Podcast: Manufacturing CEOs weigh in on economic challenges and opportunities
Blair Haas is CEO at Bud Industries. With over 50 years of experience in the electronics and enclosure industries, Blair has helped lead and been active in multiple industry associations, including EIA, ECIA, and EDIC. Jack Schron is president and CEO of Jergens Inc and has led the tooling component manufacturer for over 30 years. He also founded an educational technology nonprofit called Tooling University, now Tooling U-SME. Blair and Jack recently spoke with Laura Putre, senior editor of IndustryWeek, about how political and economic uncertainty has affected their businesses, and the strategies they’re adopting to survive.
Below is an excerpt from the podcast:
IW: So maybe we can start with you, Jack. How's business been going so far this year, and what do you see ahead for the rest of the year?
JS: Well, business has been very interesting in that we are seeing a couple different aspects of that. The business, as far as manufacturing of our core products, is probably on the flat side. We’re waiting to see what's going to happen with automotive, things of that nature. Then you flip the same equation over to aerospace and defense, and we can't make it fast enough because it's going crazy out there. And I anticipate that that's what we're going to see for a long time both here in Cleveland, our headquarters, and in our Chicago operation. We're running aerospace and defense 24/7 up in Chicago. So, I think that all indications are that that piece is going to continue to grow exponentially out there because obviously there's a lot of uncertainties in the world between what's going on in Ukraine and the Middle East and who knows what's going to go on in the Asian market. So, the Defense Department I think is really ratcheting up our portfolio and the same with aerospace.
IW: Has that been the same for a while, or has the mix recently changed?
JS: Well, the growth in aerospace and defense is really taken off in the last year and a half, two years. And again, I would attribute a lot of that to what's going on in the world. I spent 28 years in the United States Army, and whenever you get this kind of elevation of activity, it's for a reason, whether it's to shore up our defenses or it's to be prepared for something. So, I think that it's going on for a while and I think it's going to go on for a considerably long time from this point forward.
IW: And Blair, what about you? How is it looking for you over this past year and going ahead into the future?
BH: So, I think this year, I can reflect some of what Jack has said. It's almost a schizophrenic year. We have seen for several of our larger customers in IT and Wi-Fi and in some of those areas, business has gone gangbusters. We can't produce it fast enough. And in other areas, some more traditional but also tech areas, we've seen a continuing reduction of inventory. We had so many customers that were grappling during the pandemic with supply chain issues that they doubled and tripled orders to fill the supply chain, and they're still working through some of those inventories. And they're finding it's going all the way back to the basics of the supply chain, to customers and customers’ customers and so forth. In discussions we're having, we're thinking that the inventory reductions or right sizing have sort of played themselves out, but we'll see. I've heard that before. So, it's interesting. Our traditional business has been somewhat slower. The tech industry has been quite slow, but we're seeing that there are peaks that are happening that are keeping us very busy. And I think as the year goes on, we're probably going to see that play out. So it'll continue. I think things are going to get busier and busier.
JS: Blair and I, looks like we're on the same page. It might be a little different areas that are on a growth path, but those that are on the growth path are not slowing down. Those that are at the neutral area, I think they're just waiting to see what's going to happen. I hate to say it, but a lot of them are waiting to see what's going to happen in six weeks on November 5th to see where it goes. Obviously, what happened yesterday with the interest rates dropping 1/2 a point, I think that's going to help that neutral area to pick things up. I think housing is going to pick up, which then will ripple through a whole lot of areas.
IW: When you heard the news yesterday about the interest rate cut, was that across the board just a relief or are there areas that you're concerned about?
JS: Well, anytime you have everybody predicting 1/4 percent and it goes to 1/2 percent, the two sides of the equation are, one, wow that's great, because it might accelerate, because the interest rates have dropped for people to move into spending. On the flip side, is that a harbinger that things are slowing down and they needed to do a triage on it? I'll wait for the Fed to give us the equation on that one. I used to be on the Fed board here in town, and it's true uncertainty.
IW: What about you, Blair?
BH: Yeah, I think we can echo that the rates aren't going to necessarily make a big change tomorrow. I think it obviously ripples through the consumer portion of the industry much quicker. Jack and I go back far enough that we know that a five point or whatever the number was, that those were not historically really high numbers. We've lived through some really high numbers of double digits and so forth. I think it had a little slowing factor before. I don't think it made a huge difference, and I think we've got to recognize that it takes a while to come back through the economy. The first parts are psychological. Then as you move forward, obviously capital easing and so forth, but you still have a lot of supply issues that we're going to be grappling with. Jack chatted about it, and I chatted about it. When you're struggling to keep up with demand, lowering rates isn't going to impact it. You can still only struggle to keep up with demand, and it's not spurring a ton more. So, it'll be interesting to see whether it's more psychological. And I think, you know, I totally agree with Jack's point. The question is, is this a signal or is this just a change for the Fed to be sort of advanced and looking ahead to not wait too long to make a change? So, we'll see how it plays out.
JS: Yeah, I think that the positive aspect is housing. A lot of us don't see how many places that really touches. It touches the folks who make that washing machine and that stove, and it touches the people who make the lumber. And it touches a lot of places. And then it switches over into transportation. So, I do believe that the possibility is there that we could see some stimulation. I've got children that are looking at mortgage rates, and there's some magic about, I'm not sure what the magic is, but you get that 6% or below, and I think it's going to accelerate that. I remember my first mortgage was 12.5%, and I was thrilled. I was thrilled at that point. But I think there's some magic around that 6% range, and I think that will then ripple into a lot of positive good stuff out there for the economy.
About the Podcast
Great Question: A Manufacturing Podcast offers news and information for the people who make, store and move things and those who manage and maintain the facilities where that work gets done. Manufacturers from chemical producers to automakers to machine shops can listen for critical insights into the technologies, economic conditions and best practices that can influence how to best run facilities to reach operational excellence.
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About the Author
Laura Putre
Senior Editor Laura Putre manages IW contributors and covers leadership as it applies to executive best practices, corporate culture, corporate responsibility, growth strategies, managing and training talent, and strategic planning. A former newspaper journalist, Laura has written for Slate, The Root, the Chicago Tribune, the Guardian and many other publications.