Area manufacturing execs get real about tough economic times
Everyone in the manufacturing arena knows it's bad out there - but just how bad is it? The answer is...it depends on who you talk to. BNH spoke with a half-dozen area manufacturing executives recently to hear what they had to say about the economic downturn, its impact on their companies, who they're reacting to it, and what they think the future holds for their company and their industry. In what may be the We have several contingency plans for different scenarios, which I'm not at liberty to speak about in detail. Basically it means drastically taking a look at cutting all our costs, and, as top managers, adhering to those [revised] budgets.What do you think government at any level ought to be doing about it?
With the various bailout programs that the various companies have gotten from the government, I'd like to see our government more involved and understanding more of the needs of manufacturers to operate in Connecticut and in the Northeast. We're pretty proportionately high taxed, and we should be seeing more for those tax dollars. Opportunities that are going to have to be explored include retraining some of the workforce for new skilled jobs. I'm really worried about the unemployment in southern Connecticut and New Haven County. We used to have technical colleges throughout the state and technical training, and we lost a lot of that. I think that it needs to come back in some proportion, in some of the bigger cities like Hartford, New Haven, Stamford and Waterbury.
How confident are you that your company will still be in business in 24 months?
Very confident.
Why do you feel that way?
Sargent Manufacturing has been in existence for well over 100 years, and is well-recognized name with high quality products.
We have managed through downturns before, and I have confidence [Sargent] will weather this storm as well.
Robert Cowles is president of New Haven-based Cougar Electronics Corp., which manufactures and distributes power conversion components.
How exactly is your company faring during the current slump?
Right now sales are down and it's a little bit of a struggle, but we're still plugging away and we're doing okay.
What exactly has changed, and when did it change?
A lot of people are cutting back in their orders. It started about the same time the stock market took a dump, around November. A lot of people started holding back, and were not sure what to do. One guy was ordering ten a month of a power supply, and he's pushed back things a couple of months. He sells those part supplies to other people, and they've cut back. Then we've seen what the automotive people have done, closing down for a month and causing a ripple effect throughout the economy. Then the holidays hit, and that took a little bit of a toll. A lot of people who normally shut down for one week shut down for two or more [weeks]. I have a lot of niche markets, which is probably why we're okay. You can't have elevators that don't work, so that end is still holding up. We also have specialty markets, some of them overseas. We're still getting business but it has slowed a little bit. We're a manufacturer of certain products and we're also a distributor, buying products and reselling them.
What is your company doing to respond?
We're very busy calling people and trying to [generate] additional sales. I've been on the phone with a lot of customers, trying to get things started, not just for immediate but also for future business.
We're always looking to cut costs to stay in line. We've got to watch our expenses and not bring in too much inventory. I'm been in this same kind of business for 45 years. You've got to be organized, maintain a workflow and have a clean operation. Now they have names for all these things. Fairly 'lean' is the way we operate. We have a stable workforce, and haven't had any layoffs. We're holding our own right now. We've redone all the lighting in our whole plant to be more cost-effective, and we're looking constantly for ways so we won't waste any energy or heat.
What do you think government ought to be doing?
I think they have to understand what's happening. I've been in business a long time in Connecticut, and we used to have a rep that just covered Connecticut, to try to keep our costs in line. I've never asked for any handouts. If I've borrowed money from the bank I've always paid it back. All of these people getting bailouts bothers me. I see the how they spend and all the waste they do. The government should be involved in trying to make people competitive, not trying to tie people's hands behind their back. Our local government should look at how other areas support manufacturing, and allow the marketplace to level itself.
How confident are you that your company will still be in business in 24 months?
Very confident.
Why do you feel that way?
I'm a survivor, and I've been through some of the ups and downs over many, many years. You've got to continually look to change, develop new products and different markets over the years, and I think we'll continue to do that. You can't be stagnant.
Bill Neale is vice president of operations for Radiall AEP of New Haven, which manufactures electronic connectors for commercial and military applications.
