Solid Height - Spring Manufacturers Institute

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inroads in the springmaking business. India is there. Malaysia is there. China is making progress, but is not quite at the level of other Asian countries yet. Dagoe has a high level of confidence that Chinese manufacturers will be able to master springmaking eventually. “I haven’t been impressed with the quality from China,” he says, “but I, like everyone, own lots of Chinese-made goods of very high quality, so I expect them to get there in springmaking soon.” He predicts that the Chinese will find a niche market in custom aftermarket coil springs for import cars, especially in “coil-over” applications. Dagoe sees the cost of transportation and the price of raw materials as the leveling factors. “If anything, the cost of manufacturing a spring is borne in three ways, he says. “First, there is the cost of raw materials. Then, there is the labor input. Finally, you have transportation. Our steel cost is the same here as it is in Asia. Long-distance shipping is expensive. In the final analysis, the labor input is the key factor, but that is offset to some degree by the cost of shipping.” Dagoe feels the Canadian government is fairly well on track and that the administration has 14 SPRINGS July 2006 assisted Canadian manufacturers to compete on a global level. “They are making international commerce possible, which matters to me because I ship all over the world,” he says. “I’d like to see them lower taxes, of course, but our taxes really are on par with the rest of the world, so I don’t really have much of an issue there.” Renton Coil <strong>Spring</strong> Renton, WA Chuck Pepka, SMI past president and president of Renton Coil <strong>Spring</strong>, feels strongly about offshoring issues. Pepka looks to the core beliefs of SMI for future direction: “The SMI charter is to foster growth in North American spring companies. We will need to find even more ways to do this to combat offshoring.” He says SMI and other North American manufacturing organizations can lead the way by using North American vendors for association products and services. Furthermore, by lobbying and organizing member involvement with Congress, associations can pressure the government to equalize the balance
of trade. “I’m not against trade, as long as the rules are fair for all sides,” he says. “Right now we’re at a disadvantage because of tariffs and restrictions that prevent companies from being involved offshore.” Pepka feels the cost of capital is a major issue, and this is where the U.S. and Canadian governments could be of significant help to manufacturers. “If the government was really concerned, they would help us to control the cost of capital and narrow the gap between the borrowing power of Asian companies and that of North American companies,” he explains. “Then we’d be better able to invest in stateof-the-art equipment.” In the 1990s, SMI did a study on the cost of doing business in the U.S. vs. Japan and vs. Europe. “We found that the U.S. had the lowest cost at that time,” says Pepka. “We also discovered that access to capital was one key to successful business in Japan; it was four to five points lower than in North America. It costs much more to borrow money here, which gives them a bit of an edge.” “Companies that are going to succeed in the future need to purchase equipment that raises the amount of sales per employee, as a metric,” explains Pepka. “We need to buy equipment that can be retooled easily and is autonomous, rather than having 50 people with hand tools working in a finishing department, as the Asians do right now. In the future, they will adopt technology as it becomes cheaper. Therefore, we need to be able to stay a step ahead.” “We’ve been exporting for 20 to 25 years, so the international marketplace is not a big deal to us,” says Pepka. “There is one aspect of international trade that is significant for all manufacturers, though: The cost of fuel affects everyone in about the same way. The Japanese, however, have been doing this [exporting] for so many years that they are very good at it and have big tonnage relationships with shippers. Some projects have scale to them, so the shipping relationships become a key factor. Here is where small, North American-based companies have an issue; it’s hard for them to compete against this.” Pepka sees a value to overseas manufacturing of springs in certain areas. “If I were on the low-tech side of the industry, competing just on dollars, I’d be looking overseas,” he says. “You have to be aware that everything is not going to be at the same level of quality you’d get here, though. There are a lot of high-level people in big companies who thought going cheap was the right way, but they may not have been correct. The quality of materials is not as good in China, and the flow of materials is slower.” These issues would be significant in the market Pepka serves. “I service the aircraft industry in 12 different countries. We represent a limited marketplace in a high-tech industry and have to be committed to high quality to be able to do that,” he explains. “For all products, including springs, people are willing to pay more money at some quality level,” he continues. “The products that have high perceived value will be successful in the international market. When a North American springmaker competes in the international market, our perceived value advantage is that we can respond to requests for prototypes quickly. If you are quoting 30 weeks lead-time, as the Asian manufacturers do, you are probably not going to get the business; however, if you can turn around prototypes fast, you can succeed in this climate. North American springmakers have the resources and expertise to do this. Once you service the prototype needs, it is logical for the buyer to keep the business with you for production.” “North American springmakers with the agility to do things quickly will be able to make money,” he continues. “If someone wants 100k springs, you will have to be able to say you can deliver in a month, and that helps level the playing field because you can get the products to the customer faster than if that customer went offshore.” Pepka sees the U.S. government market as an asset to manufacturers. “If you sell to our govern- SPRINGS July 2006 15
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