PCDC, company officials express economic optimism

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Ewing: Problems not as severe here as in coastal areas of country

By Kevin Koelling, Managing Editor

TELL CITY - This area has not missed out on the economic downturn, "however, we should fare better than most," Clay Ewing said at the Perry County Development Corp. annual meeting March 17.

The economy here "in the heartland of the country" is not as volatile as in coastal areas of the country, the chairman of the PCDC board of directors said, but it's important to ask, "how do we ensure these short-term problems don't affect our long-term prospects?"

"A gloom-and-doom prophesy can become self-fulfilling if we allow it to," Ewing continued in his opening remarks. "We cannot afford to defer or reduce our children's education, nor ignore the infrastructure we have in place."

This is a good time for smart investors to make money, and for businesses to look for opportunities, as well as threats, in their specific environments, he said. "We have many advantages in Perry County. Our local and regional banks are healthy, and because of their conservative structure, have left us better off than most regions. Our hospital remains an important employer and lifeline. Our local employers have invested much into our community and are making every effort within their ability to remain competitive in the marketplace, and to remain efficient and effective as they put their business plans together."

All of the business, government and other leaders at the meeting have a common purpose, Ewing said, "to serve and make Perry County a better place."

Kinnett Brings Good News

PCDC President and Chief Executive Officer Chris Kinnett noted that the American economy is not in a depression.

"There is some good news," he said. "First, I heard a report that Ford Motors had called back workers for a rising demand for the ever-popular F-150 Ford pickup truck … and the average price of a used car has actually gone up $600 in the last three months. This could be an indication that inventory is dropping and demand is on the rise. Third, 52 percent of the 245 large U.S. employers surveyed in February have already conducted layoffs and 56 have instituted hiring freezes, which is up 39 percent and 47 percent, respectively. The good news in that is that the percentage of companies still planning layoffs or hiring freezes has dropped almost as sharply. Thirteen percent of those surveyed said they expected layoffs, compared to 23 percent two months earlier."

Encouraging Sign

"Fourth," Kinnett continued, "Nestle, which recently opened a new facility in Anderson, Ind., had originally planned to employ 300 people, but apparently the Nesquick and Coffee-mate business is really good, because the company has already announced that it will expand and add another 100 jobs."

"However, the next two years will be critical in determining our future direction," he added.

Retaining existing businesses is important because they account for 70 percent of all new jobs created and play an important role in attracting other businesses, he said. "It's cheaper to retain existing businesses than attract new ones."

He promised the PCDC will continue to provide leadership, advocacy and community planning and development "to raise the per-capita income of Perry County residents, retain existing firms and attract new businesses."

Methods may change, he said, "but our basic premise is to develop a strong relationship with our existing businesses and respond to individual company needs."

Recession Resilience

He introduced guest speaker Gary Gigante, president and chief executive officer of ThyssenKrupp Waupaca, who began by saying ThyssenKrupp, with sales of $70 billion and 191,000 employees worldwide, has remained profitable even in the first couple of years of the current downturn. Waupaca fits into the company's technologies group, with sales of $15 billion and 55,000 employees, and is part of its mechanical-components division. Worth $5.5 billion and employing 23,900 people, Gigante called it "our strongest area" that "in today's economy, has been able to weather the storm the best" and "will carry our group ... through this economic downturn."

Waupaca was owned by other companies previously, Gigante said. It was started with 13 employees in 1955, and has developed technology since then that helped it become a world leader, he explained. Waupaca was acquired by The Budd Co. in 1969, "and the significance here is that in order to grow a company, you have to have capital, and the owners of Waupaca at that time did not have the capital to grow the business."

Budd provided "small amounts of capital for small amounts of growth," Gigante explained.

Thyssen bought Budd in 1978 and would merge with a similar company in 1997 to become ThyssenKrupp.

"For Waupaca, that meant we had a much larger banker" and expansion capability, the CEO said. Waupaca now has six plants. Tell City's was its fifth, built when space became limited at its home site, Waupaca, Wisc.

Tell City Site Makes Sense

"When we filled up the Wisconsin plants, it was time to move elsewhere," Gigante said, "and really, we had to make a decision as to where we go and how do we do it?"

Other companies' plants could be purchased or Waupaca could build more-expensive new plants, he explained.

"The location had to be appropriate to our customers," he said in describing criteria the company used in its decision to build plants here and elsewhere. "We do everything we can to avoid unions. We need to establish our culture and our management philosophy as different than most other foundries."

Other important factors include easy access to markets, good labor with "a low level of union and organizing activity and a very aggressive community support, including financial-infrastructure help," Gigante said.

When the company decided further expansion was appropriate, it looked south to Etowah, Tenn., an area Gigante called very similar to Tell City. "It had the best labor force in all the areas we looked at," he said, adding Tennessee is a right-to-work state "and there's very little union activity in that area, and very much like here in Tell City, a very cooperative community."

Pouring in the company's sixth plant began in October 2001.

Safety, Quality Come First

Waupaca business priorities focus on safety, quality, delivery and financial aspects, Gigante said.

"We tell our people if we can do the first three right, then the last one will happen," he explained. "We really do believe that people are our strength. We spend a lot of time on development and we really try to do the best job we can with maintaining our employees. Today I would say more than 80 percent, maybe closer to 90 percent of our employees have been with us for 10 years or more."

The company promotes from within when possible, he added, but "we are the leader in our industry, so we are able to attract good talent when we need to go outside."

Having more than 450 customers helps in the company's attempts to stay as diversified as possible, Gigante said, "even though the majority of our business is with the automotive guys."

Approximately a third of the company's business is light automotive, and "a current strategy is to grow our nonautomotive business," which includes industrial, agricultural and commercial trucking, Gigante said. John Deere will be Waupaca's biggest customer this year and perhaps in coming years due to the downturn in car sales, he added.

Waupaca's growth strategy has been to add capacity through modernization and automation in existing plants, and Tell City benefited with approximately a third of a recent $75 million upgrade, he said.

Company Threats

Continued increases in material costs are among threats to the industry, Gigante said, and they can't all be passed to customers. The big car companies supplied by foundries "aren't healthy" he noted.

The Clean Air Act was another threat, Gigante said, that required "a $19 million investment in our Plant No. 1" which generated no financial return but was required "just to stay in the game."

China continues to be a threat, he continued, and fighting it has meant following the strategy of locating plants close to customers and getting other businesses like ATTC and Webb Wheel to locate close to the company's foundries.

"That's the way to keep the Chinese out," he said.

All managers and suppliers are pushed to continually reduce costs, and the company builds 3-percent productivity improvements and three automation projects into each year's plans, he added.

"We can complain about everything that's happening," Gigante said, "or we can look at it as an opportunity, and that's what we've chosen to do at Waupaca."

That perspective will not only help the company survive the recession, he concluded, but will bring increased success in the future.