Labor Day: Manufacturing is Alive and Well

I was thinking about a Labor Day post and it didn’t take long to develop a topic that I am close to and care deeply about. Manufacturing is alive and well in both the United States and Mexico. Despite the usual challenges of cutting metal in today’s world, Horst Engineering, Horst Engineering de Mexico, Thread Rolling Inc., and Sterling Machine have survived the recession and are growing again.

What does this say about the larger manufacturing economy?

In my opinion, it says that high technology manufacturing was never dead. Our family’s businesses are concentrated on precision machining and forming for the aerospace industry. Aerospace is a business that was born in the USA and has remained a core part of the manufacturing sector. We supply parts for both commercial and defense applications. As lower precision manufacturing has shifted to Asia, manufacturers have increasingly focused on aerospace, medical, power generation, and other higher technology industrial customers.

When I was growing up in our 67 year-old family business, manufacturing was already in serious decline. The transformation from mass production to a high mix/low volume business model was hard on a lot of small and mid-sized manufacturing companies. The 1980’s and 1990’s were full of bankruptcies. Fortunately, the Livingston’s made the switch. We were early adopters of CNC technology and we focused on our aerospace customers at the right time.

Our 2013 acquisition of 47 year-old Sterling Machine, another family business, highlights our renewed commitment to manufacturing, particularly in New England. We have added 33 employees to our team, and we are sharing our passion for manufacturing with them. With Sterling, we have expanded our production of precision aircraft engine components. In 2006, we launched a maquiladora in Guaymas, Sonora, Mexico. That business faced its own challenges during the most recent recession, but Mexico has regained its footing as a competitive country for production. We are proud of our manufacturing operations in Connecticut, Massachusetts, and Sonora.

The challenges I speak of are numerous, but business is never easy regardless of what and where you sell. These challenges include the high cost of skilled labor, the need to develop a new generation of skilled workers, the cost of health care, high energy costs, high taxes, and other business costs. We have recently increased our capital investments at all of our business units. Manufacturing technology is always changing and you have to keep up if you are going to stay in the game. The low-interest rate environment has helped, but you can’t buy new machines if you aren’t generating profits on your revenues, and if those revenues aren’t growing.

Technology is only one part of our two-pronged strategy to remain competitive. The other is continuous improvement. If you aren’t incorporating lean enterprise in your business strategy, then you risk ruin. Our customers’ expectations and the high cost of doing business in North America has motivated us to eliminate waste, improve efficiencies, and develop stronger business processes. Change is difficult, particularly on old companies, but we advocate this approach.

The threat of China and other low-cost countries remains. We pride ourselves on our ethics, business methods, and environmental commitment. Our plants are modern and always improving. We have been hurt by outsourcing, but we aren’t giving up. We strive to deliver a better total value proposition for our customers. We shorten their supply lines, protect their intellectual property, deliver quality parts on time, and all at a fair value. Sometimes it is difficult to convey this and their corporate initiatives result in us losing business based solely on the price of our products. It simply costs more to do business in New England. Even Sonora is threatened by Chinese competition. It’s our job to retain the business and thus keep our employees working and earning good wages. As a family owned business, our investment horizon is long-term. We make decisions years ahead, sometimes decades ahead. That is smart business.

We are hiring at all of our plants. Manufacturing job growth is critical for our economy. The benefits of a manufacturing job are numerous. There is a  compound effect that makes job growth in businesses focused on production (e.g. manufacturing) better than businesses focused on consumption (e.g. services, consulting, distribution, retailing, etc.). Manufacturers procure raw materials, tooling, gaging, equipment, special processes, and other services. The value of a manufacturing job to the economy is much higher than a lower paying service job. It makes total sense. When products are produced locally, they need an ecosystem of other business services that imported goods don’t require beyond shipping, freight, and logistics. Our businesses export nearly 15% of our production and many of our parts go into assemblies that are subsequently exported. Too much of the USA economy is dependent on cheap imports.

I say that society should change its attitude and embrace high-tech manufacturing. That means that we have to replace college focused education with more technical skills training. We should be educating more machinists, molders, welders, assemblers, toolmakers, manufacturing technicians, and engineers. It wouldn’t take four (or more) years to get many of these folks into good paying jobs and they wouldn’t be saddled with education related debt. The cost of higher education is another topic, but it is worth noting that it is disgustingly bloated. Manufacturing won’t reach the heights of the past, but we can turn things around and gain more control over the production of critical industries like aerospace. I argue that even those who go to college should have a fall back technical skill.

