Increasing energy prices are driving up costs on everything from electricity to building materials. Consumers are less confident with the current mortgage fallout. All of this has led to talk of an economic downturn.
Local manufacturers agree that a diversified customer base is essential in slow economic times.
Keeping it steady
Business at Pacific Die Casting Corp. has been steady lately, but the Vancouver manufacturer has seen ups and downs over the years, said chief executive officer Bill Byrd. He has co-owned the company since 1981 with his brother, Bob Byrd, who is president.
Pacific produces high volumes of small metal parts for other manufacturers, such as Peterbilt and Kenworth hood ornaments, pinewood derby car weights and treadmill parts.
Byrd’s key to a steady workflow is a diverse customer base, so when demand from one slows, another fills the gap.
“Diversify your customers as much as you can,” he said. “Have some Chevy and have some exercise equipment and some dental – just different types of industries.”
Especially recommended are clients in essential industries.
Pacific has about 50 full-time staff and three temporary employees. Temporary staffing ensures a good fit, which saves money in the long run.
Pacific has had about three layoffs in its 26 years, including one in early 2007. But layoffs have never affected more than five staff at a time, and Byrd said they occur when personnel are the company’s only flexible resource.
Pacific’s clients typically need products made in spurts. To keep work steady, clients give annual projections of their orders, letting the manufacturer reserve two to three months at a time to make products for each customer.
To handle rising electricity costs, Pacific got an assessment from Clark County Public Utility District. The PUD provided a low-percentage loan for energy-efficient lighting installation to cut monthly costs about 7 percent.
Streamlined processes also keep things moving in slow times. Much of Pacific’s multi-purpose machinery runs automatically.
Overseas manufacturers have created recent challenges for Pacific, buying materials en masse and lowering product prices to levels American manufacturers have a hard time matching.
“The biggest thing that hurt us recently was a metal increase,” Byrd said. In 2005 zinc cost about 70 cents a pound, but spiked later to $2.30. Now the cost has dropped, but only to $1.40.
“If you’ve got a $1 part and 50 percent of it is metal, it can really mess you up,” he said.
To mitigate this, Pacific uses a varying metal surcharge based on current metal costs. Clients seem to prefer this to changing prices, and have stuck around as metal costs fluctuate.
Going public
Operating on a larger scale is Micropump Inc., a Vancouver manufacturer owned by IDEX Corp., a publicly traded company in Chicago.
Micropump makes non-contact industrial precision pumps for paint and ink. Locally, Hewlett-Packard has used a custom Micropump product for three years in its photo printers.
Mindful of the success of the local company and its parent IDEX, Vice President of Operations Paul Johnson is completing a contingency plan for the coming year, even though the company projects double-digit growth.
This includes careful hiring.
“Headcount increases are not viewed favorably by the corporation,” said Johnson. “What’s expected is that you would do more with what you have.”
“It was great when it was private,” he said. “It was certainly different when it became public.”
But he’s found a connection to a larger corporation helps in challenging times.
“We’re not entirely on our own,” he said. “You’re not out on a boat all by yourself.”
Micropump has invested in programs like Six Sigma to improve productivity and lower costs.
For repetitive, high-volume orders, Micropump and IDEX use lower-cost factories in Europe and Asia. But specialty jobs are done in Vancouver.
“Once something gets to a certain volume and has a certain predictable production pattern you have some flexibility to have somebody else make those for you,” Johnson said.
Manufacturing, testing, development, sales and marketing all happen in the Vancouver facility. It has 110 employees, and most are full-time with benefits. Johnson has seen about six layoffs in his 23 years at Micropump, most involving about six employees; the last was about five years ago, and Johnson said he avoids layoffs when possible.
More than half of Micropump’s customers are outside the U.S., so success of the business is not always tied to the local economy.
“We’re usually on the tail end of an economic downturn,” Johnson said. “We see it happening around us and we’ll get a little whip at the end.”
A wealthy worldwide market
Targeting a very specific market globally is Christensen Shipyards in Vancouver. The company has been building yachts since 1984, typically three per year. This year, each one fetches $35 million.
That price has gone up $5 million since 2006, primarily due to increases in material and energy costs.
But the company is virtually recession-proof because customers worldwide are reserving yachts years in advance. From now until 2011, each yacht Christensen builds will have a buyer waiting for it.
“Unless there was a global recession I’d say we’re pretty insulated,” said Joe Foggia, president and managing partner of Christensen Shipyards. “(Our employees) don’t have to worry about the cyclical issues.”
Christensen has 450 full-time employees with typical salaries of $40,000, plus full benefits.
“To get the quality, you have to retain your people,” Foggia said.
It takes 50 people to build a 160-foot yacht over two years, and the company is recruiting for about 50 craft-level positions locally. Christensen is also completing a 500,000-square-foot facility in Knoxville, Tenn. The new site will initially employ 150 with possible expansion up to 1,000.
About 60 percent of Christensen yachts are purchased without financing. Foggia estimated 50 to 60 percent of the buyers are developers and multi-mall auto dealers.
“They’ve really kept the demand on the market,” he said of car dealers. “Typically celebrities can’t afford these.”
When sales slow, Christensen uses that time to develop custom products and build inventory. Demand halted as war broke out in Iraq in 2003. But 14 months later, Foggia said, “People got tired of the war and we just got hammered with sales.”
With the world’s wealthy as its market, Foggia sees the company as secure, even as a possible recession looms in the U.S.
“If one country’s hurting… all the sudden another market pops up,” he said.
Charity Thompson can be reached at cthompson@vbjusa.com.
