[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
MADE IN THE USA: STORIES OF AMERICAN MANUFACTURERS
=======================================================================
HEARING
before the
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
HEARING HELD
JUNE 19, 2013
__________
[GRAPHIC] [TIFF OMITTED]
Small Business Committee Document Number 113-024
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HOUSE COMMITTEE ON SMALL BUSINESS
SAM GRAVES, Missouri, Chairman
STEVE CHABOT, Ohio
STEVE KING, Iowa
MIKE COFFMAN, Colorado
BLAINE LUETKEMER, Missouri
MICK MULVANEY, South Carolina
SCOTT TIPTON, Colorado
JAIME HERRERA BEUTLER, Washington
RICHARD HANNA, New York
TIM HUELSKAMP, Kansas
DAVID SCHWEIKERT, Arizona
KERRY BENTIVOLIO, Michigan
CHRIS COLLINS, New York
TOM RICE, South Carolina
NYDIA VELAZQUEZ, New York, Ranking Member
KURT SCHRADER, Oregon
YVETTE CLARKE, New York
JUDY CHU, California
JANICE HAHN, California
DONALD PAYNE, JR., New Jersey
GRACE MENG, New York
BRAD SCHNEIDER, Illinois
RON BARBER, Arizona
ANN McLANE KUSTER, New Hampshire
PATRICK MURPHY, Florida
Lori Salley, Staff Director
Paul Sass, Deputy Staff Director
Barry Pineles, Chief Counsel
Michael Day, Minority Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Sam Graves.................................................. 1
Hon. Nydia Velazquez............................................. 10
WITNESSES
Richard Schwind, Jr., V.P., General Manager, Continental Took,
Smithville, MO................................................. 2
Terry Iverson, President & CEO, Iverson and Co., Long Grove, IL.. 4
Bruce Broxterman, President, Richards Industries, Cincinnati, OH. 6
Mike Mittler, President, Mittler Brothers Machine & Tool, Wright
City, MO....................................................... 19
Jim Allen, Director, Shapeways, Inc., Long Island City, NY....... 21
Jill Johnson, Founder & CEO, Institute for Entrepreneurial
Leadership, Newark, NJ......................................... 24
Anthony Wanger, President, IO, Phoenix, AZ....................... 26
Barbara Schindler, President and COO, Golden Artist Colors, Inc.,
New Berlin, NY................................................. 36
Shelly Gibbons, Vice President, Quik Mart, Tucson, AZ............ 38
Mike Bergmeier, President, Shield Agricultural Equipment,
Hutchinson, KS................................................. 39
Aaron Bagshaw, President, WH Bagshaw Co., Nashua, NH............. 42
Brad Braddon, President, Commodore, Bloomfield, NY............... 50
Shirley Brostmeyer, CEO, Florida Turbine Technologies, Jupiter,
FL............................................................. 52
Richard Najarian, President, Precision Global Systems, Troy, MI.. 54
APPENDIX
Prepared Statements:
Richard Schwind, Jr., V.P., General Manager, Continental
Tool, Smithville, MO....................................... 69
Terry Iverson, President & CEO, Iverson and Co., Long Grove,
IL......................................................... 72
Bruce Broxterman, President, Richards Industries, Cincinnati,
OH......................................................... 77
Mike Mittler, President, Mittle Brothers Machine & Tool,
Wright City, MO............................................ 81
Jim Allen, Director, Shapeways, Inc., Long Island City, NY... 83
Jill Johnson, Founder & CEO, Institute for Entrepreneurial
Leadership, Newark, NJ..................................... 85
Anthony Wanger, President, IO, Phoenix, AZ................... 90
Barbara Schindler, President and COO, Golden Artist Colors,
Inc., New Berlin, NY....................................... 99
Shelly Gibbons, Vice President, Quik Mart, Tucson, AZ........ 102
Mike Bergmeier, President, Shield Agricultural Equipment,
Hutchinson, KS............................................. 104
Aaron Bagshaw, President, WH Bagshaw Co., Nashua, NH......... 110
Brad Braddon, President, Commodore, Bloomfield, NY........... 112
Shirley Brostmeyer, CEO, Florida Turbine Technologies,
Jupiter, FL................................................ 119
Richard Najarian, President, Precision Global Systems, Troy,
MI......................................................... 122
Question and Answer for the Record:
Congressman Hanna to Ms. Barbara J. Schindler, President and
COO, Golden Artist Colors, Inc., New Berlin, NY............ 128
Additional Material for the Record:
None.
MADE IN THE USA: STORIES OF AMERICAN MANUFACTURERS
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WEDNESDAY, JUNE 19, 2013
House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 1:00 p.m., in Room
2360, Rayburn House Office Building. Hon. Sam Graves [chairman
of the Committee] presiding.
Present: Representatives Graves, Chabot, Luetkemeyer,
Tipton, Hanna, Huelskamp, Schweikert, Bentivolio, Collins,
Velazquez, Schrader, Payne, Meng, Schneider, Barber, Kuster,
and Murphy.
Chairman GRAVES. We will go ahead and call this hearing to
order, and Ranking Member Velazquez is detained for a few
moments. She is speaking across town but she is on her way and
she said we can go ahead and get the hearing started.
So with that I would like to say good afternoon, and we do
call this hearing to order.
In recognition of National Small Business Week, today we
are going to hear from small manufacturers around the nation
who have achieved success while producing goods right here in
the United States. And I would like to welcome all the
witnesses who are going to be here today and thank them for
taking time out of their busy schedules and from running their
businesses to offer us their insights. And we are going to have
four panels all together today.
We have all heard about the decades-long decline of the
manufacturing industry in America. Since the late 1970s, a
combination of high U.S. wages and cheaper overseas production
costs have led to a loss of nearly 11 million manufacturing
jobs in the U.S., with nearly 2 million of those occurring
during the recent recession. In an attempt to cut costs, many
companies that previously made goods domestically moved their
production to China and other nations with much less expensive
labor.
Now, after years of industry decline, we are seeing a shift
that is taking place. In April 2010, the U.S. began adding
manufacturing jobs for the first time in many years. High
consumer demand for Made in American products, rising foreign
wages, and the increased realization by American entrepreneurs
of hidden overseas production costs has led to more
manufacturers producing goods and creating jobs here at home.
In the past three years, the industry has added a half-million
jobs to the U.S. economy.
Today, we are fortunate enough to have with us a group of
accomplished American manufacturing leaders that have been
doing business in the U.S. for years. Some started their
businesses at the kitchen table, and others took the helm of a
local manufacturing mainstay. Whether it is a story of a paint
producer in New York or an agricultural equipment maker in
Kansas, common traits of success are very evident.
I look forward to hearing from our witnesses today about
the things that have led to their accomplishments, as well as
the challenges that they see ahead. And again, I want to thank
all of our witnesses today that are in the audience for making
the trip all the way to Washington to participate in this
hearing.
With that I will make the first introduction. With our
first panel and our first witness today is Rick Schwind, Jr.,
of Smithville, Missouri. Rick is the vice president and general
manager of Continental Tool and Manufacturing. It is a producer
of specialty tools and other machine components. This 20-
employee, American manufacturing business makes a wide array of
products, including mechanical pullers, sockets, spanner
wrenches that are used by the U.S. military. Continental Tool
was purchased by the Schwind family in 2008. And Rick, thanks
for coming all the way from Missouri's Sixth District to be
with us here today, and welcome to the Small Business
Committee.
STATEMENTS OF RICHARD SCHWIND, JR., V.P., GENERAL MANAGER,
CONTINENTAL TOOL; TERRY IVERSON, PRESIDENT AND CEO, IVERSON &
COMPANY; BRUCE BROXTERMAN, PRESIDENT, RICHARDS INDUSTRIES.
STATEMENT OF RICHARD SCHWIND, JR.
Mr. SCHWIND. Good afternoon. My name is Rick Schwind, the
vice president and general manager of Continental Tool and
Manufacturing, located in Lenexa, Kansas. I am also a resident
of Smithville, Missouri, located in Chairman Graves's
congressional district. Thank you for the opportunity to be
here to speak about our company and today's small business
climate.
Continental Tool is a family-owned, private CNC
manufacturer of specialty tools, gages, assemblies and
components with roughly 20 employees. Approximately 80 percent
of our business is manufacturing tools designed for military
end use. Think of the Army mechanic that takes care of the
Abrams tanks, Humvees, and Bradley fighting vehicles. We make
many of those specialized tools. We make specialized wrenches
for the landing gear on fighter jets, for the adjustment of
sights on weapons, for the setting of fuses on mortar rounds,
and hundreds of other tools. In addition, we provide a host of
machine components to cooling towers, fire trucks, lighting
fixtures, pumps, and valves.
My parents purchased the business in 2008 from a family who
had started it from scratch in 1980. My dad's dream was to
purchase a small, manufacturing company and offer a career, not
just a job, with paid training and benefits to anyone who
simply had the right attitude and did not mind working for
everything they earned.
As for myself, I graduated from the University of Kansas
and later received an MBA from the University of Missouri-
Kansas City. I had worked as an operator in a machine shop
while in college and after working in technology and
telecommunications, I came back to manufacturing at Continental
Tool. Like my dad, I, too, was realizing a dream. Not only
being able to work side by side with my father, but also being
in the business of ``making stuff'' for America.
As you remember, 2007 and 2008 were banner years for
manufacturing, but as the recession began to take shape, things
changed. Raw material pricing, surcharges, and the overall cost
of doing business increased. But like any small business at
that time, we pulled back, assessed the situation, drew
financial lines in the sand, and lived within them. There were
opportunities to buy new equipment that we passed up. There
were people we wanted to hire but did not due to our own
commitment to live within our financial guidelines. The single
best (and most difficult) advice my dad gave me was that we
needed to manage our business with our minds but not
necessarily our hearts.
2011 and 2012 were much better. We rebounded to 2008 levels
and operationally we were in a great place. The challenge of
the recession led us to sharpen our pencils in just about every
way and we got better. Most importantly, we retained every
employee during that period.
Challenges remain for our industry where we struggle to
find skilled labor. It takes anywhere from five to eight years
of on-the-job training to become truly skilled in machine setup
and operation. The average age of a skilled worker in our
company is 50, and that seems to be consistent across the
industry. These men and women are approaching retirement age,
and as a nation, we need to build our skilled labor bench
strength, or else we will have many people with college degrees
but no technical skills.
But as a company, we face additional issues. Uncertainty
over health care is a major concern. Today, our company fully
pays for the health care premium of every employee. But not
knowing the financial implications of the Health Care Law next
year has us questioning whether we will be able to provide this
going forward or whether we will be forced to turn this cost
over to the employee.
As I mentioned, roughly 80 percent of our business is
supplying the defense industry. This is where sequestration has
had a real impact on us. We agree Washington needs to reduce
our nation's debt and reign in spending quickly. Our company
made difficult decisions during the recession and significant
cuts to survive, and the Federal government should do the same.
However, in our company we took a sensible, precision approach
to our finances just as we would when manufacturing a tool,
while Congress did not.
Unless Washington quickly addresses the situation they
created with sequestration and the budget, the impact to small
manufacturers like ours, whose primary customer is the Federal
government, will be severe. Our sales to the government are
down 30 percent this year, and we recently were forced to lay
off three employees, temporarily we hope, and are working to
refinance our long-term debt to reduce monthly expense.
Even though our company survived the most recent recession,
we are seriously concerned with the current environment facing
small business. Does Washington really understand our
challenge? Do they sense the concern we have with lack of
skilled labor, with health care uncertainty, ineffective and
costly regulation, the sequester and indecisiveness regarding
the budget? We certainly hope so, but the environment remains
scary.
I am thankful that the Committee is asking for input from
companies such as ours in order to stem the tide. Small
business is the backbone of our economy.
I am honored to be here today, and many thanks to Chairman
Graves and the Committee.
Chairman GRAVES. Thank you, Mr. Schwind.
I will now yield time to Mr. Schneider to introduce our
next witness.
Mr. SCHNEIDER. Thank you, Chairman Graves, for allowing
this opportunity to invite owners of manufacturing companies to
testify during National Small Business Week to highlight the
critical role these small businesses play in our economy.
Manufacturing, in particular, has been a promising growth
sector of late, re-emerging after years of decline. However,
headwinds remain. Of particular note, I consistently hear, as
Mr. Schwind just mentioned, from my district companies, about
the growing skills gap threatening manufacturing and growth
prospects. That is why I am so pleased to invite Terry Iverson
from Long Grove, Illinois, for today's hearing.
Terry has been involved in manufacturing for more than 30
years. His family's involvement in the industry dates back to
the 1920s. Terry is currently president and CEO of Iverson and
Company. His company sells machine tools, automated and
precision machines that power today's manufacturing.
Additionally, he is a minority owner in his brother's company,
the Chicago Dial Indicator Company, which manufacturers
mechanical and electronic gauges. With years of experience in
the industry, Terry is now giving back to the manufacturing
community by forming CHAMPIONNow, a chain to advance
manufacturing as perceived in our nation now, an organization
working to address the skills gap in the United States.
Terry, I want to personally thank you for coming today, and
I look forward to hearing your testimony.
STATEMENT OF TERRY IVERSON
Mr. IVERSON. Mr. Chairman and members of the Small Business
Committee, thank you for the opportunity to join you today.
My name is Terry Iverson. We do sell machine tools in the
states of Illinois, Wisconsin, and Indiana. We have
approximately 20 people, and my brother Erik does run our
indicator business that has about 35 people. As you have said,
both companies are over 80 years old.
I come to the Committee today to speak about the skills gap
issue in manufacturing. This country is facing a crisis at this
moment. If we do not find the next generation of manufacturing
engineers, programmers, and CNC machinists, then the
manufacturing sector will diminish because we do not have the
human resources.
Recently, I have been pleased to hear that there is a buzz
about manufacturing in the media, attention it deserves. I
strongly believe that manufacturing has made this country
great, and supplies good paying incomes for millions of
families, and I believe that future generations as well, but we
must be mindful of the skills gap issue.
In my 33 years on the road, I have talked to thousands of
manufacturers and subcontract machine shops. They have all
increasingly shared one problem--they cannot find enough
skilled personnel. I have been told time after time, ``Terry, I
will buy a machine from you. Just give me an operator to go
with it.''
Baby boomers are getting closer to retirement. I am 54. The
average age for the manufacturing employee is 56. Young people
are being discouraged by their relatives, their counselors,
their teachers, and the media to not pursue manufacturing
careers. Because of the misperceptions, that must change. The
industry is no longer a dark, dirty, dingy, low-paying
profession. Advanced manufacturing in the U.S. is heavily
computerized and automated. In Europe, not only do they still
have apprenticeships in manufacturing, but they also have a
culture that holds these professions in high esteem. Neither
currently here in the U.S. is the case.
The young people of our country are our future, and we need
to educate the next generation of the realities of the industry
compared to the general public's perception. Forty-two percent
of young people going to college do not find their degree in
four years. Approximately 53 percent of recent college
graduates are either underemployed or unemployed. Seventeen
million workers with college degrees are now working jobs that
do not require one. With skyrocketing college tuitions and
admission requirements, it is clear that manufacturing should
be embraced by our students.
There is clearly a demand in the U.S. for highly skilled
manufacturing workers. Many are of the opinion that all
manufacturing has gone overseas. While some of this notion is
true, the advanced manufacturing will and must stay in this
country. Some of the low skilled tasks have gone, in fact, to
the Far East, but the highly skilled positions with STEM-
related skills are still needed in this country.
There are as many as 6,000 jobs for highly-skilled
manufacturing positions currently unfilled, despite
unemployment at 7.6 percent. Manufacturing needs the best and
brightest and best math and science students that are great
with their hands. They need to be seen as manufacturing
champions.
After being involved in technical education in several
community colleges, high schools, and serving on some technical
boards around the country, I came up with a vision and
organization called CHAMPIONNow. As Brad noted, it is an
acronym that stands for Change How Advanced Manufacturing's
Perceived in our Nation. The Now is the call to action. You can
see our film trailer on our website.
Since founding CHAMPIONNow in 2009, I have been involved in
various projects. Currently, I am involved in a project that
will film inspirational stories of career paths into
manufacturing with young people, and these can be used as role
models for others unaware of these successful opportunities.
I have been involved in Project Lead the Way in my
community. This program gives high school students a way to
apply theoretical knowledge with hands-on applications,
strengthening their STEM skills. This was missing in my
engineering education and I became disenchanted and went into
the working world. My family and my father's devotion to the
art and science of manufacturing has actually brought me into
what has now turned into a lifelong passion of making things.
CHAMPIONNow is poised and ready to champion manufacturing
careers. We need to educate our country on how exciting,
challenging, honorable, and financially rewarding these careers
can be. Everyone in our industry has to quit complaining and
join together and take action. I encourage everyone here to do
what they can to lead the charge on the skills gap and support
U.S. manufacturing. We have many needs in technical education,
policies, and perception. We need everyone on both sides of the
political spectrum to agree on this and play a part in the
solution.
Thank you again for all of your time and giving me the
opportunity to speak today. I hope I have been able to bring to
light some things and a passion that can make a difference in
what I consider to be a vital topic in the U.S. manufacturing
industry.
Chairman GRAVES. Thank you, Mr. Iverson.
I will now yield to Mr. Chabot to introduce our next
witness.
Mr. CHABOT. Thank you, Mr. Chairman.
It is an honor to introduce our next witness here this
afternoon, Bruce Broxterman, who is the president of Richards
Industries, which has been producing industrial valves for a
host of industries since 1948.
Bruce Broxterman started at Richards Industries as an
inside sales correspondent back in 1980 and now serves as its
president. As Bruce Broxterman can surely tell you, his is a
customer-driven company. Their growth and longevity directly
reflects the value of the products and service it offers its
customers. I am thankful that Bruce Broxterman was able to
attend today's hearing to highlight what has made his company
successful and speak to some of the challenges American
manufacturers face today.
Bruce, Jack is your brother or cousin?
Mr. BROXTERMAN. My older brother.
Mr. CHABOT. Older brother. That is what I thought.
And on a side note, Bruce's brother, Jack Broxterman, was a
football coach and social studies American History teacher at
my high school, LaSalle High School back in Cincinnati, and I
had him as a teacher and I had him as a coach, as well. And I
ended up getting a college football scholarship partly as a
result of his coaching and certainly the interests that he gave
me in politics and government and American history and that
sort of thing. So for better or worse, the Broxterman family is
at least partly responsible----
Mr. BROXTERMAN. It is not our fault.
Mr. CHABOT. Not your fault.
Some of my colleagues on the other side of the aisle would
probably say for real, but we welcome you here, Bruce
Broxterman, and look forward to hearing you now.
STATEMENT OF BRUCE BROXTERMAN
Mr. BROXTERMAN. Thanks, Steve.
Good afternoon, Chairman Graves. Thank you for holding this
important hearing today to highlight the value of manufacturing
in the United States, and thank you for the opportunity to talk
briefly about the challenges and opportunities that lie ahead
for U.S. manufacturers.
As Steve said, my name is Bruce Broxterman, and I am the
president and CEO of Richards Industries, a privately held
manufacturer of industrial valves located in Cincinnati, Ohio.
We have been in business since 1961, and our mission is to
provide heavy-duty valves to control flow, pressure, and
temperature for our customers in the process industries--places
like refineries, chemical plants, petrochemical plants,
pharmaceutical facilities, and food processing plants.
Richards Industries has been fortunate to experience solid
growth over the past six years. After a management buyout in
2007, we have seen unprecedented growth of our revenues and
profits. Over those six years, our sales grew nearly 45
percent, with net earnings improving at nearly the same rate
and employment growing by 12 percent to just under 150
employees.
The deep recession of 2008, followed by a slow and
uncertain economy, has resulted in a challenging business
environment, and even now is proving to be difficult.
Richards has grown by staying focused on the niche markets
and taking care of our key financial fundamentals.
We have a single-minded philosophy of providing products to
meet the ``special'' requirements of our customers around the
world. These products are highly engineered solutions to
different customer process problems. Manufacturing runs in our
plant are low and precision is high.
Being a small manufacturer can be challenging, but it
provides the opportunity for us to be agile and flexible as we
work to provide our customers with fast response and product
delivery that they need to be effective and successful in their
operations. We are often asked to build an engineered custom
product and ship it in less than two days, and our lean process
structure and flexible approach enables us to do that.
Our products are used in every corner of the world. Despite
our size, you will find Richards Industries products on
drilling platforms off the coast of Brazil, in pharmaceutical
plants in the heart of Europe, on gas pipelines in Central
China, and in chemical plants in Kazakhstan.
In 2007, international sales represented just 19 percent of
our Richards Industries revenues. In 2012, international sales
were 45 percent of the shipment total.
Along with increased revenues, Richards Industries has been
able to achieve healthy levels of net income and cash flow,
thus enabling the company to repay the debt taken on at the
time of the acquisition, while at the same time reinvesting
significant amounts of capital in the company. The reinvested
capital has been used to generate further company growth and
jobs.
At the heart of our success are the employees at Richards
Industries. Our team is talented, experienced, and creative,
but most importantly, they are committed to excellence and
performance, bringing a ``consider it done'' attitude to work
every day. Additionally, the family culture runs through our
company, helps set up our team for success, and has resulted in
Richards Industries being chosen as the `Best Place to Work''
five out of the last six years by a local Cincinnati business
publication.
There are, however, immediate and future challenges that
threaten our ability to maintain our pattern of success as a
manufacturer in the United States. First among them is the
structural cost of U.S. manufacturing imposed by government tax
policy, regulatory policies, and legislative initiatives.
Richards Industries is structured as an S-corporation and,
therefore, the taxable income generated by the enterprise flows
directly through to personal tax returns of the owners of the
company. High individual federal tax rates imposed on the
owners siphon off precious capital that, but for the higher
taxes, would be reinvested back into the company to purchase
capital assets, grow the company, and create new jobs.
The Manufacturing Institute estimates that these structural
costs add a full 20 percent to manufacturers' costs of doing
business here in the United States relative to our major
partners.
U.S. health care costs have increased 80 percent in the
last decade, and we believe that much of the cost increase is
attributable to government involvement in the insurance
marketplace via coverage mandates. We believe that the
expansion of government involvement in health care brought on
by the implementation of the Affordable Health Care Act will
put forward further pressure on health care costs.
Of equal concern is the shrinking supply of qualified
workers. The manufacturing workforce is moving toward
retirement at a faster rate than the rest of the economy, and
we cannot find qualified workers to fill positions as
machinists, operators, and skilled assemblers. The U.S.
education system is not equipping American students with the
right skills and the right disciplines to support the
manufacturing economy. The lack of qualified workers will
impact U.S. manufacturers' ability to compete in the global
marketplace.
I encourage the Committee to continue to explore these
growing challenges and to act to alleviate the accelerating
headwinds.
I am very proud of the small part that Richards Industries
plays in the nearly $2 trillion U.S. manufacturing sector, and
I am excited about the opportunities ahead.
Thank you for your support as we move forward through these
challenging times, and thanks for the opportunity to testify.
Chairman GRAVES. Thank you very much, Mr. Broxterman.
Mr. Tipton, questions?
Mr. TIPTON. Thank you, Mr. Chairman. I would like to thank
our panel for taking the time to be here. I am a small business
guy. That has been my real trade in life, and the ability to
create jobs and to be able to address some of those headwinds I
think is critically important. And I certainly want to applaud
all of your efforts.
If we could, you may not have a specific number. I know in
my particular district in Colorado we still have double digit
unemployment, real unemployment, in my two largest communities.
Can you tell us out of your home areas in your state what is
unemployment looking like right now? Mr. Schwind, do you want
to start?
Mr. SCHWIND. I do not have the exact figures, but I can
tell you it is hard to find the people with the skill to work
for us. There seem to be plenty of workers available to come to
work, but almost zero with the skills that we need to have them
safely work within a shop like ours with cutting tools, with
machines, with chips. Safety is a huge issue, so we cannot take
people fresh off the street and put to work; they need to be
acclimated to the environment to be able to work effectively
but really safely. So I do not have the specific number; I just
know that there might be people that could fill the jobs but
they are not skilled enough to do it.
Mr. TIPTON. Right.
Same experience?
Mr. BROXTERMAN. It is amazing. I am sorry, I had a campaign
on Saturday to hire--we are trying to hire three machinists.
First of all, it took us a good four weeks to put together a
list of potential candidates. We had 50 scheduled for
interviews. On Saturday morning there were 12 no-shows. It is
amazing to me the effort that you have to put forth just to
find--and these are not experienced machinists. We have a
training program, an apprenticeship program, so we are willing
to invest in them and train them, but to find qualified folks
who are trainable is getting to be impossible.
Mr. IVERSON. We have gotten involved in some internship
programs, I think five. We are only a 20-man company, so for us
that is kind of a big deal and we found the same thing.
Retaining people is very difficult. There is a lot of
recruiting going on and people are paying people to go from one
industry to another, so that is a struggle that we struggle
with. But I think the actual unemployment may be around 9
percent in our state. I am not really sure. Brad might know
that better than I. But certainly, finding people is very
difficult for all three of us.
Mr. TIPTON. Great.
Well, Mr. Schwind, I was captivated really by a comment you
made that came from your father, ``To manage your business with
your mind and not with your heart.'' But you then followed that
with ``even in tough times you were able to hang on to the
people that you worked with.'' Does that really demonstrate
that particularly with the small businesses that we have in
this country that it is more of a family operation and that
includes those that you work with?
Mr. SCHWIND. Absolutely. Absolutely. Being a 20-person
company, we know the families of every individual. We know the
kids, the kids' names. So we take on ourselves responsibility
of the welfare of those individuals--not just the folks who
work for us but the entire family unit.
During the recession, we kept everyone because we got a
little smarter. We did things that we did not do before. We
brought some things in-house that we had paid for currently,
and you are willing to do that. You try to do everything you
can to retain your workforce because it is a personal
relationship. If we had 800 or 900 employees, it might not be
that way, but given that I know the names of every individual
and every family member of the folks that work for us, you do
what you can to keep--to hang on to those employees.
Mr. TIPTON. Right. You know, it was interesting listen to
all three of you because what you were specifically noting is
what happens here in Washington is impacting your ability to be
able to create jobs to be able to hang onto the people you have
and to be able to build for the future. You cited the
Affordable Care Act as being able to create uncertainty,
potentially endangering jobs, sequestration. I think it is
worthy of note out of the House of Representatives we passed
two pieces of legislation, and I would encourage you to get a
hold of your senators to take up those pieces of legislation.
Also, the STEM act that we passed out of the House of
Representatives when we were looking at Science, Technology,
Engineering, and Math to be able to address them.
But if you could give, and Mr. Broxterman brought it up at
the very end, we just had the fiscal cliff legislation a few
months back, which is impacting sub S-corporations, S-
corporations like his. If you have a piece of advice for
Washington, what would it be?
Mr. BROXTERMAN. You know, from my perspective it is to be
aware of the impact that that has on small businesses. The
impression that comes to folks like myself is that we are the
fat cats that are sitting on the back of our yacht with a
martini in our hand. Well, that is actually an S-corporation.
That is a small business.
I tried to tell this to my folks at election time, is that
what has an impact on us is the approach that all income, all
personal income over $250,000 has got to be taxed at a higher
rate. Those are small businesses. Those are S-corporations.
Those are not just individuals who have been very highly
compensated.
Mr. IVERSON. I have seen a lot of people that have, because
of the fiscal crisis, have not invested in their businesses in
terms of capital equipment, things that can make them more
productive. So that is something that I have seen in calling on
different manufacturers in the three states.
Mr. SCHWIND. The one thing I would mention in terms of
Washington, and I know most of the folks on this panel have
small business backgrounds so you know what I mean when I say
this, but spend every dollar as if it were your own. Within our
companies, whether we are ordering tooling, ordering services
from an outside vendor, spend the money as if it were your own
and it is amazing how much more conservative we spend when we
think of things that way.
Mr. TIPTON. Thank you. I yield back, Mr. Chairman.
Chairman GRAVES. Ranking Member.
Ms. VELAZQUEZ. Thank you, Mr. Chairman. And thank you for
being here today sharing with us the successes.
This Committee is well aware of the great role that you
play in our economy. And so we are concerned about providing a
climate that is conducive to help you do what you do best, and
that is creating jobs for our economy.
There has been some discussion here in the House regarding
a comprehensive tax bill, and the chairman and I have
participated in some roundtables with the Ways and Means
members, leadership. And so my question to you is besides
lowering tax rates, what specific tax changes could better help
small businesses have greater access to cash?
Mr. BROXTERMAN. I think from my perspective, the continued
ability to buy capital equipment and have taxes not be a big
factor in that decision-making process is a major plus. We are
typically a company that buys a major machine tool every year.
Ms. VELAZQUEZ. Have you used section 179?
Mr. BROXTERMAN. We have. Yes. And we have----
Ms. VELAZQUEZ. One of depreciation?