We need more companies to make high quality stuff. On this Labor Day Weekend, let’s reflect on the skills that built our country into the superpower that it is, and renew our support for the risk taking, innovative businesses that drive the manufacturing economy.

 

Photo credits: Alan Grant, Digital Creations

The War Against Small Business

It’s been a while since I’ve written about business issues, but now that I have the perspective of a post-recession year behind us, I’m compelled to say a few things about our economy. Horst Engineering is doing fine. We took our lumps in 2010 and 2011, but so did a lot of other companies. We have 85 employees at our plant in East Hartford, Connecticut and 30 at our operation in Guaymas, Sonora, Mexico. So, we aren’t a tiny business, but our annual sales would be a rounding error on many big business’ income statements. We will thrive again, but headwinds remain strong and we are part of a sector known as small business, that isn’t getting much love.

The political outlook is clearer now that the presidential election is in the past, but the ongoing rift at the federal level is not good for the United States’ outlook. It is bad enough that we face fierce domestic and foreign competition, challenging markets, budget cuts, skyrocketing health care costs, and a general economic malaise. But, now, our political leaders don’t even have the foresight to forestall more damage before it is done. Special interests make it almost impossible to strike compromise and build consensus for the greater good. I would just ignore this worrisome pattern of partisan bickering if it didn’t have such a profound affect on small business and the economy. However, it does, so it is worth noting that waste in government is rampant.

In a manufacturing business, we are relentless in our  pursuit of continuous improvement. Governmental weakness is even worse at the state and local level. There is even more waste. In Connecticut, we had a commissioner of education charge the state exorbitant travel expenses while pulling a massive salary, and working from home. He doled out massive raises to most of his staff when private sector businesses were hunkering down and delivering bad news to their employees. This episode was a sign that there is even more waste in state subsidized higher education than even anticipated. Example after example of this sort of trouble could be cited.

I’m careful to criticize the behemoths of industry because many of them are our customers, so I’ll be generic. In addition to large private sector companies, we do a lot of work directly and directly for the Department of Defense. Once gain, corporate America has proven how different they are from family businesses and small privately held businesses. The Wall Street Journal even published a story today about how big business has “sold out” small business. Sold out is a strong term, but the reality is that Horst Engineering has little in common with the Fortune 500. In addition to being the customers of small business, most people with a 401(k) plan and mutual fund investments are reliant on the success of large capitalization businesses. They may even be employed by them. It’s messy and hypocrisy abounds if you criticize.

Another story from last week covers the impact of higher taxes on small businesses, particularly those that pay their taxes via the shareholder. We face challenges at the local, state, and federal level. All three are starving for revenue to fund government, programs, and budgets. Every time I read a story about waste in government, it fires me up. Jeffrey Immelt, General Electric’s CEO has taken shots for his leadership of the Obama administration’s business task force. Are these corporate titans in touch with the needs of small business? David Cote, Honeywell’s CEO, is taking flak for his support of higher taxes on higher income earners. This story summarizes his position.

There is a big difference between taxing the income of a big business CEO, rock star, actor, or athlete; and taxing the income of a small business owner who has company profits on paper (not cash) flow through his/her tax return because of an S corporation or partnership. Higher tax rates on small and mid-sized business owners will have a major impact on those businesses ability to reinvest. That means less capital equipment, less expansion, and less hiring.

I could continue to build a case for this war on small business, but in the end, I focus on what I can control and what our family’s business can control. We work with our people, the key to our success, and eliminate our own waste while attempting to build better products and deliver more value to our customers. I won’t hold my breath and hope for a political compromise. Things may not get better for some time. After all, someone has to fund this waste in government. Some small business leaders are far more vocal. They scream about the impact of taxes on their hard-earned profits. I understand why they are so mad.

I remain optimistic that small business will once again lead the way and that are economy will find more stable footing. We need the entire global economy to get to a better place because all countries are linked. I just wish that our society put a less emphasis on the big businesses, struck a balance, and truly respected the virtue of small and mid-sized businesses, and what the stand for.

2012 ACM Workforce Development Fair & Trade Show

This week, members of our team at Horst Engineering participated in the 2012 ACM Workforce Development Fair & Trade Show. On Wednesday morning, 53 of the 79 members of the Aerospace Components Manufacturers cluster came together to host more than 600 students and educators. The students came from many of the state’s middle schools, high schools, and technical schools.

