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Dale Mulder was first to arrive. The tall, amiable president of Master Finish Company is quick with a compliment and generous with a smile. His relaxed demeanor is a welcome contradiction to the often harsh and unpredictable world of the plating job-shops to which he has devoted over two decades of his life.
Dale’s father, John had started Master Finish Company in 1959, first as a vibratory finishing job-shop, eventually adding copper-nickel-chrome plating to capture the seemingly unquenchable zinc die cast market of the day. Dale joined his father’s company after exploring opportunities in other fields, finally succumbing to the gravitational pull to join the family business in 1977. He was thirty-three years old, green and eager to learn the science, the business and the art of metal finishing.
The following edition of The Finishing Line is the transcript of a joint project between Products Finishing Magazine and Haviland Products Company to capture a moment in time for an industry climbing out from a eighteen month malaise. On the dawn of Sur/Fin’s return to Grand Rapids after a sixty year absence, PF and Haviland wanted to gather together, in one room the owners of three of the area’s plating stalwarts to discuss the state of the industry, the state of the economy, Sur/Fin and the future of metal finishing.
The Summit took place appropriately on Earth Day, 2010, and appropriately in Grand Rapids, MI. It was in Grand Rapids that this nation began its waste treatment awakening of the late 1960’s. Spurred by pressure from U.S. and Canadian environmental pressure, the strict waste water standards set forth in Grand Rapids were decades ahead of other municipalities, and are still among the most stringent nation-wide. The metal finishing industry, a conspicuous contributor to the water pollution issues of the first half of the twentieth century, is now one of the most regulated, monitored and scrutinized industry groups world-wide. Today, the environmental stewardship programs, techniques, equipment and chemistries pioneered by the plating industry to treat effluent streams are used in every sector of manufacturing to sustain the precious natural resource.
The attendees of The Summit were Jon and Jeff Rasche, the second generation owners of Valley City Plating, who purchased their father’s company in 1998, Bruce Stone and Scott Alvesteffer, the one-time zinc die casters, who’s leap of faith resulted in the purchase of Allied Finishing in 1994, and Dale Mulder and Doug Roetman from Master Finish Company. Dale had taken his time to join his father’s company; Dale’s cousin Doug joined his Uncle John’s company fresh out of high-school at the company’s infancy. Fifty plus years later, the hard-nosed VP’s inevitable retirement will have to be seen to be believed.
Before the rest of The Summit invitees had arrived, Dale Mulder paused in mid-sentence with the PF and Haviland group gathered for the round-table discussion, a beaming smile stretched across his face. The proud father announced that his son, John had joined Master Finish Company two days earlier to begin his plating education and the future succession of his namesake’s company.
John was joining his father’s company after exploring opportunities in other fields, finally succumbing to the gravitational pull to join the family business. He is thirty-three years old, green and eager to learn the science, the business and the art of metal finishing.
CEO Roundtable Q&A
PF: The economy has been a huge issue in the product finishing industry for the last few years. As it is now, where do you see how everything stands and what is the prognosis for the future.
DALE MULDER: If you survived last year, then you certainly earned an ‘A’ in Expense Chopping 101. If you didn’t cut expenses, you are probably not a survivor today. And that’s been the mode we’ve all been working in the last year or so, and that was survival. When we attended Sur-Fin last year, the focus seemed to be on how the other guys in the job shops were doing to cut costs. Labor side, chemical side, you name and they were trying to cut costs. But that was last year. This year, when you look at the brochure of what is being presented, and it’s a totally different tone. It’s amazing the turn around that we have seen in just the past year.
JON RASCHE: We certainly earned our ‘A’ in cost cutting. And we’re still here which is the most important. We didn’t have to cut any people, but it certainly was a challenge. We knew it was coming, though, and we were prepared for it. Any time it’s a storm, you have to weather it. We’re starting to come back. But where we’re at now is where I thought we would be six months ago. So I think we’re three to six months behind what I projected. But we’re predominant in the motorcycle industry, and its 50% or more of our business. We’ve tried to diversify as much as we could, but when you are 50% in an industry – which is not uncommon for a lot of companies – and that industry takes a big beating, then you take a big beating along with it. We still hear every month where a plater is going out of business – mostly the smaller platers – so that gives us an opportunity to pick up some work.
PF: In regard to the business that is starting to come in, is it from new markets or is it from existing customers who are starting to ask for more product. How has business changed?
