TURBULENT TIMES MANAGING THE ECONOMY / ONE COMPANY’S VIEW : Main Street Tries to Cope : Wall Street Numbers Don’t Wash With Faucet Maker
For Wall Street, the economy is a numbers game. When the Federal Reserve Board raised interest rates this year, bond prices fell. When the nation’s economic indicators showed moderate growth last week, stock prices dropped due to renewed inflation fears.
But for Los Angeles businesswoman Barbara Nyden Rodstein, the numbers tell little about the gritty work that happens on Main Street: paying bills, meeting payrolls, finding new markets, firing or hiring workers.
“I know what the government is telling us, that all the (national) indicators are wonderful,” says Rodstein, a plumbing manufacturer. But in many ways, they “have nothing to do with anything.”
In Rodstein’s world, costs are rising faster than the national average, and she is laying off workers, not hiring them. She cannot raise prices very much, and rising interest rates are hurting. She is changing her product mix and increasingly looking abroad for new sales.
Rodstein owns Harden Industries, which makes and markets plumbing fixtures for homes and businesses. At one time, she was known as the “faucet queen to the stars” when the firm specialized in high-end products.
In a day, her workers make about 1,000 sets of faucets and handles. Those are the numbers, she says, that mean the most.
Harden Industries was founded 12 years ago by Rodstein and her husband, Harvey. Rodstein says she got the idea of going into the designer faucet business when she saw that no one else was doing it.
It just made sense, she said: “Brass was selling at 35 cents a pound, and that translated . . . into a $350 product.”
In 1983, Rodstein took over management of the business when her husband fell ill with cancer. He died four years later.
As a woman business owner, Rodstein represents one of the fastest-growing segments of the Southern California business community. It is a tough, demanding role for which she appears well suited. A product of a harsh working-class neighborhood in Chicago, Rodstein says she learned “to make more out of less, because we always had less.”
Since then, Rodstein has cultivated customers that include celebrities such as Tom Selleck, Elizabeth Taylor, Barbra Streisand and Donald Trump. But the business itself is hardly glamorous.
One of about 1,300 similarly sized companies in greater Los Angeles, Harden sits in an industrial section east of the Harbor Freeway near Compton.
At Rodstein’s South Main Street factory, workers labor at lathes or drill presses, shaping raw brass material into thousands of forms. In a curtained booth, a welder assembles a “waterfall” faucet--a wide-mouthed fixture--from sheets of brass.
In another room lined with shelves of molds for ceramic fixtures, a worker sprays a viscous glaze on a faucet handle before it is placed into a nearby kiln to be cured overnight at 1,800 degrees. And toward the front of the shop, workers lower racks of brass plumbing into vats of blue liquid to be electroplated with copper.
So how does life inside this factory mirror what’s happening on the national level? Not all that clearly, according to Rodstein:
* Nationally, employment is rising--by 456,000 jobs in February, the largest jump since October, 1987. Even in California, there were 5,800 more jobs and the unemployment rate fell to 8.6% from 9%.
But Rodstein has been laying off workers as domestic markets shrink and the company shifts production overseas.
At the peak of business two years ago, she employed about 355 people in Los Angeles. Today, that number has fallen to 215, and by July it will fall again to about 100 as Harden moves more production to its plant in Asia.
* Rodstein’s costs have been rising faster than government indicators suggest. Last month, the government reported that producer prices went up 0.2% in March.
Although she is unable to provide precise figures, Rodstein says her costs have risen faster than the wholesale price index, especially for insurance, health care, regulatory fees, raw brass and freight.
Rising costs are one reason Harden is revising its product line, eliminating items that cost too much to make and forging ahead in new markets such as more moderately priced do-it-yourself plumbing, which makes up about 30% of the company’s business.
Harden did raise prices an average of 10% in April, but the increase only begins to cover the cost increases of the past several years, Rodstein said.
* One major cost factor is interest rates, and Harden’s experience mirrors that of the rest of the nation. The Fed has raised short-term rates three-quarters of a percentage point since February, and last month several banks raised their prime rates.
The Fed’s action is intended to tighten credit markets and head off inflationary pressures. But there are no such pressures at Harden, and rising rates will simply make it more expensive for Rodstein to obtain short-term credit.
Harden has had to shorten delivery times of products so it is not carrying its interest payments on credit for too long. Before, there was as much as six months between taking an order and delivering product to get payment. Now, it’s more like 60 to 90 days, Rodstein says.
In addition, the company is adjusting production processes to shorten lead times, eliminating products that take too long to make and relying more on suppliers who will deliver raw materials quickly.
* In normal times, Harden looks forward to increased revenue as home sales improve, and that part of the California economy is looking increasingly healthy. For example, sales of existing homes in California were more than 31% higher in March than a year ago.
The housing boom of the 1980s fueled much of Harden’s growth in sales to about $25 million. But now, Rodstein says, her own experience suggests that the residential market “has remained finite.”
Indeed, much of her new sales are overseas. “We’re looking to sell more product outside the United States next year,” she said. “That’s where we think we’ll save our souls: increasing our exports to Canada and mainland China.”
