Rockford Files - today
rrstar.com
Story printed on: Aug. 4, 2002
BUSINESS: Manufacturing
We’re fighting a stacked deck
Manufacturing is the engine that drives the Rock River Valley economy. Companies that make things, mostly out of metal, employ a quarter of the work force. Those companies, and the wages they generate, keep service industries and retail stores in business.
By GEORGETTE BRAUN and CHUCK SWEENY, Rockford Register Star
For generations, a tight relationship existed between large companies and small ones in the Rockford area. Skilled craftsmen and machinists broke away from big companies and formed small firms that supplied the big ones they left.
A generation ago, Rockford was led by a handful of men who owned or ran locally based companies. Today, most of those companies are mere cogs in the wheels of international corporations, some owned in the United States, others offshore.
Hundreds of small manufacturing firms are still locally owned but are struggling to stay afloat. They claim their own government’s free trade policies have stacked the deck against American manufacturers in favor of foreign firms that can make consumer goods and machines cheaper.
They believe they’ll never be able to compete against companies in countries that do not have to pay high labor costs and benefits and that don’t have to comply with federal, state and local regulations.
Plus, they believe few Americans know or care about their plight. However, they warn that Americans will care when their standard of living begins to drop because the United States is no longer creating wealth by manufacturing products.
Recently, a group of small manufacturers and manufacturing-related businessmen met with Rockford Rockford Register Star political editor Chuck Sweeny and business reporter Georgette Braun to talk about their fears and frustrations.
The July 11 meeting was emotional. Manufacturers expressed disgust and dismay at what they see as the end of the American manufacturing era.
Edited excerpts from manufacturers’ meeting
Steve Hall: My company is Production Machinery Inc. I sell used machinery, and my industry is a leading indicator in manufacturing because when manufacturers get busy and need a new machine and can’t get one right away, they turn to the used machinery market.
Our industry is the first to go down and the first to come back up.
A nation can only live as well as it works, and the only way you can create wealth is to manufacture it. Our manufacturing is going overseas like something I’ve never seen, and I’ve been in business more than 30 years.
We don’t have a level playing field. When we’re dealing with China Inc., they don’t have to worry about Social Security payments, EPA issues, OSHA, the Americans with Disabilities Act or child labor laws. I can tell you this, China can manufacture just as well, and just as quickly, as Americans can. They have access to all the same machines.
(U.S. Rep. Don Manzullo, R-Ill.) says he’s for free trade. The problem is, a company in Taiwan or Japan will buy one machine from a Rockford company, copy it, reproduce it and they are never going to buy another machine from Rockford.
Bob Trojan: I’m a CEO of a new, start up company called Rockford Linear Actuation, and the genesis for that company was my 11 years with Hydroline in Machesney Park, which was sold to Eaton Corp. in 2000. A year later, they moved everything out of Rockford, and we decided to step into that market and build a small company. Prior to that, I’ve had extensive international experience; I’ve lived abroad.
Mal Anderberg: I own Dial Machine Co. in Rockford. I’ve had it for 36 years; I started from scratch. I normally employ about 65 people, but we’re down to about 30, including the office staff. We’re a contract machine shop that will build something you can hold in your hand right up to a 70,000 pound part.
Dave Wilson: I own Wilson Tool Corp. I started business here 30 years ago. I normally have 45 to 50 people, and I’ve got about 22 or 23 now. Rockwell International owes me $1.2 million. They’re gone. They’re making printing presses in China now.
Bret Rogers: I’m sales director for the Rockford Company, owned by Joe Klinck. Historically, we’ve been one of the biggest makers of appliance screws. As sales director, the vast majority of my time is spent fending off international competition and trying to salvage what we do best. At the same time, we’re trying to evaluate all kinds of other business opportunities and things we can do to improve the business, but so much of our time is spent trying to save what has been the bread and butter of our company.
Joe Klinck: I’m president of the Rockford Company. Three years ago, our sales were $5.5 million and we employed 50 people. We just finished our fiscal year June 30. We ended the year with $ 3.6 million in sales and about 30 employees.
We made leg levelers for Frigidaire’s laundry division in Webster City, Iowa. They make washers and driers, and they also make GE driers under private-label contract. We also made leg levelers for a dishwasher plant in North Carolina.
We lost all three of those accounts to a Mexican manufacturer.
The good news is we got all that business back, but the bad news is that we took it back at the Mexican price ... It’s not a pleasant situation. I don’t have much hope for the future. My cost for flat rolled steel went up 50 percent for the third quarter of this year.
