In May 2009, as I merged onto a congested I-94, driving from the airport to the ALAW Advanced Laser Applications Workshop outside Detroit, I saw a billboard for W Industries, a local metal fabricator. Not only was it odd seeing a contract fabricator advertised so prominently, but the sign’s design was unique. Black and sleek, its bold letters proclaimed the company’s manufacturing expertise in the aerospace and defense sectors.
The word automotive wasn’t anywhere on the billboard, even though--like most things in Detroit--W Industries has roots in the car business.
According to a Crain’s Detroit Business report, Robert Walker founded W Industries in 1981, and eventually almost 90 percent of the company’s work came from Ford Motor Co. His son, Ed Walker, took over the business in 2003 and decided to expand and diversify. That year revenue was $15 million. In 2009, the year I saw the billboard, W Industries was bringing in $90 million.
According to court documents obtained by Crain’s, in 2009 JPMorgan Chase gave W Industries a $17 million loan to buy various machine tools needed to compete in the aerospace market. But that same year, the company’s defense contracts were nearing their end. Then in 2010 W defaulted on loans and began running out of cash. Some suppliers stopped getting paid. And earlier this month the family sold company debts and assets to Tower International.
As Crain’s reporters put it, “The story of W Industries is a classic case of a family-owned business that assumed too much risk too quickly in pursuit of higher revenue and profits.” According to the article, W Industries was a victim of bad timing. The company took on more debt as revenue levels fell.
Chris Kuehl, economist of the Fabricators & Manufacturers Association, is all too familiar with these stories. He presented telling numbers--and in W Industries’ case, a harbinger--at The FABRICATOR’s Leadership Summit, the 6th Annual Metal Matters, in March. Kuehl, who also works with the National Association of Credit Management, puts together the Credit Managers’ Index (CMI), which resembles the Purchasing Managers Index (PMI) from the Institute for Supply Management. The higher the number, the more robust business is. After steady gains, the CMI in February fell slightly for manufacturers, indicating more credit troubles.
This, Kuehl said, is especially a concern for companies with poor cash flow. Financially healthy companies are investing to gain market share, which sometimes forces not-so-healthy companies to invest as well.
Companies like W Industries added hundreds of jobs to an area so desperate for them, so it’s understandable why politicians and local commerce organizations, such as the Detroit Economic Development Corp., lauded the company. That said, I wish politicians would pay more attention to these fundamentals. Unfortunately, profitable businesses don’t get them elected. Jobs do.
Politicians and mainstream media help shape popular perception in this country. Unfortunately, the careful, slow, sustainable growth of America’s small businesses--which together employ the most Americans--doesn’t match news or election cycles.
When I visit companies these days, the managers who trumpet strong cash positions often are leading second- or third-generation family businesses. They’ve begun hiring, but only the people they need. They buy equipment, but they don’t take out large loans.
They tread cautiously. They may not be hiring hundreds or doubling in size every few years, which means they don’t often make headlines or attract much attention from politicians in Washington, but collectively, quietly, such small businesses gradually are rebuilding the backbone of the U.S. economy.