How is Radiall making out during the current slump?
We're pretty much okay. We're not real consumer-oriented. We do a lot of avionics for commercial aircraft. Our customers make avionics. Our next biggest market is military [which awards long-term contracts], so we're not as short-term economically dependent as other companies. Radiall makes coaxial cables, cable assemblies, coaxial connectors and antennas, used mainly for high frequency radios, especially by the military and aeronautics industry.
Has anything changed, and if so when did it change?
One big bump in the road right now is Boeing, which has delayed [rollout of] the 787, and affected some of our customers - Honeywell, Rockwell Collins, Raytheon - producing parts for them. Boeing has delayed it a couple of times for the last year. This is totally new way of building aircraft out of carbon fiber, and they haven't figured a way to put it together, which has pushed back dates for all the suppliers.
What is your company doing to respond?
We have, on the operations side, an in-depth continual improvement program to cut costs and get rid of non-value-added things. On the sales side, I believe we have a lot of value-added offerings that beat the competition. The long-term outlook is very good. AEP [division Applied Engineering Products] used to be just in New Haven but Radiall (which acquired AEP in 2005) has operations in China, India and Europe. Our market is really the world.
What do you think government ought to be doing about it?
That's a tough one. At the federal level this is so bad we really do have to be looking at a stimulus. We have to preserve credit in the whole supply chain. We're a pretty conservative company and I'm not worried about our cash-flow problems, but if the bank decides to stop giving credit to a key supplier, one little piece, and you've got a Boeing 737 that doesn't fly. That kind of thing worries me. I recently went to a meeting with state legislators. Connecticut has a mandated balanced budget, and they kind of want to keep everything and balance the budget and not raise taxes. I don't envy them because they can't do that, but I wouldn't make a prescription [on how to fix it].
How confident are you that you'll still be in business in 24 months?
One hundred-percent confident.
Why?
Partially because I'm optimistic, emotionally, and have a glass-half-full personal outlook. The corporation is conservative about cash. We have a good, diverse portfolio of product lines and customers, and I am basically hopeful about economic things. I think there's a recognition among politicians that this is a bigger deal than anything we've seen in the last 20 years, and the easy old solutions and debates may not be adequate for this situation. Our company is in good shape, and I'm happy to hear some sober mature talk at both the state and federal level.
Paul Hoffman is president of Orange Research in Milford, a maker of industrial instrumentation.
How is Orange Research doing right now?
We had seen a slowdown in September [2008], a softening in business. Then, during the last quarter - October, November and December - a pretty good-sized drop.
What exactly changed?
The level of customer orders is down, in a lot of different industries. It isn't any particular industry; it's the whole economic downturn. I think everybody's slowing down or cutting back business, playing it safer, and not knowing how to anticipate where the economy is going.
What are you doing in response?
We look at lot closer at expenses. We've had to cut back a little bit on payroll in response to the slowing of business, and had to have some layoffs.
What should government be doing?
One thing government should look at it is its own structure, which should be as streamlined in providing services and spending the taxpayer dollars. We instituted lean manufacturing a number of years ago, which dealt with taking the waste out of our company - not just on the manufacturing floor but also in administrative areas. I think if that kind of philosophy was employed in government, they'd be better at delivering services in a timely manner and reducing costs.
How confident are you that you'll still be here in 24 months?
I'm very confident.
Why?
You have to be responsive to the economy and make the proper adjustments to your company to still be viable in a downturn. We also continue to work in areas of new product development and employee training and education, and during a downtown that's a good time to put more effort into your employee training. That's another thing the government can do: train their redundant workers to make them more flexible and valuable.
Lawrence Moon is president of C. Cowles & Co., which was founded more than 160 years ago in New Haven to make lanterns for horse-drawn carriages. That business having declined some, Cowles now concentrates on precision metal stamping.
How is C. Cowles doing right now?