Our sales and human resource folks shared Horst Engineering’s enthusiasm for high precision manufacturing with this younger generation of future workers. These children are a key to the sustainability of our manufacturing economy. Technical manufacturing and engineering careers present huge opportunities and Connecticut is chock full of companies that need stronger candidates in the worker pipeline.

The afternoon session featured networking with other members of the ACM and customers visits. Many ACM companies rely on each other and millions of dollars are sourced between companies who trade products and services. Connecticut and Massachusetts are home to the strongest aerospace manufacturing clusters in the world. Our “Aerospace Alley” is unmatched. Virtually every process required can be obtained because the knowledge base is so deep.

October is Manufacturing Month in Connecticut and our sector contributes 11% to the state economy. Nationally, the aerospace industry is the largest net exporter. The buzz at the trade show was strong and it is good to see high precision manufacturing on the rise again.

Connecticut Business Day 2010

One of my favorite days of the year is Connecticut Business Day. I missed in 2009 because I was traveling, but I’ll be there on 24 February. The Connecticut Business & Industry Association will host the event, which draws business people from all over the state. We meet with our legislators and deliver the message that business is the bedrock of our economy.

I’m torn about which breakout session to attend. #1 and #3 are most important to me, but they all look good:

Session #1
Create a tax policy that welcomes business and creates jobs…

Session #2
Don’t price jobs out of Connecticut: Control labor costs to put people back to work…

Session #3
Manufacturing drives our economy: Clear the roadblocks…

Session #4
Open the doors to small business…

Businesses, particularly manufacturers, need to get the word out like never before. With a budget process run amok and momentum within the corridors of political power to maintain spending levels while raising taxes, businesses have to stand up for what is right. At Horst Engineering, we have been brutally honest with our employees about the challenges that we face. 2008 and 2009 dealt a blow that many employers could not withstand. I get a machine shop auction flyer every day. Our 64 year history, strength, and quality have seen us through the early part of this tempest, but the storm is far from over.

With new taxes and mandates at the federal and state levels, the political decision-makes are playing with fire. The recent discussion of small business stimulus garnered media attention in the past few days, but has done nothing to quell business owners’ fears about what is to come. Our employees want Horst Engineering to stay strong and vibrant. They know that continuous improvement and technology investment are the keys to our two-pronged approach. To grow again, we will adapt. Our recent kaizen activities are proof that we will innovate to stay competitive.

But…it isn’t enough. An onslaught of taxation would drive up our costs, hinder our growth, and hurt the prospects for new Connecticut jobs. I’ll be there on Connecticut Business Day. I’ll share our perspective.

Inside Business Report with Fred Thompson

Several weeks ago, I started getting messages on my work voicemail from Inside Business Report with Fred Thompson. They chased me hard. The person calling said it was important and that they wanted to feature Horst Engineering on their television show. It has become an instinct to instantly Google anything that I’m not familiar with. I typed the name of the show into the search field and tracked down their lame website.

I knew it was a scam from the get go. The host is Fred Thompson, but at the time, the site hadn’t been updated with fresh news in a month. I’m not sure whose pockets are getting lined with the income, but it was a weak pitch. Since I’m curious about these things, I phoned the “assistant to the producer.” He never gave more than his first name. He insisted that I set up a meeting with the producer to discuss Horst Engineering’s segment. So, I went along with it and set up a phone call.

The producer dialed me at the scheduled time and I listened to him go on and on about the value of the show and how many people watched it. I inquired how he found Horst Engineering. He told me that their “research analysts” tracked us down. He mentioned something about featuring manufacturing and that our story would be great for the show. So, knowing how much research they did to find us, I asked him what kind of manufacturing we did. He avoided the question and went on again about manufacturing in general. I cut him off at the knees by inquiring about their lousy website. He made some excuse about not updating it. So, knowing that this TV show was interested more in our money than our story, I asked him how much they were charging for Horst Engineering to be on the segment. He didn’t flinch. He said, “$19,000.” I simply said, please remove us from your calling list.

The funny part about the story is that the “assistant to the producer” must have mixed up his files. He called again this week, as if we had never spoken before. This time, I think he got the message.

