Six Grand Rapids platers talk about SUR/FIN, the state of the industry, and what the surface finishing future has in store.
2010 SUR/FIN Confrence and Trade Show
What: Sur/Fin is the annual conference and trade show organized by the National Association for Surface Finishing. Professionals from around the world assemble to share ideas, experiences, and to solve surface finishing and manufacturing problems while improving productivity.
When: June 14-17 Where: Devos Place, Grand Rapids, Michigan How: Visit nasf.org to register and for hotel and travel information
As the finishing industry gets ready to congregate in Grand Rapids for the Sur/Fin conference June 14-17, we had the chance to sit down with six veteran platers and talk about how they survived the recent economic meltdown, what the state of the finishing business is like, and what the future holds for one of the most regulated businesses in the U.S.
We invited Dale Mulder and Doug Roetman from Master Finishing, Jon and Jeff Rasche from Valley Plating, and Bruce Stone and Steve Alvesteffer from Allied Finishing to sit down and discuss important issues facing the industry.
PF: The economy has been a huge issue in the product finishing industry for the last few years. As it is now, where do you see how everything stands? And what is the prognosis for the future?
Mulder: If you survived last year, then you certainly earned an 'A' in Expense Chopping 101. If you didn't cut expenses, you are probably not a survivor today. And that's been the mode we've all been working in the last year or so, and that was survival. When we attended Sur-Fin last year, the focus seemed to be on how the other guys in the job shops were doing to cut costs. Labor side, chemical side, you name it and they were trying to cut costs. But that was last year. This year, when you look at the brochure of what is being presented, it's a totally different tone. It's amazing the turnaround that we have seen in just the past year.
Jon Rasche: We certainly earned our 'A' in cost cutting. And we're still here, which is the most important. We didn't have to cut any people, but it certainly was a challenge. We knew it was coming and we were prepared for it. We're starting to come back. But where we're at now is where I thought we would be six months ago. So I think we're three to six months behind what I projected. But we're predominantly in the motorcycle industry; it's 50% or more of our business. We've tried to diversify as much as we could, but when you are 50% in an industry-which is not uncommon for a lot of companies-and that industry takes a big beating, then you take a big beating along with it. We still hear every month that a plater is going out of business-mostly the smaller platers-so that gives us an opportunity to pick up some work.
PF: In regard to the business that is starting to come in, is it from new markets or is it from existing customers who are starting to ask for more product. How has business changed?
Jon Rasche: Mostly it's products that already exist. Even the OEMs in the motorcycle industry have been pushing off launches, or are bringing back parts from the past that need very minor change. And for the most part, it is from existing parts from other platers, also, that have gone out of business.
Jeff Rasche: I'd venture to say that 10 years ago not all platers treated their customers the way that they should have, and if you're still in business today, then chances are you are not the plater that you were back then.
Jon Rasche: Yes, but I'm still amazed every day how many people elect not to reply to an e-mail or a phone call. It's just the basics of doing business. I remember reading that Sam Walton one time calling his son into his office and telling him 'If you choose not to respond to an inter-office correspondence by the end of the day, then don't bother coming in tomorrow.'
PF: What other changes are you seeing?
Jeff Rasche: The other fallout from the downturn is that employees are very grateful to have a job. They are very cooperative, and very productive. It seems they are more engaged in the business now.
Alvesteffer: We have a very active management team that knows everything that we are doing, and more importantly, why we are doing things. We don't make any decision without discussing it first with our management team. Face it, we are not always right. We've always made mistakes along the way.
Stone: Our employees' participation in helping us make some very difficult decisions is very important. Unfortunately, we did have to make some layoffs of salary people, but we were very proactive from the onset when we saw this coming. Our crystal ball is no more clairvoyant than any one else's, but we were very proactive prior to the downtown and we made a lot of concessions. So when it came we were already prepared in a fairly good spot, and when a few businesses went by the wayside in the third quarter of last year, we picked up large chunks of business and so we came out of it fairly unscathed. We are very thankful of that.
Mulder: But on the downside of all of that, quite often you are asked to take on a project at a price that drove the last guy out of business. 'Hey, the other guys did it for this price, so why can't you?'
PF: Are you starting to see 'reshoring,' or business coming back from overseas?
Alvesteffer: We are starting to hear from a lot of people who are bringing work back to the U.S. that they are starting to see what the true cost is of doing business overseas. There are inventory carrying costs, and Chinese manufacturing costs in general are going up. People are finally settling back and asking themselves what is the true cost of quality, because at the end of the day those companies overseas cannot produce the quality that comes from the United States. You can have an accountant sit in the backroom and say 'We'll accept a certain degree of quality with these prices,' but when they realize that they are starting to lose market share because of quality issues, or the perception of quality dropping, then they reevaluate those costs of doing business in the U.S., and they see the gap isn't as large as it used to be.
Mulder: Even today I get calls from companies who had work done in China and there was a problem with the project, and they want me to strip it and refinish it.
Jon Rasche: But I love those projects, because those can be some of our most profitable jobs. You get guys who call and they needed something in a satin finish and they didn't get it that way, and they need it right now and so there is a premium to finish that work.