Mr. BROXTERMAN. Yes, absolutely. And it does. It makes a
difference whether you make that move or you wait a period of
time.
Ms. VELAZQUEZ. Sure.
Mr. BROXTERMAN. Or perhaps put that move off all together.
This is the first year in probably 15 years that we did not buy
a piece of capital equipment, and it was because of the
uncertainty in the tax situation that caused us to do that.
Mr. IVERSON. I would agree also. The section 179 is huge in
our business. We sell machine tools. A couple of years ago the
179 was more aggressive than it is currently. I know a customer
that had a family business that invested in a $1.2 million
piece of equipment, which was a huge investment for them, and
the reason that they were able to do that and invest back in
their business is because of the 179 and implications on their
tax burden.
Mr. SCHWIND. I would suggest that in addition to the
advantages on capital purchases, within companies that provide
training for their employees. We have all said that we have a
lack of skilled labor.
Ms. VELAZQUEZ. Yes.
Mr. SCHWIND. Our company belongs to the National Tooling
and Machining Association (NTMA), and NTMA has created an
online university to send students to achieve college level
training at night while they work in our shops during the day.
But the individual companies bear the costs of sending those
students to programs such as this. And I think more incentives
for companies to provide training in-house or at least to
provide some incentive to do it not only makes their individual
companies stronger but across the industry if we are doing
this, I think there can be some leverage there.
Ms. VELAZQUEZ. Well, there are some partnerships happening
between community colleges across the country and the small
business sector in New York I am quite aware because one of
them is in my district. And precisely, I just held a roundtable
with small manufacturers, and time and again the major issue is
to find skilled workers.
Thank you, Mr. Chairman.
Chairman GRAVES. Mr. Chabot.
Mr. CHABOT. Thank you very much, Mr. Chairman.
Bruce, I think I would like to go to you since you came all
the way from Cincinnati.
You had started--what year did you start? Was it 1948--
excuse me, 1961 or 1948?
Mr. BROXTERMAN. The company was incorporated in 1961 but
the original product line was developed in 1948. That is
correct.
Mr. CHABOT. All right. I was just wondering how my cracked
staff could have got that wrong.
Mr. BROXTERMAN. Okay. No, they were right.
Mr. CHABOT. My question is this. You have been a very
successful company and you have approximately 150 employees
now. Times are different now than they were back then. If you
would have started a company or wanted to start a company like
you did back then now, would that have been possible? What
additional challenges do startups have out there nowadays that
were not in existence back when you guys started up?
Mr. BROXTERMAN. Well, you know, I think there are a few
things. It is interesting. I was involved in a management
buyout of the company in 2007. We could not do that today
because there is just no way in the banking environment that I
could have gotten the funds to help me finance that.
Mr. CHABOT. Is that because of Dodd-Frank in particular, do
you think?
Mr. BROXTERMAN. Yeah. I mean, from our standpoint I just
had this conversation with U.S. Bank this week, and they said
you should mention that if you get the chance because that kind
of legislation change has a huge impact on their approach to
lending dollars to people like me.
I think, too, I think the issue of finding skilled labor
now as a startup would be very difficult. It is hard enough for
me as a company of 150 to get people to take the chance to go
to work for a small company, much less someone who is just a
startup and just getting out of the chute.
Mr. CHABOT. Well, getting into that question about skilled
labor, and all three of the witnesses here have mentioned that,
they are having the same difficulty, and that is in an economy
where we have ballpark somewhere between 7.5 and 8 percent
unemployment, and that really, I would argue, does not
adequately reflect the true unemployment when you look at
people that used to work full-time and are working part-time
who are still counted as working, and people that have given up
working all together have gotten so discouraged they drop off
and they are not counted at all anymore. So it is probably
significantly higher than that. But whatever, the unemployment
rate is higher than it ought to be, yet folks like yourselves
are having a hard time hiring people. Are there any things that
you would suggest that either we ought to be doing or maybe the
local vocational schools ought to be doing or somebody ought to
be doing to make folks employable in these high paying jobs
which you all are screaming? And I will let all three of you
touch on that if you would like to.
Bruce, do you want to go first since you are the hometown
guy to me?
Mr. BROXTERMAN. You know, that is one that I thought of
quite a bit on the way out here and as I prepared for the
testimony, and it is difficult. I think there are some line
items in the budget that support the nonprofits, such as the
MEPs in Cincinnati. It is a group called TechSolve that offers
low-cost training for companies like ourselves. They have a
machining center where they share their expertise on machining
and machining skills. But it is a challenge. It is a special
challenge.
I like hearing about what Steve has to talk about because
he has taken kind of a unique approach there I think that would
be helpful as well. But it is a challenging time and I am not
sure what the answers are.
Mr. CHABOT. Okay. Would either one of the other witnesses
want to----
Mr. IVERSON. Well, I got an e-mail from the president of
the Illinois Manufacturing Association, and he said that
basically, students coming out of high school, just their math
skills are not up to par. And so a lot of us, the first thing
they do at community colleges is that they find that they have
to re-teach and do a better job at getting the math skills
sharpened first. So I think schools in general are not--they
are being measured maybe in an inappropriate or not necessarily
an efficient way. And so a lot of people, a lot of schools are
putting prominence on things that may be they should not have
prominence on.
Mr. CHABOT. Thank you.
Mr. Schwind.
Mr. SCHWIND. Yes. I think in our own experience we find new
individuals coming into our company with no experience have
found us as maybe a second or a third option. They were not
charging into machining out of high school because while in
high school there was no real promotion of it. I think we need
to get with mom and dad while these youngsters are still 14-,
15-, 16-years old in high school. I know within the high
schools at least in our area we have had good success with
robotics, and out of that students are learning how to design
high level. They are learning how to build. But it seems to be
gone the days where you would go to high school with kids that
can rebuild cars when they get out of high school. It just
seems like we have lost focus or funding. I am not sure why.
But at the high school level there is very little real building
or manufacturing going on. It seems to have moved more towards
design and engineering, which is still good, but we just lost
that hands-on approach I think at the high school levels.
Mr. CHABOT. Thank you.
Mr. Chairman, I see my time is about ready to lapse. Just
let me make one final point.
I happen to be the chair of the Subcommittee on Foreign
Affairs on Asia and the Pacific, and Mr. Broxterman, you had
mentioned that about 45 percent of your sales now are
international, and we are looking at TPP and we are looking at
trade with the Europeans and a whole bunch of other free trade
agreements and things of that nature, so in 10 seconds could
you tell us do you think those types of things would be
helpful? Would you like to see the international trade to go
up?
Mr. BROXTERMAN. Absolutely. Obviously, our goal is to have
it be half of our business or more. The more you can do to
reduce barriers between us and our foreign markets and support
us in our work and sending products overseas, the better.
Places like Brazil where there is a challenge in terms of their
import taxes, and then obviously, we have had some property
rights issues in China as far as patented products being
copied, those are the things that are toughest for us.
Mr. CHABOT. Thank you very much.
Thank you, Mr. Chairman. I yield back.
Chairman GRAVES. Mr. Schneider.
Mr. SCHNEIDER. Thank you, Mr. Chairman. I want to thank the
witnesses. I know, having run a business, taking a day and
coming to Washington is difficult, so thank you for taking time
out of your busy schedule and sharing with us your stories.
Particularly, stories of manufacturing. I know when I
graduated in 1983 with an engineering degree, we had 12 percent
of our graduates in engineering and 22 percent of our economy,
our GDP was manufacturing. Both those numbers are today at
half. All three of you have told us that you have a hard time
finding employees. When I am home in my district I make a habit
of visiting companies in the district. I am batting 100
percent. Every single company we go to is saying the same
thing. We cannot find people with the skills we need.
And Mr. Schwind, you made a comment about kids coming out
of school but not having the requisite skills. There is a
distinction between knowledge and know-how, and what we need
are people who have the know-how to put a car together, to
operate these machines.
I was proud the first bill I introduced is the America
Works Act, which is working with community colleges and
industry to help close the skills gap. And Terry, what you have
been doing in Illinois with CHAMPIONNow, working with--high
schools and some of the other things is nothing short of
miraculous. So that was a long way of saying thank you to you
all for what you do.
And I would be remiss, also, Mr. Schwind, your father was a
client of mine before you bought the business, and having
worked with family businesses for almost 20 years and working
with my own dad, I tip my hat to you because as you all said,
family businesses treat their employees like family. That is
how we are going to grow the economy.
As we look forward, as we look to close the skills gap, you
mentioned, Mr. Broxterman, that it takes a number of years to
train people in your business. How long has it taken you at
this point to fill an open position?
Mr. BROXTERMAN. From our standpoint, the process is
threefold. One is to actually find a pool of employees, and
that typically runs two to three weeks. And then once you have
them is to bring them in and vet that process. And then
finally, to make that offer and try to bring them onboard. I
would guess that the whole process for us is somewhere in the
range of about three months.
Mr. SCHNEIDER. Mr. Iverson?
Mr. IVERSON. Well, we are in a situation where we do not
have a production technician, which is hard enough in itself.
Many times we have to find either a service engineer--we have
been very lucky with our service people. But salespeople that
have to have mechanical skills and other skills, time
management skills, so we have had to actually bring young
people in and develop them, and it is short of two years to get
to the point where they can actually do the job effectively. So
if we are trying to find someone seasoned, it may take us every
bit of six months or more.
Mr. SCHNEIDER. Mr. Schwind.
Mr. SCHWIND. In our experience, to recruit someone and
recruiting someone with skill, anywhere from three to six
months. Lots of interviewing, but finding someone with the
actual hands-on and the practical experience could take up to
six months. Finding someone to come in with no skill is
relatively easy, but then you shift a lot of the responsibility
and cost of training, safety, all that, right back into your
shop. So you would prefer to obviously hire the more
experienced because you bring in some unknowns when you bring
in someone fresh with no skill.
Mr. SCHNEIDER. Sure. Do you see that timeframe--getting
people, getting people the skills, having to retrain or train
backwards, having a restrictive impact on your ability to grow
your businesses?
Mr. SCHWIND. From my standpoint, it definitely is. It
reduces capacity. We run three shifts. In past years, that
second and third shift was a big part of what we did. Our
second and third shifts now are just skeleton shifts because we
just do not have the manpower to fill them.
Mr. IVERSON. At our indicator business we do not have a
second shift and we compete with competitors all over the
globe. And we have actually gone to what they call ``lights
out'' manufacturing, where we can run the machines at night
unattended. People can say that that is taking away jobs but it
really is not. It is making us more competitive, and trying to
put a second shift on--a first shift is hard enough. A second
shift is almost impossible.
Mr. SCHWIND. We do long manufacturing runs, so we do run a
second shift, but we pick and choose. There are certain cases
where we can take a relatively new employee and have them run
certain jobs, but in many cases, if it is something
specialized, we intentionally hold off. And we could run it but
cannot because we do not have the human capital trained enough
to do it.
Mr. SCHNEIDER. Great. Thank you.
I am running out of time. I could sit here and talk all day
about manufacturing, about small business, about family
business, so again, thank you. One of the things we need to
push through is sequester, and Mr. Schwind, you touched a bit
on about it, but real briefly in a couple of seconds, can you
give us a sense percentage-wise the impact sequester is having
on your business?
Mr. SCHWIND. Year-to-date it has been about a 30 percent
impact on our revenue to the federal government. And like I
said before, we knew something had to happen. Sequestration
did, but within the recession when demand dropped, we at least
had insight into when things were going to turn around. Right
now, with our government buyers, we do not have that insight.
That is what is hard for us to plan. So what we have done in
response is we are looking for commercial work and adding that
to our pipeline, but it has been difficult for us. About a 30
percent drop.
Mr. SCHNEIDER. Mr. Iverson.
Mr. IVERSON. I would concur. I mean, there is a lot of
uncertainty, and because of the uncertainty, people are not
going to buy machine tools. Our indicator business, we are
investing in research and development quite heavily, but you
know, we cannot necessarily make the investments that we would
normally make.
Mr. BROXTERMAN. The impact there is less for me. It does
add to the uncertainty of the overall economy, and therefore,
the investments that my customers make. But I do not directly
sell to that marketplace that is so strongly impacted by
sequestering.
Mr. SCHNEIDER. Well, again, thank you. Your success is our
success. The ability for you all to grow is how we will grow
our future. So thank you all again for coming today.
Mr. BROXTERMAN. Thanks. Thank you.
Mr. SCHNEIDER. And I yield back.
Chairman GRAVES. Mr. Luetkemeyer.
Mr. LUETKEMEYER. Thank you, Mr. Chairman.
I just wanted to thank the individuals for coming today. I
appreciate your insights, the real life stories of how you
operate your businesses, the impact of the rules, regulations,
and trade policies of this country on what you do. I am going
to save my questions until the next panel because it is a long,
long day for us, so I will just yield back with that, Mr.
Chairman. Thank you very much.
Chairman GRAVES. Ms. Kuster.
Ms. KUSTER. Thank you very much, Mr. Chair.
I appreciate it. I was planning to yield back to wait for
the next panel but I appreciate this conversation so much I
just wanted to weigh in very briefly.
I am, like my colleagues, very, very interested in small
business and workforce development, and I have been on this
Congress at your Company tour whenever I go back. I am now up
to 17 companies, very, very similar to your own with this CNC
high-level manufacturing. And the witness that I brought here
from New Hampshire today actually is going to describe a five
generation company that has industrial revolution machines that
are over 100 years old in the same company, the same factory as
CNC machines that are cutting edge. So we are proud of it in
New Hampshire.
But I just want to share with you a bill that I have
introduced, Workforce Development Investment Act. It is H.R.
1747, and I would love to get bipartisan support from the panel
that will provide tax incentives to employers who partner with
local colleges to prepare students for the workforce. And is
this the type of legislation that might be helpful for you
working with your local community colleges, technical colleges?
And if so, I would love to get your comments.
Mr. BROXTERMAN. I would just say that that is the kind of
thinking that will help us move forward. It is exactly the kind
of thing that we need. Some type of a break so that we can work
with local experts to train folks. We have our own Richards
Industries University that we created for ourself, which is a
combination of on-the-floor work plus online work to help our
folks learn the industry, but anything that can accelerate that
process because it is three to six months to find somebody, but
it may be as much as two years to train someone that moved from
basic hand-drilling type operations to the true CNC
environment.
Ms. KUSTER. That would be terrific.
Your comment about the math skills, that is precisely what
I am running into. Like my colleague, Mr. Schneider, I am
batting--every single company that I have been to has had this
issue. One company, of every 10 that they bring in for an
interview, only four have the math and English skills. Of
those, two are disqualified for drugs and alcohol, and of the
two that they hire, only one will last longer than four months
in the company.
Mr. BROXTERMAN. You know, I have not done the math but I
bet ours is very similar to that.
Ms. KUSTER. Is very similar.
Mr. BROXTERMAN. And that is the sequence that we run into
as well.
Ms. KUSTER. So, my only other comment, and then time is
short today, I will yield back, but just how can we all be
working together to make sure that we invest in this basic
infrastructure which is our public school system? One of you
mentioned Project Lead the Way, and I am a huge fan of that. My
son started in the seventh grade and our teeny little town of
7,000 people, and he is now studying engineering in college and
starting to work this summer at Lincoln Labs. So how can we all
be working together to encourage those types of programs in our
public schools?
I love your CHAMPION NOW program; maybe Mr. Iverson, you
have something you could add to that.
Mr. IVERSON. Well, I think we need to keep, you know, STEM
going, Project Lead the Way. We cannot let those not be
supported. I think they need to be implemented more across the
board throughout the whole country. Different states I travel
in, I see one state doing a great job and another state not. I
also think that the school system needs to be measured a little
bit differently than it is so we can encourage and rate the
school about how successful they are not of just sending young
people to four-year universities, but then also success stories
as well and incentivize the schools and track the schools for
those successes as well. But I also think that Project Lead the
Way has got to succeed and we have got to support it.
Ms. KUSTER. And then the last question for Mr. Schwind, one
of you talked about videos, and what I have learned from my
visits to the community colleges is a comment that you made
about it is often the parents that have the image of the old,
grungy, dark shop, and so I think the videos would be brilliant
in trying to bring the parents into this modern environment
where it is so clean and some of these companies that I go
into, everybody has got the caps and the clothing, so any
comment about how we could engage the parents.
Mr. SCHWIND. Absolutely. And I think the story is a good
one in that the image needs to change for what manufacturing
really is, but you think of all the students going through
four-year universities, saddling up $60,000-70,000 of debt with
no job. In our industry, many of our companies, especially
within the NTMA, pay for that training, if there is some tax
incentive to do that, and these students graduate, have a good-
paying job with no debt. It is nothing but a good story, and I
think that needs to be intertwined and told by guidance
counselors and directly talking to mom and dad. I think it is a
great opportunity. I think videos would help.
Ms. KUSTER. Terrific.
Mr. IVERSON. We are involved in a lot of videos, and I
concur 100 percent that the parents and the influencers need to
know what reality is more so. National Manufacturing Day, I
think it was the FMA, has October 5th where we open our doors
as companies and all the manufacturers need to do that and
participate so that the parents can come in and see what the
reality is on the manufacturing floor. I also think your point
about getting businesses, partnering with community colleges is
huge. And when you see that happening, there is a notable
difference in impact on the community in the manufacturing
sector.
Ms. KUSTER. Excellent. Well, thank you so much. And I
appreciate you all coming to Washington and all the witnesses
today, and I will look forward to working on these ideas with
you.
Thanks, and I yield back.
Chairman GRAVES. Mr. Hanna.
Mr. HANNA. I will just thank the witnesses for being here
today, and I yield back.
Chairman GRAVES. Ms. Meng.
Ms. MENG. I also thank the witnesses for being here. I
yield back.
Chairman GRAVES. That is everybody.
There are no other questions with that. I appreciate our
first panel for coming in. Thank you. Some of you traveled a
long way, obviously, and I very much appreciate that. And with
that we will seat the second panel. I will turn the gavel over
to Mr. Luetkemeyer.
Mr. LUETKEMEYER. Okay. Could the second panel please come
forward? Mr. Mittler, Mr. Wanger, and Ms. Johnson, Mr. Allen.
Okay, let us get started with the second panel. And thank
all of you for coming.
We will apologize to you before we get started here. We
have votes scheduled in about 15 minutes, and so when you see
the bells and whistles and everything start to go off around
here, we will take probably a few more questions at that point
and then go five or 10 minutes or so and then we will have to
take off. We will ask for your indulgence while we go cast a
few votes and we will come back and we will continue with the
Committee at that time.
If you have been watching the discussion, you know that in
front of you you have got a little box that has red, green, and
yellow buttons on it. You get five minutes to make your
statement, and then all of the members up here have five
minutes to ask you questions, and we will try and hold to that,
in the general vicinity of, but it is my honor this afternoon
to be able to introduce one of my constituents, Mr. Mike
Mittler. He is president and co-founder of Mittler Brothers
Machine and Tool in Wright City. Mittler Brothers has been
making high-quality, metal working equipment since 1980. The
business includes a product line of metalworking and
fabrication tools used in auto racing and aviation market.
Additionally, they play a role in engineering, designing, and
building special machines to automate industry. Mr. Mittler and
his brother have built a very successful family operation that
has not only excelled in business, but it has also provided
safe and stable jobs for the local community and supported
local students in developing skills and technical experience
for future careers.
I must add for the enjoyment of any NASCAR fans in the
room, Mr. Mittler is a racing enthusiast whose experience in
auto racing is related to a number of ideas for special tools
and machine concepts, and his support of a particular
individual who is now one of the top race car drivers in the
NASCAR family. So in my opinion he is the perfect example of
how hardworking Americans can achieve anything when their
innovation and ingenuity are allowed to flourish.
I am happy to welcome this great Missourian to the
Committee, and I remind Mr. Mittler he has five minutes to
present his testimony. My special welcome. Thank you.
STATEMENTS OF MICHAEL MITTLER, PRESIDENT, MITTLER BROTHERS
MACHINE & TOOL; JIM ALLEN, DIRECTOR, SHAPEWAYS, INC.; JILL
JOHNSON, FOUNDER AND CEO, INSTITUTE FOR ENTREPRENEURIAL
LEADERSHIP; ANTHONY WANGER, PRESIDENT, IO.
STATEMENT OF MICHAEL MITTLER
Mr. MITTLER. Thank you, Congressman. It is my privilege,
and I feel my duty, to be here to give my testimony today, so
thank you very much.
As you said, my name is Mike Mittler, president and co-
founder with my brother Paul of Mittler Brothers Machine and
Tool, a manufacturing company located in Wright City, Missouri.
And as you said, I feel we are the classic example of small
business. We founded our company around the kitchen table at my
mom and dad's house Super Bowl Sunday of 1980. On Monday,
following the Super Bowl, we rented a 2,500 square foot
building for $400 and a handshake with the owner. How little
did we know?
Paul and I worked many long days and nights as the only
employees of the company to build our reputation of quality
work and great customer service. We had honed our basic
customer service skills with the first Mittler Brothers,
cutting grass, raking leaves, painting houses, and many other
odd jobs while in high school. With me, the oldest of eight
children, and Paul the youngest, if we wanted to have any money
at all, we had to earn it.
Mom and dad were great role models while providing the
initial startup money, which we paid back with interest by the
way. They quickly said, ``You boys are on your own and you have
to make it.'' Always glad to offer advice, they did not meddle
in the business and knew we had to make our own mistakes so we
would really learn the hard way.
In 1984, we moved to our second location, a 7,500 square
foot building that we helped build with a lot of sweat equity.
We added both customers and employees slow but sure over the
years and moved to our current location, a 50,000 square foot
building in Wright City in 2004.
Like Rick, I am a member of the National Tooling and
Machining Association. I was proud to have served as the
national chairman of that organization in 2006. There are
thousands of companies like ours in manufacturing America, and
together, it is these small businesses who provide jobs to the
majority of Americans.
Our most important asset is our people, and we are proud to
have 10 people with over 20 years of service with us. Two of
them started right out of high school and are now grandfathers.
We currently have 60 employees, and last year we paid out over
$2.5 million in payroll to our people. I am very proud to
currently have five military veterans as part of our team, and
I feel these are the real heroes of this country. We have
always given young people a chance to work for us, and
currently have several moving up through the ranks, including
two still in high school working part time for us.
Our people are all highly skilled, and we employ welders,
machinists, toolmakers, engineers, painters, and assembly
technicians. Our people are guided by just three basic rules--
safety, quality, productivity. We provide a quality benefit
package, including health care, that we pay the majority of, a
401K plan, a gain sharing program that last year paid over
$200,000 to our employees, and a flexible work schedule to
allow our people to deal with their family and their job.
We utilize the latest technology in our manufacturing
processes, including 3D sold design modeling software and high
tech CNC, our computer-controlled machines.
Our company has two main areas of focus. One is our product
line of special machines and components for the auto racing,
hotrodding, restoration, aircraft, and bike building industry.
And the other is design and building of special equipment for
industrial automation.
Our standard products serve both the professional racer,
fabricator, and the do-it-yourselfer who has our products in
their own home workshop. We are proud to be able to sell our
products all around the world. Our products have been featured
in a number of hit TV shows, including the American Chopper
series and several other how-to shows. Numerous trade
publications and many online videos have also featured our
products. We maintain a dynamic website, publish a 90-page
catalog, and exhibit in several trade shows to promote and sell
our products.
In the design and build area, we manufacture custom
machines and systems for large industrial companies, helping
them compete in the global economy. Our customers include
companies in medical, building products, energy, heavy truck,
and general industry.
While we have been successful over the years, many things I
currently see bother me and give me cause for great concern. I
wonder often would I do it all again? In today's climate, could
my brother and I succeed and create the jobs that we currently
have? Unfortunately, I think the answer is no.
There is too much uncertainty right now and the costs of
manufacturing in America are rising, making us less globally
competitive. Uncertainty over the health care law, instability
in the tax code, ineffective and costly regulations are the
biggest problems we face. It seems most of our obstacles come
from right here in Washington. Small businesses do not need a
helping hand. We need a sensible partner in government which
allows entrepreneurs to build a business and most importantly
create jobs.
In closing, I am proud and thankful to live in the greatest
country in the world and proud to have an opportunity to
contribute in a very small way to that greatness. May God
continue to bless America. Thank you.
Mr. LUETKEMEYER. Thank you, Mr. Mittler, for your
testimony.
For the next witness we will have Mr. Payne introduce our
next business, Ms. Johnson.
Mr. PAYNE. Thank you.
Mr. Chairman, if the Committee would be so kind to skip by
Ms. Johnson. I have not received my information yet.
I think that is a little shorter than the one I had.
Mr. LUETKEMEYER. We will skip her?
Mr. PAYNE. If the chairman would.
Mr. LUETKEMEYER. Okay.
Mr. PAYNE. Thank you.
Mr. LUETKEMEYER. Ms. Meng, is she here? There we are. You
can introduce Mr. Allen.
Ms. MENG. Thank you, Mr. Chairman, and Ms. Ranking Member.
It is my pleasure to introduce Mr. Jim Allen.
Mr. Allen is the director of Economic Programs at
Shapeways. Shapeways is the world's leading 3D printing
marketplace where users can make, buy, and sell 3D printed
products. The startup company produces and ships hundreds of 3D
printed objects per day from its 25,000 square foot facility in
Queens, New York. It also has the capability to print millions
of objects per year. Shapeways uses cutting-edge technology
that places it at the forefront of 3D technology. I am proud to
have Shapeways as part of our Queens community and look forward
to Mr. Allen's testimony.
Welcome, Mr. Allen.
STATEMENT OF JIM ALLEN
Mr. ALLEN. Thank you for inviting me to speak at this
Committee.
Again, my name is Jim Allen, and I am the director of
Economic Programs for Shapeways. We are the world's leading 3D
printing marketplace and community. We harness the power of 3D
printing by granting consumers access to commercial and
industrial-grade printers to basically print whatever they
want. These are done in our ``factories of the future,'' which
as Ms. Meng mentioned is in Long Island City. We also have one
in the Netherlands.
We want to make product design both personal, accessible,
and inspiring, and that is something that we can do through 3D
printing. I have worked closely for the last two years of the
company by maintaining close relationships with local, state,
and federal government agencies and the local economic
development community. I have also been involved in creating
what we call the ``factory of the future'' in Long Island City,
leveraging my experience in manufacturing and economic
development.
The Shapeways story reads like a new-age American success
story. The company was founded in 2007 by Peter Weijmarshausen
and Marleen Vogelaar in the Lifestyle incubator of Phillips
Electronics in the Netherlands. At the time, 3D printing was
still very expensive and virtually unknown. It was really the
domain of large corporations, prototyping service bureaus, and
architects, but it really was not used for creating real
products for real consumers. Consumers were using 3D software
to design objects but they really had no outlet to actually
have those objects in their hands. The founders of Shapeways
said, ``Let us make this possible.''
And so in 2008, the company launched their website and
started 3D printing, basically achieving the impossible. In
2010, the company was spun off from Phillips and the Dutch
founders packed their bags and their families and moved to the
U.S. They moved here to New York for the same reasons that a
lot of companies do--direct access to the world's largest
consumer market, as well as access to capital. The founders
also realized that New York City is a hub for creativity and
design, and so they looked at this as being an opportunity to
tap into the American workforce.
Since late 2010, Shapeways has created over 70 well-paying
jobs in the U.S. in the fields of manufacturing, software and
web design, marketing, product design, finance, and customer
service. As we continue to grow, we are going to have probably
over 50 people in the manufacturing plant and we are also going
to need to have support at our corporate office in Manhattan,
so there will be additional jobs created there.
I want to highlight Shapeways growth from the perspective
of community and marketplace. We have a diverse and global
community comprised of designers, shoppers, as well as
creators, who are turning out ideas on a daily basis. At least
count they were uploading 60,000 new products every month to
our website. We also have thousands of members of our community
that do not have any 3D experience and who want to get involved
in creating objects that populate their lives. At most recent
count, we have over 300,000 community members.
We also have shop owners. These are people who have design
experience and are placing their designs on our website for
others to purchase. We allow them to set their price and make
their own profit in return for a small fee from us, but we
manage the transaction from end to end. In 2012, we paid out
over $500,000 in payments to these shop owners, and at that
point there were 8,000 shop owners. Now we have over 10,000.
We have also been fortunate in raising capital. In 2010, we
raised our initial $6 million, and over the last few years we
have raised an additional $41.3 million. Most recently, a $30
million round through Andreesen-Horowitz and supported by Union
Square Ventures, Index Ventures, and Lux Capital. This is a
testament not only to the Shapeways concept and business model,
but is indicative of the game-changing potential of 3D
printing. As we go forward, we are going to continue to roll
out new materials, invest in the latest 3D printing technology,
and work our way towards 100 percent local production. Right
now nearly 90 percent of the products sold in the U.S. are
manufactured here in the U.S.
