one small firm on the other side of the world a hot commodity.

The phones at Gage Products Co., a Detroit-area company that cleans and services painting systems in auto factories, have been ringing nonstop since a paint-manufacturing plant in Japan was knocked out of operation, forcing auto makers to stop using some of its colors and switch to others.

The plant, owned by a German company, Merck KGaA, is the only source of a Xirallic, a pigment that contains coated flakes of glass that give auto paints a dazzling, shimmering look. Located in the coastal city of Onahama, Japan, the plant suffered damage from the quake. A Merck spokesman said it is unclear when production would resume.

Before the auto makers can switch to a different paint, they must clean the lines or risk tainting the new paint with the Xirallic left over in the system.

“We were certain there was going to be some effect and some type of part shortage, but this whole thing with the paint was a surprise,” said Mark Wiseman, Gage’s director of sales. “Sometimes out of tragedy there is opportunity,” he added.

Gage, a 110-employee company that normally works in the background and rarely gets any time in the spotlight, now has more than a dozen jobs scheduled over the next two weeks and expects the calls to keep coming in, said Andy Welch, Gage’s business manager. The 73-year-old firm normally does two such specialty cleaning jobs a month. It competes with Henkel AG and PPG Industries Inc.

Its customer list includes Ford Motor Co., Chrysler Group LLC., General Motors Co., Honda Motor Co., Volkswagen AG, Toyota Motor Corp., Kia Motors Corp. and Hyundai Motor Co.

Ford and Chrysler have said they are affected by the Xirallic shortage. Ford has stopped taking orders for a color called “tuxedo black” and is limiting production of vehicles painted in three shades of red. Chrysler is limiting orders on 10 different colors that use Xirallic.

Cleaning paint machines can cost from $10,000 to $25,000 and takes a four-man crew about five days and 2,500 or more gallons of solvents. Gage begins by running a pre-cleaning solvent through the hoses to robotic sprayers that apply coatings to the steel skeletons of cars or trucks before they are outfitted with seats, carpets, engines and other components.

The first solvent is forced through the equipment for eight to 24 hours, followed by another chemical for as many as 48 hours, and then a purge solvent and a final cleaner after that. Before new paint is run through the equipment, Gage takes a look inside by running miniature cameras through the hoses and machinery. The solvents are collected by Gage and recycled. Leftover paint is separated from the solvent, collected and then used to power kilns used in the cement industry.

Gage, which had about $50 million in sales last year, has more than doubled its production of specialty solvents to handle the paint-shop cleanings. The calls began coming in last week as different plants began notifying Gage they were about to run out of Xirallic paint and needed the cleaning service as soon as possible.

“I have never seen something like this [paint shortage] before and I have been working for this company for more than 13 years,” Mr. Welch said.

Write to Jeff Bennett at jeff.bennett@dowjones.com.