Dec. 2 event focuses on manufacturing survival

November 23, 2009
| By Pete Daly |
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GR Spring & Stamping Inc. isn't just a manufacturing company that has managed to survive in the dismal Michigan economy — it's 98 percent automotive.

"If you do things right, you can still make money in automotive," said Jim Zawacki, the chairman of GRS&S.

But it isn't easy to be a manufacturer, said Zawacki, because its crucial role in the state and national economies isn't recognized at high levels of government, and while global trade is said to be free, he maintains it isn't fair to many small and mid-size American manufacturers.

Zawacki will be the featured speaker at a Dec. 2 event at the GVSU Eberhard Center in Grand Rapids, "The State of Manufacturing: Why Manufacturing Is Still Alive!"

Earlier this year, Zawacki was presented with the Michigan Manufacturer of the Year award from the Michigan Manufacturers Association, which noted his "dedication to the manufacturing industry."

A blurb from West Michigan Manufacturing Societies United, which is sponsoring the Dec. 2 event, notes that "nowadays, manufacturing receives a lot of negative press. Critics say manufacturing is dead, but is it really?"

Not dead, but hurting — and that pain spreads.

"We've lost five to seven million jobs in manufacturing over a period of eight or nine years," said Zawacki, adding that manufacturing jobs have a multiplier effect on the economy, and there is a reverse multiplier effect when those jobs go away.

"We're just seeing the side effect" of those lost jobs, he said. "We knew we were losing all these jobs, and our government and state did very little to change that. Well, now we're seeing cities hurting because the revenue is not coming in. You're seeing restaurants closing. You talk to lawyers; their business is down … right on down the line."

The recession began a year ago last summer for GRS&S, said Zawacki.

"I truly believe we made the right decisions at the right time," he said. That involved cutting back on the work force at the company's three Grand Rapids area locations by close to 20 percent, about 80 people. The GRS&S fiscal year ended in June, with sales off by about 30 percent, he said — but there had been times during that year when the sales volume was trending toward 45 percent below normal.

Business picked up this summer. In the last few months, some of the laid-off workers were called back, and more will probably be called back soon, he said, bringing the local GRS&S work force back up to about 350, versus the 380 before the recession hit.

"Because we're so lean, we're calling back judiciously," said Zawacki.

GRS&S paid its workers a bonus in August and there's another bonus coming in December.

Most importantly, "we're still profitable," he said.

FY09 revenues for GRS&S were $54 million; that number was $72 million in FY08, and FY10 "should be closer to $70" million, according to Zawacki.

Zawacki said it is the "culture" of the people who work at GRS&S that helped the company survive.

"Our people said, ‘Let's just work fewer hours and try to save as many (jobs) as we can,’ and that worked," said Zawacki. Hours on the factory floor went down from perhaps 44 a week to 32, although the hourly wage rate was not reduced.

"In the office, we cut probably a higher percentage of people, and did cut wages 10 to 20 percent. I cut my wages 80 percent" for the year, he said, leaving just enough to qualify him for company health insurance. 

Zawacki said Americans shouldn't view our economic situation as one U.S. region competing against another: "It's us against the world. We've got to change some things. You don't have to have the same labor rates they have in China and India, but you have to be lean and responsive to what's going on."

For example, GRS&S had been buying large machine tools in China because they were much cheaper, he said, but it took 16 weeks before they arrived. Now, China has had to raise its prices, and the shipping costs have gone up, too. Aside from direct cost, however, time required to fill an order is a major issue in the machine tool industry.

"We now can compete at our shop with China — close in price, but more on delivery time," he said.

Ten years ago it took GRS&S 20 weeks or more to build a large tool. "We can make that tool today in seven weeks, design and build," said Zawacki — and one of his managers just told him the goal now is to reduce that to four weeks.

Manufacturing is "still one of the major payroll segments in the United States, in the majority of states," said Zawacki. But he believes that the jobs already lost to overseas manufacturers will never come back.

"We like to blame a lot on oil" prices, he said, but he is focused on the "trade imbalance … $31 billion … 60 percent from China." Right now, he said, the U.S. auto industry is "filling the pipeline with parts" because of the success of the Cash for Clunkers incentive.

"But a big part of that (parts production) is coming from overseas," he said.

The major multi-national corporations "all have plants in China," he said, and those are a major source of imports affecting the balance of trade. But Zawacki doesn't condemn U.S. overseas manufacturing out of hand; GRS&S has a plant in Mexico.

"Amway was crucified because they had a plant in China," he said, adding the company had to have a plant in China because otherwise it couldn’t sell in China. “That's a legitimate reason, in my mind," to invest in a plant there.

"We have another corporation in Grand Rapids that went to Korea and China (and) sells nothing over there — brings it all over to the U.S. to sell. I think there should be a border tax for those people," said Zawacki.

"We haven't got people in Lansing or in the Capitol in Washington that are pro-manufacturing. We still represent about 11 to 14 percent of jobs in the United States and we have no voice at the Cabinet table, at all. We have a Commerce Department that's got one-10th the budget of the Agriculture Department."

Zawacki said the large multi-national corporations with large investments in China are "very strong contributors to PACs. They don't want currency manipulation (by China) to change and hurt China.

"We've got to have an industrial policy in this country like the Chinese have," he said.

Two years ago, he heard about a U.S. company that was thinking of moving its Chinese manufacturing plants to other Asian countries because labor was going up in China. Now, however, that company is "making more money than they ever made" before in China — despite increased labor costs — because the Chinese government has held down key raw material prices on plastics and metal.

"They understand what manufacturing does for them. It's created a bank of a trillion of our dollars," he said.

The small and medium-sized companies in the U.S. have virtually no voice, he said, and when large U.S. companies "go over there to build Buicks or when they go over there to build carpet sweepers, it hurts the suppliers" back in the states.

How would Zawacki change our government's trade policies?

"Let's go back to fair trade versus free trade" and focus on the balance of payments, he said.

"If a country has a tariff going on our stuff, put an equal tariff" on that country's exports to the U.S., he said.

End the currency manipulation by China, and if the Chinese government subsidizes industry, make it an issue before the World Trade Organization.

"We need rich people; they create jobs. So give them the incentives to invest in the United States," he said. "We've been brought up to believe we are the greatest country in the world — but we're not doing the greatest things," he said, citing the failure of public schools to sufficiently educate the lower half of the student body.

"I think western Michigan has better strengths than the rest of Michigan because of our diversification (in manufacturing), because of the way we network with each other to improve, and because of the ways the communities … support us."

"If we could export politicians and lawyers at the same rate we're losing jobs, we would have solved this problem back in the 1990s," he said, jokingly.

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