I feel that this is the tip of the iceberg, not only for 3D
printing but also for U.S. manufacturing in general. I gave a
talk last January at the Leadership Summit of the International
Economic Development Council and noted that there is a
significant uptick in venture funding of manufacturing in
hardware-based companies. So it is not just the latest social
media fad or website that is being funded. This coupled with
improvements proposed in the Jobs Act to ease restrictions on
crowdfunding may help spark a renaissance in U.S.
manufacturing.
One of the challenges that we face, which has been
mentioned by each one of the previous presenters, has to do
with finding and attracting the best talent, and this we think
stems from a lack of STEM education. We need to continue to
support those programs. I worked for an economic development
agency outside of Chicago before and was working closely with
the workforce development organizations there and the
manufacturing community to make sure that that happened.
Before I finish, I would like to acknowledge the warm
welcome and assistance Shapeways has received from Queens,
Manhattan, and the State of New York, from Governor Cuomo,
Mayor Bloomberg, Congresswomen Carolyn Maloney and Grace Meng.
We have been welcomed with open arms. Queens may not be known
for its manufacturing industry, but the past few years
Shapeways has realized how great a community this can be for
business with the right investments and strategy. We hope that
Shapeways can be both a hub and a catalyst for the resurgence
of manufacturing in this area.
Thank you again for your time.
Mr. LUETKEMEYER. Thank you, Mr. Allen.
Mr. Payne, do you want to introduce your witness?
Mr. PAYNE. Thank you, Mr. Chairman.
It is my honor to introduce Ms. Jill Johnson, CEO of the
Institute for Entrepreneurial Leadership, also known as IFEL,
located within my district in Newark, New Jersey since 2002.
She started the organization to serve the unique needs of
minority- and women-owned businesses with her father, Dr. Henry
Johnson, who was a minority business advocate in Newark for
over 20 years. In 2011, she expanded the organization's reach
through a partnership with the City of New York Base Workshop
in Business Opportunities program, which has special outreach
to low-income communities, including the re-entry and veteran
populations.
While today's hearing focuses on the resurgence of small
business manufacturers, I wanted to ensure that the challenges
and opportunities for entrepreneurs of various sectors,
including manufacturing, from disadvantaged backgrounds, were
highlighted as well. Given Ms. Johnson's 20 years plus
experience with minority- and women-owned businesses and her
work in urban and low income communities, she is equipped just
to do that.
In her current capacity as the CEO of the Institute for
Entrepreneurial Leadership and Workshop in Business
Opportunities, Ms. Johnson is responsible for strategic
direction of the organization that will guide their vision to
make the American dream through entrepreneurship available to
anyone who has the drive and commitment to be successful. She
has led the company in the creation of successful programs
focusing on entrepreneurial training and mentoring services for
New Jersey Department of Labor, the Newark Urban Enterprise
Zone, and the Rutgers Center for Urban, Entrepreneurial, and
Economic Development. In 2012, the Institute for
Entrepreneurial Leadership and Workshop in Business
Opportunities together served over 1,700 aspiring and existing
entrepreneurs in New York and New Jersey, as well as through
five affiliate partners in four states. Prior to launching the
Institute, Ms. Johnson was a financial analyst at Goldman
Sachs, an associate publisher of Yes Magazine, which was a
family-owned business, and the president of On Point
Consulting, a strategic business planning consulting firm
started by her husband.
Again, it is my honor to introduce Ms. Jill Johnson.
Mr. LUETKEMEYER. Ms. Johnson, you have five minutes. And
just to let everybody--the witnesses as well as the panel
members know, we will take this testimony and then we will
adjourn to go vote. As you can see on the board, we are in the
process of voting, and then we will return probably in about 30
to 45 minutes.
So, Ms. Johnson, you have the floor for five minutes.
Welcome.
STATEMENT OF JILL JOHNSON
Ms. JOHNSON. Thank you very much to the Committee.
My name is Jill Johnson, and on behalf of the Institute for
Entrepreneurial Leadership, the Workshop in Business
Opportunities, and the thousands of people who pursue small
business ownership as their path to the American dream, I thank
you for the opportunity to address this Committee today.
I am here to share our view of the challenges that exist
for the entrepreneurs that we serve which are particularly
acute in segments that require high levels of capital
investment, like manufacturing.
The Institute for Entrepreneurial Leadership is focused not
on the entrepreneurs who start businesses with loans from their
parents or corporate buyout packages or by raising money on
Wall Street; our clients are regular people who aspire to live
a better life, people for whom the American dream is a concept
worthy of pursuit.
For over 10 years, as Congressman Payne said, from our base
in Newark, New Jersey, we have provided one-on-one mentoring to
businesses with revenues of less than $250,000. While these
types of enterprises are often demeaned as ``mom and pop''
businesses not worthy of investment, we celebrate these
entrepreneurs as the agents of change in communities where
change is most needed.
In 2011, we joined forces with Workshop in Business
Opportunities, an amazing organization that has trained over
15,000 entrepreneurs since 1966, in the areas of New York City
where the angel investment dollars do not flow. Since joining
forces, we have created an end-to-end training, mentoring, and
support continuum for the entrepreneurs that are often left out
of the mainstream small business ecosystem. Last year we served
close to 1,800 existing and aspiring entrepreneurs, and we
launched a pilot program to replicate our model nationally
through affiliate partners. Our clients are 73 percent women,
70 percent with household incomes below $60,000, and 74 percent
black and Hispanic. The challenges that our clients face in
starting and growing businesses revolve around three primary
issues: the Capital Gap, Talent Gap, and Opportunity Gap.
In 2010, white Americans were about six times as wealthy as
nonwhite Americans. In dollars and cents, this translates to
the average white family having about $632,000 in wealth,
versus $110,000 for Hispanic families, and $98,000 for black
families. While access to capital is often viewed as best
addressed through the private sector, private sector solutions
are generally not interested in low return, nonscalable
ventures.
While the SBA does what it can, the SBA cannot replace the
type of business startup and growth capital offered through
personal wealth and friends and family investment. Black
businesses are particularly affected due to the historical lack
of intergenerational wealth transfer. While money alone cannot
fix a flawed business model, it is a simple truth that money
can buy expertise and can enable a small business to stay
afloat long enough to figure things out and adjust. Access to
capital makes the pivot to profitability possible.
Undercapitalized businesses have no room for error. We need to
find solutions to the access to capital gap.
In addition to capital constraints, many entrepreneurs rank
lack of business training as high among the challenges they
face. Again, this is where we see a divergence in what exists
for high tech, high growth businesses and the businesses that
we serve. Across the nation there is a strong effort to support
incubators and accelerators for companies that have the
potential to attract significant private sector investment
dollars, as well as research grants. Most of the value is in
having access to the talent and expertise that entrepreneurs
generally cannot afford during the early years in the
development of the business. These incubators and accelerators
stimulate innovation, provide support, and connect capital to
projects that can change the world. What we are missing is the
same level of resource for entrepreneurs who can change
communities. We need to find solutions to the talent gap.
Related to the previous two issues, a challenge for many of
our clients is the inability to win meaningful contract
opportunities. While this is due in large part to lack of
capacity, we find that the absence of strong networks and
relationships is also a limiting factor. Limited resources
often prevent undercapitalized entrepreneurs from attending
conferences, playing golf, joining clubs, and making the sales
calls necessary to develop strong relationships with large
potential customers. Government set-aside programs and
corporate spend goals have been helpful in certain areas.
However, for the businesses that we serve, these programs do
not apply. We need to find solutions to the opportunity gap.
After our years of working with thousands of aspiring and
existing entrepreneurs, I have come to believe with all my
heart that solutions are possible. I have presented several in
my written testimony. It is not enough to just focus on those
who have been blessed with the benefits and privilege of
history; we must also empower those individuals who have not
but aspire for more and whose spirits are still open to
dreaming.
On behalf of the thousands of entrepreneurs like the ones
that we serve, I ask that as you consider ways to support the
manufacturing sector, that you commit yourselves to inclusion
of community entrepreneurs whose success creates a path to
economic self sufficiency for more of us and a healthier
economy for all of us.
Thank you very much.
Mr. LUETKEMEYER. Thank you, Ms. Johnson. That was right on
five minutes. Very good.
We apologize to the panel. This is our life around here. We
are in the process of putting the rule on the floor for the
Farm Bill, and so we are going to have a recess here for
probably about 30 to 35 minutes, I would assume, around 3
o'clock, give or take five or 10 minutes, we will be back. It
probably will not be any sooner than 3 o'clock, but I would say
as soon as we can get a number of members back here we will
again go back to work. And I apologize, but again we ask for
your indulgence.
With that, we will recess until a little after 3:00.
[Recess]
Mr. SCHWEIKERT. Okay. Our Subcommittee is back in session.
This is actually one of those moments where I got to be in
the chair at just the right moment. I get to introduce Mr.
Wanger.
Anthony Wanger is president of IO, a global leader in the
manufacturing of software-defined data centers with intelligent
controls, the next generation of data center inner structure
technology, and integrated hardware and software data center
platforms. IO intelligent controls offer enterprises,
governments, and service providers an innovative way to deploy
provisions and optimize data center capacities anywhere in the
world. As president, Mr. Wanger directs the company's expansion
and acquisition activities overseas, key transactions, and the
company's legal, HR, security, and risk management functions.
Prior to his involvement with IO, Mr. Wanger co-founded and
managed Sterling Network Services, a leading enterprise data
service provider. Earlier in his career, Mr. Wanger was a
private equity investor and served as a senior vice president
at Sterling Partners, where he directed a variety of
investments and transactions for the firm. Mr. Wanger graduated
with a bachelor of arts degree in political science from Embry
Riddle University--that is a strange place to go for a bachelor
in poly science--and a juris doctorate degree from Boston
University.
I know him. He is my friend. I am allowed to screw with
him.
And from a personal standpoint, knowing of the company,
knowing some of the technologies, one of the reasons I am
actually very pleased to have my friend actually here from
Arizona. It is often when we speak of manufacturing we think of
the production of widgets and things and not understanding the
platforms it requires to manage in an information world.
Anthony.
STATEMENT OF ANTHONY WANGER
Mr. WANGER. Thank you so much. Good afternoon, everyone.
This is a terrific opportunity to appear before the Committee.
In addition, I would like to thank each and every member of our
team at IO. We now have employees all over the world
prominently in Arizona but we have folks in several other
states and also overseas. I owe a great thank you to my co-
founders and partners, George and Bill Slessman, and our
financial backers who have been steadfast. We built this
business from the ground up, no employees. We started with a
Costco folding table the first day of January 2007. So it has
been an interesting several years.
Lastly, I guess I would like to thank our customers who are
the reason we are here, and people ask me all the time what is
the secret to business and the secret to small business
success? I think it is very simple. It is find great customers
and keep great customers and make customers happy. If you do
those things the rest of it is manageable.
Just a little bit to add to the introduction, I come from a
family of all small business owners. My mother, father,
grandparents, father-in-law, sister-in-law are all small
business owners. So these are discussions that we do not just
have here, but also over the dinner table and at holidays.
About IO, just to give you a little bit of background, we
are a manufacturer of modular data centers and we are a leader
in the software-defined data center industry. I brought an
image over there. We build very large scale building blocks
that can be used and combined to create the data center
capacity that a given company needs, from the very small all
the way through large global giants. Our technology can be used
to deploy, provision, and optimize so-called clouds. We hear a
lot about the cloud in the news. The cloud really, ultimately,
is a series of servers and storage devices that are connected
to the Internet, and the demand for these services is
substantial and growing. Our customers are industry leaders in
everything from financial services, education, entertainment,
health care, retailing, and more.
I am very proud to say that our products and technology are
made in the USA. We manufacture our data center modules in
Chandler, Arizona. We recently doubled the size of our factory
from two lines to four lines, and in addition, we employ a
great deal of technical specialists, including software
developers, so all of our physical hardware is software-defined
and software-controlled by the operating system that we
developed in a proprietary fashion, which again we believe to
be industry leading. I am very proud to say that we have a
substantial number of U.S. patents both issued and pending and
that every day we go to work we wake up to please our customers
and to innovate; to find better solutions to the problems and
help our customers solve those problems.
A recent item of note, the company is very pleased that we
are now an exporter. We just landed our first IO anywhere
modules in Singapore. We sent around on Twitter a picture of
the modules literally hitting the dock earlier this month, and
that was a proud moment for us to see great high technology
products going from the U.S. to Asia and the rest of the world.
We employ a workforce of approximately 385 people. The joke
was that I am very pleased to be able to appear before you
today but in a year or so we might exceed 500 employees because
we are scaling rapidly and we have added about 100 employees
this year already. Most of that was attributable to the
expansion of our manufacturing operation.
We both sell our modules, our IO Anywhere modules to
customers directly where they deploy them and we also operate
them for our customers as a service, and we do so in data
centers in Arizona, New Jersey, and Ohio. And as mentioned,
soon in Singapore. Our corporate headquarters is located in
Phoenix, Arizona, and I think it is an important point that not
only do we directly employ these folks but we have an ecosystem
of terrific partners--supply chain partners and installation
partners and other folks. And so when a small business is able
to succeed and grow, I think we are able to take a lot of folks
along with us, not just our direct employees but also the folks
that work with key partners.
Having done this, I personally in expansion have traveled a
great deal and been able to see how much of a hunger there is
for American-made products and technology. We are leaders in
the IT and Internet infrastructure industry and IO is proud to
be a part of it.
Mr. SCHWEIKERT. Thank you. Not as good as Ms. Johnson in
hitting the mark, but it was very, very close.
One of the joys of getting to sit in the chair is I get to
throw out a couple of questions, and so think of this sort of
as the lightning round.
There are a couple things having listened to some of the
opening statements. Ms. Johnson, just for the fun of it, are
you familiar with the discussions on crowdfunding? And how do
you think that future is going to help? Because I was listening
to sort of you describe a lot of the sort of these tiny little
organizations who are trying to set up businesses and get
themselves going. Will it help?
Ms. JOHNSON. Absolutely. And I think that crowdfunding is
really, really an exciting opportunity for a lot of the
businesses. We recently, actually, joined with Kiva Zip, which
is doing crowdfunding, and they are doing it in a bit of a
different way. So people can actually give contributions, loans
essentially, in increments of $25 to give people a loan up to
$5,000. We had someone, a client who was on the platform and
was able to raise $5,000 in less than 30 days, and this was the
money that provided the resources that she needed to really get
her product up and going and to another level.
Mr. SCHWEIKERT. I am elated to hear that. It is one of
those, as you spoke in your opening statement, we do have some
communities, some populations which do not have necessarily the
family structures, the economic structures or banking
relationships. It is a new world out there if we can ever get
the SEC to finish its rule sets. I am excited because is think
it is going to do sort a certain level of egalitarian level of
access to capital.
Ms. JOHNSON. The other thing that it does, just to add, is
that it provides access to markets as well because it
familiarizes more people with the product.
Mr. SCHWEIKERT. Mr. Wanger, now the Jobs Act last year also
had the emerging growth company part of it. So if you ever
chose to go public in the next couple of years, do you believe
you would fit into that portion of the Jobs Act?
Mr. WANGER. Yes, I do. My understanding is that we would be
right within the definition of the emerging growth company
definition of the Jobs Act.
Mr. SCHWEIKERT. And have you, as an organization, thought
about what that might do to your ability to hire people and
create jobs and create that platform for economic growth?
Mr. WANGER. We have. Ultimately, we compete against very,
very large companies, and one of the advantages they have
besides their access to capital is also their ability to
provide stock options and equity ownership and some of those
items. So the ability to streamline a process to test the
market and to do those things would be very beneficial.
Mr. SCHWEIKERT. Okay. Forgive me for asking, but Mr.--is it
Mittler?
Mr. MITTLER. Mittler.
Mr. SCHWEIKERT. Mittler, sorry.
Mr. MITTLER. Yes, sir.
Mr. SCHWEIKERT. Anything you see out there, both we have
done in Congress that is helpful or you see as bottlenecks
right now in your ability to grow and provide economic
expansion?
Mr. MITTLER. Well, I think that the health care law is
certainly a big unknown for all of us. We are spending a lot of
time trying to understand that. No one seems to really know
what the direct impact of that is going to be for us. So that
is something that we feel has hurt us directly. We provide a
very rich package. We pay about 85 percent of the total
premium, not only for our employee but all their families and
all that. We then, to keep our premium down, we have a partial
self-funding, so that we assume part of a large deductible, but
we self-fund that back to the employee to keep our premium down
or low and still provide a good benefit to our employees. So
that, I think, is a huge thing.
We, as some of the other members spoke about, we are a
family-type business. I do not know every one of my employees'
children's names but I know all their names, most of their
spouses. We engage them at least twice a year in social events.
So I think that is a real problem for us.
And then burdensome regulation, I think a lot of these
regulations are written for the big guys, and when OSHA comes
into a small business it is really quite a worry for us. And so
I have said here before, I think OSHA as a small business
should be there to support us, pat us on the back, and yes, if
there are flagrant, repeated violations, certainly, fines would
be in order. But I think they should be there to serve and help
us to be globally competitive, help us to provide a safe
environment.
As you noted my three rules, I am a very simple guy--
safety, quality, productivity. And I am proud to have been over
a five-year run without a lost time accident.
Mr. SCHWEIKERT. Thank you, Mr. Mittler.
Mr. Allen, same sort of question. As policymakers, what are
the bottlenecks that you see coming either from regulatory or
public policy for you?
Mr. ALLEN. I guess I see a couple areas. One I mentioned
during my talk was about I think with the Jobs Act with the
relaxing of restrictions on crowdfunding, if that could get
passed through the SEC, I think then as Jill was talking about,
that there is a lot more access to markets. It is sort of a
validation of what a product or a company can do. One of the
most successful campaigns that was on Kick Starter, a
crowdfunding site, was for a manufactured product. The founders
were looking for only about $250,000. They raised close to $10
million. So that tells you be careful what you wish for. But I
think that is one thing.
Within the 3D printing industry, we also have to look at
intellectual property rights. We are very vigilant about making
sure that people do not upload designs that have been
copyrighted by others and they certify when they upload designs
and sell them that they are their own designs. So that is
something that we want to make sure happens or that we police
ourselves, but we are also worried that larger companies may
want to shut down companies like ours because they look at us
as a repository for designs that could conceivably be--they may
think that they are theirs.
Mr. SCHWEIKERT. Interesting.
Mr. Wanger, I saw your head nodding, so let me ask sort of
you have had amazingly rapid growth, and I am elated to have
you as part of my community. But with that, what are the
bottlenecks that are hitting you, and what do you think we as
policymakers should take on that would be helpful?
Mr. WANGER. Thank you. I think from my perspective it would
be an effort to create simplicity, perhaps safe harbors. Time
and time again I will be on a conference call with a benefits
lawyer and a finance lawyer and a securities lawyer and an
auditor and I am paying them all to fight with each other to
try to understand what the intention was. And I think that
things like a safe harbor or like a clear rule or a path as was
exposed in the Jobs Act is just so helpful to us because it
just gives us a clear path. We can comply with the law and get
on with the business of business and job creation.
Mr. SCHWEIKERT. With that, I pass over to the ranking
member, Ms. Kuster.
Ms. KUSTER. Thank you very much. And thank you, Mr. Chair.
And I want to thank all of you as witnesses for taking the time
as small business owners to come down and be with us in
Washington today.
My questions are focused, and I am so impressed by the way
with all of your companies. Mr. Wanger, you are setting records
here on job creation, so Congress needs to take note. We all
were elected to create jobs, and I thank Mr. Mittler for his
comment that Congress should be a sensible partner with
business, and I agree with that approach.
My question is in the area of workforce development. And I
guess I will start with you, Mr. Wanger. Have you had any
difficulty with this level of growth in terms of the skills? We
heard on the previous panel issues around STEM education or
preparation for the workforce and I was referencing a bill that
I have introduced on tax incentives to employers who partner
with local colleges to prepare students for the workforce. Do
you have any comment on workforce development?
Mr. WANGER. Sure. Thank you.
Yes, I do. I actually sit on, in Arizona, on the Arizona
Workforce Development Task Force as part of our Technology
Council. We have had very good success training individuals who
were previously residential contractors or tradesmen or women,
and they have come into the factory and been able to contribute
meaningfully quickly after some training. That has been a very
positive story for us. I think a bigger challenge has been
around some of the very specialized areas--sofware development,
electrical, and sort of multiple discipline engineering can be
a challenge because we need folks who understand electrical
engineering and computer science and mechanical engineering.
And so literally today on our website I think we have 30 or 40
open jobs openings, and most of the ones we have trouble
filling are on these STEM technical areas.
Ms. KUSTER. So I want to invite you to come to New
Hampshire where we have on taxes, either income or sales. You
have a long list. We would love to have you--and a great
engineering school as well.
So I wanted to turn to Ms. Johnson. In the same realm, do
you have issues with the companies that you are working with in
terms of the talent pool available and the education system?
And do you have any recommendations of how we could be the
sensible partner with business on the education side?
Ms. JOHNSON. Absolutely. And I think that the challenges
that a lot of our clients face are even more acute because they
have fewer resources, and so they are hiring from probably the
lowest end of the talent pool and in inner city communities
where the educational systems tend to be not what they should
be. And then I guess from a personal standpoint I have four
sons who are all in public school--three of whom are in public
school, and one of the things that I have seen is just a
movement away from working with your hands. And when I was in
school we had to take shop--metal shop or wood shop. I took
wood shop. And so you develop a familiarity and comfort with
working with your hands and being in that environment that may
lead someone to decide that a career in manufacturing is the
right path for them. And I think it would be very beneficial to
move that back into schools at the earliest educational levels,
even at the elementary level, so that way young people have
options. They have a path. It is not just, you know, if you are
smart you go to college and if you are not you do something
else. It is that now you are training very smart people and
talented people from the very earliest levels to look at
manufacturing as an option. And in our inner city communities
where people may not have the ability and wherewithal to go on
to college, this is really a viable career path that needs to
be encouraged.
Ms. KUSTER. Excellent. Thank you so much.
I note that the clocks are not working but I will yield
back in case I have any time.
Mr. SCHWEIKERT. I just thought you were special.
Mr. Hanna.
Mr. HANNA. I will just thank the witnesses for being here
today. You all have very impressive resumes and I will yield
back.
Mr. SCHWEIKERT. And my friend from Arizona, Mr. Barber.
Mr. BARBER. I have no questions.
Mr. SCHWEIKERT. Mr. Bentivolio.
Mr. BENTIVOLIO. Does it work? Can you hear me all right?
Ms. Johnson, I could not have come at a more opportune time
for me anyway.
I was a vocational teacher and general ed teacher before I
came. In my district we are really concerned about something
just mentioned regarding apprenticeship programs. I noticed
over my tenure as a teacher that the metal shop, the CAD, the
woodshop disappeared, and it is a great loss because there are
a lot of kids out there wondering what they are going to do and
they have no clue. They are being forced or told to go to
college.
And also, we have a bunch of veterans coming home from
overseas and having been a veteran, in 2007, I came home. I
went to college and you know all that, and I found that the
best, most therapeutic thing for me was to work with my hands.
I took up gardening and it was very relaxing for me and within
weeks I was well adjusted and back.
They are going to have some fun with that later I am sure.
What would you recommend? Because right now I am finding
out there is a problem working with VA and the Department of
Labor. Getting the Department of Labor, for instance, to agree
to an apprenticeship program that the VA or a soldier once he
is discharged can apply for VA benefits. But it does not apply
to apprenticeship programs because the Department of Labor does
not authorize it. I am just now getting into that. Do you have
an information on that? Can you help me in understanding what
the big problem is?
Ms. JOHNSON. I am not familiar exactly with VA benefits,
but one of the things that I do want to say based on our
experience in working with the Department of Labor, in New
Jersey there was a very innovative program to support
entrepreneurial training. And the challenge often with
entrepreneurial training programs is that it is not deemed as
looking for work. And so even programs like Job Corps, they are
responsible for helping young people get trained for jobs,
starting a business does not count for that.
And so one of the things I would love to see is that there
is more of a relationship between the job training programs and
entrepreneurship because for so many people there are just not
the jobs out there. And when you especially look at the re-
entry population, that will have a special emphasis as well.
There are just not opportunities for them in the workforce
oftentimes with the skills that they have. However, having a
trade and learning to work with your hands, that is something
that is then a transferrable skill to starting your own
business.
Mr. BENTIVOLIO. How would you recommend we get public
schools and other schools more interested and focused on giving
students the opportunity to go to an apprenticeship program
like carpentry, masonry, or a manufacturing technician of some
sort? Do you have any suggestions?
Ms. JOHNSON. I do. I think that really, again, it starts
with having exposure. I did not originally say I think I want
to take something working with my hands; I want to take
woodshop. It was either I took home economics, metal shop, or
woodshop. And I was not so interested in cooking, and so I
chose to do woodshop. And now actually doing sheet rocking and
spackling and working on my home is a release from the work
that I do every day, and it also supports home ownership. And
so I think that in creating an opportunity for exposure is what
young people need where it is not an option because young
people do not always know best what they need.
Mr. BENTIVOLIO. Well, I just spoke to a young--do I still
have some time left, Mr. Chairman?
I just spoke to a young congressional award winner for
students, and the student came to my office today and asked if
there was a program where she could--because she does not
really know what she wants to do. A lot of students think they
do but they will get involved in something and they find, well,
that is not really what I wanted to do. And I suggested maybe
they follow me because one of the opportunities I have as a
congressman is I get invited to a lot of my constituents' place
of business for a tour. I am just wondering if maybe that is an
opportunity we should explore and get more young kids involved
at the high school level, maybe during the summer, to tour some
of these various employers' facilities. Do you think that is a
good idea? Suggestion?
Ms. JOHNSON. I absolutely think so. And I think that would
also be an amazing opportunity for a lot of the entrepreneurs
like the kids that we serve to close the talent gap. And having
young people, whether they are in high school or especially
even at the college age, where now you have programs like Teach
for America, which allow very young, energetic people to go
into the teaching profession for a period of time. We could do
the same thing with entrepreneurs in disadvantaged communities
and provide incentives for people to work and support these
entrepreneurs while getting access to training and just
experience so that they can then have the opportunity to decide
what they want to do. This would be a great experience for a
lot of veterans returning home as well.
Mr. BENTIVOLIO. Thank you. I have some more questions I
would like to explore if we have time.
Mr. SCHWEIKERT. We may have to make a circle around.
Mr. BENTIVOLIO. No problem.
Mr. SCHWEIKERT. Thank you, Mr. Bentivolio.
Mr. BENTIVOLIO. I yield back my time. Thank you.
Ms. MENG. Thank you, Mr. Chairman.
I was curious to any and all of the panelists what are some
programs, if any, federal programs that have been helpful to
your businesses?
Mr. MITTLER. I would comment that the section 179 for the
advanced depreciation of capital equipment is beneficial for
us. Our business is very capital-intensive, buying expensive
CNC machine tools, so that really helps us defray the cost of
that. So I think that is a positive benefit.
Mr. ALLEN. One program that I have taken advantage of with
Shapeways is the Manufacturing Extension Partnership through
the National Institute of Standards and Testing where they
provide low cost manufacturing training, safety training, lead
manufacturing and other topics, and train the supervisor.
Ms. MENG. Similarly, the R&D tax credit is of great
importance to the manufacturing industry because it provides
the ability to invest in innovative research. Currently,
America leads the world in groundbreaking R&D and small
companies are prominent in that effort. How in your view could
the R&D credit be made more business friendly? And should it be
made permanent?
Mr. MITTLER. I would like to comment on that again. That is
exactly parallel with the other. Since we develop our own
products, having that R&D tax credit is very important, and I
think if that was made permanent then that would give us a
longer range view of developing more increased products. So I
would highly encourage that that R&D tax credit be made
permanent. Every few years we see are we going to have it, are
we not going to have it? I mean, we move forward the best way
we can, and if we benefit, we benefit. But if we knew that that
was there, and again, that is part of the uncertainty that I
spoke of, you know, we are not in a certain climate, so if we
had more certainty that would make it easier to have a long-
term view of developing more and bigger products.
Ms. MENG. Thank you. I yield back.
Mr. SCHWEIKERT. Thank you.
Mr. Payne.
Mr. PAYNE. Thank you, Mr. Chairman.
Ms. Johnson, as you know, New Jersey's Small Business
Development Centers, in conjunction with the SBA and several
other organizations, hosted a series of educational and
networking events around entrepreneurial and small businesses
this week. During Monday's event I heard from a young man with
an interest in 21st century manufacturing opportunities
particularly dealing with technology. Can you speak of the
possibilities and opportunities and challenges facing your
particular constituency in these efforts?
Ms. JOHNSON. Sure. Thank you.