Business Wisdom You Can’t Buy

Earlier this week, I had the pleasure of attending a small breakfast education event that had a big impact. Our group of business leaders got to hear from three Connecticut retail industry leaders: Jack Mitchell of Mitchells/Richards/Marshs, Suzanne Zarilli of Wish List, and Roxanne Coady of RJ Julia Independent Booksellers. All three lead businesses that were among the first businesses to feel the economic downturn. In the case of Mitchells/Richards/Marshs and Wish List, they sell high-end fashions (one really high-end and one casual high-end) and are based in the southwestern part of Connecticut. They were both affected by the financial industry collapse because their clients were right at the epicenter. Fairfield County is a bedroom community for many Wall Street employees. As for RJ Julia, they were already in a tough market before the collapse. As one of the last remaining successful independent book stores, they are faced with fierce competition from both larger chain store rivals and the Internet. They have managed to succeed despite difficult circumstances. The key is that they focus on their niche and execute.

I though Manufacturing was a tough market to be in, but when you hear war stories from retailers, you realize that all business is tough. Their challenges are different from ours, but no less significant. All three CEO’s spoke eloquently about their businesses. You can’t help but be motivated when you hear success stories from small business leaders. I always come away from these events with fresh ideas and a new perspective. Jack Mitchell was funny and interesting. His “heart and head” approach to management isn’t rocket science, but it is a simple mantra that you can repeat. In addition to being one of the second generation leaders of his family’s business, he is a best-selling author. Jack wrote Hug Your Customers and Hug Your People. Both books share his theme of leading with kindness.

I often seek out the counsel of business leaders like these three. At Horst Engineering, we do this within our industry on many fronts. We exchange ideas about technology, lean enterprise, and business development. Earlier this month, two peer companies allowed us to tour their plants and see some awesome manufacturing equipment. Sharing best practices is a sure way to advance your own objectives. When you gather the ideas that others have to offer, you form your own approach. In business, as in sport, you have to learn from the best if you aspire to be the best.

If it isn’t Wall Street or Main Street, it must be a Side Street

What is going on with the economy? Don’t try to answer. That was a rhetorical question. I have to admit that I follow this stuff closely. I’m practically addicted to the numbers. I have to be. My decision-making as CEO of Horst Engineering requires that I be well-informed. Truthfully, whether you are a CEO or not, you should pay attention to issues that impact our global economy. I follow the local, state, national, and international news in an effort to gather as much information (intelligence and knowledge) as I can.

At times, I’m overwhelmed. There is so much information out there and it has become a cliche to state that information is traveling faster than ever. There is no shame in admitting that one cannot keep up with the depth and breadth of information that floats through the air. It is also important to remind oneself that just because it is news, doesn’t mean it is fact. Regardless, there is a lot going on right now. This massive stimulus plan has created a bad situation. The fact that the equity markets (public equity markets) have roared back makes the situation even worse.

Dow 10,000 masks the true problems. We all pay too much attention to the fortunes of the largest companies on this Earth. Fortune 500, S&P 500, Forbes list, NYSE, NASDAQ, FTSE, DAX–whatever the list is, this isn’t reality. Reality is that the vast majority of businesses are still small businesses. Small businesses employ most US workers. They are the ones that create value. I was reading about the top global brands in BusinessWeek, and I wanted to vomit. Sure, I cheer on the stock market rally when my mutual funds loaded up with GE, Coke, Amazon, Berkshire Hathaway, Google, Microsoft, and Apple rise. I also want our customers, many are on these lists, to succeed so that we can succeed.

But, that isn’t reality. How come Horst Engineering’s value hasn’t shot up 50%+ in the past six months? We seem to still be struggling with the real problems that are squelching growth and job creation. We continue to invest in our enterprise, but there are major disincentives to hiring. The cost of doing business (especially in manufacturing) are horrendous and the government continues to put up road blocks. The next road block is even higher health care costs.

In Connecticut, this is particularly bad at the state level. Rather than lowering costs for businesses, the state is driving our costs through higher taxes, fees, and mandates. This will not encourage growth. Certain things, like environmental regulations, crime, and homelessness, need to be legislated and governed, but government should allow the free market to work. This is particularly important for small businesses. Unfortunately, we get lumped in with ALL businesses. This is not good.

