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Copyright © 2000 Seattle Times Business News : Sunday, August 22, 1999 Small players find strength in numbers by Chuck Taylor, Seattle Times aerospace reporter VANCOUVER, B.C. - The major players in aerospace have been merging and globalizing for years. Now it's time for the small companies that supply them to do the same. That's the message Washington state suppliers were given here recently at the Aerospace North America trade show, during a forum sponsored by the Seattle-based Washington Aerospace Alliance, which represents mostly smaller companies. At stake is the survival of suppliers that employ as few as a handful of people, or even those that employ several hundred. Those smaller manufacturers thrived during the era when behemoths such as Boeing counted on hundreds of suppliers for the millions of parts that go into aircraft and space vehicles. But in recent years, the large companies have been thinning their lists of suppliers - increasingly counting only on the biggest and most stable - and demanding just-in-time delivery of inventory on short notice, all in the name of cutting overhead. The big players also are doing less assembly themselves and are buying subassemblies - large multi-part sections of an aircraft or spacecraft - instead of just individual parts. Addressing those trends has been a challenge for many small shops, which might not be big enough to make the supplier lists of major manufacturers or aren't capable of assembling products or filling orders in a matter of days. The solutions, aerospace executives say, include consolidation, targeting new markets and collaboration, even across national borders. "You have to join organizations, you have to network, you have to attend meetings," said Rosemary Brester, who with husband Larry owns Hobart Machined Products, an eight-employee shop outside Issaquah. She was among the Washington suppliers attending Aerospace North America. "If you're a non-participant, things aren't going to happen for you," she said. "You have to be very creative." For Brester, who is Hobart's president, that has meant taking advantage of a government-organized trip to visit companies overseas and even having a booth at the huge Paris Air Show in June. Indeed, Peter Smith, president of Canada's Aerospace Industries Association, told the small gathering of Washington state suppliers that "national loyalty doesn't exist." Major companies are "sourcing on a global basis," he said, and small ones must act accordingly. The view from Britain is similar. If companies there are to supply big U.S. firms such as Boeing, "we've got to have partners in Washington (state) to do it," said John Whalley, chief executive of the North West Aerospace Alliance in England, a trade group. During the trade show, Seattle's Canadian consulate organized a gathering of smaller Canadian and Washington state aerospace companies, with the hope that connections made there might result in future business relationships. About 80 people turned out. And a memorandum of understanding was signed at the trade show to foster alliances among the 125 companies of the Washington Aerospace Alliance and the 30-member Aerospace Industry Association of British Columbia. Also attending the Washington Aerospace Alliance's roundtable were two representatives from a trade group in Spain, whose Basque-region companies hosted a visit by eight Washington companies - including Brester's machine shop - last March. The trip was organized in part by the U.S. Commerce Department. "Business opportunities did not develop overnight," said Jay Field, a Seattle-based international trade specialist with the Commerce Department. "But we are hearing from companies that they are receiving visits from Spanish companies, and a number of participants have scheduled or are contemplating return visits." Field, whose mission is to promote exports by small- and medium-size companies in Washington, said those companies usually find that global business moves at a different pace. "It takes a much longer lead time to get to the point of (price) quotes and things of that nature than what many of these smaller companies are used to in their home, traditional markets," Field said. So far, overseas outreach has resulted in a few conventional supply contracts for smaller U.S. companies, somewhat short of the more-sophisticated joint ventures some envision. But relationships have begun. At a meeting with Taiwanese companies in SeaTac in May, Hobart Machined Products, which does about $550,000 worth of business a year, made connections to supply lavatory countertops to a company in Taiwan that was, in turn, supplying Boeing's C-17 military-transport program. There is a good possibility, Brester said, that Hobart will come away from the trip to Spain, too, with new business. "Those are the first steps toward getting more formal alliances in the future," said Washington Aerospace Alliance Executive Director J.C. Hall. Many other Washington companies, however, are either in denial about the global aerospace economy or are simply too busy making ends meet to see the big picture, Hall said. " 'Woe is me' is the refrain of small suppliers," he said. "We are still only to a certain extent coming to grips with the fact we are really a global industry now." Washington companies aren't alone. Whalley, of the British trade group, said small companies there, too, "are too busy right now to figure out how they're going to expand or improve." While it might be comforting that small companies worldwide are having to face the need to expand their horizons, that also could be a threat to Washington shops. "When you look around the Northwest," Hall said, "we used to think in terms that we are in Boeing's back yard, that we have Boeing's business. But now everyone wants to play in Boeing's back yard." Hall said many suppliers overextend themselves during booms of the cyclical commercial-aircraft industry "and almost have become one-customer shops." Those companies must diversify their customer base. "There is life beyond Boeing," Hall said. For example, at Cessna, the Wichita, Kan.-based general-aviation manufacturer, "they will tell you that business is absolutely booming. They're looking for suppliers." Brester said her company began seeking a variety of work in the early 1990s when, she said, Boeing told the owners, "You need to diversify. We might not always be here." Besides machined parts for aerospace, Hobart Machined Products now supplies the automobile air-bag and medical industries. Hobart also has formed an alliance with two other small companies, Cad Support Services of Lynnwood and Design-A-Weld of Portland. The companies subcontract work with each other, enabling them to bid on supply jobs they would not be able to handle alone. Meanwhile, in Canada, the Aerospace Industries Association is seeking ways to improve the financial, managerial and legal expertise of smaller companies, to better enable them to form consortiums that supply bigger companies, Smith said. As in the U.S. supplier market, Smith said, Canadian companies are restructuring. They also see big companies doing more "outsourcing" of specialized tasks, and they are experiencing a trend toward longer-term supplier relationships. The consolidation and thinning of the aerospace supplier base is prompting some small-company owners - many of whom have run their businesses for years and might be near retirement age - to sell, according to Scott Hardman, who handles mergers and acquisitions for Alexander Hutton in Seattle. Hardman said that, besides the increasingly competitive climate, relatively high acquisition prices are incentives to sell family businesses to bigger companies. In some cases, small companies are merging to grow bigger. One such deal recently brought two Seattle-area companies and one from California together: Mamco of Seattle, with 250 employees; Allfab of Everett, with 270 workers; and, Quality Aluminum Forge of Orange, Calif., with a payroll of 272. All make precision metal components and assemblies for airplanes and now are divisions of a merged, Seattle-based company called Neuvant Aerospace. There are likely to be other examples - and even company failures. "Many of us are going to be struggling, fighting to keep the doors open for the next couple of years," Hall said. -------------------------------------------------------------------------------- Chuck Taylor's phone-message number is 206-464-2465. His e-mail address is: chucktaylor@seattletimes.com. << Return To Archives Page |