I think that the challenges really exist around the three
areas that I mentioned in my comments--the access to capital
gap being a very large part of that. It is very difficult to
get a business started and to scale up, if you will, without
the capital necessary to, one, test and do prototypes. And I
was discussing that with Jim a little bit earlier--to test and
do prototypes--and to be in business long enough for the
reality to actually happen. And so I think that one of the
challenges with access to capital can be effectively addressed
through crowdfunding. I think that will just open a lot of
doors and enable people to test concepts in a short order using
funding that they are able to raise, not relying just simply on
their own means.
I think that the other real challenge is just an access to
opportunity around contracting, and I think that most of these
small businesses with which we deal, which are the very
smallest in size, are not able to take advantage of contracting
opportunities as many of them exist because they are just too
small and they do not have the opportunities to scale. And I
think as Mr. Wanger mentioned in being able to create
additional opportunities and utilizing resources that exist and
creating an ecosystem so that businesses that may be growing
very rapidly like his company are able to bring others along by
providing contracts. And even if some of the contracts are in
catering and janitorial services and other resources that exist
or that are required by the ecosystem and that community, those
are ways to create a spillover effect by the growth and success
of other businesses. And I think that is especially true in the
manufacturing sector.
Mr. PAYNE. And also, we tend to find I know in the
constituency that we serve, bonding in different areas--in
construction and what have you. Not manufacturing, but the
capacity for people to be able to afford the bonding that is
required has been prohibitive in entrepreneurs moving forward.
My experience in small business, I come from a
manufacturing background in the 1970s. My uncle had created a
company in 1969 that manufactured the old computer forms that
we used to use, the big folded sheets with the holes down the
side that are obsolete. But we were the only minority firm in
the nation that was doing that at that time in the 1970s,
hiring--we called it guys coming back home from doing their
debt to society but now we call it re-entry. So I am very proud
of that background which really continues to lead me down this
path to try to help young people in startup businesses be
successful.
In your testimony, in speaking of the enormous level of
support and resources for high tech and high growth business,
you state that what is missing is the same level of resource of
entrepreneurs who can change communities. Can you expand on
that point?
Ms. JOHNSON. Sure. I had the opportunity to visit the
Entrepreneurship Center I think it is called in Nashville as
part of a conference that was held by the Startup American
Partnership, which has been highly touted, lots and lots of
publicity, and lots of resources. It is a great partnership and
provides a great benefit to high tech, high growth businesses.
There are many incubators and accelerators that focus on high
tech, high growth businesses, and they are doing that because
we have made a conscious decision that as in particular areas
and as a country, that we want to be the leaders in these
areas. And I think that if we are going to have the same amount
of success with businesses, with companies that are providing
the jobs to people from the re-entry population that are
serving the needs of local communities, that are creating
economic opportunity in our most distressed communities, we
also have to think about the level of resource with which we
are supporting these types of entrepreneurs.
We have resources provided through the SBDCs and SCORE and
various resources provided through the SBA, but our feeling
about that is if those resources alone were not good enough to
have the type of high tech, high growth companies that we
wanted to produce, why do we feel that that is enough for
minority women and small businesses that are community-based
businesses in the areas where they are in most need and that
have the fewest resources? I think we have to be serious about
or decide if we are serious about really growing those types of
businesses and then provide and support those businesses with
the requisite resources.
Mr. PAYNE. Thank you, Mr. Chairman. I yield back.
Mr. SCHWEIKERT. Thank you, Mr. Payne.
I actually also remembered green bar computer paper. I
think that is what we all called it, which is actually sort of
tear--I also remember punch cards.
Last quick comment. Thank you. Having Mr. Wanger here is
special for me because Arizona is a long way away, but actually
all of you had some really interesting things to share.
There are no further questions for the panel. I want to
thank the witnesses.
The third panel will be getting ready to be seated. And Mr.
Hanna, I believe you are chairing the next panel, and this
panel is actually now closed. If you have any other testimony
or comments you would like to submit for the record, I believe
it is tradition in this Committee to keep it open for five
legislative days. And with that, the next panel.
Mr. HANNA. Thank you, everyone, for being here.
I will begin by introducing Barb Schindler, our next
witness, president and chief operating officer of Golden Artist
Colors, a world-renowned company, that does business in over 60
countries, I believe. Ms. Schindler joined the company in 1997
as comptroller, and previously served as chief financial
officer. Golden Artist Colors is an employee-owned company
which began in 1980 in New Berlin, New York, proudly located in
my congressional district. The company makes tools and products
for artists, including acrylic paints, and provides good jobs
in my community. For that we are all very grateful.
Welcome, Ms. Schindler. You may begin.
STATEMENTS OF BARBARA SCHINDLER, PRESIDENT AND COO, GOLDEN
ARTIST COLORS, INC.; SHELLY GIBBONS, VICE PRESIDENT, QUIK MART;
MIKE BERGMEIER, PRESIDENT, SHIELD AGRICULTURAL EQUIPMENT; AARON
BAGSHAW, PRESIDENT, WH BAGSHAW CO., INC.
STATEMENT OF BARBARA SCHINDLER
Ms. SCHINDLER. Good afternoon, members of the Committee.
And thank you, Congressman Hanna, for inviting me to be here
today to testify on manufacturing in America.
My name is Barbara Schindler, president of Golden Artist
Colors. Golden manufactures acrylic and oil paints for
professional artists. As a global company, we export our
products to 60 countries around the world.
Our mission is to grow a sustainable company dedicated to
creating and sharing the most imaginative and innovative tools
of color, line, and texture, for inspiring those who turn their
vision into a reality.
To achieve that mission, we operate on three principles: 1.
Make the best products; 2. Provide customers with the best
service; and 3. Find people that can make the first two things
happen. Our products are intended to preserve the artistic
legacy of our times for hundreds of years. This is a unique
responsibility and privilege that we take very seriously. In
2002, Golden became an employee-owned company. We have 157
owners coming to work each day, knowing that their contribution
will have a direct impact on their investment and their
retirement.
The art materials industry is one which grows a meager 2
percent per year. Despite that reality, Golden has grown its
business 21 percent since 2009. Many of our competitors have
moved a portion of their manufacturing to emerging markets,
predominately China. We choose to remain here, as we recognize
we can protect our product quality and intellectual property in
the U.S. Our continuous efforts to drive manufacturing
efficiencies improve our ability to remain competitive;
however, our commitment to new product development and consumer
relationships is essential for continued growth. Our five-
member technical support team responds to 13,000 phone calls
and e-mails annually. We also contract with over 40 teachers
throughout North America who provide art education for over
15,000 people each year.
Most of the issues we face are local and industry-related,
yet there are three significant issues where we feel the
Federal government can provide leadership and assistance. They
are health care, education, and harmonized labeling standards.
We remain optimistic that the Affordable Care Act will meet
its goal of creating affordable health insurance to all
Americans. As we prepare for this future, however, it is our
approach to ready our employees and our business for every
aspect of health care, and not simply the ACA impact alone.
At Golden, we have been managing affordability via staff
education and wellness. Yet, a consumer mindset can only go so
far in an opaque market such as health care. Medical inflation
outpaces the cost of living. We need your continued efforts to
address the entire health care system. Americans must embrace
wellness and health care providers must place the patient in
the center of all they do so that we may once again enjoy the
highest quality health care in the world and not simply the
highest cost.
Secondly, an educated and creative workforce is critical to
sustain success in any business. Unfortunately, due to federal
mandates and budget shortfalls, art teachers are being lost in
almost every district. We are troubled by the lack of arts
education in our schools and believe this is a serious
situation that will in the long run shrink one of the most
significant drivers of American ingenuity and leadership.
Finally, we need a harmonized regulatory framework for
health and safety labeling of art materials. Applying state of
California mandated health warnings to our products, warnings
that are deemed appropriate by no other jurisdiction in the
world, causes confusion and lost sales not only in the U.S. but
in our foreign markets as well. Adoption of the United Nations'
Globally Harmonized System of Classification and Labeling of
Chemicals as the preemptive standard for consumer products,
would eliminate these burdensome domestic and international
inconsistencies.
Golden's future is both positive and sustainable. We will
be successful if we are able to maintain and hire an educated
and enthusiastic staff. Employee ownership has been a point of
difference between us and other employers. Federal support for
ESOPs is invaluable for creating workplaces which honor and
celebrate its staff. ESOPs are not a cure-all for business
success, yet it provides another level of security for
employees trying to navigate their future. When employees are
treated like owners, they act like owners.
Thank you again for the privilege to address this
Committee.
Mr. HANNA. Thank you. You have about a moment left if you
would like to wait for the 157 people that are watching you I
understand.
Ms. SCHINDLER. No, that is good.
Mr. HANNA. You are all right then. Good.
Ms. SCHINDLER. Thank you.
Mr. HANNA. Thank you.
I would like to yield to Mr. Barber, who will introduce our
next witness.
Mr. Barber.
Mr. BARBER. Thank you, Mr. Chairman, and thanks to all the
witnesses for being with us today. It has been a very
educational hearing so far, and I know it will continue that
way with your testimony.
It is my honor and pleasure to introduce Shelly Gibbons.
Shelly and I come from the same town. We were both from Tucson
where she is the vice president of Quik Mart, a family-owned
and grown small business in Tucson, Arizona. Quik Mart was
started in 1965 by Shelly's dad. Growing up, Shelly and her
brother and sister worked almost every job there was in the
business from counting change to pulling weeds to secret
shopping, which she still does when she is not being
recognized. She told me yesterday that actually her dad would
have the children around the dinner table and he would throw a
bunch of change and he would say you better know how to count
that. So we need to do more of that it seems to me.
Now almost 50 years later, the Quik Mart business has not
only survived the test of time but has grown. From those first
three stores, Quik Mart now has 27 stores, all in southern
Arizona, and it is truly a local small business success. As a
former small business owner myself, and my wife, we owned a
business for 22 years, a retail business, I know just how hard
it is to start a business, make ends, meet, meet a payroll,
keep the customers coming back, and so my hat is off to any
business that can survive the first five years of opening and
operation because that is usually when businesses, if they are
going to succeed, do; and those that do not, fail.
As a member of Congress now, as a small business owner in
the past, it is my job to make sure that the voices of small
businesses in Arizona are heard here in Washington. And I
invited Shelly here today to testify before the Committee, to
tell us her family story because her family business is a
shining example of the entrepreneurial spirit that is in so
many southern Arizonans and working families across the
country.
I want to thank you for joining us today, Shelly. It has
been great talking with you and getting to know you. We met
many years ago when I was district director for Congresswoman
Gifford. It is great to see you here today in my new capacity
as a member. We welcome you and look forward to your testimony.
STATEMENT OF SHELLY GIBBONS
Ms. GIBBONS. Thank you, Mr. Barber, and Mr. Chairman.
My name is Shelly Little Gibbons. My family owns Quik Mart
stores in Tucson, Arizona. My father, Wes Little, started Quik
Mart in 1965, like Mr. Barber said, where he opened three
stores. My mother and father are the ones that chose the
colors, the logo, and the name Quik Mart. He liked the way that
there were four and four letters, so that is why there is no C
in Quick. After these three stores opened, mom and dad would
scrape and save until they had enough money to buy another
corner or build another store. They did not borrow any money
from the bank to expand the business.
Growing up, there were a few memories I remember clearly.
One is dad working extremely hard to keep the business running,
but he would also be home every night for family dinner.
Another is how we would take Sunday drives. Mom and Dad would
pack us three kids in the car and we would drive around the
streets of Tucson. As I got older, I realized our family drives
were to be looking at different street corners where Dad was
contemplating building another store. Another family tradition
was every time a new store opened, in the evening we would all
drive out to the new location to visit and check how it looked
at night. So you can see all of our stores are like another
child in our family.
Quik Mart slowly grew from the three stores in 1965 to the
27 we currently have today in Pima County. The 27 stores we
have are not all the original stores. We have opened and closed
and renamed many a store. Since all stores are family owned and
not franchised, if one is not doing well and hurting the
company's bottom line we will close it. Sometimes the city and
county help with that by changing traffic flows, so it is not
as convenient to get to us anymore. Or sometimes it just turns
out not to be a great corner. Housing developments that we
thought were going to go in did not.
Owning convenience stores is a hard business, especially
after 2008. It became harder and tougher. Our vendors now
charge us a fuel charge when they deliver products.
Unemployment tax, workman's comp premiums, payroll tax health
insurance, everything every year keeps going up while the
business with so many people unemployed keeps going down or is
staying the same. Also, we are experiencing more shoplifting,
beer skips, and robberies with so many people out of work and
desperate.
Our next big expense is the new Affordable Health Care Act.
We employ over 170 employees, so either way we go, providing
health insurance for our employees through the company or
paying the penalty and sending our employees to the Exchange
will be a huge expense for us.
But with all I have mentioned, we are very proud that we
Quik Mart stores and little family have been open and around
for almost 50 years. You do not see too many family businesses
that have grown and have had this much impact on a community as
ours has. We have kept many people employed throughout the
years. We have even had many generations of family members work
for Quik Mart. People like working for us because we are local.
Our corporate office is right there in Tucson. Any of our
customers or our employees can come by at any time to see us.
We have had a lot of loyal employees that have been around
for over 30 years, and the majority of our employees stay five
years or longer. Quik Mart--We are Tucsonans.
I would at this time like to thank Congressman Ron Barber
again for inviting me to testify here. Thank you.
Mr. HANNA. I will yield to Mr. Huelskamp to introduce our
next witness.
Mr. HUELSKAMP. Thank you, Mr. Chairman. It is my privilege
to introduce my fellow Kansan, Mike Bergmeier. Mike is the
owner of Shield Ag Equipment in Hutchinson, Kansas. Shield Ag
has been in business for 75 years and is a small manufacturer
that meets the needs of farmers with tools and assemblies
required for a sustainable modern agriculture. And I will say I
have known Mike's Equipment long before I knew Mike in our own
operation. His customers are regional and international, with
distributors in Canada, Europe, Asia, Mexico, New Zealand, and
Australia. Mike currently employs 44 full-time and five to six
seasonal part-time employees. Mike is a graduate of two
outstanding universities, Kansas State and Wichita State. He
also served his community for eight years on a local school
board. Mike and his wife Angie are parents of six children and
reside outside of Hutchinson.
And I welcome him to Washington to share his testimony
today. Thank you for being here and joining us today, Mike.
STATEMENT OF MIKE BERGMEIER
Mr. BERGMEIER. Thank you, Representative Huelskamp.
My name is Mike Bergmeier. My wife Angie and I own Shield
Agricultural Equipment, South Hutchinson, Kansas.
The economy of the United States was built around the three
super sectors that create wealth--mining, agriculture, and
manufacturing. I am proud to own a small business within
manufacturing in direct service to agriculture.
The only way to create wealth is to create it out of
something tangible, hard, growable, or renewable. When a
president or a politician from either party starts talking
about creating jobs, I worry, because government spending does
not create wealth for the human race. And the more jobs balance
shifts away from the big three, the poorer we become as a
nation.
That is why I am here today, for my children, not for me,
to tell you why my children might not have the same
opportunities I did to own a business and employ people. With
all respect, please allow me the time to discuss these
government functions that inhibit the ability for me to grow my
business. And you will see a danger down the road for my
children.
It is difficult for most politicians and business leaders
to pin down overregulation. It just seems there are no
specifics; just talk about there being too many. I liken these
government regulations to the Eastern Red Cedar tree. Cedar
trees supply windbreaks and shelter for farm and domestic and
wild animals where I live. Having more of them seems to be a
good thing. I have plenty of cedar trees. The problem is that
one cedar tree left unattended becomes about a dozen within a
year, and then 100 within a few years, and 1,000 within a
decade. And you get to the point where you cannot grow or
maintain your farm and ranch your livestock. The bluestem quits
growing because the cedar trees suck up all the resources. You
have to spray more invasive weeds because they will grow or the
grass will not.
And you look back on it and say where did all these cedar
trees come from? And you cannot pick out any one cedar tree
that is the culprit. The only real option is to get out the
chainsaw and cut down as many as you can without much regard
for the good trees or the bad trees, because my quarter of
grass land became dysfunctional and I had to do something.
Here is a sampling of the forest of laws and regulations
that keep me from expanding my business. The Patient Protection
and Affordable Care Action of 2010. My company will remain at
44 full-time and 4 to 15 part-time employees. Any benefits to
people PPACA aside, this was the real issue. It hurts the
people you are trying to help the most, folks in the lower and
middle income classes. Those 4 to 15 part-time men and women
will not have access to my health care insurance, and I will
not expand. As my company paid total health care insurance
premiums, Arista, by $45,000 a year, that is one person I
cannot hire. It is that simple. I have to make payroll every
Friday and I have got to pay my suppliers on time.
So let us go back to the cedar tree thing again. The
following is a list of just a few of the new forest of
regulations that are impediments to growth. The RIN numbers are
listed in my written testimony, and all have potential onerous
effects on any future expansion. From the EPA, stormwater
runoff revision of section 402(p) of the Clean Water Act, and
the national pollution discharge elimination system, revisions
to hazardous chemical reporting, risk and technology reviews
for foundries. From the Department of Labor and OSHA,
electrical power and distribution protection; trip, slip, and
fall safety improvements; and the new revisions to the national
ambient air quality standards for particulate matter, dust,
under Title I of the Clean Air Act. By the way, it is 522 pages
long and impossible to interpret.
There are at least 200 rules, laws, and regulations out
there that my business falls under, and expansion is just not
worth the trouble. My bankers spent more time on the banking
regulations that regulate the regulations than they do in
processing business loans. Full implementation of Basel III
capital requirements will impair the ability of business
lenders to provide funds for expansion. The federal tax code is
incomprehensible and nearly impossible to comply with. The
forest of cedar trees is just too thick. When you increase my
taxes, I just react. I do not hire the next person. I do not
purchase a new piece of equipment, and I do not improve my
operations and expand into new opportunities.
As I fear that my kids will not have an opportunity to own
a new business, a small business, or work in one of the big
three wealth creation industries due to burdensome government
regulation and laws, I also worry that their education will not
position them to be future leaders. The education system in the
U.S. is broken. We spend more money per student on education
than any of the other 11 most developed countries in the world
with lesser outcomes than most of the other 11. I implore you
to completely gut the No Child Left Behind and AYP standards.
Allow the states and localities to determine what is best for
the lifelong earners we are trying to raise.
In closing, I have got to tell you the truth. You do not
owe me nothing. I was born with nothing, raised in a great
family environment, educated at a small rural school, and I
graduated from the finest land grant university in the United
States. In 1983, I moved to Hutch with nothing but a college
degree from Kansas State and a used pickup truck. You can
overtax and under serve me. I really do not care because I love
my family and I love my employees and other stakeholders, and I
will continue to work to make a living because that is what I
do. And the USA continues to be a great country to operate a
small business. I will leave this life someday and report to
God with nothing and that is fine by me. What I am asking you
to consider is making sure that my children, grandchildren, and
future generations of Americans have the same opportunities
that I have and that you do not overtax and regulate business
to the extent that nobody wants to take the risk anymore of
joining in the great triangle of wealth-producing industry. We
all owe that to our children. Thank you very much.
Mr. HANNA. Thank you, sir.
I would like now to have Ms. Kuster introduce our next
witness. Ms. Kuster.
Ms. KUSTER. Thank you very much, Mr. Chairman.
I am delighted to introduce our next witness. Aaron
Bagshaw, my constituent from Nashua, New Hampshire, and I want
to thank Aaron for being here with us today and for sharing
your inspiring story of manufacturing innovation and ingenuity.
It is my pleasure to introduce Aaron, who is the president of
W. H. Bagshaw Company, a pin manufacturer, in my congressional
district in Nashua, New Hampshire.
In business since 1870, and in Nashua, New Hampshire, for
the past 60 years, the W. H. Bagshaw Company is the oldest pin
maker in America. A small, family-run business, Bagshaw has
adapted to the times and now manufactures products for the
medical, aerospace, defense, and high tech industries. I also
want to note that Mr. Bagshaw works in a fifth generation
company. Aaron and his wife, Andrea, were kind enough to host
me and Congressman Hoyer in their factory earlier this year to
discuss the importance of American manufacturing. I am thrilled
to return the favor and give Aaron the opportunity to discuss
his company's success story.
And with that, I recognize Mr. Bagshaw so he may address
the Committee.
STATEMENT OF AARON BAGSHAW
Mr. BAGSHAW. Good afternoon. Thank you to the Committee. I
appreciate the opportunity. Representative Kuster, thank you
very much for the invitation to speak to you all today.
As a small business owner, it is so encouraging to know
that our voices are being heard and that small business, and
manufacturing in particular, is such a priority to our
delegation. Representative Kuster has been to our factory, like
she said, on two visits now, once as a candidate, and more
recently, like she said, with Steny Hoyer.
My name, Aaron Bagshaw. I am president of the W. H. Bagshaw
Company in Nashua, New Hampshire, a fifth generation pin
manufacturing business. After combing through our records
recently, I have discovered that we have manufactured and
shipped, since our inception 143 years ago, almost 42 million
pounds of pins to happy customers all over the world.
Amazingly, this would be enough steel to build the Chrysler
Building in New York City.
My great, great grandfather started manufacturing pointed
pins for the textile industry in 1870. In the 1920s, we were
the only and original manufacturer of the Brilliant Tone
phonograph needles. We still manufacture textile and phonograph
pins today, as well as more modern products that are in higher
demand. The life cycle of the pin to me, and probably to some
engineers out there, is baffling. If any engineers are
listening right now, I would like to share this information
with you. We still manufacture and sell the same product we
manufactured 143 years ago. However, over the years we
obviously had to adapt, update, and change not only what we
sell but how we manufacture it. We are now making complex
machined components for high tech applications using advanced
machinery.
Our pin-making machines are modeled after Leonardo Da
Vinci's grinding concepts. We are a living, breathing showcase
of where the Industrial Revolution meets the Digital
Revolution. We have machines that can make millions of pins per
week, and we have state-of-the-art machines that can make
incredibly complex components. Often in my tours of our
facility, I will say that our ``older'' machines can make a lot
of pins fast. I liken our story to what Henry Ford described as
``you can have any color you want as long as it is black.'' You
can have any pin you want as long as it looks like a pin that
we have manufactured before. Textbook Industrial Revolution.
Next on our tour, I would show you our computer-controlled
machines that are making parts unattended. We download a
computer program into the machine wirelessly or directly from a
laptop. With setup assistance of an operator, the machine
manufactures complex components. Textbook Digital Revolution.
All under one roof.
When people learn about our business, after the obvious
question, ``What do you mean, pins?'', we are asked, ``How have
you managed to stay in business so many years?'' Our magic
formula seems to be having this incredible legacy and
foundation partnered with lots of mojo and a fresh approach to
marketing and to management. As well, we like to say, we are a
143-year-old startup. Our core values are: Family, a ``Make it
Happen'' approach, Empowerment, Courage, and Perseverance.
The story of our family business truly is one of courage
and perseverance. Through the years we have weathered several
years, obviously, a Depression, and the recent Recession. Ten
years ago, we made a courageous decision to branch out into new
markets, investing in CNC machines. CNC stands for computer
numeric controls, which means that they are programmable
machines. One operator can run several machines at one time.
These machines have allowed us to produce pins that are much
more complex for the aerospace and high tech industries.
Several years ago, my wife and I made another courageous
decision--we purchased a controlling interest in the business
to secure the business for future generations.
As with most businesses, we are concerned about the
economy, health care, and energy costs, but our most important
resource is our labor force, and a big challenge for us is
access to skilled labor. There is a shortage in our area of
machinists who are skilled at running these types of machines.
In some cases, we have been able to bring in entry-level
employees and train them. We are working with our local
community college to bridge some of the gaps in their skill
levels so we can accelerate their learning. We were excited to
learn that a federal grant allowed for a major upgrade to the
equipment in their machining labor. Having these partnerships
with community college will be effective for the continual
development of our workforce. While a large corporation can
hire someone to focus on workforce development and educational
outreach, a small business like ours does not have that
resource. We have taken advantage of lean manufacturing courses
in our state, NETAAC programs, export assistance through the
U.S. Department of Commerce, and business advising from our New
Hampshire Small Business Development Center. The Trade
Adjustment Assistance for firms has also been very beneficial.
Support like this is critical to small businesses like ours.
We often say, ``If you think a pin is just a pin, you do
not get the point.'' We have survived for 143 years on grit,
determination, fortitude, and a bit of luck. From Da Vinci to
Ford to the Digital Revolution, we, as a company, need and will
continue to need the skills that stem directly from the fields
of Science, Technology, Engineering and Math. Our story does
not end here. Our continued growth and evolution will rely
heavily on the ability of our employees to adapt and grow and
use these technology skills. Thank you.
Mr. HANNA. Thank you. There are a number of themes going on
here today. Deep concern about the health care law. An idea
that regulation is far-reaching and growing and cumbersome and
difficult, and keeps you from growing your businesses. Another
theme clearly is the lack of--there is opportunity, there are
jobs, lack of employees to fill STEM-type jobs--Science,
Technology, Engineering, and Math, which is directly related to
how we educate ourselves in this country and how we compete
globally.
Something unique among our panel, I think, is Barbara
Schindler's ESOPs program. And it is an Employee Stock Option
Plan. Maybe you could enlighten us a little bit about how that
works and how it has changed the dynamic in your company since
the Goldens originally started. And what kind of incentives it
may or may not provide.
Ms. SCHINDLER. Sure. So our business was started by Barbara
and Mark Golden and Mark's parents, and they put probably
$5,000 into it and sold a lot of artwork and started the
business. In 2002, when it was determined that they were
interested in creating this ESOP, Mark Golden tells the story
that he always asked employees to act like they were owners.
Act like it is your dime that you are spending, and so whatever
you are doing, keep that in mind.
So 2002 actually allowed us to finally say, okay, not only
are we asking you to act like owners, but you will be owners.
We have always been an open company where we have shared our
financial information, and when it is a year that is more
challenging, or if we are venturing into a new market that we
want everyone to be aware of, we provide that information to
them. So we really have an open set of books. So it was an easy
transition for us to move into an ESOP environment.
We continue to educate them on what evaluation, how that
happens, you know, what happens when you take on debt, what
does that do to your valuation? So we continue to educate our
staff on the meaning of it, and then besides having the ESOP,
we continued with our 401K match, which many ESOP companies do
not, but we really want our folks, when they retire, to be
situated where they can celebrate their years of hard work.
So the ESOP, just so people know. I had, in fact, our
electric guy, our electrician, he was at the point in his
career where he is over 55 and he has been in the plan for 10
years, and he could diversify. That is one of the rules around
ESOP, to protect your interests. So he could actually take 25
percent of the monies of his shares in the ESOP and convert it
and put it in his 401K or another investment. And he said to
me, he said, ``Barb, I know what we are doing. I have no idea
what any other company is doing.'' And I aid, ``Well, that is
right.'' He said, ``I am comfortable leaving my money here.''
And I said, ``It is your choice. Do what you need to do.'' But
that is the feeling, the sentiment that it brings.
So it is a great avenue. The owners, they wanted to really
give back to the arts and so they created an artist in
residency program. And that is what having the money out of the
company and into their hands enable them to do. So it is a win
all around.
Mr. HANNA. Thank you. Ms. Kuster.
Ms. KUSTER. Thank you very much, Mr. Chairman. And thank
you, Ms. Schindler, for sharing that story with us. One of the
most successful companies that I have visited on this Congress
at our Company tour--I visited 17 small companies now and one
of them has an ESOP. And I love visiting there because the
associates, as they called them, all of the employees are so
excited to show me what they are working on, and they always
want me to know what the next product line is and where--and
the other thing that I love is when I get to the end and they
are showing me the shipping and delivering and there are these
huge boxes that say ``Ship to Shanghai.'' And this is what this
whole day is about and this week and this whole Committee is
Make it in America. So I am very proud of what you are doing,
and I think you do get better energy out of your employees when
they are owners.
I am interested--a previous panel member said that
government should be as sensitive partner in business. And I
certainly agree with the comments on we want to avoid
overburdensome regulation but by the same token we have had a
lot of conversation today about education, STEM education. I
have a bill about cooperating with community colleges.
I have not heard as much today, but I do hear on visits
about infrastructure. And I am going to guess that your
companies are not going to, building the roads and the bridges
to get your employees to your plants and get your products to
market. And so I would love to hear your comments on what the
government can do to provide you with the infrastructure that
you need, and it may be telecommunications, but getting your
products to market. If you could comment on that I would be
interested.
Mr. Bergmeier, did you have any comments?
Mr. BERGMEIER. Well, you know, we pay taxes for the roads.
You know. And so I kind of expect that out of my government.
That is part of the taxation I pay on diesel fuel and gasoline.
So, of course, infrastructure is a way to improve the economy
because you can flow goods quicker. But with regards to any
special programs, I already feel like it is the government's
job to do that because I am paying the taxes for that to
happen.
Ms. KUSTER. And have you had any issues that all the other
panelists have discussed--STEM education, difficulty in hiring
in this new technological environment that we are in. Have you
had any issues about hiring?
