Business Adapts to Economic Vagaries
President Harry Truman once remarked that he was looking for a “one-armed economist” so that his advisors would stop saying “on the one hand, this” and “on the other hand, that.”
As 2003 dawns, with the business outlook clouded by great uncertainty, a one-armed economist would be a rare find, indeed.
Every week, it seems, brings more confusion: One set of government indicators suggests that the economy is poised to rebound, and then the next set signals the opposite. Consumers are said to be the only ones propping up the economy, and then the holiday shopping season turns out to be the worst in 30 years. The stock market looks like it’s about to gain some real traction, only to shift back into reverse.
Yet if there’s one thing that can be said with any confidence -- and without fear of contradiction -- it’s that 2003 will be a year of adaptation.
Because that’s what businesses do. Come good times, come bad, they figure out how to adapt. And you don’t have to search far or listen to bloodless economic forecasts to find plenty of examples of that happening.
Take Waltco Engineering Co. of Gardena, a 62-year-old manufacturer of precision parts for computers, telecommunications equipment, aerospace and medical instrumentation.
For years, Waltco made parts for IBM computers, Boeing airplanes and other big customers, enjoying a long production run with every order. But now, notes Deborah Nash, vice president and co-owner of Waltco, “the long production run goes to Asian manufacturers” that can offer lower costs.
Such shifting production is a threat to manufacturing in this region. But Waltco Engineering isn’t stopping in its tracks to fret about Asian competition. Instead, it has been moving to more technically demanding tasks, such as design and development.
“Customers,” explains Nash, “want us to do more of the advanced engineering work.”
In the last year, Waltco has required its 90 employees to take a 10-week course, for two hours a day, in advanced engineering techniques in order to remain competitive. “We have a very highly skilled workforce,” Nash says. “And so we will become a one-stop shop for technical development of highly engineered components.”
A lot is at stake. Waltco in the last year became an employee-owned company as descendants of the founders sold out to Stephen and Deborah Nash and their workers.
At $16 million in sales this year, Waltco is operating at less than 50% of its capacity and “not yet sustaining the growth we want,” Nash says. But given the company’s nimbleness, “we are cautiously optimistic.”
Torrance-based manufacturer Ace Clearwater Enterprises Inc. is another good example of a business eager to adapt, learning and changing over time.
The firm was founded in 1949 as Ace Welding of El Segundo and grew over the decades as a supplier to Garrett Aerospace (now part of Honeywell Inc.), Lockheed Corp. and other aerospace giants.
Two of its businesses -- making parts for power-generation plants and the commercial aviation market -- have been in the doldrums this year with no upturn in sight. Annual sales for Ace Clearwater, which employs about 200 people, have fallen from $28 million in 1999 to about $23 million in 2002.
But rather than sit and stew, it has hustled for business, capitalizing on its expertise in exotic metals -- a skill, says Vice President Gary Johnson, that was “learned working on heat exchangers for General Electric power plants.”
Now the company is getting orders for parts for small aircraft, including Cessna planes made by Textron Inc. and Embraer aircraft made by a leading company in Brazil.
“Markets are doing well for those 80- to 110-passenger jets,” Johnson points out, “and we get a lot of work from Brazil because we can work with ... cobalt nickel alloys.”
Ace also has taken steps over the years to become a lean operation, making it an attractive subcontractor for major Pentagon suppliers. And with international tensions and U.S. defense budgets now rising, orders are starting to run heavy for spare parts for the Lockheed F-22, Boeing C-130 and other military aircraft.
“Spare parts orders were postponed in defense budgets for years and now there’s a rush on,” Johnson says.
Meanwhile, Ace also has been landing parts orders from GE that the electrical giant might in more peaceful times have given to its plant in Hungary. “With the uncertainty about war,” says Johnson, “GE is supporting domestic plants as alternative suppliers.”
As Harry Truman’s imaginary decisive economist would say, successful businesses will be the ones that adapt in 2003. And there’s no “on the other hand” about that.
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James Flanigan can be reached at jim.flanigan@latimes.com.