This whole Wall Street vs. Main Street debate is hilarious. I actually joke that Horst Engineering is on a Side Street. We stay out of the fray by keeping our nose to the grindstone and focusing on what we can control. Most successful businesses are off the radar. They go about their business and contribute real value to our society. You have to believe that most business leaders are altruistic. The greedy crooks may garner all of the headlines, but they are not representative of the true work ethic that makes our economy strong, even in recession.

It was ironic that Jeff Skilling, the former CEO of Enron, made headlines last week. He is seeking a re-trial. He is locked up for a long time, but he has peers who have been just as greedy and crooked, who are walking the streets. Heck, many are still leading the firms that are seemingly so important to our country and our economy. His decision-making hurt a lot of people, but it isn’t fair that others have been treated differently.

The real problem is that our bureaucratic politicians, our two-party system, and our massive government spending need reform. That last statement is vague, broad, and not meant to offer any solutions. I’m simply stating that as an example, government financed projects that result in more asphalt (an oil product) being laid down on roads, isn’t going to strengthen our economy for the long-term. I’m afraid that we are headed in the wrong direction, and I’m not alone. We need leadership and debate at every level of government. It is painful to think that we may be stuck in a position where no real good can occur. With the cyclical nature of the economy and the cyclical nature of politics, we may be in for a long rough ride.

CBIA Manufacturers Spotlight

Horst Engineering is one of the companies featured in the Connecticut Business & Industry Association Manufacturers Spotlight. Leading Connecticut manufacturers are periodically featured on the CBIA website’s business page. Horst Engineering was featured in early October. The full directory of Connecticut manufacturers who support international trade can be found at this link.

It is good to see that the CBIA is advocating for Horst Engineering and fellow manufacturers at a time when we need as much support as we can get. With all of this economic turmoil (and more bad news from major companies like Boeing today), the challenges that manufacturers face is greater than ever. Higher taxes, higher fees, more mandates, and more health care costs are a recipe for disaster. Government should allow business, especially small business, do what they are best at. Let us innovate and we will create jobs. If government keeps putting barriers and cost in our way, then we will not grow and the economy will stagnate even more.

Connecticut Newsmakers

On Sunday, I appeared on Connecticut Newsmakers with Tom Monahan, a program that airs on NBC30/WVIT, the local NBC affiliate.  I was invited on the show to share Horst Engineering’s story. I discussed Horst Engineering’s history and growth, talked about our solar PV electric system, and commented on the potential business impact of Connecticut’s budget deadlock.

It was a great opportunity to share some of our company’s successes and acknowledge some of the recent challenges brought on by the recession. Our solar PV electric power system is just one example of how we have broken new ground in our industry. Our investment in sustainable energy was forward looking and we are proud of the impact it has made. The solar system gave me the opportunity to explain how our progressive business model is unique.

Being in business for 63 years, especially family business, doesn’t happen by accident. I was keen to add my comments about the difficulties of doing business in Connecticut. All USA manufacturers face challenges, and they are particularly hard in our home state. Connecticut faces a record deficit with a huge revenue shortfall. The deficit is the worst since 1991 when the state income tax was instituted. Since then, the size of the budget has quadrupled. Government spending is out of control and this has a nasty impact on the businesses, the primary funders of the tax base. 

Legislators are faced with an unenviable task, but if they choose the path of higher taxes and increased business mandates, then they will be choosing to weaken our economy rather than strenghten it. Small and mid-sized businesses are the backbone of the local, state, and national economies. Higher business costs will hurt businesses and prevent growth. Our lawmakers should be focused on steps that will increase investment, increase innovation, and reward businesses for training their workforces to better compete in the global economy.

Health Care Hell

You wouldn’t want to know what Horst Engineering “invests” every year in health care premiums on behalf of its employees. Of course, it pales in comparison to the real number (premiums) that a General Electric, United Technologies, or other large corporations spends on providing health care benefits to their workers. Those companies self insure, so the situation is different. I’ve written about health care before. I’ve spoken with our legislators (mostly at the state level) about the mandates that Connecticut requires. I’ve written letters. The health care mess isn’t going away. I tuned out President Obama tonight right when he started answering questions. The rhetoric is terrible. No one is going to solve this problem anytime soon. The results are going to be painful regardless of which side of the debate wins the day.