Mr. BERGMEIER. My shop is pretty simple. We are a modern
shop with modern equipment and CNC equipment, but we are still
a blacksmith shop. And we hire people who have skills. We are
in a rural area, so in general we can get people with physical
skills to come to work. I do work with the Kansas WorkforceONE
development program. In working with their directors, you have
to bring them aside but they will tell me the truth; that they
cannot get people to apply because they make $11.45 an hour on
a 40-hour week sitting at home because of SNAP programs and
other welfare programs and social programs. Those people cannot
recruit people to their programs to be trained to go into the
Kansas workforce because they make more money sitting at home.
Ms. KUSTER. Mr. Bagshaw, do you want to comment on your
experience with the community colleges and training and maybe
comment on the wages if that is the issue--what the wages are
for manufacturing in New Hampshire. I know that we have a 5.3
percent----
Mr. BAGSHAW. Unemployment?
Ms. KUSTER. Unemployment. So most people in New Hampshire
are employed. We do not have the situation you re describing in
Kansas where may be the benefits are far more generous than in
New Hampshire.
Mr. BAGSHAW. We are understanding right now that with our
local community college that they are going to be receiving or
they have already received a grant for a machine that is
representative of the machine that we use in our facility which
will be absolutely dynamite for us. We are ready to hire people
and put them into positions now. The issue that we have is that
when we do hire people, usually we are training them for six
months, seven months, eight months. It takes them probably a
year before they are really contributing to the team. So that
is the battle that we have. So with the community college and
partnering with them, hopefully, we can reduce that timeframe.
Ms. KUSTER. And if I could just very briefly with my one
second left, what is the average hourly wage of the incoming
employees?
Mr. BAGSHAW. I think they could be making $20 an hour when
they are coming out of that community college.
Ms. KUSTER. Thank you very much.
Mr. HANNA. Mr. Huelskamp.
Mr. HUELSKAMP. Thank you, Mr. Chairman. I appreciate the
opportunity to ask a few questions. I certainly appreciate the
testimony from Mr. Bergmeier.
We were talking, in general, the hearing theme is Made in
the U.S. And I know, Mike exports all around the world, in
multiple cases. Tell me now, as an American manufacturer, where
the other folks who were trying to shed jobs overseas. How are
you able to complete in a multitude of countries and get that
done?
Mr. BERGMEIER. Well, what Shield Ag has done is, as you can
see we, we are at 75 years old, but in the last 10 years we
have reinvented ourselves to really focus on sustainable
agriculture. That is a more sustainable footprint and the
ability for underdeveloped countries to grow their own food.
And by doing that we have positioned some of our products so
that countries, other than the United States, that want access
to U.S. agricultural technology, come and find us. And that is
where we have been successful in our export markets.
Mr. HUELSKAMP. Okay. Fantastic.
Describe a little more. You had, I think, seven different
regulations you had identified. Can you pick one of them out of
the business and say, hey, this is what it is doing to me?
Mr. BERGMEIER. I picked the ones that are impediments to me
putting up more plant, property, and equipment. By looking at
which ones I would have to file paperwork on it. Remember, big
companies will complain about this stuff, too, but it is just
me and some great managers making payroll every Friday. So if I
want to put up 2,000, 3,000, 5,000 square feet, I have got a
lot of stuff to do. And I also run heat treat facilities and
things like that, which are subjected to all these EPA things
and it is just not worth the hassle.
I did not want to pick on any one particular organization,
but when I see the flood of recent regulations and updates to
regulations since about 2009, I say those are targeted right at
me. So why should I want to do it? I will just continue to do
what I can within the laws of my own building as I grow my
revenues.
Mr. HUELSKAMP. And Ms. Schindler, what has been your
experience with implementation or the new regulations coming
out of the president's health care plan and response from your
employees? Mr. Bergmeier indicated he has capped the number of
employees he is going to hire. He is not going to cross the 50-
employee threshold. Your thoughts?
Ms. SCHINDLER. For us, as I said, we remain optimistic. We
took a serious approach to wellness and looked at our health
plans, and we actually moved to a high deductible health plan
with the heavy savings account probably five years ago. So
there has been a lot of education, just about being consumers
of your medical needs. You know, you would not buy a car, just
that the salesman is saying, ``Hey, trust me. Buy it.'' So we
have done a lot of education for our staff to just--I am just
trying to be better prepared for going to the doctor and their
medical needs.
So for us there is a lot that you do not know. We had to
try to understand it just with--we bring in a lot of college
students which we love because for us our back to school time
of year is now. We are preparing for all the colleges taking
art materials, and so we bring in about 15 to 20 college
students for the summer and we were not sure what that was
going to mean with the Health Care Act. And I said, ``Look, on
the end we cannot change our business practice; we just have to
understand what it may mean and then keep talking about that.''
I think for us as we understand it, I know that this year
for our renewal, there is a 5 percent increase that we are
going to have to bear just because of the act. But we strive to
say, okay, there is a challenge with raw materials. I have the
same challenges with all the different markets and trying to
figure out who is the best partner to be able to sell to that
consumer and understand the consumer in that market.
And so our approach is really to say, well, with this
opportunity, how can I increase more business? So we are always
looking at growing the venue side because we have these
challenges. So that is how we are approaching it. We do
understand the theory behind it and we do believe that everyone
needs to have health insurance. How it is going to pan out, we
hope the dialogue continues so that you can ask us for that
feedback. But there is a lot that is not, you know, there is a
lot that you are still developing. And we realize we have to
partner in that development.
Mr. HUELSKAMP. Yeah. It was reported I think yesterday or
maybe even today that the January 1st deadline, the regulations
are behind schedule, and there are some things you do not know
today and maybe we will not even know on the deadline, January
1st, so I appreciate the testimony.
I yield back, Mr. Chairman.
Mr. HANNA. Mr. Barber.
Mr. BARBER. Well, thank you, Mr. Chairman. And thank you
again to all of the witnesses. I think your testimony has been
excellent and you have made a number of points that I think we
all need to take to heart.
You need to know you have allies in this Committee, on both
sides of the aisle. We would not be here if we were not
interested in helping small businesses thrive. And not only
survive but thrive because we know, all of us, that 70 percent
of this economy is in your hands, and in the hands of many
other people in this country who run small businesses or run
into all the problems that you have talked about today. I want
to make sure that we deal with those problems as specifically
as we can, and I will come back to that in a moment.
But I wanted to ask Ms. Gibbons a little bit more, if you
could share a little bit more about your concern. I think other
witnesses, too, have some concerns about the health care law,
the Affordable Health Care Act. As you know, it is going to be
implemented over the next six months or so, starting July 1st,
in October enrollment, and then implementation in January if
things go according to plans. And I am concerned about that as
well.
I want to make sure that this health care law, and we know
that it is going to continue, works for small businesses. So I
am really interested in what we can do to make it work because
we are not going to have implemented it over the next several
weeks, and months.
So Ms. Gibbons, can you tell me and other witnesses
perhaps, to, what kind of help do risk sources assistant do you
need--you do not have that would make easier for you to work
within this new law that we have got?
Ms. GIBBONS. Well, I think part of it is information and I
know that out there it is very sketchy, low to reach us. But in
our situation with our employees, right now we do offer health
insurance. The time limit, you know, they have to work for us
for a year. The type of employees we have, of course, are
under-educated, lower income employees, and so what we are
struggling with is sending our employees to the Exchange, and
from the research and having them take advantage of the
subsidies seems like the best way for them to get affordable
health insurance. But then the penalties that we would have to
pay would cost us up to $250,000 a year that we cannot afford.
So we probably will continue with the health insurance that
we are offering for them but we struggled with what would be
best for our employees versus the company, but sometimes
keeping the company up and running so that they have a job is
the difference between our employees having health insurance or
not. But we are afraid that a lot of our employees are just
going to just do the buyout because it is the cheapest way to
go. And then we are back to them not having health insurance.
Mr. BARBER. It is tough balancing act, and I think small
business all across the country are going to try to figure out
what to do.
I am really interested in taking a hard look at specific
parts to the bill. I was not here when it was approved, but I
am interested in fixing what is wrong with it and there are
many things that we need to fix, and that is co-sponsored some
bills that I hope will help small businesses if we are able to
get them through.
Let me move to a different question in regard to
regulations. You know, we hear a lot here in these--how
businesses, small businesses struggle with bureaucracy and red
tape. And we need to make government work better for small
business. I think sometimes it is about getting out of the way,
and sometimes it is about removing things that are burdensome.
And certainly, even the tax code is problematic for business,
the same individual if we need to fix that as well.
So can you describe, Ms. Gibbons, some regulations that you
faced that you deal with that you think do not make any sense,
we could get rid of them; we would get them out of your way and
you would be able to do a better job as a small business owner.
Ms. GIBBONS. Well, I think some of the tax codes could go
away. I do not know which ones specifically. The problem that
we have is our small business is 170 plus employees, and so a
lot of the tax codes and the tax breaks that we could get were
too big of business to get those but then we are not a big
business either. So we sort of get stuck, crunched in the
middle, with not getting any tax breaks and still having to pay
like a big business all the taxes and unemployment and workers'
comp.
Mr. BARBER. Well, I am out of time but I know there are
many other questions all of us want to ask you all. And again,
thank you for being here. Thank you for doing what America
needs, and that is keeping small business not only alive but
growing hopefully and continuing to serve our communities and
the people who live in them.
Thank you so much. I yield back.
Mr. HANNA. Thank you.
Mr. Bentivolio.
Mr. BENTIVOLIO. I yield back. Thank you very much, ladies
and gentlemen.
Mr. HANNA. Thank you to all of our witnesses. Thank you for
your insights, your long travel, and the distance, and
certainly the expense. And we are deeply appreciative of all of
that.
If there are no further questions for this panel, I want to
thank you and excuse the panel. The next panel may now be
seated and I will turn the gavel over to Mr. Collins of New
York. Thank you.
Mr. COLLINS. In the interest of time we are going to go
ahead and jump in. I think we have some other members on the
way. This has been one of those days that we have all been
jumping around not sure when votes are coming. But anyway,
thank you all three for coming, and in particular I guess we
will start with Mr. Braddon, who was invited down here by me.
He is the president of Commodore Plastics in Bloomfield, New
York. I had the pleasure of touring that factory here just a
month or so ago. They are located in New York's 27th District,
which as I said I am proud to represent. It is a family-owned
business operated by Mr. Braddon's father, started in 1981, who
is with us today and his lovely wife. Thank you for joining us.
Commodore is a manufacturer of foam meat trays for
supermarkets and food processors. It employs 150 people and it
runs 24/7. He and his company service approximately 4 percent
of the U.S. market for meat trays. He is also the president of
the sister company, Commodore Technology, which makes all the
equipment Commodore plastic uses and also sells this technology
to vendors around the globe. And from what I remember the
machines are about the size of this room, so it is not exactly
small equipment. They employ approximately 30 people in
Commodore Technology. It is a successful exporter. And as we
all know, we cannot export too much.
I want to thank Mr. Braddon for traveling to Washington
with the family to share with us the success of his business
and what this Committee and the Federal government can do to
help him and his business grow, expand, and succeed. Thank you.
STATEMENTS OF BRAD BRADDON, PRESIDENT, COMMODORE; SHIRLEY
BROSTMEYER, CEO, FLORIDA TURBINE TECHNOLOGIES; RICHARD
NAJARIAN, PRESIDENT, PRECISION GLOBAL SYSTEMS.
STATEMENT OF BRAD BRADDON
Mr. BRADDON. Thank you very much for the introduction.
Thank you for having me.
I submitted a report here that is I think better to read--
or better for you to read than for me to read, and so I am
going to go a little unscripted here and just kind of touch on
what our story is. I do not need to read that one. I know that
one pretty well. And then a little bit about us and government
and kind of how we see that and a little bit about something
that is really bothering us and then something a little bit
about taxes.
My father started the business in 1981. He was working for
Mobil Chemical as a process engineer and he was watching them
put foam lines in. They would put a line in and it would be
full. They would put another one in and it would be full. And
he thought, jeez, I can do this. I know how to do it. I am
doing it. So he managed to pull a line together and he gets
some people and he gets a building and he starts--he has got
this idea he is going to make four trays. And he goes and gets
these four trays going and of course his money is gone. He did
not have very much money to start with, so really the American
dream story started with $30,000 and became a manufacturer.
But pretty quickly they said, ``No, George. You have got to
have all the sizes.'' And he was scratching his head like I do
not know how I am going to come up with all the sizes. And he
is an investor so he invented a way to get the sizes. He
introduced some colors, and eventually, he did get some
business. So far into that business, after about 10 years,
pretty successful, and then the plant burns down. And so it is
reset button and we are beginning all over again.
But during this process he found a customer that was
Pepperidge Farms, and they had an extrusion line. And they did
not want to run it anymore. They decided that being vertically
integrated, making your own foam trays, did not make a lot of
sense so he got some new equipment, new used equipment and a
customer at the same time. And what happened was he realized
that the manufacturing footprint that they had for this little
teeny operation was the manufacturing footprint that he needed.
And so we are a teeny little player in a great big market and
we survive because we have this other footprint. We build all
of our own equipment. That is what Commodore Technology does,
and so we are the only ones with it. And all the other
competitors in the U.S. are big. They do not want that
manufacturing footprint because they are big, and so that is
kind of how we are able to survive.
So one of the things I guess is we do not really consider
ourselves a small business anymore because we are not finding
ourselves having to do--I do not have to do everything myself
anymore. George does not have to do everything himself anymore.
And when he did, that is when we considered ourselves to be
small. And when we did have to do everything ourselves, that is
when the regulations are tough. Right now I look at OSHA as
that is the guide on how to be safe. Just follow that guide and
you will be safe. It is a law of cause and effect. It is
perfect. We could not think of those rules ourselves. It works
good.
Some of these regulations that we have had some issues
with, we had an issue with not knowing a law existed. There was
a chemical bulk storage law that existed that we did not know
existed. We figured out that it existed, but by the time we had
our program in place we had a visit, had the wrong program, and
had a pretty good size fine there. Most recently, we had some
building code problems. We had a building that we have been
occupying since 1994 and we find out from the fire chief that
we do not meet these guidelines and we have to move. Well, we
really did meet the code, and fortunately, we were able to find
an architect and we swung around that curve ball.
So when it comes to the Affordable Care Act, I think we
should talk about that just for a minute. Mostly, what we are
finding out and what we are learning is that we meet these
requirements with what we offer today. The thing that we are
most concerned about is the affordability provision. And this
year it is okay. We have maybe a slight change that will be
needed, but next year it changes pretty dramatically, and we
just do not know kind of where that is going to come from and
what that is going to mean to us.
I already went over on time. Please do not mind.
There is a couple of things that I outlined about some of
the other regulations. You never think about audits on 401Ks, a
workman's comp that we had where we were sued by New York State
and we lost. We were part of a pool. I explain a little bit
about that. The one thing I say about taxes here is I am told
that there are loopholes in taxes but they do not apply to us.
I do not know what they are. If they do exist, they certainly
do not apply to us. We feel like we pay taxes. And they feel
like they are pretty significant. And when you do pay a lot of
taxes it is difficult to reinvest because you pay the taxes,
you pay yourself, and the other thing that happens a little bit
to me personally right now is where the S-corps or the
company's profits are coming through our owner, so my income
tax--I look like this on paper, right, but I get paid somewhere
like this. So I am not eligible for financial aid for my kids
to go to college so I better make sure that I save some money.
I am going to jump to the thing that is really bothering
us, and that is what is going on with some product bans. And
right now there are some product bans on foam, hinge hood
containers, and they are mostly going on in California and they
are mostly being done by individual cities. But just recently,
Mayor Bloomberg proposed a ban on Styrofoam. And Styrofoam is a
trade name. It is really called polystyrene foam trays. That is
what we make, and so we are super concerned about this
attitude, and it is really not based on something that is--it
is not real. There is a perception that this stuff is bad for
the environment, but the reality is that it is not. And it is
taking just a little bit of plastic and making a lot of
products. We are foaming plastic like in the bathroom when you
foam soap and use a little teeny bit of soap and you get a lot
of soap. It is a little bit of the same thing.
One of the things I want to add about that is polystyrene
foam that is used in the United States is made in the United
States and it is good manufacturing jobs and a lot of the
people who work for us, this is the first job they have ever
had and they come in here and we provide them with some
structure and we provide them with some benefits. I am just
kind of dumbfounded that this is a concern of ours really. That
I guess would be the thing that is really bothering me.
Mr. COLLINS. We can even talk about that some more, but at
this point what I would like to do is yield to Mr. Murphy to
introduce our second witness.
Mr. BRADDON. Okay.
Mr. COLLINS. And then we can do some questions after.
Mr. BRADDON. I am sorry that I went over.
Mr. MURPHY. Thank you, Mr. Chairman.
I would like to also thank I guess Ranking Member
Velazquez. I passed her in the tunnel, so I got a little wave
to her.
On behalf of the Small Business Committee I would like to
welcome Shirley Brostmeyer, CEO of Florida Turbine
Technologies. Ms. Brostmeyer is an engineer by training and
trade. She started her career as a line engineer working on
turbine blade and vein designs for GE and has worked across the
international turbine industry as a manager and consultant. As
CEO of FTT, an innovation in its field, Ms. Brostmeyer
represents the best of American ingenuity. Her experience
working in both extremely large and small companies from the
lowest level to the highest is invaluable to the Committee as
it seeks to level the playing field for small businesses
seeking government contracts. I thank Ms. Brostmeyer for
traveling to Washington from beautiful Jupiter, my hometown, to
speak at this hearing, and I look forward to your testimony.
Thank you.
STATEMENT OF SHIRLEY BROSTMEYER
Ms. BROSTMEYER. Thank you, Congressman Murphy, and thank
you to the Committee for this opportunity.
Again, I am Shirley. I am the chief executive officer of
Florida Turbine Technologies. We are a leading provider of
engineering, development, and testing, and the manufacturer of
test equipment for turbomachinery. This turbomachinery is used
for military and commercial aircraft, space propulsion, and
industrial power.
Florida Turbine Technologies began in 1998 in Palm Beach
County with a handful of engineers, and we have grown to supply
research and development activity worldwide with over 200
employees. FTT is a leader in innovative turbomachinery
improvements. In fact, we lead the nation in patents per
employee. Many of FTT's patents are recognized by the Air
Force, who actively review these patents as extremely
innovative ideas.
Thanks for the privilege of speaking with you today, and I
would like to encourage the creation of a new federal
acquisition regulation for government research and development
projects. Currently, whether or not a company has production
products is being used as a selection criterion for R&D, and
this should not be allowed.
We at FTT feel that better utilization of small business
for government contracts would provide more innovative and
affordable solutions--saving money for the taxpayers, and
creating exports that will boost our economy. I would like to
quote a March 2010 House Armed Services Committee report
regarding the current defense acquisition process, ``Small
businesses are largely locked out of the process or accorded
contracts only on the goodwill of one of the larger firms. We
are concerned that the end result of this process is the
gradual erosion of competition and innovation in the defense
industrial base.''
Only 2.5 percent of research and development funds are
allocated to Small Business Innovative Research programs, or as
you probably know it, the SBIRs. And yet, small businesses
provide the most innovative and agile workforce available
without the large overhead costs of large companies. For the
other 98 percent of government R&D acquisitions, government
decision makers actively use a selection criterion which puts
small business at a significant disadvantage. This criterion is
that a company must have at least one active production program
to be a serious competitor for R&D funds. This is true because
of historical close ties between the government and its large
production suppliers. But this is also true because government
employees prefer to work with a ``proven entity,'' albeit
expensive and less innovative. They feel comfortable that the
technology will be taken to market and not left on a shelf
after their investment. But there are many contractual ways to
deal with product transition into production, and once a
development prototype from a small business has been proven,
larger businesses will often compete to license the available
technology.
FTT has developed small engines that address future DoD
needs for small UAV and missile platforms. We have developed
our most recent engine on SBIR funds, and we have matched the
funds dollar-for-dollar with profits from our commercial
business. This small engine would reserve as an ideal platform
to affordably demonstrate advanced aircraft engine
technologies. However, we are discouraged from competing for
R&D contracts because our small engine is not currently in
production. This issue is certainly not limited to the turbine
engine community. The findings in the 2010 House Armed Services
Report confirm that this is a pervasive issue.
Thus, I have a recommendation which would increase small
business participation in R&D programs, and this is it: create
a Federal Acquisition Regulation that R&D contract decision
makers may not use the existence of production programs as a
selection criteria.
I thank you for your time, and I hope you consider this
change to the existing acquisition philosophy.
Mr. COLLINS. Thank you, Ms. Brostmeyer. I always say do not
bring me a problem without a solution. That was well done. You
have a solution.
I would like to now yield to Mr. Bentivolio to introduce
our next witness.
Mr. BENTIVOLIO. Thank you, Mr. Chairman. Ranking Member,
fellow Committee members, I am very appreciative we are holding
this hearing today. According to the business research firm,
Dunn and Bradstreet, Michigan's Eleventh Congressional District
is the second leading manufacturing district in America. It is
my privilege to introduce Mr. Richard Najarian, representing an
exemplary manufacturing company in this industrial district.
Mr. Najarian--did I pronounce that correctly?
Mr. NAJARIAN. You did.
Mr. BENTIVOLIO. Thank you. Mr. Najarian is president of
Precision Global Systems, a manufacturer for some of the
world's largest automotive and defense companies based in Troy,
Michigan. Since being founded in 1983, PGS has become a leader
in crisis manufacturing management, machine and assembly, and
component recertification. With over 100 employees in three
manufacturing sites, PGS ships over 3 million parts every month
across North America and beyond. Mr. Najarian is also chief
investment officer and a board member of Premier
Biomechanical--excuse me, Biomedical, Incorporated, a company
working with the U.S. Army to develop cures for cancer,
traumatic brain injury, and suicide ideation. A veteran of the
frontlines of American capitalism, I am honored to introduce an
individual who has been successful in good times and bad and
has insights to share on public policy moving forward. Mr.
Najarian, I thank you for coming and look forward to your
testimony. Thank you.
STATEMENT OF RICHARD NAJARIAN
Mr. NAJARIAN. Thank you for the introduction.
Am I on? I guess I am. Okay.
Thank you for the introduction. First and foremost, this is
a fantastic forum and I thank you for that.
Congressman Bentivolio's invitation came through another
organization called Automation Alley, which is a networking
organization in southeastern Michigan, and we have been working
with them for a little while here with regard to both
automotive and defense contracting.
I hope you have a chance to read my testimony, my written
testimony. If you have not, please if you get a chance to take
the time I would appreciate it. As a graduate of the University
of Michigan, B.A. in English, 1989, Go Blue, I like to write,
and sometimes I can get a little carried away on the written
testimony side so I will be brief in the oral testimony here.
Our capabilities are in component recertification, value
add sub-assembly, as well as complete production assembly. The
PGS team implements these processes at one of three
manufacturing sites occupying nearly 200,000 square feet
located in southeastern Michigan. We ship over 3 million parts
each month to customer locations throughout North America and
beyond.
Several years ago I wrote a letter to the employees of PGS
to note some of the trends I was witnessing. As you will know,
we were already in the midst of the recessionary events that
created such turmoil in our economy. I am going to read a
couple of excerpts from that note.
``The tides change, the winds shift, the water ebbs and
flows, and the sun sets only to rise again. PGS has had
wonderful days and yet these recent days have been extremely
slow. We will soon find growth and opportunity at our
doorsteps, and with the systems recently implemented, we will
have no hesitation to open the door and let it in.
We arrived at our place within the automotive industry by
design. We do great things for great companies. We work behind
the scenes of our customers who continue to waste millions of
dollars in scraps, rejects, and wasteful processes. We have
tasked ourselves to help them stop this absurdity. Our ideas
will reinvent their successes as well as ours.''
Then in 2010, I issued yet another letter, but this time
the ebb had receded and the flow had begun again for PGS. I
will read an excerpt from that note.
``The year was 2008 and the economy was on the brink of
disaster. In many ways it provided a test of our resolve. How
hard could our group be tested? And we were tested unlike any
other time in our 27 year history. The entire automotive
manufacturing industry lay in ruin as Congress and the American
people questioned our intelligence, our ingenuity, and our
integrity.
How will we all help? Cast no shadow on the questions each
of us asks for they are the power of our future. Harnessing the
power of success with innovation and determination will lead
our company and our team into a very bright future and only we
determine how our future shall unfold by the course of our
actions and the strength of our spirit.''
So I was asked to come here and talk to this Committee
about the question of what will be obstacles in our growing
manufacturing organization? And I will say it is a very deep
and troubling question. There are a lot of regulations that are
out there. There are a lot of taxes that are out there. Tax
code, there is a section 179 expense election, and we think
about all these things but there are a couple things that came
to mind. One is, and I share some concerns with my neighbor to
the left of me, is how do we get U.S. manufacturers to do
business with U.S. manufacturers that are small business
companies? And the second is how do we account for the waste
that is a byproduct of every manufacturing site?
Incentivizing one company to do business with another could
be one of the most intriguing demonstrations of U.S. policy in
years. Small business manufacturers based in the U.S. shall be
granted certification as such.
Giving a federal tax incentive for work produced to a small
business manufacturer would stimulate the economy, continue to
assist more small businesses in gaining a better foothold on
their specific product or service and keep these factories
still active and in the market. Market forces do not always
favor the small business.
Frontline buyers are typically unaware of how their
purchasing power can affect their community, and upper
management may consider how they save money through supplier
consolidation or shared product/material purchases. They may
consider how they better brand their product or push themselves
into new markets. Why not extend the new opportunity to U.S.
small business manufacturers similar to minority-owned, women-
owned, 8(a), and so on.
The second idea is with regards to waste. Plastic plugs and
caps are utilized for either shipping from plant to plant or as
assembly aids. The caps and plugs are used one time in a way to
either protect a seal, maintain fluid in an assembly, secure a
wire, assist in protecting a sensitive area during the assembly
process. Quite literally, thousands of tons of material are
annually sent to landfills as a result of this seemingly
innocuous process. We estimate approximately 20 million pounds
of plastic sent to landfills or dumps each year just from the
auto industry. And just because a plant has plastic material
removed from their site does not qualify them as a zero
landfill facility.
LEED, as some of you may know, has become the standard for
buildings erected or modified throughout the country. It is now
time to establish a new standard for the manufacturing process
throughout the country that incorporates the same need to
respond to environmental concerns. Why not certify via an
outside independent auditor, whether a plant or facility really
has done all that is possible to either reduce or eliminate the
waste product entering our soil?
Again, thank you for the opportunity to present this
testimony. I hope the two primary ideas I offered will be
respectfully considered by this Committee as reasonable and
possible. Further, to the hearing, I pledge my continued
support and vigilance to these ideas, and I look forward to
your desire in kind. Thank you.
Mr. COLLINS. Thank you, Mr. Najarian.
I know Mr. Bentivolio has got another meeting he is going
to have to go to, so I will yield to Mr. Bentivolio at this
time.
Mr. BENTIVOLIO. Thank you.
Mr. COLLINS. Five minutes.
Mr. BENTIVOLIO. Thank you very much, Mr. Chairman.
Mr. Najarian, I understand you manufacture an increasingly
diverse line of automotive parts. Can you describe some of the
challenges involved in branching into a new product line?
Mr. NAJARIAN. Well, some of the issues that we run into as
a small business is because of resources. Typically, in some of
the instances that I have had we have been fortunate that we
have established some relationships with some larger OE
customers--OE being original manufacturers or original
equipment manufacturers. The difficulty in that is being able
to--even though our ingenuity or engineering, our abilities or
capabilities are available to do something, a specific product,
it is hard to get a customer to actually give you the
opportunity to do so. And the reason why is because maybe you
are not doing it today.
Well, what does that mean? What I am talking about is in my
case we were doing a derivative of a project. We happened to be
working on actual and a customer, in this case it was Chrysler,
gave us the opportunity to work in engines and transmissions.
It was a derivative of what we were doing but they saw through
that and said, ``Well, we see the success that you have on the
actual side so we would like to talk to you about engines and
transmissions.''
So I think the trouble is--and then when that happens, the
ability for us to then go into engines and transmission work
becomes greater. The problem is getting that frontline customer
to come to you and say could you do something. The problem
today is the buyers are typically going to a smaller set of
large organizations, and that is who they typically go to. And
the reason why is because they really do not understand how
they affect their community at-large. So if you look at their
city, their state, or their country, from that standpoint, how
they affect it from their purchasing is not something that the
typical buyer really understands. And I am talking the
frontline buyer. I am not talking about management and so on
and so forth.
So I think that is part of the issue, is getting them to
better understand what it is that small business can do for
their community because sending the money overseas, which is
what a lot of them do, it is usually out of convenience because
those are the companies maybe that do that project already or
that part already.
