No endorsement for president here, just a reminder that small business teeters on the edge

/in /by

Years ago, I learned the perils of endorsing a political candidate in a business publication. In October 2008 I was traveling with a group of companies and was met in the DIA concourse by the CEO of my largest advertiser and sponsor of the trip. Our magazine had endorsed Barack Obama the same week. Needless to say, it was a lively conversation.

Fast forward a dozen years. Today, CompanyWeek readers are flooded with political opinion, shilling for either side. Our endorsement, my endorsement, wouldn’t change a thing, even if manufacturing is an entirely appropriate filter to judge each candidate.

Sidestepping an endorsement also saves me from the blow back from annoyed readers. “I don’t read your publication for political opinions,” always meant, “you picked the wrong candidate.”

Some of those readers would also be the same folks who today use their own platform to advocate for a preferred candidate. No doubt I’d have heard from Daniels Manufacturing Corporation (DMC) President George Daniels, based in Orlando, Florida, who last week fired an employee for publicizing Daniel’s internal memo stating, “If Trump and the Republicans win the election, DMC will hopefully be able to continue operating, more or less as it has been operating lately.” The letter continued, “However, if Biden and the Democrats win, DMC could be forced to begin permanent layoffs beginning in late 2020 and/or early 2021.”

Daniels may be right, but for the wrong reason. Whoever wins will face the reality that today, in the midst of a pandemic, small business teeters on a knife’s edge. It’s a story lost in this election cycle; or too remote. It may not be much longer. We’ve yet to find a “new normal” — a work-life balance that includes COVID. Until we do, a new economic crisis is as likely as an extended recovery.

If I were to be pressed for an opinion, I’d say, as I have for months, that both Trump and Biden have at times been effective in promoting manufacturing: Biden as vice president in an Obama administration that orchestrated key federal investments in manufacturing infrastructure; and President Trump through more unconventional means, using both carrot and stick to compel companies to favor domestic production.

On the flip side, neither candidate has been able to articulate a strategy to shore up our domestic supply chain — the key to U.S. manufacturing — or demonstrate a deep understanding of the industries that will drive sustained growth. In other words, if manufacturing were the lens through which CompanyWeek would endorse a candidate in next Tuesday’s election, neither would get full throated affirmation.

Instead, despite the duplicity, we’re rooting for Daniels Manufacturing Corporation. And demanding the party that emerges from next week’s election immediately set to work to undergird small and middle-market manufacturing, to support communities with the vision of San Leandro, California, or Fort Collins, Colorado, towns that value “job-dense, 50-person, high value-added employers”, i.e. manufacturers.

Delivering on that promise might compel me to again endorse a candidate. It’s never too late.

Bart Taylor is publisher of CompanyWeek. Contact him at btaylor@companyweek.com.

Inside the Tesla supply chain: Hale Foote and Scandic

/in /by

We first interviewed Hale Foote in 2017, and Dan Sanchez’s profile of Foote’s spring and stamping company, Scandic, has stuck with me ever since. Scandic is a Tesla supplier, and Foote’s description of how the upstart automaker was bringing a Silicon Valley ethos to the manufacturing ecosystem in the Bay Area was fascinating.

I caught up with Foote again last week. He first asked about CompanyWeek, and agreed with my thought that things continue to line up for U.S. manufacturing. “Before COVID hit us, I was seeing more work come in from China in January,” he said. “There’s growing sentiment that we need to reshore some work.”

Here’s my Q&A with Hale Foote, owner of Scandic, a CompanyWeek Best of California manufacturer.

CompanyWeek: How’s life in the Tesla supply chain these days?

Hale Foote: Unchanged, but we’re kind of a unique animal here, we’re locked in to Model S and Model X, the first two big ones. The Model 3 and Model Y, we have not been heavily involved in. Tesla emerged as a more mature company and they were able to get Detroit suppliers to play ball, Chinese suppliers to play ball. But we’re locked in where we are, and we’re in a good spot.

CW: You’re in a unique position — you’ve been with Tesla through uncertain and volatile times, only to see it evolve into an industry phenomenon and Wall Street darling. What changed?

HF: Two things changed, one with Tesla internally, and two, with the world market.

First, Tesla began to get volume, and the traditional Detroit auto parts suppliers who had written them off as a California flake, started to see numbers that made sense, and that was largely due to Model 3, when they started selling hundreds of thousands of cars a year instead of 20,000 or 30,000, or even 50,000. So Tesla finally got it right, and not just with Model S and X, which were expensive, but Model 3 got people’s attention. That was the one.

Then externally, various governments around the world started seeing that EV is the way to go and decided, “Yes, we’re going to incentivize people to do it.” Everyone from GM to Ford started coming out with EVs that gave Tesla a whole lot more credibility.

And frankly, no one can touch them on infrastructure. The supercharger network and their batteries are their secret weapon, not the cars. So it was a combination of their own smarts, engineering and instinct for survival, and externally, governments around the world saying, “We need to go electric.”

CW: During their real volatile period, I recall there also being a lot of discussion around people and the loss of key production executives. Was Tesla focused on workforce all along?

HF: Yeah, I think a lot of that talk was driven by the auto establishment, saying, “Look, they’re just a Silicon Valley startup churning through people,” and there was some of that, but that’s Silicon Valley. They did start getting people coming in from the midwest, auto industry veterans who knew what they were doing. But it’s fascinating, since we’re here in the area, I see people now circling from Google to Apple to Tesla constantly. And what do Google and Apple have in common with Tesla? Smart engineers. There’s a huge cross-pollination of talent here.