JON RASCHE: Mostly it’s products that already exist. Even the OEM in the motorcycle industry has been pushing off launches, or are bringing back parts from the past that need very minor change. And for the most part, it is from existing parts from other platers, also, that have gone out of business.
JEFF RASCHE: I’d venture to say that 10 years ago not all platers treated their customers the way that they should have, and if you’re still in business today, then chances are you are not that plater that you were back then.
JON RASCHE: Yes, but I’m still amazed every day how many people elect not to reply to an email or a phone call. It’s just the basics of doing business. I remember reading that San Walton one time calling his son into his office and telling him ‘If you choose not to respond to an inter-office correspondence by the end of the day, then don’t bother coming in tomorrow.’
JEFF RASCHE: The other fallout from the downturn is that employees are very grateful to have a job. They are very cooperative, and very productive. It seems they are more engaged in the business now.
BRUCE STONE: We’ve always been very open with our employees, even before the downturn.
SCOTT ALVESTEFFER: We have a very active management team that knows everything that we are doing, and more importantly, why we are doing things. We don’t make any decision without discussing it first with our management team. Face it, we are not always right. We’ve always made mistakes along the way.
BRUCE STONE: Our employees’ participation in helping us make some very difficult decisions is very important. Unfortunately, we did have to make some layoffs of salary people, but we were very proactive from the onset when we saw this coming. Our crystal ball is no more clairvoyant than any one else’s, but we were very proactive prior to the downtown and we made a lot of concessions. So when it came we were already prepared in a fairly good spot, and when a few businesses went by the wayside in the third quarter of last year, we picked up large chunks of business and so we came out of it fairly unscathed. We are very thankful of that.
DALE MULDER: But on the downside of all of that, quite often you are asked to take on a project at a price that drove the last guy out of business. ‘Hey, the other guys did it for this price, so why can’t you?’
PF: Are you starting to see ‘reshoring,’ or business coming back from overseas because the OEM just isn’t see cost savings in Asia and other manufacturing locations?
SCOTT ALVESTEFFER: We are starting to hear from a lot of people who are bringing work back to the U.S. that they are starting to see what the true cost is of doing business overseas. There are inventory carrying costs, and Chinese manufacturing costs in general are going up. When people are finally settling back and asking themselves what is the true cost of quality, because at the end of the day those overseas cannot produce the quality that comes from the United States. You can have an accountant sit in the backroom and say ‘We’ll accept a certain degree of quality with these prices,’ but when they realize that they are starting to lose market share because of quality issues, or the perception of quality dropping, then they reevaluate those costs of doing business in the U.S., and they see the gap isn’t as large as it used to be. But what Dale said is correct, we may never meet those prices from China, but you can’t have your cake and eat it, too. So we try to compromise and sharpen our pencils some to meet costs where we can and get a little closer. In our business, volume makes a lot of sense.
DALE MULDER: Even today I still get calls from companies who had work done in China and there was a problem with the project, and now they want me to strip it and refinish it.
JON RASCHE: But I love those projects, because those can be some of our most profitable jobs. You get guys who call and they needed something in a satin finish and they didn’t get it that way, and they need it right now and so there is a premium to finish that work.
DOUG ROETMAN: And that’s what the market tests are for, just to see what these prices are going to be once they come back from overseas. They wouldn’t even bother to have us quote it if they were satisfied with what they were getting. But I think they still check and see what those costs are going to be, since they know that a few of us are still hungry out there.
BRUCE STONE: They’ll try and do that and get away with it for only a short period of time, but once enough product has come back and the financial burden is so great for them, they’ll have to start paying more market prices, but right now they are at the very front end of it and some platers are still so hungry that they are still willing to work the prices down. But that will only be available to them for only so long and then they’ll have to start paying market price again.
PF: Certainly another hot topic has been the new regulations that are coming out of Washington and with the EPA. How has these decisions been affecting you?
DOUG ROETMAN: We’re going through the same things we have always gone through over the year, but this time it’s a new perspective from their point of view.
DALE MULDER: There are very few industries that have as many environmental stewardship requirements than we do. I don’t think that will ever change.
SCOTT ALVESTEFFER: Let’s face it, these regulations often times eliminate the ‘bottom feeders’ who don’t have the wherewithal to invest in the technology to meet the new standards. But the difficult part is that they raise our standards and we are competing daily with China or India, who are not playing on a level field by any stretch of the imagination with us. It does make it very difficult. If it was the same playing field, then we would accept it all day long, but it’s not. When I’m playing on price, and the other guys are not having to pay what we have to for waste treatment and everything else, it’s tough.
