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Two companies offer different perspectives on ‘Jobless Recovery’

IN Amazing Things, Management Team, Microelectronics, Press Releases, . . . On 12-01-2004


“Two companies offer different perspectives on ‘jobless recovery’ ”

– Natel Engineering Company Inc
– Sure Grip International Inc

Kate Berry

Two years ago, Sure-Grip International employed 60 workers on a roller skaic assembly line in South Gate. Now there are 22, and company President Jim Ball has no intention of hiring, even though business is picking up.

“There is no job recovery,” Ball said. “We’re importing everything from China because it makes us more profitable and competitive.”

Across town in Chatsworth, Prakash Bhartia, executive vice president of Natel Engineering Co. expects to add 10 new workers at a plant that make circuits for F-18 military aircraft.

“We’re basing our hiring on certain known quantities such as what we need to start up a small operation,” said Bhartia, whose company employs 215 altogether. “If business increases, we’ll hire more people.”

More than two years after the recession officially ended, jobs are still hard to come by, especially in L.A.’s manufacturing industry. Throughout the state, manufacturing shed 305,000 jobs in 2003, according to Keitaro Matsuda, senior vice president of Union Bank of California.

“Globally, the manufacturing sector is going through a similar thing the agricultural sector went through in the 1930s, with total output increasing dramatically, but the number of workers decreasing,” Matsuda said. “We have to manage that transition somehow and get those workers being displaced into well-paying jobs in the technology and service sector–and into jobs that are not exportable.”

While some economists think it’s only a matter of time before overall hiring gears up, others point to uneven job growth in recent months that could suggest a more profound adjustment in the U.S. economy. Much of this stems from lower-wage jobs that have moved overseas.

Indeed, the economy has shed about 2.3 million jobs since President Bush’s term began, making it a campaign issue that the Democratic presidential candidates have been emphasizing. “The wreckage of the Bush economy is all around us,” Democratic frontrunner John Kerry said last week.

The sluggish growth in new jobs, whatever the reason, can be seen up close through the experiences of Ball, whose company is still cutting back, and Bhartia, whose company has managed to add jobs, though not without difficulty.

New techniques

At Natel Engineering, Bhartia said 95 percent of the company’s business involves military contracts for firms like Raytheon Corp. Those contracts prohibit him from shipping manufacturing overseas, unless approval is acquired from the Pentagon or State Department.

When the economy turned south in 1999, Natel survived by converting to “lean manufacturing,” a term coined by Toyota Motor Manufacturing USA, that refers to producing products only when they are needed, not in batches.

The company, which makes miniaturized circuits and had $46 million in sales last year, became more efficient by cutting back inventory and producing only when orders came in. During the difficult years, one competitor went bankrupt and another put itself on the auction block.

“Because of lean manufacturing we’ve saved a lot of potential labor hours that we can transfer to new operations without hiring new employees,” Bhartia said. Natel promised its workers that it would not cut any job cuts when it moved to the lean processes.

“By being more efficient, there should be labor, space and material savings,” he said. “That helps us quote lower prices to customers and to gain new business with the same number of workers.”

Some redundant workers are being transferred to Natel’s Simi Valley plant, where the 10 new hires will include a production manager, engineer and several skilled technical workers with experience mixing chemicals.

Bhartia doesn’t plan to hire costly mid-level managers.

Because the plant is just five miles from Natel’s headquarters, all administration, from procuring materials to management, can be handled at the Chatsworth site.

Bhartia said the company is looking to broaden its customer base by expanding into other markets such as health care and satellites. It will use existing workers to staff operations until those businesses grow.

In November, Natel bought Scrantom Engineering Inc. of Costa Mesa, which has capabilities in microelectronic packaging of circuits.

“Mostly we have expanded by acquiring new companies in new areas while keeping our current staff,” he said. “I would say the economy is still quite stagnant. It’s really like pulling teeth trying to find new business.”

Toll on head count

By contrast, Sure-Grip, the largest U.S. manufacturer of roller skates, is a 68-year-old family business that has gradually downsized to about one-tenth of the 200 employees it had in 1980.

Jim Ball, 51, is the third-generation owner who has survived a steady downturn in a trend-driven retail industry primarily by outsourcing to China.

Ten years ago, Sure-Grip began buying a small precision ball bearing from a Chinese company, Fortune Venture, which specialized in metal working. Soon after, sales agents from Taiwan and Shanghai were knocking at his door urging him to purchase components from shoes to wheels abroad for the company’s skates.

Smaller manufacturers like Sure-Grip are following in the footsteps of industrial giants that moved offshore in the last decade. Doing business in Asia has become easier because Chinese companies have opened accounts at U.S. banks that eliminated the need to get letters of credit.

“As we keep outsourcing to be more profitable and competitive, we end up losing more jobs,” Ball said. “I’m at a point where I can’t lay off any more workers.”

He described having a supervisor oversee an assembly line of up to 10 workers and gradually the line would dwindle to just two to three as he laid off more workers and imported products.

Eventually, the remaining workers were mostly supervisors, and even those were asked to kick in $20 a month toward health care coverage–essentially wiping out the minuscule raises Ball had provided over the previous three years.

Meanwhile, prices for roller skates have remained stagnant, while the cost of making them has fallen because of cheaper sourcing overseas.

In an industry that rolls with the fads, Ball is concerned that roller-skating hasn’t enjoyed a resurgence he has seen during past economic downturns. And the skateboarding craze of two years ago seems to have fizzled.

Manufacturers have complained that the Chinese government is feeding the flight of overseas jobs by pegging its currency to the dollar. The peg, they argue, is keeping the yuan undervalued, making Chinese goods less expensive in dollar terms–giving the imports a price advantage against home-built goods.

“My main concern is, what is the government doing to create jobs, because manufacturing is really struggling,” Ball said. “Every business is doing very well right now because their margins are better, they’re importing goods but they have fewer employees.”

Ball believes the U.S. should impose tariffs on imports to remedy the job shift abroad.

“The government is essentially telling us to buy goods from China and lay off workers,” he said. “With workman’s comp, wages, no import duties and no tariffs, you cannot compete with 40-cents-an-hour workers in China.”

COPYRIGHT 2004 CBJ, L.P.

COPYRIGHT 2004 Gale Group


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