Kai Ryssdal interviewed New York Times journalist, David Leonhardt, on Marketplace tonight. I enjoyed the chat that the two journalists had on the radio. Look at the text of the interview, or listen yourself. Leonhardt said in reference to the major powers (special interests) that dominate the health care landscape, “Your waste is their income.” That says it all. The system is laden in waste, so that means huge profits for many of the key players. The insured consumer/patient isn’t even considered in this equation. All you hear about is doctors, insurers, pharmaceutical companies, politicians, and of course, the uninsured. Naturally, you hear about the uninsured. They are a big part of the problem and yes, there needs to be a solution for that part of the problem.

Even still, I think the small and mid-sized businesses are totally being overlooked. Small businesses employ more than anyone. We pay the premiums. We pay the taxes. We aren’t shirking responsibilities with shell companies in offshore locations and Cayman Island bank accounts. We aren’t shifting profits around the world to avoid our obligations. We are employing people, paying taxes, paying huge sums in health care insurance premiums, and struggling to survive in a an economic system that is hostile too.

Leonhardt went on to point out that, “…the (current) system isn’t making us healthier.” Bingo! This battle is going to rage on. Most of us are sitting back and watching this thing play out. We weigh in from time to time, but mostly, we are out of the fray while the livelihoods of many people and enterprises hangs in the balance.

I don’t know what the answer is.

Metal Fatigue

I met University of Massachusetts (Lowell) professor, Robert Forrant, several years ago. He toured Horst Engineering. I contacted him after reading an article that he wrote about Brimfield Precision, a renowned precision machine shop focused on the medical device industry. Brimfield went on to become part of Medsource Technologies, which became Accellent. Anyway, the story was about Brimfield’s transformation. Forrant has written extensively about the industrial revolution in New England and the demise of the metalworking industries that made our region a world manufacturing leader.

I just ordered his new book from Amazon. It is called Metal Fatigue: American Bosch and the Demise of Metalworking in the Connecticut River Valley. The book explores many themes, including globalization. I’m really looking forward to reading it in detail and plan to follow up with Forrant. Horst Engineering is 600 feet from the Connecticut River and we are not in demise. Of course, our industry has suffered a long decline. I’m sure I agree with many of his points. Now that we are a global operation, we have a different perspective. Our management team has taken the necessary steps to maintain growth. 

Forrant should make a return visit to Horst Engineering now that we are broadening our horizons beyond the aerospace market and turning our focus to the medical device industry. When he first visited with me, he was curious why we had made the cut. He asked why we had survived when so many other metal shops had folded. There are many reasons. Forrant was a machinist for many years and he worked at American Bosch, the company at the center of his latest work. I caught an interview with him on WFCR a few weeks ago. He spoke about the difficulty of writing the book as both a researcher and an actor in the demise of American Bosch, an automotive parts manufacturer. It was difficult for him to remain objective when he was one of the workers who was impacted by the closing of the plant. It was the collapse of the industry in the 1980’s and early 1990’s that led to his transformation from metalworker to Ph.D candidate to professor. The Boston Globe wrote about Forrant’s book in a recent review.

Orthopaedic Manufacturing & Technology Exposition and Conference

I was in Chicago, Illinois, earlier this week for the Orthopaedic Manufacturing & Technology Exposition and Conference (OMTEC). Technically, the trade show was held at the Rosemont Convention Center. It was my first time to OMTEC, but it was the 5th time it has been held. Horst Engineering’s medical business unit, Horst Medical, is accelerating its growth in the medical market. 

Orthopaedics are an excellent growth opportunity because several of our core processes, including Swiss screw machining, turning, milling, and centerless grinding; are ideally suited to produce surgical instruments and implants. I attended several workshops at OMTEC in an effort to get a pulse on the current condition of the market. Though medical has remained stronger than the aerospace and industrial markets, it is much weaker than it has historically been. 

Still, there were attendees and presenters who remain bullish about the long term prospects for sustained industry growth. An aging population, Zoomers (active and upwardly mobile Baby Boomers), obesity, population growth in emerging markets, and a host of other factors are increasing the demand for orthopaedic products and services. Even the businesses in the medical marketplace are feeling the pinch of this economy. Trade show attendance was well down from prior years according to the organizers. Of course, the refrain was that those that attended were “quality leads.” I would hope to think so. Horst Medical made some excellent contacts. Now we have to turn our focus from generating leads into quoting opportunities.

The Economy

Suprising, even to myself, is the fact that I haven’t written much about the economy recently. Business at Horst Engineering and related companies has been so hectic, that I haven’t had time to truly reflect on the meltdown of world financial markets. The subject of the economy is at the top of everyone’s agenda right now, so there isn’t much I can really add.

