WESTERN REGION, THE
Jacobs, Charles F
REGIONAL REVIEW THE WEST
Economists are sayings: “Clouds on the horizon.”
Western fastener people are sayings: “The sun is shining. Hardly a cloud in sight.”
Economic indicators continue to be mixed, but they also continue to point to clouds forming on the horizon. The good news is that those clouds, which were expected to rain on our parade by now, remain there on the horizon. As far as the fastener people we talked to in the Western Region are concerned, most of them are too busy coping with record sales levels to notice any clouds.
Looking at the economic indicators, the Federal Reserve Board, at the end of the third quarter, described the economy as continuing to expand at a moderate rate with the rate of growth slowing throughout the Northeast and Central regions while showing modest growth elsewhere. Consumer spending continued to increase “moderately,” dragged down by sluggish sales of vehicles and housing-related goods. Large inventories of cars and unsold homes are reported, but retailers report other inventories as being at satisfactory levels.
Domestic automakers are thrashing around in a pool of disinterested consumers, and high wage and pension commitments that were unfunded, struggling desperately to regain their footing. Consumers are switching to smaller, more efficient cars and find that most of them carry Asian labels. Ford announced it was cutting 10,000 salaried workers and offering buyouts to all 75,000 of its hourly workers. Their goal is to shed over 30,000 of them. All of the Big 3 automakers (or should we say formerly Big 3?) have announced major cutbacks. Rumors have even surfaced that Ford and GM are talking a merger. A small, efficient Fordrolet may be the family car of the future.
The Federal Reserve reports manufacturing output as having shown a modest decline as the summer drew to a close, in spite of a slight improvement in aircraft and defense activity. While inflation pressures were moderating, sustained cost increases continued to be reported in metals, energy, and petroleum based products. Even though “moderating,” inflation continues to pose a problem. Over the past 12 months, core inflation (which excludes the volatile energy and food sectors) has grown 2.8%, the highest rate of growth in five years. It is hoped that end-of-summer (or pre-election) relief at the gas pumps may trigger improvement in consumer attitude and spending, giving the economy a boost at year end.
There’s nothing mixed about the business picture described by the Western Region fastener people that we talked to. While 2005 was, for the most part, a good year for the fastener business, 2006 is a better, in fact a great year, thank you. As for those economic clouds on the horizon: what clouds? Here, specifically, is what they had to say:
Brian Sonnenberg, now chairman of Portland Bolt & Manufacturing Company, Portland, Oregon, has one word to describe company sales in 2006: “Unbelievable.” In his 30 years in fasteners, Sonnenberg has never seen anything like it. It is unprecedented. Receivables, for example, are three times normal levels. Portland Bolt makes hex caps, bolts, structural bolts, and custom fasteners, and rounds out its product offering with imported nuts and washers. Founded in 1912, the company does heading, bending, threading, galvanizing, and, with its NVLAP accredited lab, comprehensive testing and certification. The construction industry is a major user of Portland Bolt products and tremendous growth in commercial construction and infrastructure projects has contributed significantly to the company’s sales increase. Sonnenberg indicates that the price of steel appears to have leveled out but the price of zinc has tripled. Import fastener prices continue to go up. Looking ahead, Sonnenberg sees no signs of any lessening in demand. With Sonnenberg assuming the chairmanship, son-in-law Jonathan Todd, with an accounting background and a number of years in Portland Bolt sales and management, now runs the day-to-day operation.
Suzanne Dukes, President of Haves Bolt & Supply, San Diego, California, describes their sales increase of 30% over a strong 2005 as “challenging.” This ISO 9000 recognized company has 49,000 domestic and imported line items, including a wide range of MIL-SPEC parts for government subcontractors as well as parts for electronics and biomedical products. Hayes specializes in developing comprehensive (IT programs for its customers. Dukes continues to see price increases on stainless fasteners and on imports. They are still able to pass those increases along to the customers. “We wear them down,” she explained. “We have to.” The company has been doing some hiring and focuses on internal training to develop the skills needed. Dukes keeps hearing rumors about a business slowdown but sees no clouds on her horizon.
