By Dana Hedgpeth
Washington Post Staff Writer
Thursday, August 13, 2009
EATON RAPIDS, Mich. -- Determined not to sink along with other links in the auto supply chain, family-run Dowding Industries borrowed $12 million to leap into the green future and leave the dirty assembly line behind.
Almost two years later, Dowding has built the plant and bought the machines to make parts for wind turbines, providers of clean energy intended to help the country become less reliant on foreign oil. But so far Dowding has found little demand.
Instead, Dowding's big new machines are making a 35-foot-long, 20-ton steel part for a high-powered water jet system used to cut disposable diapers, brownies and even steel. The plant is running, but hardly at a level the company expected.
"We've never stepped out this far," Chris Dowding, the chief executive of the 44-year-old company, said of borrowing the $12 million. "It is scary and frustrating that the market isn't there yet. You're banking 40 years of your life on a new deal. Everything we have is now highly leveraged because of this new business."
She compares it to a kid getting a graduate degree. "You're proud of the accomplishment, but when the economy is bad all you're thinking is he just needs a job. That's us. We just need a job."
Here in Eaton Rapids, a town of 5,200, many residents work in auto and auto parts plants in and around the nearby state capital of Lansing and they have an intimate view of the industry's struggle. The Dowding family and dozens of businesses that once thrived by supplying the Big Three American automakers are trying desperately to adapt.
They are doing exactly what economic development officials and politicians hoped they would. Some are trying to produce parts for medical equipment. Others are switching to aerospace and defense. But it's harder than many expected. Expense, time and a hostile economy can clobber even the most well-thought-out move to a new business line.
Over the last six months, more than 500 auto suppliers have gone to workshops around Michigan, set up to help them transform themselves. Not all will survive. At least 500 to 600 of the nation's roughly 5,000 suppliers are expected to go under in the next few years, according to auto industry analysts at CSM Worldwide.In the Family
Chris Dowding comes from a long line of people who worked with their hands. Her grandfather raised dairy cows and worked in Detroit's auto industry. Her father, Skip Dowding, opened his own business, making auto parts in 1965. Skip, now 77, worked his factory floor six days a week, sometimes working through the night at the shop to keep up with orders from the Big Three automakers. Even so, he tried to stay diversified, selling wood-burning stoves, building tractors for Third World countries, making ice-fishing gear. The company's auto business has made a range of parts, including turn-signal levers, gas tank nozzles, and brackets for alternators and transmissions.
Twelve years ago, Skip and Chris, a 50-year-old Northwestern MBA graduate, hired Jeff Metts, a 55-year-old former football player with a firm handshake and a thousand-watt smile, to help beef up sales and diversify the business still more. Two and a half years ago, Jeff and Chris married. Chris is considered the bean counter. Jeff, who is president, and Skip, chairman, are the visionaries.
Metts launched a full-court press to get into wind turbines after he and Skip heard a pitch at a Los Angeles trade show -- it would be the next hot manufacturing business. Auto parts have gone from 100 percent to 10 percent of their sales, and they're hoping wind turbines will become the company's largest revenue stream, though for now they're relying on other lines of work, including making parts for satellites, dump trucks and subway cars.
But they're finding that nothing takes the wind out of a new idea like the worst recession in decades. Deals with several banks and venture capitalists have not worked out.
"We're grateful to have something to run at all," Skip said. "The wind stuff is pretty dead. We'd prefer to have the wind stuff, but we'll take what we can get."
Putting on a pair of safety glasses, Chris leads a tour through one of the factories. In Plant 3, a low-slung building behind the main office, welding sparks fly as roughly 60 workers make metal covers for heaters in subway cars along with brackets and other parts for Caterpillar dump trucks and bulldozers. Most of the workers wear earplugs over the din of the machines. There's one shift a day, and the crew works 36 hours in a good week. The plant used to have about 120 employees, working three shifts, but demand is down 45 percent since last fall. Sales are down 45 percent across all the company's business lines since the recession, although a few orders have been starting to trickle in over the last few weeks. In May, sales were down as much as 70 percent.
"We get bankruptcy letters almost every other day from a supplier," Dowding said, which forces her to keep looking for other sources for her own supplies.
Nearby stands the new 38,000-square-foot wind turbine plant, quiet, neat and clean.
"It will take a long time to pay it back," said Chris, who still hopes the business will grow once the economy recovers.Looking for Business
These days, Metts and Roger W. Cope, a top executive at MAG Industrial which makes the machines Dowding's wind operation uses, travel from Capitol Hill to Germany to rally support and drum up sales for the wind business.
So far the wind industry has not grown all that much. Last year, about 3,500 wind turbines were assembled and produced in the United States. By comparison, the auto industry was producing about 17 million cars a year in its heyday.
With smaller volume, fewer workers are needed. And it is unlikely that the wind turbine industry will create enough jobs in the near term to offset the thousands of jobs lost in the auto industry. In addition, re-tooling a plant, whether to make parts for wind turbines, medical equipment or aircraft, takes money -- and often lots of it -- for research, marketing, retraining workers and new machines.
"You've got companies that are already over-leveraged and living hand-to-mouth to make it in the auto industry," said Jim Gillette, director of financial services for CSM Worldwide, a consulting company in Grand Rapids. "It takes time, it takes money and everybody is trying to do it."
At Su-Dan Corp. in Rochester Hills, Mich., chief executive Dennis Keat has gone to one of the state-sponsored workshops to figure out how to convert his business from car door brackets to dialysis machine brackets. His auto supply business has been cut in half, forcing him to lay off more than half of his 200 workers and cut managers' salaries as much as 20 percent. He's trying to get an $11,000 grant from the state, but is uncertain about how he'll amass the $500,000 investment he thinks he'll eventually need.
He worries about volume. He might have made 2 million car brackets a year, but medical customers are likely to only need about 20,000 brackets a year.
"I'm going to have to get 10 times the medical work I'm doing," he said, "just to replace the auto work."
Stephen P. Artz, vice president of operations at RTD Manufacturing in Jackson, is trying his hand at almost anything. His work supplying parts and servicing machines for the Big Three has plummeted 75 percent in the last year. He's down to 11 workers from 58.
Artz tried making dumpsters and steel supports for the construction business. The industry tanked. He's got a deal to service equipment at a few nearby ethanol plants and another to make foot pedals for RV toilets -- RVs being another industry feeling the economic crisis. Defense contracting? He has made parts for a military fighter jet and shields for NASA satellites. He is waiting on a deal to make an ammunition sorter for the military .
In making a piece for a nuclear submarine, Artz spent about eight hours explaining to his workers what the Navy wanted.
"Every industry has its own language and you've got to translate that to the guys on the floor," he said. "If somebody makes a mistake in making the part, you've blown $20,000 on raw material. For a company that's trying to get by, you can't afford to blow that kind of money."
Of course, competition is fierce.
A military sales consultant recently told Artz he knows of dozens of auto suppliers trying to convert to defense work.
"They're calling him every week asking for business," Artz said. "They're all saying, 'Pick me. Pick me.' You're hoping you can hang on long enough. We're just trying to survive."