Roetman: And that's what the market tests are for, just to see what these prices are going to be once they come back from overseas. They wouldn't even bother to have us quote it if they were satisfied with what they were getting. But I think they still check and see what those costs are going to be, since they know that a few of us are still hungry out there.
Stone: They'll try and do that and get away with it for only a short period of time, but once enough product has come back and the financial burden is so great for them, they'll have to start paying more market prices, but right now they are at the very front end of it and some platers are still so hungry that they are still willing to work the prices down. But that will only be available to them for only so long and then they'll have to start paying market price again.
PF: Certainly another hot topic has been the new regulations that are coming out of Washington and with the EPA. How have these decisions been affecting you?
Alvesteffer: Let's face it, these regulations often times eliminate the 'bottom feeders' who don't have the wherewithal to invest in the technology to meet the new standards. But the difficult part is that they raise our standards and we are competing daily with China or India, who are not playing on a level field by any stretch of the imagination. It does make it very difficult.
Jon Rasche: It baffles me when I see a customer who wants to have it done a certain way here, but they don't even care how it's done for them in Asia. They want me to follow certain environmental standards here, but if the price is right over there then they take the business over there.
Stone: Absolutely without a doubt, some of the bigger companies are willing to sacrifice quality and other standards for a cheap price if it's coming out of Asia versus what they will allow you to do here in the U.S.
Alvesteffer: They just don't have to face it. We've had large companies come into a meeting face-to-face with us and talk about how Chinese companies are doing everything state-of-the-art and waste treatment is closed loop systems, and we ask them, realistically, what are they doing and we've had a few admit that they are never there to see the discharges, or they just look the other way. I have to ask them, 'how can you sleep at night?' Is that right?
Stone: It's getting tougher and tougher with the local municipalities, too. They are getting held accountable now by the EPA. The cities that most of us are working with are getting tougher and tougher. The amount of time that our people spend on reporting-even with computerized software-it's still difficult compared to what it used to be. And it's not that we are doing anything irresponsible; it's just that if you look a document or something of that nature, then they'll say you never submitted it. But you have the cities and states that are now held accountable by the EPA and they just keep on squeezing tighter and tighter.
Stone: You talk to the city and ask 'Why are you asking me to do it this way?' and you get an answer, 'Well, that's the way the state is making us do it now.' And then you sit back and say to them 'Wait, you're an intelligent person; look at this.' And you get back again, 'Well, they're making us do this.' And that's what irritating.
Roetman: And that's the problem. You now have three levels of bureaucracy and no one wants to stand up to them.
PF: What about other regulations you will be facing down the road, such as the new health care program. Do you have a handle on what those impacts will be?
Jon Rasche: I don't think anyone has an idea of what the costs will be. It's hard when they haven't even written the language yet. It's tough to get an idea of what this will cost. It's really a frame without a picture in it.
Mulder: If we just had some information early about what everything will cost us in the future, then we could make some fairly decent estimates of what it will cost us. But we just don't know. But that is what's great about participating in events like Sur-Fin, because you get to help experts talk about these issues, and you hear from everyone else on what is happening in the industry.
PF: Talk about belonging to the industry associations. How have they helped you over the years?
Mulder: Historically, Grand Rapids has had a very long history with its associations, with die castors and platers in the area, and because of that we've had a pretty strong trade group association.
Roetman: We've always encouraged our people to become members, because it's good for them to get a better sense of what they do in their job, because they get to talk to others who do the same job. It's both a social and educational benefit, we feel.
Mulder: Having Sur/Fin in Grand Rapids this year is just dynamite, because we'll get an opportunity for some of our people to get some great training.
Jon Rasche: We usually get 25 or 30 people to monthly meetings, and we try to bring in speakers to talk. It's a great way to stay connected. The good thing about cooperation is that sometimes, even with some of our biggest competitors, they are very open with ideas and suggestions.
Alvesteffer: We all understand that we are competitors, but at the end of the day we all can benefit from each other. We've all gotten together many times, and we've helped each other with metal and things like that. We are competitors, but we aren't looking to take anyone out.
Jon Rasche: It's just pretty darn unique that I can call on Steve and Bruce and ask for help sometimes. We've been in a pinch before with nickel where we're pretty much screwed, and these guys have stepped up and bailed us out.
Mulder: Years ago we had an formal arrangement where a few firms would get together at meetings and the focus was on what things we could purchase together to make a group buy on things at lower costs. Why this works is that each of our companies has a variety of market niches that we are active in. Yes, some overlap and I compete with them and I compete to win, and at the end of the day I want to get the job. But if I don't get the job, then I want it to stay in our community and maybe one of these other guys gets the job. When the business stays in our community, then we all win.
Alvesteffer: We've actually had companies come in and ask us about our local competitors, and we tell them 'they are all great shops.' There are niches that we fill better than others, and vice versa.
PF: With the economy starting to pick up some, what does the next few years look like for the industry?
Alvesteffer: We'll be up considerably.
Mulder: We'll be up as well.
Stone: I think over the next two to three years, things will be fairly strong for those of us who survived and are still around. We've gone through a filtering of the industry where a lot of the smaller job shops are gone. Those that have weathered the storm and proven themselves will probably pick up quite a lot of business. Even if it's not anything new that we pick up, with the economy recovering we'll all get busy again.