One industry down, one up

The New York Times has an article by Louis Uchitelle about the decline and rise of the parts business:

For nine years, the Strong brothers, Mark and Tim, made tools in their machine shop to maintain the giant presses that stamped steel sheets into fenders and hoods at a nearby General Motors factory in Lansing, Michigan. Aircraft parts were a sideline but, when auto work dried up last November, the brothers managed to get more orders from that side of the business to keep them afloat. They have been shaping wing spars for the A10 Thunderbolt, used to provide ground support in combat. “The wars in Afghanistan and Iraq helped us a lot,” Mark Strong said.
Wing spars, however, are hardly a substitute for the tools that GM seemed to always need from the Strongs for its assembly lines. The $632,000 in sales the brothers rang up in 2008 has shrunk to less than $95,000 so far this year. The seven-employee staff in their machine shop in Mason, Michigan, is down to just three, and the Strongs hope the wing spars will somehow carry them over until GM once again sends business their way. The brothers are among the tens of thousands of suppliers whose fortunes are directly tied, for better or worse, to the automakers. And now, with new-car sales touching low levels not seen in decades, and with GM and Chrysler forced to shut plants as they struggle through bankruptcy, their prospects seem grim.
“Most of these supplier companies are family-owned,” said Daniel Luria, research director of the Michigan Manufacturing Research Center in Ann Arbor. “And in a period when the families can’t sell, the decision is to preserve the companies as future streams of revenue for the next generation.” Auto suppliers, which employ more workers than the car companies themselves, have cut way back, almost hibernating, as they lay off employees earning $10 to $22 an hour, or cut back their hours. Some, like the Strongs, are trying to diversify, but such efforts have not noticeably offset the lost automotive business.
“We are estimating that 500 suppliers out of 4,000 could go out of business between now and the end of the year,” said Neil DeKoker, chief executive of the Original Equipment Suppliers Association. Billings just to the three Detroit automakers from the nation’s auto suppliers have fallen to $7 billion a month, on average, from $16 billion in January, he said.
The Whitlam Label Company, in Centerline, Michigan, has tried to diversify. It makes a wide variety of labels and bar codes that are pasted on car parts and on finished vehicles, including the stickers on radiator covers warning people to keep their hands away from the fan. The company has expanded into food and beverage packaging. But its revenue is still down, running at an annual rate of $14 million this year, well below the $20 million of 2008. Its work force dropped to one hundred from 130 (ten of them are children and grandchildren of the late George Shaieb Sr., a Syrian immigrant who bought the company in 1973). Whitlam is faring better than others in the downturn because it is still shipping labels to Chrysler and G.M., including price labels taped on the windows of thousands of unsold vehicles. “We are trying to get more automotive by selling more aggressively to Toyota and Honda and the other foreign transplants,” said Richard Shaieb, Whitlam’s president and one of George Shaieb’s sons.
That market represents fewer opportunities for companies like Mr. Shaieb’s. After all, the percentage of parts made in the United States for foreign brands assembled here is less than the domestic content of vehicles made by General Motors, Chrysler, and Ford, according to Mr. Luria.
But that is not the concern of George Buhaj today. The company Mr. Buhaj heads as president— Avon Broach, a machining operation in Rochester Hills, Michigan— designs and makes broach tools, which are used by the three Detroit automakers and also other suppliers to cut and shape transmission gears and other complex parts. After layoffs in March, his payroll is down to 16 from 25. “Business just fell right off because of the Chrysler bankruptcy and the potential for one at GM,” he said. In April, Mr. Buhaj, who is 49 and bought out other Avon owners in 1993, cut back the work day by several hours. He said he was planning another layoff in the next couple of weeks, dropping at least two more people. A year ago, struggling for orders, he started searching for customers in other industries. “I have identified wind energy and medical,” he said. “I’m not yet making parts for these but I’m trying.”
Pioneer Forge, near Toledo, Ohio, would also like to diversify, said Michael Regal. He manages the factory, which forges tie rods and other steering links for trucks, including pickup trucks assembled by Ford and Chrysler. The company has not made a profit for two months, Mr. Regal said, and the work force is down to 51, from 100 a year ago. Revenues have plunged to less than $10 million, at an annual rate, from more than $15 million in 2007, just prior to the start of the recession. Mr. Regal says he sees no other choice but to try to sell more steering mechanism forgings to foreign auto companies that assemble vehicles in the United States. He would like to diversify away from auto supply, but the economics work against Pioneer and many others in the industry. “You have to set up your operation to handle the mass volumes that the automotive industry sends at you, and you become a captive of the parts that you make,” he said. “If you want to venture out into some other business, you have to have a lot of capital to do that, and when things take a turn for the worse, the capital is not there.”

Rico says he once dated, whilst in college (thus a long time ago), a woman who lived in Michigan and whose father worked in the auto parts industry; he's undoubtedly retired by now, thus out of this problem, but Rico wishes him, and all the poor bastards like him, well with this...