JON RASCHE: It baffles me when I see a customer who wants to have it done a certain way here, but they don’t even care how it’s done for them in Asia. They want me to follow certain environmental standards here, but if the price is right over there then they take the business over there.
BRUCE STONE: Absolutely without a doubt, some of the bigger companies are willing to sacrifice quality and other standards for a cheap price if it’s coming out of Asia versus what they will allow you to do here in the U.S.
SCOTT ALVESTEFFER: They just don’t have to face it. We’ve had large companies come into a meeting face-to-face with us and talk about how Chinese companies are doing everything state-of-the-art and waste treatment is closed loop systems, and we ask them, realistically, what are they doing and we’ve had a few admit that they are never there to see the discharges, or they just look the other way. I have to ask them, ‘how can you sleep at night?’ Is that right?
DOUG ROETMAN: They’ll showcase to you a company, and then when no one is looking its 180 degrees the other way.
SCOTT ALVESTEFFER: That’s a shame that they are looking so much at the bottom line that they are willing to look the other way.
BRUCE STONE: It’s getting tougher and tougher with the local municipalities, too. They are getting held accountable now by the EPA. The cities that most of us are working with are getting tougher and tougher. The amount of time that our people spend on reporting – even with computerized software – it’s still difficult compared to what it used to be. And it’s not that we are doing anything irresponsible; it’s just that if you look a document or something of that nature, then they’ll say you never submitted it. But you have the cities and states who are now held accountable by the EPA and they just keep on squeezing tighter and tighter.
DOUG ROETMAN: And that’s the problem. You now have three levels of bureaucracy and no one wants to stand up to them. I’m the last guy who wants to sit in a meeting with a bureaucrat, because for the most part they have no idea what you’re doing. It’s not so bad on the local level because you see the same people, but the state level is different because at the state level those people can rotate any time they want. They get tired of one job, and then they move on to another job.
BRUCE STONE: You talk to the city and ask ‘Why are you asking me to do it this way?’ and you get an answer, ‘Well, that’s the way the state is making us do it now.’ And then you sit back and say to them ‘Wait, you’re an intelligent person; look at this.’ And you get back again, ‘Well, they’re making us do this.’ And that’s what irritating.
PF: What about other regulations you will be facing down the road, such as the new health care program. Do you have a handle on what those impacts will be?
JON RASCHE: I don’t think anyone has an idea of what the costs will be. It’s hard when they haven’t even written the language yet. It’s tough to get an idea of what this will cost. It’s really a frame without a picture in it.
SCOTT ALVESTEFFER: It’s as scary as hell. I’ve sat in on two 2-hour webinars on different perspectives, and I still couldn’t tell you what it will cost us, but I’m convinced it will all cost us a lot more. The question is how much.
DALE MULDER: If we just had some information early about what everything will cost us in the future, then we could make some fairly decent estimates of what it will cost us. But we just don’t know. But that is what’s great about participating in events like Sur-Fin, because you get to help experts talk about these issues, and you hear from everyone else on what is happening in the industry.
PF: Talk about belonging to the industry association. How have they helped you over the years?
DALE MULDER: Historically, Grand Rapids has had a very long history with its associations, with die castors and platers in the area, and because of that we’ve had a pretty strong trade group association.
DOUG ROETMAN: We’ve always encouraged our people to become members, because it’s good for them to get a better sense of what they do in their job, because they get to talk to others who do the same job. It’s both a social and educational benefit, we feel.
DALE MULDER: Having Sur-Fin in Grand Rapids this year is just dynamite, because we’ll get an opportunity for some of people to get some great training.
JON RASCHE: We usually get 25 or 30 people to monthly meetings, and we try to bring in speakers to talk. It’s a great way to stay connected.
SCOTT ALVESTEFFER: Years ago we had a group of local companies that would go around to each other’s businesses and critique operations to try to help with improvements. Those were very helpful and insightful.
JON RASCHE: The good thing about cooperation is that sometimes, even with some of our biggest competitors, they are very open with ideas and suggestions. And I think people are comfortable coming to us and asking for ideas.
SCOTT ALVESTEFFER: We all understand that we are competitors, but at the end of the day we all can benefit from each others. We’ve all gotten together many times, and we’ve helped each other with metal and things last that. We are competitors, but we aren’t looking to take anyone out.