We're doing okay. The downturn was so sudden and fast, I don't know that anybody understands the full impact of it yet. We're in four separate industries. Three are doing well, and the automotive, obviously, is not doing well. I don't know that the press has put it into the proper perspective. All the platform companies [major automakers] have scaled way back for the month of January, causing the Tier 1s [major suppliers] to scale way back. That obviously impacts us, but we have orders on the books for February,
What changed, and when did it change?
It's too soon to tell. Obviously, the auto industry is not making 17 to 18 million cars [annually] any more. We're making 11 million, so there will be a scale back in the supplies. For us, sales for the month of January have tanked for the automotive side. There are hardly any - I've never seen an order book dry up like that. Normally [customers] give us eight to 12 weeks of releases, but they didn't push January and said, 'Don't ship us anything.'
What are you doing to respond?
On the automobile side, we've pretty much closed the operation down for the month of January moved about half of the employees to our other businesses. The others got layoff notices, and they will start coming back, probably the last week of January and [in] February. We're also doing things to diversify into other industries. Our stamping business [for example] is moving into other businesses, like medical instrumentation, to offset the volume [in lost automotive sales].
What should government do?
The one area that I think has really hurt the Big Three [automakers] is the economy is dramatically down and there is no consumer confidence, so if the stimulus package works that would be great. The second area is credit availability, so the government has to continue to work on the credit markets. In terms of the Big Three, I don't know that the government should try to steer them toward hybrids if hybrids won't sell if the price of gas remains low. I think the free market should determine that. The Big Three have to restructure their balance sheets, and remove the legacy costs. Four out of five people associated with the legacy costs are retired, so the government is going to have to pay anyway in the form of Medicaid, food stamps, etc.
How confident are you that you'll still be in business in 24 months?
As of yet our other companies have not noticed the impact of the economy, but if this continues I'm sure we will see a downturn. There are just too many things unknown with the auto industry. It is the last major integrated business in this country, and the biggest thing of any major scale. If you're going to be a contract manufacturer you're going to have to maintain your share of the automotive industry. There's going to be a contraction of auto suppliers. Obviously we feel we're the best equipped to survive, but a lot will depend on how much business we maintain. The other businesses are doing fine. Even if there is a downturn we would anticipate them coming back in a very acceptable manner.
Ken Bryant is CEO of Bead Industries in Milford, which for nearly a century has manufactured Bead Chain. The company also owns McGuire Manufacturing, which makes commercial plumbing supplies.
How business right now?
Last year was one of the best years we've had in a long time. In November [2008] we took a bit of a hit, then came back a little bit. But things are certainly slow for January.
What changed, and when?
We're in the automotive, telecommunications and PC board industries. What has helped us is we had added quite a few more customers last year, so while everybody's down in sales, we have more because of our marketing efforts.
What does 2009 look like?
It's going to be difficult to predict this year. December is usually slow but it picks up in January. We haven't seen that pickup, and the bookings are still behind where they should be for January.
What is your company doing to respond?
Over the last ten years we've really gone through a lot of lean manufacturing initiatives, so we're pretty light on our feet. That's how we've really responded. Our expenses are down about as much as [they] can, so even though sales are off a bit, it's not really affecting us, as far as the bottom line. We always do a strategic business plan for the next year, and will turn one in for February. It's going to be difficult to predict this year.
What should government do, if anything?
You'll hear the same things from all of us. Labor is our [highest] cost. Then it's raw material. Then it's medical insurance for our employees. We can wring as many dollars as we can out of our costs, but still are faced with 20- to 30-percent medical cost increases every year, which is a result of not having good tort reform. [Beyond that] I think the government should stay out of it. Most employees are well above minimum wage. I think they ought to ease off on taxes and promote more technical skills because we're running out of skilled people. If we don't have the engineers and machine operators here, that will impact us severely.
How confident are you that you'll be in business in 24 months?
I'm very confident.
Why?
I think we've definitely hit the bottom, where everything was pretty much blown out of place, with real estate just being beyond what it was worth and the market so blown out of value. It's going to be slow crawl back, but I'm very confident about the future.
