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GRBJ 30th Year: Manufacturing: foreign competition drove the changes
Two highly respected veterans of the West Michigan manufacturing scene for the past 30 years, Jim Zawacki and Fred Keller, both immediately touch on the same factor when asked about the biggest change since 1983.
Keller calls it “internationalization.”
Zawacki is even more specific: Japanese automakers.
“Everything was different” in American manufacturing in 1983, said Zawacki, chairman of Grand Rapids Spring & Stamping. “The Japanese were just beginning to get involved in the automotive market.”
When Zawacki and his partners bought GRS&S in June 1985, the stamping plant just north of downtown had 45 employees. Now it has 625 workers in several plants. About 65 percent of GRS&S’s metal components output today is for the Japanese automakers. Sales in the last fiscal year, which ended in June, were more than $100 million.
“The influence of the Japanese manufacturing technique was very strong,” said Keller, who founded Cascade Engineering in 1973. Today the plastic injection molding company has about 1,200 employees, almost half of them in Grand Rapids and the rest in Ohio, North Carolina, Texas, and Budapest, Hungary.
The automotive industry is still very important for both GRS&S and Cascade Engineering. Keller’s company is known for a variety of plastic products, from wheeled carts for curbside refuse collection and recycling to parts for big trucks such as fenders, grills and fairings to deflect the wind. The truck parts division is the largest of its 12 divisions.
Zawacki said in 1983, quality of production wasn’t the big issue — it was just one of them.
Keller said the Japanese showed American manufacturers they did not have to choose between cheap production and high-quality production.
“You could have high quality and be the least expensive at the same time,” said Keller. “The only way to get low-cost goods was to make them right the first time.”
Thirty years ago, according to Zawacki, cost wasn’t the driver it is today.
“Today, quality is a given, and delivery (on time) is a given,” he said. The auto industry “won’t even talk to you if you haven’t got decent quality records in parts per million. We didn’t even talk in parts per million.”
“The Japanese hate waste,” he said, and with good reason. If production entails waste, it means cost may be reduced by eliminating the waste.
GRS&S is big on quality. It worked to qualify for the globally recognized ISO quality standards for manufacturing and then the more advanced QS standard for auto parts.
“We were one of the first 200 (companies) on the QS (standard) back in the late ’90s,” said Zawacki, “a coup” that helped put GRS&S ahead of its competition.
GRS&S is also ISO 14001 registered, which is the environmental quality standard, according to Zawacki, “and the big pushers of that were the Japanese.” Again, there was a practical reason: Reducing industrial waste that goes into landfills or risks polluting the air and water ultimately will help reduce costs.
“Now, of course, everybody’s on the green bandwagon,” said Zawacki.
Just how good at beating the competition GRS&S has become was evident in early 2010. Toyota had been subjected to a recall of millions of vehicles when it was suspected gas pedals were causing unexpected acceleration. A Japanese parts maker that competes with GRS&S needed six to eight weeks to produce a key replacement part; GRS&S needed only days to build the dies and ship 1 million parts.
Zawacki said success on a tough order doesn’t guarantee more business with Toyota. “We’ve got to be competitive,” and “cost is a very big driver” in that competition.
Electronic technology makes things happen much faster now. Zawacki noted that GRS&S did not even own a fax machine in the early 1980s. “I used to go down to Western Union if somebody said they were sending me a fax.” Today, “we’re a cloud-based ERP system at work. The computer systems are phenomenal. I can go online at any time and see which machines are running and which are not — and why.”
Employee relations have changed, too. Zawacki figures GRS&S has been sharing its financial statements with employees for about 15 years, something that was almost never done in a manufacturing environment years ago.
“We don’t have time clocks,” he said.
A lot of manufacturing companies treat their employees much better now, he said, and actively encourage employee involvement in finding ways to decrease cost and improve production.
“We’ll implement 25 ideas per year. That’s unheard of in the United States,” he said.
The Great Recession almost cut U.S. auto sales in half and drove the weaker industry suppliers out of business from 2007 into 2009. Now the pendulum has swung back. “It’s just amazing. I don’t know who’s buying all these cars, but God bless ’em,” said Zawacki.
The problem is, the supplier base is no longer large enough to meet demand, and “some of them are busting at the seams and are on the verge of problems,” he said.
Adding to that constraint is a lack of suitable new employees for factories that need to expand. “Hiring people that want to work and want to learn is a problem today,” said Zawacki.
Keller notes that manufacturing created a great deal of wealth in the U.S. because of exports from the U.S. in the decades after World War II. The internationalization of manufacturing today means U.S. manufacturing lost a lot of jobs, and that “huge shift” also means American industry has less impact on the growth of the economy now, he said, because more of the capital is being generated by overseas manufacturers.
Part of the reason for the negative balance of trade in this country is due to 50 percent of U.S. oil being imported, according to Keller. Natural gas and oil are still the primary source of the vast majority of plastic, although plastics can be made from biological materials such as corn.
However, to environmentalists who think fossil fuels should not be used to make plastics, Keller offers a different perspective: “It’s a far better thing for us to do with our oil and natural gas than simply burn it for energy.” When burned in cars and homes, “it’s gone,” he said, but if used to make plastics that go into many everyday products, “we can recycle it many times over.”
“Thirty years ago we were still pretty much in the throwaway world, and today we’re much more involved in utilizing recycled material,” said Keller.
And now, there is a new capability in U.S. manufacturing: the ability to “manufacture energy,” he said. He is talking about solar receptors and wind turbines that generate electricity “so we don’t need to be continually relying on fossil fuels for our energy.”
Solar panels have dropped in price and increased in efficiency. Years ago the installation cost of solar panels was estimated at about $12 per watt of power output; now it is about $1. The cost of a complete solar generating system “used to be in the teens (of dollars) per watt. Now it’s down to about $2.50 or $3,” according to Keller.
It’s the entire system, not just the solar panels, “that’s now driving the cost,” he said. But wait: Cascade Engineering makes plastic racks for large, flat-roof solar systems, rather than the more expensive metal racks. The plastic-based systems snap together, further reducing installation cost.
Keller also likes to point out that the greatest demand for electricity by American consumers is for air conditioning during heat waves — “exactly when the sun is shining and when the solar panels are collecting at their peak.”
Think Michigan doesn’t get enough sunshine? Germany has the largest installed base of solar panels in the world, per capita — “Yet their sun is about the same as in Michigan,” said Keller.
Meanwhile, fossil fuel costs will continue to increase, driven by distant consumers such as China and India. “So if you want long-term price stability, we should invest in solar,” said Keller.