JON RASCHE: It’s just pretty darn unique that I can call on Steve and Bruce and ask for help sometimes. We’ve been in a pinch before with nickel where we’re pretty much screwed, and these guys have stepped up and bailed us out.
DALE MULDER: Years ago we had an formal arrangement where a few firms would get together at meetings and the focus was on what things we could purchase together to make a group buy on things at lower costs. It was s deal where it was good for all of us. So if I was the smallest member of the group and I was buying a commodity, and the biggest company was also buying it, we were ending up getting just about the same price break in total volume. So it worked well for everyone to join together.
SCOTT ALVESTEFFER: It’s the same way with things like insurance programs. Everyone saves in those deals.
DALE MULDER: Why this works is that each of our companies have a variety of market niches that we are active in. Yes, some overlap and I compete with them and I compete to win, and at the end of the day I want to get the job. But if I don’t get the job, then I want it to stay in our community and maybe one of these other guys gets the job. When the business stays in our community, then we all win.
SCOTT ALVESTEFFER: We’ve actually had companies come in and ask us about our local competitors, and we tell them ‘they are all great shops.’ If that is who they want to go to, then more power to them. We understand. There are niches that we fill better than others, and vice versa. We compete with them, but for the most part we are not looking for any ill-will with anybody.
DALE MULDER: We all have our own markets, but if I get a call from someone wanting plating on aluminum, I don’t do that. But I’d be happy to them that Allied Finishing does that and they should call them. And likewise, I do things they don’t do, and we share it. We’re happy to pass those leads along.
DOUG ROETMAN: I think it all goes back to the original question, and that is whether the local organization is important. Some of us paint in watercolors, and some in oils. We know that, and we know we can coexist.
PF: With the economy starting the pick up some, where does the next few years look like for the industry?
STEVE ALVESTEFFER: We’ll be up considerably.
DALE MULDER: We’ll be up as well.
BRUCE STONE: I think over the next 2-3 years, things will be fairly strong for those of us who survived and are still around. We’ve gone through a filtering of the industry where a lot of the smaller job shops are gone. Those that have weathered the storm and proven themselves will probably pick up quite a lot of business. Even if it’s not anything new that we pick up, with the economy recovering we’ll all get busy again.
DOUG ROETMAN: I remember 25 years ago when things were bad, and saying we’ll have to find something else because plating was going to die. And that was because of pressure from every direction. Aside from nuclear, we are probably the most regulated industry there is.
BRUCE STONE: I don’t care what industry you’re in, the key is diversification. Three years ago we did a lot of work in the motorcycle industry, and they couldn’t get enough plating. Well, now our big customers are looking at a lot more black than chrome, but we now we have other industries going back to chrome. Now, chrome is cyclical when it comes to styling or design environment. It’s popular in homes, then it goes out. Then it’s popular in cars, and then it goes out. So you have to be in the industry that happens to be popular at the time, then you’ll do fairly well. But the other industries will slow down. So the key is staying diversified in those different industries so that you can be there when the need arises.
PF: How much of your business is local or regional?
BRUCE STONE: We’re all over the country. First, there’s just not a lot of us left in the industry, and second we have a fairly aggressive sales staff that scours the country.
SCOTT ALVESTEFFER: 25 years ago there was no need to look outside of West Michigan, but today it is one of our smallest regions where we get business.
JON RASCHE: Michigan is our third largest in percent of where we get business. Before that it was the largest.
SCOTT ALVESTEFFER: 10 years ago is was 100%. Now it’s less than 10%.
BRUCE STONE: I think it still goes back to diversification in our substrates. Five to-seven years ago we plated nothing but zinc, and now we plate on a multitude of substrates.
DALE MULDER: We do lots of work on stainless steel nowadays that we never did before. We still do some zinc, but stainless has really come on strong now, as well as brass components. So diversification is really the key to success.
For more information about Allied Finishing, go to: www.alliedfinishinginc.com
For more information about Master Finish Company, go to: www.masterfinishco.com
For more information about Valley City Plating, go to: www.brassplater.com
Photos Courtesy:
Vandenberg Photography
759 Butterworth St. N.W.
Grand Rapids, MI 49504
616 901-9401
www.vandenbergphoto.com
The Summit took place at:
SIX.ONE.SIX
JW Marriott
235 Louis Campau N.W.
Grand Rapids, MI 49503
616 242-1448
www.ilove616.com
Special thanks to Colleen Gill and the amazing staff of SIX.ONE.SIX