U.S. ‘fiscal cliff,’ regulatory environment continue to pose challenges
By Loralee Stevens Special to the Business Journal
With the fiscal cliff looming and demand for manufactured goods falling, North Bay manufacturers are finding ways to cope with uncertainty.
One thing is sure: manufacturing is not for the timid.
“To stay in the game you have to make your own opportunities,” said Jim Judd of J & M Manufacturing Inc. in Cotati. “You can’t sit around waiting for things to improve.”
According to the November report from the Institute for Supply Management a leading index showed a decrease of 2.2 percentage points from October’s reading, indicating contraction in manufacturing for the fourth time in the last six months.
Distrust in national leadership added to the usual burden of state and federal regulation is taking its toll on the industry, according to some local business owners.
“We saw the slowdown start in November and we don’t expect much change through the first quarter of 2013,” said Richard Hunt of Datum Technologies Inc. in Santa Rosa.
The precision machine shop saw a fall-off in the semiconductor industry, while oil and energy sectors flattened.
“Medical equipment is showing steady growth and aerospace is looking good. In times like these diversity is key,” said Mr. Hunt.
With diversification in mind, Datum Technologies is pursuing AS9100 certification, which will allow it to expand into the aerospace sector.
Certification is part of a strategic initiative plan put in place last spring. Mr. Hunt and his wife, who acts as president, also added 850 square feet to their manufacturing operation and made improvements to the laboratory.
“Before things fell off we were running two eight-hour shifts, keeping the machinery going all night. If orders pick up again we’ll even add an employee or two,” he said.
Other local manufacturers contemplate no hiring during the first part of the new year.
“If you’re making one kind of widget you’re in trouble,” said Pierre Miremont of Architectural Plastics Inc. in Petaluma. “But even diversification doesn’t help when all your clients are down.”
His company was most hurt by the construction drought. “We didn’t realize what a sizable chunk of our portfolio was tied to construction until it was gone,” he said.
Picture frames, another source of revenue, fall out of demand during lean times. Hospitality products and museum displays are holding their own.
“Our strongest suit right now is medical products. That industry continues to grow as the population ages,” said Mr. Miremont.
But an aging population causes problems of its own: Architectural Plastics will need to replace its workforce soon and Mr. Miremont is hard-pressed to find good, trainable employees.
“I’d like to hire and train, but now is not the time,” he said.
It’s not the time for J & M Manufaturing either. Instead of expanding its workforce, the Cotati metal fabrication shop is investing heavily in automation equipment.
“We plan to put about $1 million into a series of machines that will automate feeding sheet metal, a task that’s done manually at present,” said Mr. Judd. Rather than layoffs J & M will retrain employees to do other work.
Human resources can be a liability in tough times, especially in California, where employer obligations often pose a barrier to expansion, he said.
“Besides, it’s increasingly hard to find good workers.”
Automation will allow the company to expand its capacity, broaden its markets and adjust to the much faster turnaround demanded by today’s clients.
“It’s our answer to hard times. A good entrepreneur is always retooling for profitability in the light of the economic climate, good or bad. That’s how we measure success in manufacturing,” said Mr. Judd.
Dick Herman, president of the manufacturing group 101MFG, said the industry has the talent and determination to succeed.
“The five or six-hundred mid-sized manufacturers and job shops in northern California are the backbone of our competitiveness. Almost everything starts with them … injection-mold tooling, machining critical parts for prototypes and ‘first-articles’ and countless other things. Going into 2013 and perhaps another challenging year I’m not worried — these folks will make the investments, tighten the supply chain and continue to make it possible for U.S. manufacturing to compete on the world stage.”
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