The Carson, California based Porteous Fastener Company has been supplying the nation’s distributors with a wide range of quality imported fasteners for 40 years, lay Hebert, Vice President of Sales, describes 2006 as excellent and up over 2005. The company put renewed emphasis on its broad line of domestic and imported construction fasteners with its acquisition of the U.S. Anchor mechanical anchor division and trade name a couple of years ago. The move was well timed and Porteous is enjoying the benefits of increased demand from the commercial construction sector. Infrastructure projects, triggered by the large Federal highway bill, also add to the demand for construction fasteners. When asked about prices, Hebert indicated that, while a higher increase was talked about and expected, overseas steel prices went up about 4%. Prices for fasteners continue to go up but also at a more modest rate than originally expected. Zinc prices are going up significantly, however, all over the world. As to the future, Porteous must plan ahead six months to maintain domestic inventory levels that will support anticipated demand. They continue to order at high levels and do not expect any significant change in that demand. To help house that inventory, Porteous has now opened their new warehouse in Atlanta. At 70,000 square feet, it is the same size as the narrow-aisle, high-bay warehouse they recently opened in New |ersey. In addition to these two, Porteous has 15 strategically located service centers around the country to respond quickly to the needs of its distributor customers.
Over at WCL, Inc., Industry, California, Kelly Cole, Vice President of Marketing, also searched for the right superlative to describe the company’s 2006 experience. He came up with the same word Brian Sonnenberg used at Portland Bolt: “Unbelievable.” Then, he added “Absolutely great,” to paint a very clear picture. He sees no sign of a decline on WCL’s horizon. The company will be celebrating its fiftieth year of operation in 2007 and is a master distributor of quality and domestic fasteners in all materials. At WCL, “off-the-shelf” means high performance and MIL-SPEC compliant fasteners as well as standards. The company is focusing on broadening its fastener offering and services to its core distributors. In partnership with NAFCO, It recently added a line of quality rivet nuts and automatic insertion tools. According to Cole, these rivet nuts deliver greater pullout resistance, reduce rework downtime and assure a lower parts-per-million rejection rate. WCL caps off this costreducing rivet nut offering with the best prices available anywhere. The company is now also offering custom packaging. Cole describes prices on steel fasteners as leveling off and he is not seeing much in the way of increases from his global fastener sources. The company has been doing some hiring in response to its increased volume and is solving the skilled worker shortage problem with an inside training program.
In Anaheim, California, CaI Fasteners, Inc., posted its thirtieth year of operation in 2006. The company distributes a broad line of domestic and imported copper and aluminum connectors, insulators, and machined parts, as well as threaded fasteners and stampings in a wide range of materials to the electronics, electrical switchgear, panel board, construction, and automotive markets. Major lines include Maclean/Esna, Micro Plastics, Richco, ITW, and Eaton Tinnerman. President Bob Truckey described 2006 sales as up more than 25% across the board. Truckey acknowledges that, to a degree, the increase reflects increased prices resulting from increases in the cost of copper and stainless steel, which he describes as “going through the roof.” When asked about any signs of softening, Truckey said that there might be a pocket here and there but CaI Fasteners is just too busy to think about them. Their website is now contributing to the company’s sales growth and they are selling “all over.” CaI Fasteners is having some assembly work done in Mexico now as they try to get a little closer to prices from China. The company is doing some hiring, including outside and inside sales people.
It should be difficult for a company that has achieved a 20% to 30% growth rate every year since it opened its doors six years ago to continue, let alone exceed, that growth rate. Kevin Hartman, Sales Manager at Vegas Fastener Manufacturing, Las Vegas, Nevada, doesn’t have any trouble with it, though. He indicates that the company exceeded its goal for the year before the end of the third quarter and would experience a 40% growth in sales this year. As much as half the increase, he acknowledged, might be from increased prices necessitated by increased raw material costs. They continue, however, to add an average of 10 to 11 new customers a month. The company specializes in short or long runs of large bolts and socket screws, special head styles, and high end fasteners made from exotic materials. Hartman describes the prices on the nickel and copper based alloys that they use as going up by 50% to 100% accompanied by shortages and extended lead times. Over 90% of the company’s output is sold through distributors and used in power generating equipment, chemical processing, marine, and government applications. Most of the people at Las Vegas Manufacturing have over 25 years of experience, having come over from Nonferrous Bolt after that company was sold and subsequently closed. The company continues to put its money where its growth is with new presses and CNC machines, increased inventories of special materials to protect against extended lead times, and the hiring of both factory help and outside sales people. As for the future, Las Vegas Manufacturing hasn’t seen a cloud since it opened its doors.