Don’t ask me how that can happen when the import duty is only 30 percent. Apparently, because of the uncertainties, nobody ordered any imported steel, so it’s not on the way in. Therefore, there’s not enough domestic supply to cover orders, so the price has gone up.
How many (small manufacturers) have been able to get a price increase? If you’re doing work for an auto company or GE or Frigidaire, they want a 5 percent decrease from you.
Even if you’ve been able to streamline your manufacturing, you’re still faced with cost increases you can’t control. Everybody’s insurance is going up. My workers comp cost $33,000 last year. It’s $44,000 this year. Where’s the money going to come from for that?
Matt Bortoli: I’m president and CEO of Quality Metal Finishing in Byron. We’re a custom manufacturer of decorative zinc die casting, plumbing trim hardware, faucet hardware, tub spouts, stuff like that. I can’t tell you how much the Chinese have affected our business. It’s unfathomable.
We used to have more than 600 employees. Now we’re down to about 400. I’ve lost one complete account to China. On another very large account, I’m doing 20 percent of the business I used to. I don’t think there’s any end in sight, unless the buying public gets it in their head about what damage is being done.
When I go in and call on an account, they tell me I’m going to lose the work. I ask what I have to do to get it, and they tell me to cut my price 50 percent.
I’m sure if the Rockford Register Star cut their price 50 percent they wouldn’t last long, either. I’ve heard the line that we’re going to replace our manufacturing jobs with service jobs. It’s not going to happen. There’s only three ways to create wealth. You have to mine it, grow it or create it in manufacturing.
The service jobs we have in this country, especially high-price services, are already moving off shore. Accounting work is being done off shore.
It seems simple to me. The world is a pie. There’s only so much pie to go around. Historically, the U.S. has had a pretty big piece of the pie.
If they want to bring the standard of living up in these other countries without them growing on their own, supplying goods to their own people, we’ve got to give up part of our standard of living. The manufacturing base is eroded to the point it’s really fragile.
Mal Anderberg: It’s fragile to the point we’re going to lose all our industry. We all know we have to have trade, but what is the definition of free trade? We don’t have free trade here right now. Here’s an example. In 1976 I ordered a new machine. It cost $400,000. I figured we needed to do $80 an hour worth of work. We ordered it, and we had so much work we didn’t know what to do. Now, on that machine I can’t get $80 an hour worth of business.
Don Metz, vice president, Metz Tool and Die Works Inc.: The American dream was built on your grandfather’s and great-grandfather’s back, and the same companies that have profited from their efforts have moved offshore, and the labor that our forefathers put in is now being used to put us out of business.
You cannot compete unless the playing field is level, and unfortunately we don’t have a level playing field.
Register Star: I’ve got to tell you, this all sounds a little hopeless.
Bret Rogers: The people who took our business were making 60 cents an hour in Mexico, and over in Taiwan they’re probably making 8, 10 cents an hour.
Mal Anderberg: The problem isn’t all China, it isn’t all Mexico. It’s corporate greed right here. It’s large corporate greed, what we see with the Enrons and WorldComs. Let’s take Sundstrand, the man who ran Sundstrand for a year and a half, sold it ... He’s good for the rest of his life.
What’s taken root in this country is corporate greed, stockholder profits have got to be gigantic while the actual producers of the product are going down the tubes.
Steve Hall: But Mel, (greed) drives the free enterprise system. If someone had told you the president of Dial Machine can only earn $20,000 a year, would there be a Dial Machine? No.
Dave Wilson: One thing that frustrates me is the attitude that this country’s going to own the technology, and we’re going to get stuff made all over the world. The fact is, we need jobs for all skill levels, not just high tech. We’re not all computer wizards.
I was up in Appleton, where there’s a heavy paper industry, and they were telling me that the machines they make over in Europe far exceed what we make here because their technology is passing us.
I guarantee you, we may be using Mexico and China right now to make stuff, but they will learn from everything they’re doing and 10 years from now they won’t give a damn about our technology.
Eric Anderberg: I got off the phone this afternoon with a guy who sells machine tools out of Japan. The gentleman he does business with just got back from China and every plant he was in was 2, 3 years old, all the latest machines you can get. They’re not dragging carts down the aisle with oxen, it’s the latest state-of-the-art equipment in their plants.
Dave Wilson: And our plants aren’t even sellable today. Nobody would buy them.