Mr. BENTIVOLIO. And earlier you had a proposal where you
indicated that a number of facilities declared themselves to be
zero landfill facilities but that is not always the case. Would
you care to elaborate on the scale of this issue and how it
affects companies like your own which reuse and recycle their
waste internally? I want you to expand on that, too, because I
found that very interesting what you are doing with these caps.
Can you talk about that?
Mr. NAJARIAN. Sure.
Mr. BENTIVOLIO. Thanks.
Mr. NAJARIAN. So the caps and plugs that we are talking
about are shipping aids. What happens is what we designed was a
process to recover those and a process to clean them and
recertify them, send them back to the manufacturer. When I am
talking about a manufacturer, I am saying, okay, so for
instance let us take a transmission. On the transmission you
might have four or five plugs or caps that are used to protect
either a seal or a port. When they are taken off at the
assembly site when they are assembling the vehicle, they
typically throw those parts away. And so we developed a way to
bring those back, clean them, requalify them, and send them
back to the transmission site, for instance. I actually
patented and actually have a patent that came through in April
of this year, so we just finally closed that out which was a
huge success for the organization.
But one of the things that I am concerned about is there
are a lot of companies out there, large organizations that
qualify themselves as zero landfill organizations, and they are
really not. They might be selling their plastic or selling the
stuff that they would otherwise put into the landfill; somebody
else puts it in a landfill for them. They might burn it off.
Somehow, some way, trust me, it is going into the land. It is
going into the soil. And I think we need to start regulating
that with regard to not--and I am not talking about regulations
like we typically think of regulations, but what I am saying is
that if you are going to call yourself a zero landfill
facility, you should be certified as such.
And similar to LEED, where LEED does, okay, well, you are
platinum or gold or silver star, LEED building, we should have
similar capabilities of judging whether or not a plant really
takes the environment into consideration. They do not have to.
There is no requirement, but if they are going to say it and
they are going to qualify themselves as such, then we need to
give them some sort of standard by which they should follow.
Mr. BENTIVOLIO. I see my time is expired. Thank you very
much, Mr. Najarian. I appreciate your testimony.
Mr. NAJARIAN. Thank you, Congressman.
Mr. BENTIVOLIO. To all of you, I want to hear more about
your story. Real quick. I have about five seconds here. Is the
original owner in the room?
Mr. BRADDON. Yeah, right here.
Mr. BENTIVOLIO. Okay. Good job. Thank you. We need more
like you.
Mr. COLLINS. Thanks, Mr. Bentivolio.
At this point I will yield to Mr. Murphy.
Mr. MURPHY. Thank you, Mr. Chairman.
Ms. Brostmeyer, again, welcome. Thank you.
Your Florida Turbine Technologies is one of the most
innovative in America and you remarked on that already. And it
is a prime example of the kind of high tech design in
manufacturing where we are always going to hold an edge in
America. As you pointed out, FTT has the greatest number of
patents per employee in the nation. I mean, how cool is that?
That is something to be proud of.
In addition to outserving the competition patents, I
understand that your company excels at finding new and
innovative applications for existing technologies. A talent
that large, that large of a talent pool you have, companies are
often unable to replicate this. Can you give us a concrete
example of how a FTT product or a prototype that has benefitted
from being able to quickly and easily cross pollinate some of
these technologies?
Ms. BROSTMEYER. Definitely. That is an excellent question.
We see that actually working with some large companies that
work in multiple industries that one group does not talk to the
other, and that is one of the really powerful things about a
small technology company. Although we work in various
industries, we are so small that we are able to take lessons
learned from one industry and apply it into another. So one
example where we are doing that, we have developed a sequential
cooling scheme for an industrial turbine application. It is
being tested this year and it is going to have all kinds of
efficiency improvement implications in the machinery. But we
just actually took the same concept and designed it into an
aircraft engine application and we have actually just received
an award, an SBIR award to test that as well or to develop it
to the point of test. So it is really good to get the synergies
from different industries, especially high tech like the space
industry that we are in, aircraft engines, and industrial
turbines.
What I think is rather interesting is that our country is
behind in rocket turbines and rocket space relative to the
Russians and the Europeans, but we are not behind in aircraft
engines and we are not behind in industrial turbines. So
lessons from those industries can readily be transferred to our
rocket industry, and we are actively doing that.
Mr. MURPHY. You mentioned SBIR. Can you maybe talk about
some things you have done to take advantage of that program,
and perhaps some things we could learn and some improvements
that you would recommend to us?
Ms. BROSTMEYER. Sure. Yes. FTT is very active with the SBIR
program. I mean, over the years we have been awarded over $10
million worth of SBIRs. And actually, we have designed and
developed an entire turbine with SBIR funds. In our case,
actually, we matched those funds with profits from our
commercial ventures. But that saved the government--I mean,
normally you are looking at a 10 million plus program and so it
saved a lot of money in terms of the development costs.
I think SBIR is a great program. I guess if we had to make
a couple suggestions, one would be that they shorten the time
cycle because there is more than a year from the time that we--
there is some kind of a technology need identified to the time
that one is actually awarded the monies to start working. So
that could be shortened. That would be helpful. And another
thing that we feel would be helpful is, I mean, if you have a
good idea such as our small engine and you are getting the
momentum, there is a $1 million cap on phase two SBIRs. And we
feel perhaps it could be a little higher than that in order to
enable really larger products to continue being developed.
Mr. MURPHY. Thank you for those recommendations.
And you made the case that the defense acquisition process
is inherently biased against small businesses and you had a
pretty shocking quote there. You have recommended the federal
acquisition process not just use prospective contractors'
production status as selection criteria. If we were to make
this change, how would you recommend the government ensure
small businesses with unknown production capability were able
to produce the products that the government needs?
Ms. BROSTMEYER. Well, again, that is a really good question
because I know that is the concern that is cited a lot of times
when small businesses are locked out of the process. But there
are a couple things. First of all, we are right now working on
licensing agreements for technologies that we have developed
under research SBIR programs, and if there is a good idea,
larger companies will want to license the technology or a team
or a joint venture, but in the worst case, if the government
funds a small business for a R&D or development program and the
small business is unable to commercialize it, the government
owns rights to the technology and therefore, the government
could take the project and go to somebody else, you know, even
a larger manufacturer at that point to put it into production.
So that would be the worst case if the small business cannot
figure out a way to license or work together with other
businesses. But I guess the other point is that the government
should encourage large businesses to engage with small
businesses who have good ideas, and that encouragement would
also really go a long way.
Mr. MURPHY. Thank you. Just one more question here.
I caught the tail end of your testimony, Mr. Braddon, and
Mr. Najarian, you spoke about this idea of LEED certification
for manufacturers. I am certainly not an expert on Styrofoam
but I guess I am in the general public category. You mentioned
perhaps the naive thinking that Styrofoam is very bad for the
environment. I fish, I dive, every time I go in the ocean, when
I see things floating it is always Styrofoam. My understanding
is that it does not break down. Maybe you could explain that.
And Mr. Najarian, your thoughts on what he said.
Mr. BRADDON. Okay. Well, when he talks about the zero
landfill, I would say that our plant probably qualifies as a
zero landfill. It is not something that we have purposefully
tried to say that we are, but every bit of scrap that is
generated in our process goes back in and we make more product
with that. And that would be on the foam side of the business.
On the equipment side of the business, our scrap is metal
chips, and so of course, that is all recycled, and all of our
cardboard is recycled and all of our plastic wrap is recycled.
And the most garbage that comes out of our plant is from the
cafeteria. That is where most of it comes from.
As far as foam in the environment, foam is basically inert,
and if you do not like it because it floats, well, it is very
light. Only 5 percent of a foam tray is actually plastic. The
rest starts out as a blowing agent. You know, you take plastic
and you foam it. It is not too much different than this
plastic. You do not hate this plastic, but if we were to foam
this plastic you might hate it. And we cannot understand that.
It is taking a little bit of plastic and making a lot of
product. A typical meat tray might weigh 6 grams, so you get
about 500 school lunch trays out of 10 pounds of plastic. I
mean, that is a pretty efficient use of material, and it is
inert. And if you do want to use it as waste to energy, it has
got a high BTU content. You could say that you were going to
take these natural resources and you were going to make
electricity. Well, you could take these natural resources, you
could make plastic, then you could make electricity. Why not
use it once first.
My father invented the term ``precycle.'' He says you are
going to use it for this. Use it for something else first. And
I think there is a lot of hope to that waste to energy. Right
now you have these recycling programs where they throw
everything in the bin. Everything in the bin. And then you
cannot really sort everything out of that bin. Like if you look
at the Europeans, they have a green dot program. They collect
clear PET, green PET, blue PET, aluminum, and steel. They do
not collect everything like we do. But we are collecting
everything, and I think that could be a really nice way to
waste energy because it is not absorbent, it will help the
stuff that is soaking wet that is in with the plastic to burn.
You get a real nice BTU content. I think it makes a lot of
sense.
Mr. MURPHY. Mr. Najarian?
Mr. NAJARIAN. Do I have to push this button again? I do not
know. Okay.
So I do not have anything necessarily against polystyrene
so I did not make any ovations to that, but as far as what I
was talking about, my idea is specific to any facility, any
manufacturing facility in the country.
With regard to making sure that the waste that they have,
this byproduct, and a lot of it is plastic, some of them are
good with their cardboard, baseboard, you know, metal, of
course, is always recycled because you get some good money for
the scrap dealers that are out there in this country and
everybody is looking for steel or aluminum or some form of
metal, so that is not an issue. And they have recycling
programs for light bulbs and things of that nature, but the
question that I am asking, and the assistance that I think
needs to be done is how can we actually certify a company as
being environmentally sound.
I have, for instance, TS69, 49, 9001, and ISO14001, those
are all certifications, two are for quality and one is for
environmental. 14001 tells me I measure my aspects and impacts
to the environment very well and I follow exactly the rule that
the international standard states. But what it does not say is
am I really removing this product from my facility the right
way? Or in this case what I am talking about is recycling those
plastic parts. There is nothing that says that you cannot
recycle on a normal basis. These parts that I am talking about
are washed and brought back and we charge a nominal amount of
money for it. It is a cost savings to the company, but the
bigger issue is certifying those companies within. And not just
allowing them to self-proclaim themselves. You know, self-
proclamations of, hey, we are zero landfill. We do not affect
the environment at all, and nobody can challenge it because
there is no auditing committee that comes in and says are you
really that? So it is kind of that truth in advertising. We do
not allow that. We regulate that; we should regulate these
things of things, too.
Mr. MURPHY. Thank you all very much.
Mr. COLLINS. Yeah, no, thank you. I have got a last but not
least.
A few questions. I am also a small business guy. I have
done that for 40 years--high tech, low tech, and bio tech, and
one of my companies also lives on patents. The funny one off
the record here--but we are not off the record--is the patent
on bed bugs. So we are going to see where that one goes.
What I would ask is maybe a rhetorical question just to get
some info. One benefit of these hearings is to get on the
record your opinion. You are all successful, hardworking, small
business owners, and it is helpful for all of us when we go to
other committees even to give them feedback from here. So my
rhetorical question or comment to start is in my businesses we
have a mantra ``Grow or die.'' Every day we come in we want to
take care of our customers, we need to worry about orders,
collecting money, paying our bills, et cetera, et cetera, but
we all plan to grow. I mean, how are we going to grow? Whatever
that is. We may not always succeed.
Now, to me, growth is an investment. It takes money, and so
I guess the concern I have on this Committee and serving in
Congress now and seeing some of the environment that we talk
about here, I talk about financial things. For the first time
in history, small business taxes are higher than big
corporations. It has never happened before. 39.6 percent for
subchapter S pass-through, and I am presuming all of you are
subchapter S pass-throughs. So you are paying, and I pay, at
39.6 percent. But the biggest corporations pay at 35. Now, to
me, number one, that is just plain wrong. But my rhetorical
comment is that is money you cannot invest in your business.
Mr. NAJARIAN. Right.
Mr. COLLINS. The money is coming to Washington for whatever
programs--good, bad, or indifferent--but you do not get to keep
the money to invest, and I think you probably could confirm you
take most of the money you make and reinvest it. That is what
entrepreneurs do. They do not, by and large, have yachts and
airplanes and that kind--you are always looking to grow your
business. So every dollar that comes to Washington is a dollar
you cannot invest, and this tax code that we are talking about
at a 25 percent marginal tax rate, I am presuming, and that
will be one of the questions, what would your reaction be on
the positive or neutral--but I think positive--to a 25 percent
top marginal tax rate that says--putting aside the state you
are in, I am from New York, you know, shame on me or unlucky
me--you get to keep 75 percent instead of only 60. How would
that impact you if we are able to get tax return this year?
What would you think of a 25 percent top marginal rate which is
what they have in Europe?
Maybe we will start with Mr. Braddon and ask all three the
same.
Mr. BRADDON. Of course, that would have a positive effect.
Right now, you have a certain amount of debt capacity and you
have to be at a certain profitability level in order to have
that debt capacity. So when you start bumping up close to that,
then you are done. And you cannot borrow any more money. The
bank looks at your ratios and they say, okay, you are done. We
are not doing anymore. And then particularly if you have a bad
year, which happens, you know, you lose customers, you gain
customers, especially in a market that is not growing, and
yeah, it would give more debt capacities. It would fix those
ratios. You would be able to borrow more money and buy more
equipment and grow.
Mr. COLLINS. I will take that as a yes.
Ms. Brostmeyer.
Ms. BROSTMEYER. Yeah. I mean, certainly, everyone wants
more money to reinvest in their business, and we would be no
different than that. I do not know the big picture as far as
how our government is going to get enough taxes to do what they
need to do, but I would say that I think the off shoring of
profits that is going on in large businesses is a big problem.
And as a small business, I look at some of the large businesses
and ask myself, well, gosh, you know, how can they shift their
profit centers offshore such as they do? How do they get away
with that? And to me that is also something that really needs
to be addressed because that is where a small business is
really at a loss. They will pay their taxes. They have no
choice about it.
Mr. COLLINS. Thank you.
Mr. NAJARIAN. So 15 percent is quite a bit. I could not
fathom that happening.
Mr. COLLINS. Twenty-five.
Mr. NAJARIAN. No, I mean, 15 percent reduction over what I
have got now from almost 40 percent, right? I think it is 39.6
or something like that. But anyway, one of the issues that we
ran into I know last year, it was a very nice year for PGS, but
it was funny because at the end of the year we needed up with
no cash--paying down loans, our payables went down, so that was
nice. We paid off our working capital loans. And at the end of
the day we had no cash left because the rest of it went to
taxes. And in fact, I ended up in the negative territory when
you added the taxes into it. So that was kind of an interesting
side note.
I think extra money for us, we would be moving into new
markets. We would be pushing a little bit harder into new
opportunities that right now we hesitate on because of the
resources that we have or do not have right now. We have a
great relationship with our bank we established a couple years
ago. We actually worked with the SBA on a big loan a couple
years ago which has been absolutely the most fantastic thing
that happened for my organization and allowed us to actually
grow and prosper. So if any of you had anything to do with that
I thank you for that. I think what we would look at is moving
into new markets and pushing a little bit more on the limits of
what we could do from a manufacturing standpoint. And in doing
so you increase business. You just keep going.
Mr. COLLINS. That is helpful because when we stand up and
we make these proclamations that if we give small businesses
more cash, they will spend it on job creation. And that if we
need more jobs, and we do in this economy, the quickest way to
get those jobs is let small business owner, who all are
subchapter S. So these are not the fat cats. The three of you
sitting there who would take that differential and put it right
back in your business, whether it is R&D, another trade show,
or in Ms. Brostmeyer's case, another 100 patents. Right?
Ms. BROSTMEYER. Yes.
Mr. COLLINS. Which is jobs. And so we have talked about it
would be revenue neutral. We would get rid of all those
loopholes that Mr. Braddon does not know about. But if it is
revenue neutral, and I think that is our focus, and I do not
think it is even--I think it is bipartisan. We need to unleash
the ingenuity and the creativity of small business owners who
speed to market, which is what Ms. Brostmeyer was talking
about, would make the bigger corporations look slow and
lethargic.
Now, my other question really concerns Obamacare, you know,
the Affordable Care Act. And I bring that up because, again,
there is a cost issue. There are two issues here. One is impact
on your employees. And you are not running a fast food
restaurant where you can cut your workers down to 27 hours.
That is not something you are going to do, and I was just in
with some insurance companies who were begging to repeal the
health insurance tax. And I go, ``Where does the $100 billion
come from?'' That was a way of raising monies to pay for the
expansion of Medicaid. And while it is going to get passed on
to you, by the way, we had a hearing on that a few weeks back,
and someone from the insurance industry said, yes, the $100
billion health insurance tax paid by the health insurance
carriers will absolutely be directed back to the consumers,
which are businesses, impacting premiums. So now we do not yet
know exactly what is coming, but I have heard a lot of folks,
if they have got 39 or 42 or 45 employees say I want to grow
but not beyond 49. And we have seen smaller companies like
yours cutting hours.
But my question on Obamacare is where is that in your
thought process right now? How big of a concern? Have you
gotten your premiums for next year yet? And maybe the last one,
maybe the controversial one was if you could vote tomorrow to
repeal Obamacare, or let it go just the way it is because there
are no changes coming. It is what it is. So would you repeal it
or not? That is kind of a direct question I am curious about.
Mr. BRADDON. So we have a fair amount of people who are--I
guess a starting wage of around $10 an hour. And so when you
look at the affordability piece of that, right now I think it
is 20 percent of a single--it is 10 percent of a single
program, that is the affordable----
Mr. COLLINS. Yeah. Affordability is like 9.5 percent of W-2
wages. If you had a $20,000 employee, the affordability would
be considered $2,000 for his portion.
Mr. BRADDON. Okay. So that is not too far off from what a
single policy goes for; right? I mean, that is not that
different. It might be $4,000 for a single policy. Okay, so you
check the mark. We are going to pass on affordability. Now,
next year it goes to the employee and all their dependents.
Mr. COLLINS. Except their spouse.
Mr. BRADDON. Except their spouse. So if you have--now you
are buying them a family policy. I mean, right now no policy
exists like that. It is either single, two, or family. There is
no--not being offered to me. So now, okay, the same person that
makes $10 an hour, now we have to buy them a family policy.
That is about a $9,000 a year policy. So now you are paying
$7,500 if it is a----
Mr. COLLINS. I want to meet your broker because in my
companies the single policy is like $6,000 or $8,000 and the
family is $15,000. So.
Mr. BRADDON. Yeah, well, you know, yeah, okay.
Mr. COLLINS. A lot of people--not to put words in your
mouth--really do not know yet what they are going to do.
Mr. BRADDON. Right. There is an uncertainty right now. I do
not know how many people are going to sign up. Right now we
have 90 out of 170 roughly. And so how many people are going to
sign up this year more? I do not know that. So that is an
uncertainty. And then next year, how many people fall into this
particular bucket where now we have an extra 7,500? And I think
what is going to happen is people are going to move in favor of
eliminating low paid positions. And you are going to take that
bottom rung on the ladder and you are going to raise that up
and people are not going to be able to get on the bottom rung
anymore.
Mr. COLLINS. So would you repeal it?
Mr. BRADDON. For the way it is? I think it is going to do
more harm than good, and I would.
Mr. COLLINS. Thanks.
Ms. Brostmeyer.
Ms. BROSTMEYER. Yes. Well, our company provides health
care. We always have for our employees and their families.
Really, it is not going to influence us in any way except that
our premiums are going up at a little bit higher rate than they
would have otherwise. We are extremely vigilant about comparing
policies and trying to find something that works for us, so we
did just change carriers in an effort to try to keep the
premiums at an affordable rate.
I mean, it is a challenge, and I would not say that I would
repeal it because I will say, I mean, I have a handyman. I have
a cleaning woman. I utilize lot of household help in order to
work, and my husband works, and we have two teenage daughter.
So we have a lot of household help, a lot of help. None of them
have health insurance. I mean, you ask them, you know, what are
you going to do if something happens? And I go to the emergency
room. I have been there a few times, and it is filled with
people who do not have health insurance. And there are people,
like my sister for instance, I mean, people that have medical
conditions that in the past have worried, oh, gosh, it is going
to be really hard for me to change jobs because I have a
specific medical condition and, you know, preexisting
conditions are so difficult. Employers are going to look at
that and say I know that it is going to be a challenge to hire
you and put you on a medical plan. So I do not feel I have the
oversight to say, okay, here is exactly what we should do about
health care, but I know it is a complex issue and I would not
claim to say let us get rid of it. I do not think that is the
right solution.
Mr. COLLINS. That is why I am asking.
I will say this. Some of the lower paid folks qualify under
Medicaid. One thing as a nation we have to remember when we
talk about the uninsured, we normally think about the poor.
Well, in fact, they have insurance; it is called Medicaid. And
when we worry about the emergency rooms, the thing that I worry
about is many doctors do not take Medicaid patients. If you
show up at the door of a primary physician, a dermatologist,
and you say I am on Medicaid, more than not, certainly up in
our area, they do not accept you. So you go to the emergency
room with your insurance card. The expansion is Medicaid, so
now you have a lot more Medicaid carrying individuals who are
going to the emergency room. Well, if you think it is crowded
now----
Ms. BROSTMEYER. It is going to get worse.
Mr. COLLINS. Just wait. Yeah. Unintended consequences.
Mr. Najarian.
Mr. NAJARIAN. If it is a vote of three I am going to go
with repeal.
Anyway, so, you know, I am a republican by nature and by my
beliefs.
Mr. COLLINS. And a taxpayer.
Mr. NAJARIAN. Yeah. And a taxpayer. Yes. And I hesitate to
say that out loud because I am being audited right now by the
city and the state which is one of those coincidental things.
And it is okay. We go through those days.
So we have in a similar sense, we have had insurance for
our employees since day one. The company opened in 1983 and we
have been providing insurance for everybody. There was a time
we used to pay 100 percent. We cannot do that anymore so we pay
a percentage. And I think the biggest issue that I found, if
somebody was to say what is the matter with health care, I
would say that the problem with health care is we do not
understand it. I am talking about Obamacare, not health care in
general. And what I mean by we do not understand it, small
businesses are very savvy. Small business owners are typically
pretty savvy people. And I say this because if we knew six
months ago, a year ago when everything was voted on and passed,
it is fine. It is passed. We are not changing it. You said it
yourself, it is not going to go away right now. But for us to
plan for it, you cannot--we are in the dark. I think it is
absolutely absurd for us to be in the dark this long to know
exactly how we should plan. When everything came through we had
an insurance carrier who came to me and said this is what it is
going to be like. Three months later I get the guy come back in
my office who says, okay, there are changes to it. We did not
understand these other things. Oh, now there is another system.
We still do not really understand what it is that we are going
to be doing. And so for us to plan for the inevitable is
difficult.
Mr. COLLINS. The uncertainty. I was just with an insurance
company and they were sharing they have had to put forth their
premiums for next year and they do not know who is signing up.
Mr. NAJARIAN. Right.
Mr. COLLINS. They do not know if the young and the healthy
are going to stay in, and they are all brand new policies.
Policies that are being offered have never existed before
because they include the health clubs. They have to have
prescription coverage. There are a lot of things that now have
to be in policies that were not before, so they do not have a
base to compare it to. They do not know who is signing up, but
they had to lock in their premiums.
Mr. NAJARIAN. Right.
Mr. COLLINS. They have done that, and right now they do not
know what their profits or losses may be. So it is an unknown.
Mr. NAJARIAN. Right. And we have been trying to plan for it
like everybody else, but it is just you are planning sort of in
a bubble almost because every small business owner has a
different interpretation of exactly what is going to come down.
Mr. COLLINS. So as we wind down, one other quick one. I am
being selfish because you are helping me here a little bit. I
have held hearings on cybersecurity because I chair the
Subcommittee on Technology, and I am also on the Science, Space
and Technology Committee. The statistics are 87 percent of
small businesses do not have formal cybersecurity polices, and
I have to admit across my companies I am as guilty as the rest.
I have one that is really good and the rest are not. But
cybersecurity and small business, when we worry about customers
paying our bills and collecting our money, cybersecurity is not
real high on the list. We are trying on this Committee to shine
a light on it, to make people more aware. I am just curious
where you are on that and also specifically, are you in the
cloud or not?
Let me start with Ms. Brostmeyer.
Ms. BROSTMEYER. Yeah. First of all, we are not in the
cloud. And I am sort of curious how that works with very secure
information. But I am told that there are ways to do it, that
one can really stay secure. So I have been asking the question
should we be looking at this, and I really do not know enough
about it yet. But we do have cybersecurity. I mean, we see all
the time threats in our industry especially from Asia, from all
over the world, and we are very vigilant, sometimes too
vigilant that it slows our computers down so much because there
is just so much involved.
Mr. COLLINS. Is somebody in charge and do you educate your
employees on passwords--changing your password dos and do nots?
Ms. BROSTMEYER. Absolutely. Yeah, very important in our
business. And so, yeah, there are people in charge. We have a
group that really monitors it very regularly.
Mr. COLLINS. Good for you.
Ms. BROSTMEYER. And we are trained.
Mr. COLLINS. So you are part of the 13 percent.
Ms. BROSTMEYER. I guess so. Yeah.
Mr. COLLINS. Thank you. Mr. Najarian?
Mr. NAJARIAN. I am going to hand you this capability
statement in a little bit, and the differentiators talk about--
the first thing says cybersecurity compliant. It is something
that we take very serious. We are in the cloud. We have been in
there quite a while. Everything that I do, I can operate the
entire company over the Internet, but we work with a company
that is very secure. If I lose anything tomorrow, if something
happened and the system went completely down, we actually have
cold storage and hot storage sites that are not even located
nearby our facility.
We are very dedicated to traceability to everything--lot
traceability, lot controls, things like that, so parts coming
into our plant, when they go out we know where they got to in
the process in the assembly, so if a customer calls up and says
I have got a problem, I not only contain what he has on his
floor but I can contain any other customer that has shared
those types of parts.
But I think that one of the questions that you asked with
regard to cybersecurity is understanding how it can negatively
affect your company, and until you have really had to react to
something, and that is typically why anybody starts up and
says, okay, we need to be a little bit more vigilant, is
because they have had an issue. And I think the shame of it is
that, yeah, we have a lot of people that are hacking into our
computers all the time--not ours personally but in the United
States. And a lot from overseas. And I know the government is
the primary objective for a lot of those overseas nationals.
Mr. NAJARIAN. They are actually coming after small
businesses.
Mr. COLLINS. And the small businesses.
Mr. NAJARIAN. Stealing your IP, stealing your customer
list, getting your banking information, and your employees'
data.
Mr. COLLINS. Yeah. And that is the challenge, just keeping
everything in a secure site. And that is why we do this in a
cloud bubble because we have found that if somebody can get in
to a computer itself, they still cannot get into that and that
is one of the issues that we----
Mr. COLLINS. Yeah. Good. Good.
Mr. Braddon.
Mr. BRADDON. We do not specifically have a cybersecurity
policy. I think we follow some good practices. We have the
standalone system for our banking. Our servers are hardware in
a closet on our own site. We do have, you know, we are doing
some offsite backups in a couple of different ways and knock on
wood, we have not had any issues.
Mr. COLLINS. Yeah, I think as we move forward there is
going to be more and more emphasis on it, and I think as you do
business--if your customers are big customers, they are going
to want to know--there is something called Trust Mark, which is
the cybersecurity, like you were talking about LEED
certification, and maybe we can get something for the
sustainability and all of that. And we are trying to shine a
spotlight on it on this Committee because small business people
do not generally go to work worried about cybersecurity. It is
Federal government, big banks, insurance companies. But they
are starting to come after us, and when they do, it can be
devastating if you are not ready. And most are not ready.
So I guess I know we are running out of time, but this has
been very helpful.
Mr. Braddon?
Mr. BRADDON. I would like to maybe mention one thing. In my
testimony I talk about one piece of self-regulation that we do,
and I think it is similar to what you are talking about with
the ISO certifications where we hire a company and they come in
and they do their inspection and they give us a guideline on
how to make products that are safe for serving food, and then
they come in and then they give us a score. And believe it or
not, they have competition. Right? So there is different--and a
food producer can look at those guys and say I like the way
that AIB is doing their audit or I like the way these guys are
doing their audit. So you have competing companies that are
regulators. Basically, it is a form of regulation, and we
voluntarily sign up. And if some of these ideas come out, maybe
so will more of that type of regulation.
Mr. COLLINS. We are always looking for a competitive
advantage. And hey, if you have got one and you can promote it
and it gets you business, you want to do that, that is what we
do as entrepreneurs.
Well, I thank you for your time. I know we have run over a
little bit but all of you should be proud of yourselves, and we
thank you for the jobs you have. And I know you are all going
to grow your companies this year. So thank you for the new jobs
that you are going to be adding, caring about your employees
and all that we do here.