Over in Phoenix, Arizona, Yates Hudson, at Copper State Bolt & Screw, describes 2006 sales as showing a “nice increase” over a strong 2005. The company is a manufacturer and distributor of bolts, structural bolts, anchor bolts, lag screws, Grade 5 hex bolts, and hot forged bolts. They have forging, bending, machining, threading, and cutting capabilities and do bar coding both in and out. Many of their items are used in the construction industry and they have developed comprehensive inventory management programs for many accounts. Hudson is hoping that copper and stainless may level out after the first of the year. He indicated that overseas steel prices have increased 4% rather than the 7% originally talked about. The company is opening its twenty-first distribution center in the Southwest, this one in Prescott, Arizona. When asked about any signs of a softening in demand, his response was “not yet.” Copper State has been hiring and relies on its own training program for skill development. Hudson says it takes about six months to get new employees up to speed.
This was the sixtieth year of operation for Tacoma Screw Products, Tacoma, Washington, a major distributor of threaded fasteners, washers, and some nylon parts. The company supplies fasteners to the general industrial and commercial businesses in the Northwest region. Tacoma Screw will be opening a new branch in Yakima, Washington in the spring. COO Eric Niesz describes sales as being very good and up from 2005 levels. He does see indications that things might be starting to turn a bit. Prices for the fasteners he buys are leveling off some but he is concerned about large increases in health care costs and the difficulty of finding capable people.
State Industrial Supply, Tucson, Arizona, is an ISO 9001 registered distributor of domestic and imported fasteners and electronics hardware operating on a global basis. The company has a warehouse operation in Mexico to support its business with subcontractors in that country. State Industrial’s products are used on everything from computers and missile hardware to second tier automotive components, communications equipment, medical equipment, and high-end motion cameras. Sales Manager lean Revello said that by the end of the third quarter, State Industrial had exceeded all of its goals for 2006. She is not seeing any specific signs of softening, but the company is prepared and being cautious. They have installed a new software program and are now 100% RoHS compliant. State Industrial continues to see price increases in brass and stainless steel, but steel fasteners have leveled off. The company has been hiring, particularly to handle the increase in warehouse and shipping activity. State Industrial has always had its own training program.
Los Angeles based Hanson Rivet & Specialty has been around since 1929. The company offers a complete line of rivets including blind, solid, drive, semi-tubular, tubular, and shoulder rivets, plus belt rivets, tinner’s rivets, rivet nut inserts, and its new Captiv line of self-clinching studs, nuts, and inserts. The company recently moved about 20 miles to a new plant, doubling the size of its facility. Vice President Jim Williams describes sales as well up over 2005 levels. The company’s major concern as it looks ahead is continued cost increases in special alloy materials and in freight, wages, and health benefits. They continue to pass these increased costs along in their sales prices.
Moses Cordova has been in the fastener business for over 50 years and founded Cordova Bolt in 1975. The company, headquartered in Buena Park, California, is a master distributor of domestic and imported bolts, nuts, screws, washers, rivets, anchors, and metal building fasteners. Cordova sells mostly through distributors and its products are used in heavy construction, utilities, agricultural, and computer equipment. When we talked in September, Moses Cordova said that sales were well up over 2005 and that the month just ended was the biggest sales month in the company’s history. He said they are carrying a lot of inventory to support current demand and he sees no sign of any decline in that demand. He finds fastener prices are generally stable with imports showing some increases. Son Matthew Cordova runs the day-to-day operallons at Buena Park and son Mark Cordova is General Manager of the company’s Denver branch.
Economists are usually pretty good at spotting trends. There is logic in their arguments that higher interest rates on mortgages and other consumer debt, increasing prices, declining home values, and a shift to generally lower paying service jobs will impact on consumer confidence and spending and then on business spending. Domestic fastener companies have obviously gotten pretty good at finding business in shrinking markets, however, and they are certainly proving how good they are at it this year.
Copyright American Fastener Journal Nov/Dec 2006
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