However, upon reflection, there are aspects of the economic situation that are important to our businesses. We have spent time with the associates at Horst Engineering. They have concerns like everyone else. Sales volume, 401(k), and health care costs are just some of the topics of concern. There is more uncertainty right now than in some of our past downturns. However, for a family business headed into it’s 63rd year, three, six, or even twelve months of turmoil  isn’t really enough to have a huge impact on our long term strategy.

Don’t misinterpret my thoughts. A lot of financial damage has been done to a lot of businesses. We haven’t escaped the slowdown. It is just that we have a bit of a different outlook. There are tremendous opportunities right now for businesses that have been well run and well capitalized. A foundation of strength offers a huge advantage over the weak position that many businesses were in when this crisis hit.

Our business strategy isn’t much different than the strategy of individual investors. We are looking for diversification opportunities like everyone else. We are cautious with our expenses. We are addressing operational efficiency. Business in times like this can be fun, but you can’t take things too seriously. It is a good time to focus on fundamentals. With the election in two days, one unknown variable will at least be addressed. Unless we have a situation like 2000 when it took weeks to resolve the outcome, we should at least know which candidate is going to get his chance to implement his policies in 2009.

Recently, I have spent a lot of time thinking about where things may go from here. I’ve done a lot of benchmarking. I’ve made a lot of phone calls to other business leaders and I’ve had a lot of discussions with our own management team. I’ve got a great network to tap into and that is a confidence builder. Like most people, I hope that we have seen the worst of the financial turmoil. Nevertheless, I’m prepared for whatever happens next.

International Manufacturing Technology Show (IMTS)

This week, the 2008 International Manufacturing Technology Show took over McCormick Place in Chicago, Illinois, USA. IMTS is a biannual trade show for the manufacturing industry, and it is massive. Nearly 100,000 visitors descended on the Windy City to walk the convention center floors and see the latest in manufacturing technology. I flew to Chicago on Wednesday and it seemed as if everyone on my Southwest Airlines flight was headed to the same place. Before hitting the show, I took a train/cab combo to visit Montana Metal Products in Des Plaines. MMP is a precision fabricating and machining company that is run by a friend. I got a great tour from a 48 year veteran of MMP. He knows the place even better than the owner! It was a fruitful visit and I learned some best practices that have helped make them successful for many  years.

 

Following my visit, I reversed course, returned to downtown Chicago, and checked into my hotel. Then, it was another cab ride to the south side. Once I reached McCormick Place, one of the largest convention centers in the world, I registered and met up with a couple of my colleagues from Horst Engineering. Art Roti and Jim Bowtruczyk had flown out the day before and they were wrapping up their visit as I was beginning mine. We toured the Abrasive Machining hall together and evaluated centerless grinding equipment.

There are four major buildings at McCormick Place and IMTS was using all of them. I first attended in 2004, but I was still blown away by the size of this year’s convention. I returned to McCormick Place both on Thursday and Friday, spending a good part of both days looking at machining equipment, grinding equipment, software, gauging, and other examples of the latest manufacturing technology. 

I connected with my friends (and editors) from Today’s Machining World magazine and discussed story ideas. In chatting with them, we agreed that the overall atmosphere of the show was positive. Despite having a strong Midwest oriented automotive influence, attendees were still upbeat about the overall manufacturing economy. Automotive may be really weak, but other industries like aerospace, wind turbine, power generation, farm/construction equipment, medical device, commercial construction, and oil/gas drilling are still strong, especially outside the US.

 

All of these industries need precision manufactured products. To make those parts, you need a lot of heavy equipment and tooling. Those are the folks who were selling their stuff in Chicago this week. I’ll be curious to see the post show statistics in order to get a sense from the sellers, who spent huge amounts for their exhibits, employees, and travel; if they are happy with the 2008 IMTS. 

A few other observations:

1) Putting on a trade show of this scale is a massive undertaking. 

2) The food and beverage vendors were gouging the buyers. 

3) Big machines were all the rage this year. Industries like oil/gas require very large components. Those parts need to be made on very large machines. 

4) The automation is really insane. Everyone is auto-loading their machines with the latest generation robots. Also, the cost of automation is coming down quickly. 

5) Inflation has had a big influence on current machine tool and accessory pricing. There really aren’t a lot of deals right now. 

IMTS will be back in 2010.