So what we have started is a dialogue. That is what the
Small Business Committee does. Talk about small business--your
issues, your concerns. You have given us some good ideas here,
and I am sure we can follow up on some of that. So again, thank
you for all of your time.
I ask unanimous consent that the members have five
legislative days to submit statements and supporting materials
for the record. So without objection, so ordered.
The hearing is now adjourned. Thank you.
[Whereupon, at 5:30 p.m., the Committee was adjourned.]
A P P E N D I X
[GRAPHIC] [TIFF OMITTED] 81699.001
Testimony of
Mr. Rick Schwind
Vice President, General Manager
Huntington Partners Inc. DBA Continental Tool & Mfg
before the
House Committee on Small Business
June 19, 2013
Good afternoon. My name is Rick Schwind, Vice President and
General Manager of Continental Tool & Mfg, located in Lenexa,
KS. I am also a resident of Smithville, MO located in Chairman
Graves' Congressional District. I am honored to be here today,
and thankful to Chairman Graves and this committee for the
opportunity to speak about our company and today's small
business climate.
Continental Tool is a family-owned, small private CNC
manufacturer of specialty tools, gages, assemblies and
components with roughly 20 employees. Approximately 80% of our
business is manufacturing tools designed for military end use.
Think of the Army mechanics that take care of and maintain the
Abrams tanks, Humvees, and Bradley fighting vehicles. We make
many of those specialized tools. We make specialized wrenches
for the care of landing gear on fighter jets, for the
adjustment of sights on weapons, setting of fuses on mortar
rounds, and hundreds of other tools. In addition, we provide a
host of machined components to cooling tower companies, fire
trucks, lighting fixtures, pumps, and valves.
My parents purchased this business in 2008 from a family
who started it from scratch in 1980. My dad had retired as an
executive with a background in manufacturing and industrial
distribution. His dream was to purchase a small manufacturing
company and provide long term employment for the company's
employee base, but also to find and nurture a younger
generation of worker. His dream was to be in a position to
offer a career, not just a job, with paid training and benefits
to anyone who simply had the right attitude and didn't mind
working for what they earned.
As for myself, I graduated from the University of Kansas
and later received an MBA from the University of Missour-Kansas
City. I had worked as an operator in a machine shop while in
college and eventually ended up in management. For a few years
I worked in a technology start-up and then the
telecommunications industry before coming back to manufacturing
at Continental Tool. Like my dad, I too was realizing my dream.
Not only being able to work side by side with my father, but
also being in the business of ``making stuff'' for America.
As you remember, 2007 and 2008 were banner years for
manufacturing. The economy was good, competition was fair,
opportunities were everywhere. But as the recession began to
take shape, things changed. Raw material prices, surcharges,
and the cost of business increased. Competition became fierce.
But like any small business at that time, we pulled back,
assessed our situation, drew financial lines in the sand and
stuck to those principles. In a world full of emotion and
momentum, we became focused on running the business with the
best financial acumen we could muster--by the numbers. There
were opportunities to purchase new equipment we wanted to take
advantage of, but we passed up. There were people we wanted to
hire, but didn't due to our commitment to live within financial
guidelines. The single best (and most difficult) advice my dad
gave me was that we needed to manage the business with our
minds but not necessarily our hearts. We needed to protect the
jobs of our employees to the best of our ability. Use our mind,
emotion, and faith as the backbone for every decision, but levy
that against the financial justification on whether or not to
proceed. We knew of several shops in our area at that time that
failed to fully comprehend the financial aspects of some of the
decisions they made, and sadly some of those shops failed and
closed during that time period. 2009 and 2010 were indeed a
challenge.
2011 and 2012 were much better. I'm glad to say that our
business rebounded to 2008 levels and operationally we were in
a great place. The challenge of the recession led us to sharpen
our pencils in just about every way and we got better. Our
processes improved, our quality improved, our margins improved,
and we retained every employee.
But challenges remain. In terms of talent, we continue to
struggle to find skilled labor. In our industry, it takes
anywhere from 5-8 years of on the job training to become truly
skilled in machine setup and operation. The combination of
mathematics, mechanics, and technology are a challenge for
anyone new to this industry and the learning curve is steep.
I've heard there is renewed focus at the college levels on
engineering, but we cannot stop there. There is an even more
pressing need for skilled labor. The average age of a skilled
worker in our company is 50 and that seems to be consistent
across our industry. These men and women are approaching
retirement age and as a nation we need to build our skilled
labor bench strength, or else we will have many people with
college degrees, but no technical skills.
But as a company we face additional issues. Uncertainty
over health care is a major concern. Today, our company fully
pays for the health care premiums for all employees. But now
knowing the financial implications of the Health Care law next
year had us questioning whether we'll be able to continue
providing this going forward, or whether we will be forced to
turn this cost over to the employee.
As I mentioned, roughly 80% of our business is supplying
the defense industry. This is where sequestestration has had a
real impact on us. We agree with the decision to pass a law
holding Congress accountable to reduce our nation's debt and
reign in spending. Our company made difficult decisions and
significant cuts to survive, and the federal government should
do the same. However, we took a sensible, precision approach to
our finances as we would when manufacturing a precision tool
while Congress did not.
Unless Washington quickly addresses the situation they
created with sequestration, the impact to small manufacturers
like ours, whose primary customer is the Federal government,
will be severe. Our sales to the government are down 30% this
year, and we recently were forced to lay off three employees,
temporarily we hope, and are working to refinance our long term
debt to reduce monthly expense.
Even though our company survived the most recent recession,
we are seriously concerned with the current environment facing
small businesses. Does Washington really understand our
challenge? Do they sense the concern we have with health care
uncertainty, ineffective and costly regulation, the sequester
and the indecisiveness regarding the federal budget and tax? We
certainly hope so, but the environment remains scary.
I am thankful that this committee is asking for input from
companies such as ours in order to stem the tide. Small
business is the backbone of our economy. We employ the majority
of workers, and due to our small size we build close, personal
relationships with our employees and take on the responsibility
of the welfare of their families. We ask that our government
use sound financial justification in every decision, just as we
do in our shops and plants across the country. As Americans, we
are blessed with that special drive to do things beyond
ordinary, and I see that drive in every small business owner I
meet.
I am honored to be here today, and many thanks to Chairman
Graves and this committee.
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``Made In America: Highlighting the Success of Small American
Manufacturers''
Testimony of:
Bruce Broxterman
President and CEO
Richards Industries
Cincinnati, Ohio
Before the Committee on Small Business
United States House of Representatives
June 19, 2013
The Honorable Sam Graves, Chairman
Good afternoon, Chairman Graves. Thank you for holding this
important hearing today to highlight the value of manufacturing
in the United States and thank you for the opportunity to talk
briefly about the challenges and opportunities that lie ahead
for US manufacturers.
My name is Bruce Broxterman and I am the President and CEO
of Richards Industries, a privately-held manufacturer of
industrial valves, located in Cincinnati, Ohio.
We have been in business since 1961 and our mission is to
provide heavy duty valves to control flow, pressure and
temperature for our customers in the process industries such as
refining, chemical, petrochemical, pharmaceutical, food
processing--just to name a few.
We have six different product families that are made up of
highly engineered products that are specifically designed to
meet unique, individual requirements.
Richards Industries has been fortunate to experience solid
growth over the past six years. After a management buyout in
2007 we have seen unprecedented growth of our revenues and
profits. Over those six years our sales grew nearly 45% with
net earnings improving at nearly the same rate and employment
growing by 12% to just under 150 employees.
The deep recession of 2008 followed by a slow and uncertain
economic recovery has resulted in a challenging business
environment that even now is proving to be difficult.
Richards has grown by staying focused on the niche markets
and taking care of our key financial fundamentals.
Staying Focused: Richards Industries continues to thrive as
a manufacturer here in the US because of our single-minded
philosophy of providing products to meet the ``special''
requirements of our customers around the world. These products
are highly engineered solutions to difficult customer process
problems. Manufacturing run quantities are low and precision is
high.
Agility & Flexibility: Being a small manufacturer can be
challenging but it provides the opportunity for us to be agile
and flexible as we work to provide our customers with the fast
response and product delivery that they need to be effective
and successful in their operations. We are often asked to build
an engineered custom product and ship it in less than two days
and our Lean process structure and flexible approach enables us
to consistently do it.
International Reach: Our products are used in every corner
of the world. Despite our size, you will find Richards
Industries products on drilling platforms off the coast of
Brazil, in pharmaceutical plants in the heart of Europe, on gas
pipelines in Central China, and in chemical plants in
Kazakhstan.
In 2007, International sales represented just 19% of
Richards Industries revenues. In 2012, international sales were
45% of the shipment total.
Richards Industries were among the winners of the
Governor's Export Award in 2010.
Financially Sound: Along with increased revenues, Richards
Industries has been able to achieve healthy levels of net
income and cash flow, thus enabling the company to repay the
debt taken on at the time of the acquisition while
simultaneously reinvesting significant amounts of capital in
the company. This reinvested capital has been used to generate
further company growth and job creation.
Talented Workforce/Special Culture: At the heart of our
success are the employees at Richards Industries. Our team is
talented, experienced and creative but, most importantly, they
are committed to excellence and performance bringing a
``Consider It Done'' attitude to work every day. Additionally,
the family culture that runs through our company helps set up
our team for success and has resulted in Richards Industries
being chosen as the ``Best Place to Work'' five out of the last
six years by a local Cincinnati business publication.
There are immediate and future challenges that threaten our
ability to maintain our pattern of success as a manufacturer in
the US. First among them is the structural cost of US
manufacturing imposed by government tax policy, regulatory
policies, and legislative initiatives. Richards Industries is
structured as an S-Corporation and, therefore, the taxable
income generated by the enterprise flows directly through to
the personal tax returns of the owners of the company. High
individual federal tax rates imposed on the owners siphon off
precious capital that, but for the higher taxes, would be
reinvested back into the company to purchase capital assets,
grow the company, and create new jobs. High federal corporate
tax rates have the same effect on entities structured as
traditional C-Corporations.
The Manufacturing Institute estimates that these structural
costs add a full 20% to manufacturer's costs of doing business
relative to our major trading partners.
US health care costs have increased 80% in the last decade
and we believe that much of this cost increase is attributable
to government involvement in the insurance marketplace via
coverage mandates. We believe that the expansion of government
involvement in health care brought on by the implementation of
the Affordable Care Act will put further upward pressure on
health care costs. Indeed, just last week the Ohio Department
of Insurance announced that preliminary indications point to
individual health insurance premiums increasing 88% in 2014
relative to 2013 rates. We anticipate similar premium increases
for the plans we offer to our employees. Cost increases of this
magnitude will in part be passed on to our employees and in
part borne by Richards Industries, again diverting capital that
would otherwise be deployed to grow the company and increase
jobs.
Of equal concern is the shrinking supply of qualified
workers. The manufacturing workforce is moving toward
retirement at a faster rate than the rest of the economy and we
cannot find qualified workers to fill positions as machinists,
operators, and skilled assemblers. The US education system is
not equipping American students with the right skills and in
the right disciplines to support the manufacturing economy.
This lack of qualified workers will impact US manufacturer's
ability to compete in the global market while manufacturing
products in the US.
I encourage this committee to continue to explore these
growing challenges and to act to alleviate these accelerating
headwinds.
I am very proud of the small part that Richards Industries
plays in the nearly $2 trillion US manufacturing sector and I
am excited about the opportunities that lie ahead.
Thank you for your support as we move forward through these
challenging times and thank you for the opportunity to provide
testimony today.
I look forward to your questions.
Written Testimony
of
Mike Mittler
President & Co-Founder, Mittler Brothers Machine Took
Before the
U.S. House of Representatives Committee on Small Business
Wednesday, June 19, 2013
My name is Mike Mittler, President and Co-Founder with my
brother Paul of Mittler Brothers Machine and Tools, a
manufacturing company located in Wright City, Missouri. We are
the classic example of a small business. We founded our company
around the kitchen table at my mom and dad's house Super Bowl
Sunday of 1980. The following Monday, we rented a 2,500 square
foot building for $00 and a hand shake with the owner. How
little did we know.
Paul and I worked many long days and nights as the only
employees of the company to build our reputation of quality
work and great customer service. We honed our basic customer
service skills with the first Mittler Brothers--cutting grass,
raking lots of leaves, painting houses and many other odd jobs
while in high school. With me the oldest of eight children and
Paul the youngest, if we wanted to have any fun money, we had
to earn it.
Mom and dad were great role models and while providing the
initial startup money, they quickly said you boys are on your
own and you have to make it. Always glad to offer advice, they
did not meddle in the business and knew we had to make our own
mistakes so we would really learn the hard way.
In 1984, we moved to our second location in a 7,500 square
foot building we helped build with a lot of sweat equity. We
added both customers and employees slow but sure over the years
and moved to our current location the 50,000 square foot
building in Wright City in 2004. I am a member of the National
Tooling and Machining Association and there are thousands of
companies like ours manufacturing in America, but together it
is these small businesses who employee the majority of
Americans.
Our most important asset is our people and we are proud to
have 10 with over twenty years of service with us. Two of whom
started right out of high school and who are now grandfathers!
We currently have 60 employees and last year we paid out over
$2.5 million in payroll to our people. I am very proud to
currently have five military veterans as part of our team and
feel these are the real heroes of this country. We have always
given young people a chance to work for us and currently have
several moving up thru the ranks including one still in high
school working part time for us.
Our people are all highly skilled and we employ: welders,
machinists, tool makers, engineers, painters and assembly
technicians. Our people are guided by just three basic rules;
SAFETY, QUALITY, PRODUCTIVITY. We provide a quality benefit
package including health care, more on this later, a 401K gain
sharing program that last year paid over $200,000 to our
employees and a flex work schedule to allow our people to deal
with their family and job.
We utilize the latest technology in our manufacturing
process including 3D solid model design software and computer
controlled machines.
Our company has two main areas of focus, one is our own
product line of special machines and components for the racing,
hot rodding, restoration, aircraft and bike building industry.
And the other is design and building of special equipment for
industrial automation.
Our standard products serve both the professional racer,
fabricator, and the do it yourself who has our products in is
home workshop. We are proud to be able to sell our products
globally with customers in much of Europe, Russia, Japan,
Australia, New Zealand, Canada, and Mexico. Our products have
been featured in the hit TV series American Chopper and several
other ``how to'' shows. Numerous trade publications and many
online videos have also featured our products. We maintain a
dynamic web site, publish a 90-page catalog and exhibit in
several trade shows to promote and sell our product.
In our design build area, we manufacture custom machine and
systems for large industrial companies helping compete in the
global economy. Our customers include companies in the medical,
building products, energy, heavy truck general industrial area.
While we have been successful over the years, many things I
currently see really bother me and give cause for great
concern. I often wonder would I do it all again? In today's
climate, could my brother and I succeed and create these jobs
in Missouri? Unfortunately, I think the answer is no.
There is too much uncertainty out there right now and the
costs of manufacturing in America are rising, making us less
globally competitive. Uncertainty over the health care law,
instability in the tax code, ineffective and costly regulations
are the biggest problems I face. It seems most of our obstacles
come from Washington. Small businesses don't need a helping
hand, they need a sensible partner in government which allows
entrepreneurs to build a business and create jobs.
In closing, I am proud and thankful to live in the greatest
country in the world and proud to have the opportunity to
contribute in a very small way to that greatness. May God
continue to bless America!
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Statement for the House Committee on Small Business Committee Hearing
Mr. Chairman, Rep. Sam Graves, and Rep. Nydia Velazquez,
Ranking Member, and Members of the House Committee on Small
Business.
On behalf of the Institute for Entrepreneurial Leadership,
the Workshop In Business Opportunities and the thousands of
people who pursue entrepreneurship and small business ownership
as their path to the American dream, I thank you for the
opportunity to address this Committee today.
I am here to share our view of the challenges that exist
for the women, minority and low income entrepreneurs that we
serve and to offer potential solutions to help them contribute
to economic recovery and stability that never seems to make it
to America's most distressed neighborhoods.
Our entrepreneurs are mostly people who see starting a
business as an avenue to a better life. They have an idea, a
vision and a lot of passion. The resilience of small business
owners and aspiring entrepreneurs never ceases to amaze me,
particularly those whom we support. On a daily basis, they
continue to push forward and succeed against considerable odds.
IFEL is focused not on the entrepreneurs who start
businesses with loans from their parents or SBA, corporate
buyout packages or by raising money on Wall Street. Our focus
is not on the high tech, high growth businesses that grab the
attention of wealthy angel investors. Our clients are regular
people who aspire to live a better life, people for whom the
American Dream is a concept worthy of pursuit.
For over ten years from our base in Newark, NJ, the
Institute for Entrepreneurial Leadership has provided one-on-
one mentoring to women, minority and inner city businesses with
revenues less than $250,000. While these types of enterprises
are often demeaned as ``mom and pop'' businesses not worthy of
government or private sector investment, we celebrate these
entrepreneurs as the agents of change in communities where
change is most needed. If we can help these businesses grow, we
can make a difference for the people they employ, the customers
that they serve and the communities in which they exist.
In 2011, we joined forces with Workshop In Business
Opportunities (WIBO), an amazing organization that has trained
over 15,000 entrepreneurs over 47 years in the areas of New
York City where the angel investment dollars do not flow--
communities like Harlem, South Bronx, Washington Heights, and
Bedford Stuyvesant. Since joining forces, we have created an
end-to-end training, mentoring and a support continuum for the
entrepreneurs that are all too often left out of the mainstream
small business ecosystem. Last year we served close to 1800
existing and aspiring entrepreneurs through our trainings, one-
on-one business mentoring, clinics, webinars and other
resources. I come before you today to speak on their behalf.
Our clients are 73% women, 70% with household income below $60K
(36% below $20K), and 74% black and Hispanic. The challenges
that our clients face in starting and growing businesses
revolve around two primary issues: the Capital Gap and the
Talent Gap. I would like to take a few minutes to discuss each
and then propose some solutions for consideration.
The Capital Gap
A study released by The Urban Institute in April 2013,
details the increasing gap in the wealth between white
Americans and nonwhite Americans. The study discussed that with
the 2-to-1 earnings differential has remained relatively
constant for the last 30 years, the gap in wealth has increased
substantially from pre- to post-recession. The study,
summarizing Federal Reserve data, indicates that before the
recession, non-Hispanic white families, on average, were about
four times as wealthy as nonwhite families and by 2010, were
about six times as wealthy. In dollars and cents, this
translates to the average white family having about $632,000 in
wealth, versus $110,000 for Hispanic families and $98,000 for
black families.
The Minority Business Challenge, a report published by the
Milken Institute and the Minority Business Development Agency
in 2000, revealed that capital gaps exist at very level for
financing the capital structure of minority businesses: equity,
mezzanine and senior debt. It went on to say that the fact that
minority-owned businesses tend to be more prevalent in
industries with lower entry costs may--at least in part--
reflect more binding liquidity constraints and generally less
access to startup capital among prospective minority business
owners.\1\
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\1\ Minorities in Business, 2001, Published by the SBA Office of
Advocacy, p. 22
While capital access is often viewed as best addressed
through the private sector, private sector solutions are
generally not interested in low return, non-scalable ventures.
Initiatives like the highly touted Startup America Partnership
and the resources available in Silicon Valley and Silicon Alley
and other high tech regions do a great job at supporting the
development of the entrepreneurial ecosystem for high tech,
high growth businesses--there is not, however, a place at the
table for those businesses that do not fit this mold. And while
the SBA does what it can through the limited resources that it
has, the truth is that the SBA as its capital resources as
currently structured cannot replace the type of business
startup and growth capital offered through personal wealth and
``friends and family'' investment. Black businesses are
particularly affected due to the lack of intergenerational
wealth transfer that has occurred historically due to the fact
that blacks in America were for so long denied the opportunity
to own and build. In a community of ``have nots'', financial
support from friends and family is not an option. To date,
there have been few options to address lack of access to
capital, which is inextricably linked to lack of collateral
which can be linked to the lack of familial wealth and poor
personal credit which often stems from trying to start or run a
business without capital--a vicious cycle. We need to find
solutions to the access to capital problem created by the
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wealth gap.
The Talent Gap
In addition to capital constraints, many entrepreneurs rank
lack of business training as high among the challenges they
face. Increasingly, financial institutions see training and
mentoring as a risk mitigator, increasing a business's
likelihood of success and repayment.\2\ While most small
business and entrepreneurial experts agree that money can't fix
a business without a fundamentally sound business model, it is
a simple truth that money can buy expertise and can enable a
small business to stay afloat long enough to figure things out
and adjust. Access to capital makes the pivot to profitability
possible. Access to capital enables entrepreneurs to bolster
their own skill sets, hire experts and build a capable employee
base. Undercapitalized businesses have no room for error and
little capacity for weathering a storm.
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\2\ Creating Capital, Jobs and Wealth in Emerging Domestic Markets,
p. 64
Again, this is where we see a divergence in what exists for
high tech, high growth businesses and for the community based
businesses that we serve. In New Jersey and across the nation,
there is a strong effort to support incubators and accelerators
for tech companies that have the potential to attract
significant private sector investment dollars as well as
government and institutional research grants. The NJIT
Enterprise Development Center, which has collaborated with us
since our inception, supports high tech companies and the
Entrepreneur Center in Nashville, which I visited through a
Startup America conference, which accelerates the development
of high growth companies, are two such examples that do a great
job at their intended purpose. The NJITEDC has university
support and the Entrepreneur Center has the support of the
entire Nashville entrepreneurial and business communities.
There are many, many examples of similar facilities and
resources across the country and around the world for high
tech, high growth businesses--and this is a good thing. Most of
the value proposition of these incubators and accelerators is
in having access to the talent and expertise that they could
not otherwise afford during the early years in the development
of the business. These incubators and accelerators stimulate
innovation, provide support and connect capital to projects
that can change the world. What we are missing is the same
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level of resource for entrepreneurs who can change communities.
By helping community based entrepreneurs and small business
owners gain access to talent, we can help them navigate their
way to success. Their success can provide economic stimulus at
a local level and sets the stage for healthy functioning
communities with strong families, motivated youth, safe
streets, arts and culture, and more. If we are able to help
more community based entrepreneurs realize their potential, we
can create jobs for those who are often difficult to employ and
ultimately expensive to house, feed and clothe through other
government channels. We need to find solutions to the talent
gap that exists for community based entrepreneurs.
Solutions
So what are the solutions to these challenges that have
plagued the micro-enterprise landscape for years? While there
are no magic bullets, a renewed commitment to community based
entrepreneurs and small business owners as the engine of
revitalization in our most distressed regions can lead us to
solutions that require relatively limited financial stimulus
from the federal government. Here are a few solutions that we
propose:
Access to Capital:
1. Provide incentives for private debt investment in micro-
businesses. These businesses are not great candidates for
equity investment for many reasons. A loan of $20-100K is often
what they need and could be provided by friends and family,
except this target population doesn't have friends and family
with these resources. For loans with principal payments
deferred 3+ years, interest paid could be tax free or at a
reduced tax rate.
2. Encourage the SBA to work with its micro-lending
partners to relax the credit and collateral requirement for
loans up to $10K.
3. Include incentives for investors in businesses in
distressed communities in the crowdfunding legislation being
considered.
Eco-system:
1. Motivate banks to support entrepreneurial training and
ongoing support (with evidence of results) through stronger CRA
requirements; give additional credit for banks that demonstrate
results in historically redlined communities
2. Include small business development as a component of
Community Block Grant funding
3. Require that federally funded projects not just have
minority subcontractor targets, but also include targets for
ancillary services like catering, photography, and printing.
This could provide a boost to local businesses in the area
around federally funding projects.
4. Require SBA funded programs like SBDC, SCORE, WBC to
demonstrate evidence of partnership with community based
organizations.
``Government must be a key partner in creating a favorable
environment for business to flourish in integrating these
communities into a regional, national, and global economy. The
nonprofit sector also must continue to be a partner.
Community-based organizations and other nonprofit entities
have a critical role to play in linking investment with
community resources so that partnerships can create a fertile
environment for community capitalism. They are a critical
component to the success of economic growth in distressed areas
by identifying market opportunities, leveraging public and
philanthropic dollars, creating healthy communities, and
facilitating business investment.
Community capitalism's goal must be to create healthy
economies that produce jobs, income, and wealth for community
residents at rates that are at or near national norms. This
will provide the economic foundation on which business,
government, nonprofit organizations, and individual residents
can join together to build decent homes, good schools, cultural
and recreational opportunities--all the ingredients of livable,
sustainable communities.''\3\
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\3\ Excerpts from Community Capitalism: Rediscovering the Markets
of America's Urban Neighborhoods, The Ninety-first American Assembly,
April 1997, The American Assembly, Columbia University.
After our years of work with thousands of aspiring and
existing entrepreneurs, I have come to believe with all my
heart that solutions are possible if we believe that
entrepreneurship is truly the way to the American Dream. It is
not enough to just focus on those who have been blessed with
the benefits and privilege of history, we must also empower
those individuals who have not, but aspire for more and whose
spirits are still open to dreaming. On behalf of the thousands
of people who pursue entrepreneurship and small business
ownership as their path to the American dream, I ask that you
commit yourself to inclusion of the community entrepreneurs
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whose success creates a better way of life for us all.
Respectfully Submitted,
Jill Johnson
Chief Executive Officer
Institute for Entrepreneurial Leadership/Workshop In
Business Opportunities
550 Broad Street, 15th floor, Newark NJ 07102
www.ifelnj.org / www.wibo.org
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Made in the USA: Stories of American Manufacturers
Testimony of:
Barbara J. Schindler
President and COO
Golden Artist Colors, Inc.
New Berlin, NY
Before the Committee on Small Business
United States House of Representatives
June 19, 2013
Good afternoon Chairman Graves, Ranking Member Velazquez
and members of the Committee. Thank you to Congressman Hanna
for inviting me to be here today.
My name is Barbara Schindler, President and COO of Golden
Artist Colors, Inc. Thank you for the opportunity to provide
testimony on manufacturing in America. GOLDEN manufactures
acrylic and oil paints for professional artists. As a global
company, we export our products to 60 countries around the
world. Currently, our international sales make up 25% of our
business.
Our mission is to grow a sustainable company dedicated to
creating and sharing the most imaginative and innovative tools
of color, line and texture for inspiring those who turn their
vision into reality.
To achieve that mission, we operate on three principles: 1)
make the best products, 2) provide customers with the best
service and 3) find people who can make the first two happen.
Our products are intended to preserve the artistic legacy of
our times for hundreds of years. This is a unique
responsibility and privilege we take very seriously. In 2002,
GOLDEN became an employee owned company. We have 157 owners
coming to work each day, know that their contribution will have
a direct impact on their investment and retirement!
What makes GOLDEN a successful manufacturer in America?
The Arts Materials Industry is one which grows a meager 2%
per year. Despite that reality, GOLDEN has grown its business
21% since 2009. Many of our competitors have moved a portion of
their manufacturing to emerging markets, predominantly China.
We choose to remain here, as we recognize we can protect our
product quality and intellectual property in the United States.
Our continuous efforts to drive manufacturing efficiencies
improve our ability to remain competitive; however our
commitment to new product development and consumer
relationships is essential for continued growth. Many product
concepts come from artists/consumers who use our brand. Our
five-member technical support team responds to 13,000 phone
calls and emails annually. We also contract with over 40
teachers in North America who provide art education for over
15,000 people per year.
GOLDEN believes in giving back to our local community and
the global arts community as well. Each year the company has
contributed 10% of its net profit to the many non-profit
organizations that make a difference in our world. Business is
an ecology of interconnected resources, human and
environmental. Each business needs to find its own way in
nourishing these resources to remain sustainable.
What obstacles do we face on a federal level?
Most of the issues we face are local and industry related,
yet there are three significant issues where the Federal
Government can provide leadership and assistance. They are
health care, education and specific to our industry, harmonized
labeling standards.
We remain optimistic that the Affordable Care Act will meet
its goal of creating affordable health insurance to all
Americans. As we prepare for this future, however, it is our
approach to ready our employees and our business for every
aspect of health care, and not simply the ACA impact alone.
At GOLDEN we have been managing affordability via fierce
staff education and wellness. Yet, a consumer mind set can only
go so far in an opaque market such as health care. As health
care services remain rationed, especially in rural areas of our
State, and with medical inflation outpacing the cost of living
in multiples, we need your continued efforts to address the
entire health care system. Americans must embrace wellness and
health care providers must place the patient in the center of
all they do so we may once again enjoy the highest quality
health care in the world and not simply the highest costs.
Secondly, an educated and creative workforce is critical to
sustain success in any business. Unfortunately, due to federal
mandates and budget shortfalls, art teachers are being lost in
almost every district. We are troubled by the lack of arts
education in our schools and believe this is a serious
situation that will in the long run, shrink one of the most
significant drivers of American ingenuity and leadership.