Eric Anderberg: That’s because our government hasn’t allowed us to have the incentive to reinvest in our equipment and plants and because of the trade policies they have with communist governments.
Matt Bortoli: I’ve got customers who have facilities in China, and they’ve told me that in China, the more you export, the higher the subsidies are from the Chinese government. They will not let you take money out of China, but you can take all the goods you want out. China is the one that has really affected us, and the plant that has affected us has got 1 million square feet of space, brand new equipment, and the labor rates are the equivalent of about a dollar a day.
Eric Anderberg: And they’ve done it with our money, from the people who go to Wal-Mart every day and buy those Chinese products.
Matt Bortoli: I’ve got customers who put Made in U.S.A. on their product, and all it means is they put it together here with foreign parts.
Mal Anderberg: Is the answer to have some kind of import tariff on this stuff? Is the answer only political?
Eric Anderberg: All this is happening out of our control. Everybody here has had a successful business. We’ve done everything we could to be as efficient, productive and profitable as we can. But there are things outside our control, largely our government, that has heaped all this on us.
There is tort law, the trade agreements, the one way door coming in our country, so we sit here, we’re going to die. We’ve tried to talk to our politicians; they don’t seem to want to listen.
Register Star: What should the U.S. do to restore American manufacturing?
Several answered at once: Close the borders!
Steve Hall: All you have to do is reinvent your business.
Bob Trojan: The cost to lay off a person here is a whole lot cheaper than to lay off people in Germany, say. They protect their people, where as here, we don’t.
What if we did a comparison of the costs of running a major manufacturing company here, in China, Italy, and other countries and show the politicians these are the barriers we have, these are the things we’re fighting against.
Steve Hall: One of our problems is that we don’t have an NRA to lobby for us, an organization as strong as the NRA. We don’t have the lobbying power.
Don Metz: If the newspaper started taking all the news stories off the AP, what would happen? There would be no need for local reporters, and those people down in proofing wouldn’t have a job, and it wouldn’t matter how cheap the paper is, you wouldn’t be able to afford it. And that’s kind of where we’re heading. The guys producing things are the guys getting hit first.
The politician is sitting there saying, “OK, (manufacturers) are one group, but the vast majority of Americans like cheap products, so I’m certainly not going to rock the boat.” But it won’t be long and the vast majority of Americans are going to be affected by all of this.
Joe Klinck: What kind of logic does anybody use to protect 166,000 jobs in the steel industry and risk 2 million jobs of people making parts out of steel? What kind of logic is that? This is a Republican president we elected, and he’s pulling this kind of crap. It makes absolutely no sense.
RRS: Can our local leaders do anything to help you?
Bob Trojan: I’d like to see them recognize what’s going on, whether it’s the Council of 100, the Chamber of Commerce or even the politicians. When the gubernatorial candidates come to town, where do they take them? To WorldCom! Do they take them to manufacturing companies? No. Do we have any brochures that say here’s all the wonderful capabilities of Rockford companies? No.
Dave Wilson: Nobody’s going to listen just to people from Rockford. Not the politicians. It would be interesting if all the manufacturers went out to Washington, D.C., so that even the cars couldn’t move. Maybe they’d listen.
RRS: I imagine you all are closer to the Republicans politically, but do you guys talk to the Democrats at all?
Matt Bortoli: I can’t understand why organized labor just doesn’t get in a row, because they’re taking it on the chin, too. Even those little American flag pins we’re wearing are made in China. We’ve sold ourselves.
We’ve made a deal with the devil, folks.
Bob Trojan: Now that the ball has started to roll, let’s keep the ball rolling and at least say, as Teddy Roosevelt said, keep trying, keep trying, keep trying, for the young people.
Mal Anderberg: They say that eventually the pendulum will swing back.
Dave Wilson: I used to believe that, but no longer. The companies that I did business with are gone. And when they talk about it swinging back and forth, there is no swing.
I have been in business 30 years, and I question my future. It isn’t just, “I’ll go out and work hard, and I know I’ll come through it all.” No, I question if I’ll come through it.
I’m 60 years old. I don’t have a lot of time to recover, I don’t have a lot of time for laws to change.
Steve Hall: Ross Perot was right. There has been a giant sucking sound. It started with NAFTA (North American Free Trade Agreement). I used to do 6 or 7 million dollars a year in business.
Now I’m doing $500,000 a year, and next year I’m going to be out of business.
I’ve had it. I’m going to the lake. |