CW: You made a comment in our interview three years ago that stuck with me, that “Bay Area companies like Tesla and Apple want to fail faster to succeed sooner.” So they’re doing more than that. They’re creating their own ecosystem of shared talent?

HF: So California has very strong protection for employees — non-competes are very disfavored here. California has always had strong worker protection, to say that “Hey Apple, you can’t shut this engineer down from going elsewhere.” And we’re seeing the upside of that here.

CW: So tell me about your company. Three years is a long time in your business. What’s new at Scandic?

HF: Yeah, so we just passed the 50-year mark last year, now in our second half-century, so we’re happy about that. On the people front, our big news is that our oldest daughter has just come back from Ohio to join the company and she’ll be taking over for me. Third-generation ownership, and we’re very excited about that.

CW: Was that in the works for a long time?

HF: No! She was like me, a liberal arts major, a different career, but saw the writing on the wall that this family business thing has worked pretty well. And it seems most of your readership is in the same position, a lot family businesses.

CW: Definitely one of the great attributes of manufacturing. So how’s the California business scene? The national narrative isn’t always the most positive.

HF: Yeah, the trade associations I belong to tend to be populated by more conservative business owners, and they always give me grief about, you could divest in California, why don’t you leave, taxes and regulations, et cetera, et cetera. You know, there’s a reason why people own companies here. There are thousands of businesses doing well here.

CW: I hear it all the time: “We love doing business here, we’d never leave, but man, it’s hard sometimes.”

HF: Yeah, we love doing business here, we’d never leave, and it’s not that hard!

CW: Do you think economic developers in California are supportive of manufacturing?

HF: Very much so. For example, the city where we’re located has always been a manufacturing city. They very much value companies like us — really job-dense, 50-person, high value-added employers. They’re not crazy about big-box warehouses. They want companies like us, that pay people well, people can buy houses and live that kind of life.

Is there environmental regulation? Of course there is. Is our water and air getting cleaner? Yes it is. So there are definite benefits to it. Yes, sometimes you’re going to be a little more expensive than someone in Nevada, but you know, they’re in Nevada and I’m in California.

CW: Where do you see opportunity going forward for Scandic? Where does Tesla fit?

HF: Tesla’s an important part of our business, but by no means the major part. They’re important, they’re solid, they’re steady, and at this point we’re a legacy supplier. It’s predictable, and it’s a good fit. But we’re not really an automotive supplier — they’re our only automotive customer, as opposed to my friends in Cleveland who have three customers. They work for the Big Three. That’s it. They live and die by how many F-150s sell that quarter.

We’re medical, we’re aerospace, we’re transportation, we’re safety systems.

CW: Will new technology open even more verticals for you? How about 3D printing?

HF: We make money on high-volume stuff, and additive manufacturing, in my experience, is not quite there. Making a product that takes 12 minutes to print is really not our market.

What is changing, and what’s going to change in my lifetime, is when we can print tooling, instead of building tooling over a period of months. When we can print the die, that will be a game changer for us.

For more coverage of California manufacturing, visit the CompanyWeek archive.

When the sound of winning is silence: Manufacturing quiets its critics

/in /by

After launching CompanyWeek in 2013, I fought a running editorial battle with a cadre of business writers about the state of U.S. manufacturing. The narrative from the national writers was that manufacturing was no longer essential, a quaint vestige of an earlier economic era. Columnists from Forbes, Fortune, the Wall Street Journal — most all had bought into the narrative that globalization had won the day, that it didn’t matter where America’s uber-talented tech and engineering class manufactured their products. China? Sure. Vietnam? OK. Anywhere but here.

I hit back in columns like A report proclaims the manufacturing “renaissance” a hoax, and the national media follow suit; and Is manufacturing great again? Don’t ask. We stopped counting.

It’s not that my adversaries were wrong; U.S. companies had indeed chased cheap labor overseas. Vast sums of capital followed as American brands built a manufacturing ecosystem offshore, employing millions of foreign nationals to work in factories entirely removed from the communities where products were inspired and headquarters based.

In retrospect, we could have guessed this was a model that inevitably would develop leaks. But the mistake of my adversaries was a fixation on the numbers. At the time, they were staggering. As we’ve documented, America lost millions of manufacturing jobs — about 4 million from 2006 to 2012 alone — leaving total U.S. manufacturing employment around 12 million jobs, or about half the number at its peak.

Even today, there’s still an “enthusiasm gap” among the business intelligentsia because many of these jobs won’t come back — here or anywhere. Technology is transforming the sector. And without high employment numbers, manufacturing will continue to be underestimated.

But it’s a reasonable guess that manufacturing employment, at its current level of 12 million jobs or so nationally, has found a new equilibrium. Losses to automation will be offset by gains from growth industries powering today’s manufacturing economy and a new national enthusiasm for domestic production. In Colorado and elsewhere, the sector is also proving uber-resilient in today’s “crisis” economy.

The fixation on numbers also never took into account the societal implications of sending the production of American-inspired products offshore. We’re a country of builders, of makers, of doers. If Main Street wasn’t home to a factory, it provided a direct path to one. Along with our lunch boxes, we shipped our national identity offshore when we decided others could make our products for us.

But just as the crowds that return to ballparks will raise the roof and replace the strange silence that today attends a touchdown, so too will the business punditocracy celebrate the return of America’s manufacturing ethos, in loud and boisterous terms. Watch for it.

For today, their silence speaks volumes.

Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.