Manufacturers look for good news

By Scott Miller
smiller@scbiznews.com

The slumping economy forced Jack Hoey to expand his business quicker than he intended.

Hoey runs Coastal Glass Distributors, which has headquarters in Charleston. The plant fabricates architectural glass products for both commercial and residential development and redevelopment.

As the housing industry suffers, so does Hoey’s company. So he expanded his market reach to find new customers. Coastal Glass opened a new plant in Jacksonville, Fla., in 2007, for example, and is now leaning on it to boost sales in a hurry.

“One of the challenges of a new plant is there is a learning curve. If you force them to do too much too fast, you run into quality issues, production issues,” Hoey said. “When we opened that plant, we had a phased-approach plan to go into new markets. Now we have to move quickly into those new markets because the volume in our base markets has declined so much.”

The expansion could prove beneficial when and if the economy turns around, providing a bright spot in an otherwise dark economic picture.

“A lot of folks are looking to hear the positive news, and, right now, they’re having a hard time doing that,” said Lewis Gossett, president of the S.C. Manufacturers Alliance in Columbia.

“It doesn’t mean manufacturing is in distress right now,” he said. “But they (manufacturers) wonder how long these more recent developments of the last few weeks start to affect manufacturing.”

Not all the news is bad, Gossett points out.

BMW Manufacturing Co. is in the middle of a $750 million expansion of its facility near Greer. Several of its European suppliers visited the Upstate this month as they are considering potential locations there as well.

East Coast Ethanol of Columbia intends to begin construction in January on a plant in Chester County that will employ 45 people.

Depends on the product

“It’s amazing how much steady and strong growth I do hear about,” said Jennifer DeWitt, executive director of the Lowcountry Manufacturers Council. “It affects everyone differently, depending on your size and product.”

Consumers will continue to buy toothpaste and toilet paper, so business should remain OK for the Kimberly-Clark plant in Jackson, Gossett said.

But producers of nonessential goods could face tougher times, he said.

Mohawk Industries, the world’s largest floor covering company, said earlier this month it will close its plant in Dillon. The Gates Corp., which makes timing belts for the auto industry, plans to close its Moncks Corner plant early next year.

The economy is such a “deeply sensitive” issue right now that MWV Specialty Chemicals in North Charleston, a division of MeadWestvaco Corp., declined comment, spokeswoman Amy Kovach said.

MWV supplies pine chemicals and other products found in a variety of consumer products such as detergents, printing inks, clothing dyes, asphalt and paints. The company also produces activated carbon used in emissions control devices in automobiles.

MeadWestvaco, meanwhile, lowered its corporate quarterly earnings projections this month, citing lower sales of consumer and office products, weakening demand for some packaging products and higher input costs.

Kovach said that forecast doesn’t include the specialty-chemicals business.

“At specialty chemicals, we continue to export and ship products on pace with expected targets and customer demand,” she said.

Uncertain future

Economic uncertainty is the problem —uncertainty surrounding future production orders, uncertainty regarding payments on current orders and uncertainty about the success of expansion plans like Hoey’s.

“They’ve (manufacturers) got their orders and they know what production is going to be for the next few months,” Gossett said. “We’re starting to wonder what business will look like after the fourth quarter.”

Credit is tight, and, although the $700 billion bailout of the U.S. financial industry has dominated headlines, some producers are equally worried, if not more worried, about the deteriorating markets in Europe and Asia. Many U.S. manufacturers found opportunity in exchange rates and the declining value of the U.S. dollar.

“One of the strengths of the American economy has been the export economy here,” Gossett said. “If Europe can’t buy, if Asia can’t buy, then our exports aren’t going to be so robust.”

No Credit

Cash flow also seems to be a legitimate concern. Difficulty obtaining credit could force some companies to put expansion plans on hold, DeWitt said.

Manufacturers typically have a backlog of orders, so production will continue. But they’re also part of a supply chain that involves many exchanges of money, Hoey said.

“The flow of money has really been tighter. Many of our customers are having trouble getting paid, which is the classic example of a credit crunch,” he said.

If his customers aren’t paid, he’s not paid.

“It may not be that the manufacturers can’t get credit,” Gossett said. “It may be that the folks they sell to can’t.”

Reach Scott Miller at 843-849-3119.