MAHONING VALLEY Chinese competition hits hard
Area companies hurt by China look for new ways to survive.
By DON SHILLING
VINDICATOR BUSINESS EDITOR
John Kephart recalls the bustle on the shop floor of his forging company.
Hulking presses kept a clanging beat throughout the plant. Workers on several production lines rapidly stuffed the machines with red-hot metal rods that were cut and bent into pry bars.
That was B.C. -- before China.
An industrial explosion half a world away has divided the history of J & amp;H Manufacturing in Columbiana.
Presses that had been pounding metal six days a week now run infrequently -- some once a week, others once a month. Annual sales have been cut by two-thirds to $900,000. The work force has been reduced from 24 to 10.
"Some days I wonder why I have 10," Kephart said.
China has been the difference. Chinese manufacturers began making some types of pry bars three years at prices so low that J & amp;H couldn't compete.
China is in the midst of turning itself into an industrial powerhouse. Chinese companies and foreign investors are pumping money into new steel mills, car plants and other industrial factories.
J & amp;H isn't the only area company getting squeezed.
Summitville Tiles in Summitville was forced to seek bankruptcy protection in December after 10 years of battling a flood of low-priced tile imports. At first the threat came from other countries, but tile increasingly has been coming from China, said David Johnson, Summitville Tiles president.
The Columbiana County company has cut employment from 650 to 250.
Werner Co., which is based in Greenville, Pa., is cutting 1,000 jobs at U.S. operations because retailers switched to low-cost ladders coming from China and Mexico. A plant in Greenville was closed, and one in Alabama is in the process of shutting down.
Werner still has 550 people working in Greenville, at its headquarters and at an aluminum extrusion plant.
Brian Benyo, president of Brilex Industries in Youngstown, fears the worst is yet to come for U.S. manufacturers.
For the most part, China has been building new factories to supply its own growing economy, he said. Benyo figures that China soon will have too much capacity and will increase its exports of both raw materials and finished goods.
If that happens, more U.S. manufacturers will face even more low-priced imports, he said. That concerns Benyo because Brilex supplies machines and equipment to factories.
See an unfair advantage
Local manufacturers say that they don't mind competition, but that it should be fair. China has an unfair advantage, they say, because it sets the rate of its currency, instead of allowing it to be controlled by market forces, and its companies aren't paying U.S. wages and benefits.
"In our opinion, the cost of labor in China is nonexistent," Kephart said.
Johnson said Summitville Tiles faces an added burden because of U.S. trade policies. China charges a much higher tariff for tile imported into that country than the United States does for tile sent here.
For Brilex, however, the industrial boom in China isn't all bad. Between 20 percent and 30 percent of the company's annual $10 million in sales comes from equipment bound for China, he said.
For example, Brilex now is making a high-tech milling machine for a Chinese mill. The automated machine is designed to move quickly as it cuts pipe that has just been produced.
Little work supplying Chinese projects is available for U.S. companies, however, Benyo said. In the past, between 80 percent and 90 percent of equipment needed for a new plant in China was produced in this country. Now, the percentage is reversed at the insistence of Chinese leaders, he said.
Dwindling U.S. jobs
As more manufacturing is done in other countries, jobs in this country are disappearing. The United States has lost 2.7 million manufacturing jobs since 2000, according to federal statistics.
Brilex has been an exception to the decline, however. It has 60 people working at its Crescent Street plant, compared with 25 six years ago.
Besides the China business, the company has succeeded in expanding to new markets and new regions, Benyo said.
The success came despite the troubles of the domestic steel industry, which was hit a few years ago by a wave of low-priced imports.
With its customers struggling, Brilex officials decided to spend more money, not less. They expanded their sales force, invested in new production equipment and moved into areas such as power generation and airport security equipment.
At Summitville Tiles, Johnson has decided that the company must focus on a narrow line of tiles that have features that can't be matched by imports. He hopes the company will emerge from bankruptcy court this summer.
"I feel I can rebuild this company," he said.
Products that Summitville is depending on include bricks designed specially for large buildings such as hotels and acid-resistant flooring that is used in a variety of food and beverage plants.
At J & amp;H, Kephart isn't sure what will happen to his 21-year-old company. With industrial sales down, about 25 percent of the company's revenues are coming from contracts to supply the federal government with pry bars.
Kephart said the company has been able to survive because it has no debts, but he and his wife, Hellen, who handles the company's bookkeeping, haven't been paid in two years.
"I only get paid if the company makes money," he said.
He is considering producing new items, such as hammers, and expanding a related business, ATV World, which sells all-terrain vehicles and supplies.
"Within five years, our [pry bar] products will go the way of shoes, clothes and TVs. Everything will be made overseas," he said.