Finally, we need a truly harmonized regulatory framework
for health and safety labeling of art materials. Applying State
of California mandated health warnings to our products,
warnings that are deemed appropriate by no other jurisdiction
in the world, causes confusion and lost sales not only in other
States of the U.S., but in our foreign markets as well.
Adoption of the United Nations' Globally Harmonized System of
Classification and Labeling of Chemicals, as the preemptive
standard for consumer products, would eliminate these
burdensome domestic and international inconsistencies.
What does the future look like for GOLDEN?
GOLDEN's future is positive and sustainable. With the help
of NYS and Chenango County, GOLDEN just began a capital project
to prepare us for future growth.
We will be successful if we are able to maintain and hire
an educated and enthusiastic staff. Employee ownership has been
a point of difference between us and other employers. At the
2011 Inc Magazine Awards for the 50 Top Small Companies to work
for, at which GOLDEN was one of the recipients, 12 of the 50
companies recognized were ESOP companies. Federal support for
ESOPs is invaluable for creating workplaces which honor and
celebrate its staff. ESOPs are not a cure-all for business
success, yet it provides another level of security for
employees trying to navigate their future. When employees are
treated like owners, they tend to act like owners.
Thank you again for the privilege to address this
committee.
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Testimony of Aaron Bagshaw, President of the W.H. Bagshaw Company
Before the U.S. House of Representatives Committee on Small Business
``Made in the USA: Stories of American Manufacturers''
June 19, 2013
Good afternoon. I first want to thank Representative Kuster
for the invitation to speak to you all today. As a small
business owner, it is so encouraging to know that our voices
are being heard and that small business, and manufacturing in
particular, is such a priority to our delegation.
Representative Kuster has been to our factory for two visits
now, once as a candidate and more recently with Representative
Steny Hoyer.
I am Aaron Bagshaw, President of the W.H. Bagshaw Company
in Nashua, NH, a fifth generation pin manufacturing business.
After combing through records, I have discovered that we have
manufactured and shipped, since our inception 143 years ago,
almost 42 million lbs. of pins to happy customers all over the
world. Amazingly, this would be enough steel to build the
Chrysler Building in New York City.
My Great Great Grandfather started manufacturing pointed
pins for the textile industry in 1870. In the 1920's, we were
the only and original manufacturer of the Brilliantone
Phonograph needles. We still manufacture textile and phonograph
pins today, as well as more modern products that are in higher
demand. The lifecycle of the pin is baffling. If any engineers
are listening I would like to share this information with you.
We still manufacture and sell the same product we manufactured
143 years ago. However, over the years we have had to adapt,
update and change not only what we sell but how we manufacture
it. We're now making complex machined components for high tech
applications using advanced machinery.
Our pin making machines are modeled after Leonardo Da
Vinci's grinding concept. We are a living, breathing showcase
of where the Industrial Revolution meets the Digital
Revolution. We have machines that can make millions of pins per
week and we have state of the art machines that can make
incredibly complex parts. Often in my tours of our facility I
will say that our ``older'' machines can make a lot of pins
fast. I liken our story to what Henry Ford described as ``you
can have any color you want as long as it's black''. You can
have any pin you want, as long as it looks like one we have
manufactured. Textbook Industrial Revolution. Next on our tour,
I would show you our computer controlled machines that are
making parts unattended. We download a computer program into
the machine wirelessly or directly from a laptop. With the
setup assistance of an operator, the machine manufactures
complex components. Textbook Digital Revolution. All under one
roof.
When people learn about our business, after the obvious
question ``What do you mean, PINS?'', we are asked ``How have
you managed to stay in business so many years?'' Our magic
formula seems to be having this incredible legacy and
foundation partnered with lots of mojo and a fresh approach to
marketing and management. As we like to say, we're a 143 year
old startup. Our core values are: Family, a ``Make it Happen''
approach, Empowerment, Courage and Perseverance.
The story of our family business truly is one of courage
and perseverance. Through the years, we have weathered several
wars, a Depression, and the recent Recession. Ten years ago we
made the courageous decision to branch out into a new market,
investing in CNC machines. CNC stands for Computer Numeric
Controls, which means that they're programmable machines. One
operator can run several machines at one time. These machines
have allowed us to produce pins that are much more complex for
the aerospace and high tech industries. Several years ago, my
wife and I made another courageous decision--we purchased a
controlling interest in the business to secure the business for
future generations.
As with most businesses, we're concerned about the economy,
healthcare and energy costs. But our most important resource is
our labor force, and a big challenge for us is access to
skilled labor. There is a shortage in our area of machinists
who are skilled at running the types of CNC machines that we
have in our factory. In some cases, we have been able to bring
in entry level employees and train them. We're working with our
local community college to bridge some of the gaps in their
skills so we can accelerate their learning. We were excited to
learn that a federal grant allowed for a major upgrade to the
equipment in their machining lab. Having these partnerships
with community colleges will be effective for the continual
development of our workforce. While a large corporation can
hire someone to focus on workforce development and educational
outreach, a small business like ours cannot--tax incentives for
these types of partnerships would be quite welcome. We have a
huge slate of process improvements we would like to tackle and
are always interested in tax incentives that support these
measures. We have taken advantage of Lean Manufacturing courses
in our state, NETAAC programs, export assistance through the US
Dept of Commerce, and business advising from our NH Small
Business Development Center. The Trade Adjustment Assistance
for FIRMS has also been very beneficial. Support like this is
critical to small businesses like ours.
We often say, ``If you think a pin is just a pin, then you
don't get the point.'' We have survived for 143 years on grit,
determination, fortitude and a bit of luck. From Da Vinci to
Ford to the Digital Revolution we, as a company, need and will
continue to need the skills that stem directly from the fields
of Science, Technology, Engineering and Math. Our story does
not end here. Our continued growth and evolution will rely
heavily on the ability of our employees to adapt and grow, and
use these technology skills.
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Commodore - A Small Manufacturing Business
Our Story
Commodore is a small manufacturing business located in
Bloomfield NY. We make polystyrene foam meat trays and the
equipment to make foam products. Commodore Technology LLC makes
the machines and the molds for Commodore Plastics LLC and also
sells equipment for export. Commodore Plastics makes and sells
mostly meat trays for the domestic market. We started as a foam
packaging business in 1981 and added machinery sales around
1990 when we learned that there is a market for equipment
designed like ours.
My father, George, decided to start a foam business in 1981
when the industry was in a high growth period. He was able to
pull some people together and buy some used equipment. His plan
was to offer a few items with some unique features added to the
current offering. Right away this idea didn't work. The
customers required that he be able to offer all of the sizes.
He could not afford the molds for all of the sizes using the
current processing technology so he developed and patented a
new method of trimming the parts from the web. He was later
able to offer more sizes, but still had trouble with sales. So
George started offering colored trays (rose, blue, charcoal)
instead of just the offering at the time of white and yellow.
The developments came as a result of necessity and are part of
our continuous improvement.
It was much more difficult than my father imagined, but he
had some lucky breaks too. At one point, he learned that
Pepperidge Farms had decided that they would rather buy their
trays instead of making their own. As a result, he was able to
get some equipment and a new customer at the same time. This
led to a discovery that the smaller equipment that Pepperidge
Farms had been using was more efficient with material than what
he had been doing. Because we are small relative to our
competitors, we needed a different manufacturing footprint in
order to be competitive. With the addition of this new
equipment, he could see what previously had not been known to
him.
From this knowledge, we developed a system that
incorporates many of the ideas behind Lean Manufacturing. We
need to make shorter runs of different sheet types and colors
and this change allows for us to do it efficiently. This turned
out to be a big advantage when it came to selling equipment and
molds. Many of the worlds markets are smaller and a producer
might make trays, hinge lid containers, and plates all in the
same plant. Our foot print works well for this so we have been
able to design, manufacture, and sell equipment and molds to
companies in Central and South American. Today the area where
we are most active selling equipment is in Russia and the
former Soviet Republics.
Our company's biggest setback occurred on May 19, 1991. The
entire business burned to the ground. There was almost nothing
of value remaining. Insurance was expensive so we were
underinsured leaving us few options. We focused exclusively on
making machines and molds. We found this to be very difficult
and we were determined to get back into the foam business. Then
in 1995, we found a way and found it to be even harder the
second time. Things started out very slowly and 10 years after
the fire, we were still well below our pre-fire revenue levels.
I have always been impressed with my father's optimism. For
the first 20 years, we struggled. We reinvested every penny
that we earned back into the business. He had everything that
he owned on the line.
Things have improved. The last 10 years have seen 8 that
were profitable and a few good years where we earned more than
a normal return. We have a strong balance sheet and currently
meet all of our bank convenants. Commodore is now 175 employees
strong and offer competitive compensation packages. We are able
to attract some great people to come and work with us. We are
the largest private employer in the Village of Bloomfield and
an important part of our community. We contribute to many great
causes from kid's baseball to the school yearbook. We are very
happy where we are now with the business and very hopeful that
we can continue to grow and prosper.
Commodore and Government
Our Company and the Government are sort of like partners
with the Government having the final word in many areas. The
Government has a set of rules that we live by called
regulations and we pay taxes on our profits. The government
does what they can to ensure the market place is fair for all
competitors and also does what they can to help us to be
successful through Government programs.
Over time we have found our way through the maze of laws
and regulations. We have great products so we are competitive
in a mature market. We know that we need to get all of the
details just about perfect or there will be no profits for a
given period. We are most concerned about things that we can't
control. One of things where we have the least control is with
the most recent government intervention on the part of Mayor
Michael Bloomberg in the form of product bans.
Regulations
Regulations can be a very real barrier to entry. There are
so many different regulations that can be very complicated and
also costly. Over time, the regulation become less onerous and
if done right can be a guide to best practices. Listed below
are some of the regulations that we follow. An unfortunate
aspect of regulations is that they don't always change as fast
as new technologies become available.
OSHA
We want a safe work place and feel this is one of our
most important responsibilities to our employees. The
last thing that we want to see is a person getting hurt
on our watch; this is the same as what OSHA wants. We
meet or exceed the regulations and as a result, have a
safe work place.
Chemical bulk storage
We are regulated by the EPA for chemical bulk
storage. The butane is use to foam the plastic and we
buy it by the tanker load. The tank needs to be big
enough to fully unload the truck. We had a case where
we did not know a law existed regarding the storage. We
found out about the law after we had been using the
tank and were in the process of creating a safety
program to meet the regulation when we had an EPA
visit. We were given a chance to submit the program
that we were working on and when we did so at the wrong
program level, we were subject to a fine.
Building codes
The codes for buildings and fire systems can be
confusing. We have an older building that was built
around 1900. At one point we had a very difficult time
with the fire inspection process. We were very
fortunate to find an architectural firm with the
necessary expertise to move us forward.
AIB
We are self regulated by The American Institute of
Bakery. We hire AIB to do an annual inspection of our
manufacturing facility. AIB publishes a guideline for
facilities making packaging for food. We develop
processes that follow the guideline and they assign us
a number grade for our performance against the
standard. Because of this, our customers do not need to
inspect our facility to know that we are delivering
safe and sanitary packaging. Our December 2012 score is
940 out of a possible 1000 points.
The Affordable Care Act
We offer a group health care option to our employees.
We pay for about half of the cost. We have about 90 of
our 175 full time employees that participate. We
purchase our coverage from a brokerage company and they
spend time with management to help us decide what
package is the best fit for our employees. They also
explain the benefits to our employees and they are our
primary source of information. We have been in constant
contact with them since The Affordable Care Act passed,
but we still do not understand how much our costs are
going to change. We assume that some of the people who
do not get insurance through the company get it from
other places including their parents or spouse. We also
assume that some do not have insurance. How many will
join our plan is unknown and this is concerning. We
think that our plan meets the affordability
requirements this year, but the regulation changes and
our current plan may not meet the requirements next
year.
I have concerns that the legislation will decrease
the employment for the entry level worker. At Commodore
Plastics, we have chosen to do a lot of work in our
plant manually as opposed to automatic packing
machines. We feel the added complexity of having more
equipment and the setup associated will limit
flexibility. With the upcoming changes, I can see
companies choosing automation over hiring more people.
401K
We offer our employees a defined contribution
retirement plan. Since we have more than 100
participants, we are required to do an annual audit.
The cost of the audit is about $10,000 not including
the time spent by our employees.
GAAP Accounting
We are required to follow GAAP accounting. The banks
that we work with insist that we follow the rules so
they can understand the financial health of a business
before loaning the business money. We understand the
rules and do the accounting ourselves and then have
them reviewed by an accounting firm that specializes in
reviews and audits.
Taxes laws
The tax laws are very complicated so we hire an
accounting firm to prepare our taxes. We have been
through an IRS audit of our business and personally.
Workman's Comp.
We purchased workman's compensation insurance through
a pool regulated by New York State. We were members of
the pool for one year and then moved to a different
carrier. Years later when the fund was empty and still
had claims to pay; the attorney general of NYS sued the
past and present members of the pool. We spent a
significant amount of money on attorneys and eventually
paid a settlement of about $250,000.
Visas for Visitors
Because we make equipment and also run a
manufacturing plant, we can offer training to our
Technology customers by having them spend time in our
plant. We have been having trouble getting the
necessary travel visas for them to come and visit.
Taxes
We are an S corporation so we pay our income taxes through
the owner's tax return and do not file a separate corporate
return. The negative impact is that individuals pay a higher
tax rate than C corporations leaving us at a competitive
disadvantage.
Loop holes
I have heard of these, but don't know of any. These
must apply to some other type of company or product
because we pay almost 50% of our income in taxes.
Reinvesting in the company
High income tax rates hinder growth. Our owners work
for the business. We pay money to our owners for living
expenses; we pay our taxes and reinvest the rest. With
the tax amount being high, the reinvestment is low.
Successful manufacturing businesses constantly reinvest
just to stand still and more investment is required to
grow. Alternatively, we borrow money to grow, but banks
will not lend to a company that is not reinvesting as
it will not have the proper debt to equity ratios.
Lower rates would increase growth. Perhaps a reduced
rte for money that remains inside the company would do
the same thing for an S corp.
Financial assistance
We have taken part in a few different government loan
programs. The loans were a very important part of our past. The
loan guarantees that we were able to get from SBA and USDA
allowed us to borrow money and grow our business.
EXIM Bank
We have an ExIm line of credit that we use to finance
our work in progress for exporting machinery and
tooling. The program also allows us to write a standby
letter of credit. The program has worked well for us in
the past. We have customers that use the ExIm bank to
finance their projects. We are currently working on an
order that will ship to Paraguay. This will be their
second project using an ExIm loan guarantee.
Product bans
We are most concerned about PS foam packaging bans. We
believe that the bans are based on people's negative reaction
to litter and not based on scientific fact. There are many
people who think that ps foam is bad for the environment. They
base their opinion on emotion and avoid understanding the facts
about foam packaging. Foam packaging is polystyrene that is
foamed to stretch the natural resources to make more product
using less material. People don't seem to have a problem with
the unfoamed version of the exact same material. There are many
positive attributes of foam packaging. The process to produce
foam uses little energy and there is no water waste. Foam
packaging is thought to be non recyclable but that is not the
case. It is being recycled and turned into many household
products. All of the internal scrap in our plant is recycled
and put back into the products that we make.
Mayor Michael Bloomberg has proposed a law that would ban
polystyrene take out containers in New York City. This ban will
have little to no impact on litter or the amount sent to
landfill. This ban is bad for New York State and it is bad for
Commodore. It is very difficult for us to understand how a
government can pick the winners and losers without considering
all of the other products in a category and without having the
science on their side. I have invited Mayor Bloomberg to visit
our plant and have had no response. It seems to me that he
should see the material being made before taking such
consequential actions.
Made in USA
Most of the foam used in the US is produced in the
US. The substitutes that are being pushed by the bans
are often made abroad. In many cases, these products
are made in China and often are made from recycled
paper. Paper is made from wood and contains many
naturally occurring but potentially dangerous
chemicals. The substitute products are less
environmentally friendly when looking at the entire
life cycle of the product.
Waste to Energy
We expect in the future that waste to energy will
become more popular. Plastic packaging is generally non
absorbent and also has high BTU content. Instead of
using petroleum to make electricity, use is to make
packaging and then use the packaging to make
electricity.
Conclusion
Commodore is a small, privately help company operating in
Bloomfield, New York which is located in the Finger Lakes
Region. We have been in business for since 1981 and employ 175
people. While our company has had its' share of challenges
through the years, (fire disaster, market driven, regulations),
we are healthy with a bright future. We believe in reasonable
and fairly administered government oversight; one that allows
privately held companies to compete effectively domestically
and abroad.
Our biggest concern is that Government will ban our
products.
I appreciate the opportunity to have Commodore's story
heard in front of the Committee on Small Business.
Florida Turbine Technologies, Inc. Testimony of Shirley
Brostmeyer, Chief Executive Officer Before the Committee on
Small Business U.S. House of Representatives June 19, 2013
Prepared Testimony and
Statement for the Record of
Shirley Brostmeyer, Chief Executive Officer
On Behalf of
Florida Turbine Technologies, Inc.
Before
The Committee on Small Business
U.S. House of Representatives
Hearing on
Made in the USA: Stories of American Manufacturers
Wednesday, June 19, 2013 - 1:00 p.m. 2360 Rayburn House Office Building
Good afternoon. Chairman Graves, Ranking Member Velazquez
and Members of the Committee. I am Shirley Brostmeyer, Chief
Executive Officer of Florida Turbine Technologies, Inc., a
leading provider of engineering, development, and testing of
turbomachinery for military and commercial aircraft, space
propulsion, and industrial power. Florida Turbine Technologies,
Inc. began in 1998 in Palm Beach County, Florida, and has grown
to supply research and development activity worldwide with over
200 employees. FTT is a leader in innovative turbomachinery
improvements. In fact, we lead the nation in patents per
employee. Many of FTT's patents are recognized by the Air
Force, who actively reviews these patents, as extremely
innovative ideas.
Thank you for the privilege of speaking with you today. I
would like to encourage the creation of a new Federal
Acquisition Regulation for government research and development
projects. Currently, whether or not a company has production
products is being used as a selection criterion. This should
not be allowed.
We at FTT feel that better utilization of small business
for government contracts would provide more innovative and
affordable solutions--saving money to the taxpayer, and
creating exports that will boost our economy. I would like to
quote a March, 2010 House Armed Services Committee report
regarding the current defense acquisition process, ``Small
businesses are largely locked out of the process or accorded
contracts only on the goodwill of one of the larger firms...(we
are) concerned that the end result of this process is the
gradual erosion of competition and innovation in the defense
industrial base.''\1\
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\1\ House Armed Services Committee Panel on Defense Acquisition
Reform Findings and Recommendations, March 23, 2010, pg 7.
Only 2.5% of Research and Development funds are allocated
to Small Business Innovative Research programs (SBIRs). And yet
small businesses provide the most innovative and agile
workforce available, without the large overhead costs of large
companies. For the other 98% of government R&D acquisitions,
government decision makers actively use a selection criterion
which puts small business at a significant disadvantage. This
criterion is that a company must have at least one active
production program to be a serious competitor for R&D funds.
This is true because of historical close ties between the
government and its large production suppliers. But this is also
true because government employees prefer to work with a
``proven entity'', albeit expensive and less innovative. They
feel comfortable that the technology will be taken to market
and not left on a shelf after their investment. But there are
many contractual ways to deal with product transition into
production. And once a development prototype from a small
business has been proven, larger businesses will often compete
---------------------------------------------------------------------------
to license the available technology.
FTT has developed small engines that address future DOD
needs for small UAV and missile platforms. We have developed
our most recent engine on SBIR funds, and have matched the
funds dollar-for-dollar with profits from our commercial
business. This small engine would serve as an ideal platform to
affordably demonstrate advanced aircraft engine technologies.
However, we are discouraged from competing for R&D contracts
because our small engine is not currently in production. This
issue is certainly not limited to the turbine engine community.
The findings in the 2010 House Armed Services Report confirm
that this is a pervasive issue.
Thus, I have a recommendation which would increase small
business participation in R&D programs: create a Federal
Acquisition Regulation that R&D contract decision makers may
not use the existence of production programs as a selection
criterion. I thank you for your time and I hope that you
consider this change to the existing acquisition philosophy.
Testimony of Richard T. Najarian
President of Precision Global Systems (PGS Inc)
Before the
Committee on Small Business
United States House of Representatives
On June 19, 2013
Good afternoon Chairman Graves, Ranking Member Velazquez
and members of the Committee. Thank you for extending an
invitation to provide testimony on behalf of President Global
Systems and the many manufacturers throughout the country who
would otherwise love to have this opportunity. I respectfully
submit this testimony not only on behalf of Precision Global
Systems, but also as a member of the Board of Directors, Chief
Investment Officer, and Vice President of Premier Biomedical
Inc., a company developing cures for Cancer, Traumatic Brain
Injury, and Suicide Ideation. We are working with the
University of Texas and El Paso and last week signed a
Cooperative Research and Development Agreement (CRADA) with the
U.S. Army. We hope to be manufacturing modules that will be
used in the treatment and cure of many of the most debilitating
and life-threatening diseases known to mankind.
Beginning in 1983, PGS has been providing products and
services for some of the world's largest corporations in the
automotive and defense industries. Since surviving the dramatic
downturn which began in 2007, we have diligently helped support
our customers' increased production volumes through creative
cost savings programs by implementing high quality and
environmentally responsible innovative manufacturing processes.
Our capabilities are in component recertification, value add
sub-assembly, as well as complete production assembly. The PGS
team implements these processes at one of its three
manufacturing sites, occupying nearly 200,000 sq. ft. located
in S.E. Michigan. We ship over 3 million parts each month to
customer locations throughout North America and beyond.
In order to survive during this difficult period, we like
so many companies aggressively addressed every opportunity we
faced with a sense of urgency and resolve that helped us
survive and ultimately thrive in this newly defined
manufacturing environment. I strongly believe there is no
greater place to manufacturer a product than in the United
States for several reasons. First is the challenge. We are
challenged everyday for process improvements, process
capability, and process repeatability. The test of our group is
the laser like focus of those in the positions of
responsibility and authority. While added-value is created on
the plant floor, it is the resilience and dedication of the
entire team from the front office to the shipping clerk that
keeps us on track. Second is the satisfaction. All passionate
manufacturers truly care about what they provide, whether a
product or a service. There is an absolute satisfaction when
the parts going out of your plant meet or exceed your
customer's expectations. We all revel in the knowledge that
there is a PGS part on a car or a military vehicle.
Several years ago I wrote a letter to the employees of PGS
to note some of the trends I was witnessing. As you well know,
we were already in the midst of the recessionary events that
created such turmoil in our economy. To be optimistic and
energized with the economy falling fast is not an easy notion
to grasp. I don't want to dwell on what was, but I do want to
share a couple of paragraphs from that letter.
Excerpt from Letter to the Employees of PGS - March
5, 2007:
Mexico, Asia, and the Eastern Bloc have reined in
companies willing to expose themselves to cultures as a
way to survive, not necessarily a way to prosper. We
may relish the thought of potential growth outside of
our borders, but the answers to our current issues are
in our backyards. Over time the same concerns and
difficult questions will be asked, even if we buy a new
chalkboard today. The capability of an organization is
only as strong as its weakest member. Whether it is a
person, a factory, a division, or a technology. We are
all subject to the same scrutiny by our customers, and
therefore are subject to the criticism that may follow
in our wake. The recipe for success lies in the ability
to fix the ineffectiveness and inefficiencies wreaking
havoc on your core business.
The tides change. The wind shifts. The water ebbs and
flows. And the sun sets only to rise again. PGS has had
wonderful days, and yet these recent days have been
exceptionally slow. We will soon find growth and
opportunity at our doorsteps, and with the systems
recently implemented, we will have no hesitation to
open the door and let it in.
We arrived at our place within the automotive
industry be design. We do great things for great
companies. We work behind the scenes of our customers
who continue to waste millions of dollars in scrap,
rejects, and wasteful processes. We have tasked
ourselves to help them stop this absurdity. Our ideas
will help reinvent their successes as well as ours.
Then in 2010, I issued yet another letter, but this time
the ebb had receded and flow had begun for PGS. To share how we
accepted nearly every job, project, or opportunity that was
presented to us would seem boring to those that read this
testimony. However, I can tell you this, we worked hard,
maintained our sense of direction, responded with
responsibility and integrity and showed up every day to do it
again, and again, and again, and again....
There is an air of nostalgia when I think back on those
days. Please take a second to read these three paragraphs from
that letter.
Excerpt from Letter to the Employees of PGS - April
22, 2010:
Six months ago I began writing this letter, only to
see more revisions than the weeks that passed. I only
say this because you should know that the future of PGS
was uncertain and that caused a multiplicity of
indistinguishable rants on this keyboard. And so I
start with the past and then move us to the
future....The year was 2008 and the economy was on the
brink of disaster. In many ways it provided a test of
our resolve. How hard could our group be tested--and we
were tested unlike any time in our 27-year history. The
entire automotive manufacturing industry lay in ruin as
Congress and the American public questioned our
intelligence, our ingenuity, and our integrity.
Appropriate manufacturing techniques will need to be
employed by every player in this industry. Strategy is
not just doing it in-house or outsourcing specific
processes. The industry needs to challenge not only
what, but how they manufacturer. Designing for the
manufacturing process and working with the Tier I
companies to think similarly is not just a desire but a
prerequisite. They cannot merely react to a print or
spec, but actually suggest and participate in the
process. A rebirth of what's appropriate will surely
find its way to the engineering and product development
tables throughout Detroit.
So how will we all help? Cast no shadow on the
questions each of us asks for they are the power of our
future. Harnessing the power of success with innovation
and determination will lead our company and our team
into a very bright future and only we determine how our
future shall unfold by the course of our actions and
the strength of our spirit.
So here I am, writing to you as a Small Business
Corporation from the great State of Michigan through an
invitation that was started by our dear friends and colleagues
at Automation Alley in the city of Troy. They have certainly
found the recipe for networking companies to do business
together for all the right reasons.
I was asked what I thought may be an obstacle in my growing
manufacturing business in the coming months and years. What is
it that I think would help if the SBA could somehow assist.
Well, to be honest, it is a very deep and troubling question.
Is it the tax code or a specific request to repeal a new tax on
my company? Is it how we set-up our organization as an L.L.C.,
an S-Corp, or a C-Corp? Is it universal health care or the
bureaucracy in permitting and expansion projects? Should I ask
you to lift a regulation, or increase the Section 179 Expense
Election? There are a number of tedious and cumbersome personal
and corporate objectives that are laid out every day to your
group and other groups just like you. Indeed these are all
great questions and issues that you have no doubt taken up the
cause to either settle or fix.
At dinner parties or with friends and family at the
backyard BBQ, I find my thoughts and comments invariably
gravitating to two fundamental ideas--how do we incentivize a
US manufacturer to do business with other US manufacturers AND
how do we monitor and account for the waste that is the by-
product of every manufacturing site?
Idea #1:
Incentivizing one company to do business with another could
be one of the most intriguing demonstrations of U.S. policy in
years. Small Business Manufacturers based in the U.S. shall be
granted Certification as such. Customers willing to use these
companies as suppliers to their enterprise will be given a tax
abatement against their building taxes, because it is the
manufacturing building that houses the equipment and people
that produce the product. Although there is a specific and
unique formula that each city charges, their replacement funds
would come from the U.S. Government.
Giving federal tax incentive for work provided to a small
business manufacturer would stimulate the economy, continue to
assist more small businesses in gaining a better foothold on
their specific product/service, and keep these factors still
active and in the market. Market forces don't always favor the
Small Businesses. While I believe in the free market as much as
the next, there are times when assistance becomes not
necessary, but imperative. Tax incentives can create a call to
arms by even the largest of purchasing departments to focus
more attention on U.S. based Small Business Manufacturers.
Front line buyers are typically unaware how their
purchasing power can affect their community. Upper management
may consider how they save money through supplier consolidation
or shared product/material purchases. They may consider how
they better brand their product or push themselves into new
markets. Similar efforts are made on behalf of companies
certified as minority, women owned, veteran, disabled veteran,
8a, etc. So why not extend the same opportunity to U.S. based
Small Business Manufacturers (USSBM's)? Naturally, this would
be a short-term program that would create a heightened
awareness by purchasing departments of every large OE (original
equipment) Manufacturer because it would put money back into
their pockets through tax-based incentives and grow the very
core of the companies this Congressional committee represents.
Idea #2:
I cannot tell you how many manufacturing plants are self-
proclaimed zero-landfill facilities. My regular routine
involves the touring of some of the largest manufacturing
facilities in the world - some exceeding 2 million square feet.
One of the services PGS provides is the recertification of
components that would have otherwise been scrapped during the
manufacturing process. While touring these manufacturing
facilities I observe the thousands of plastic caps and plugs
that are collected and regularly sent to solid waste sites.
Plastic cups and plugs are utilized either for shipping
from plant to plant or as assembly aids. These caps and plugs
are used once as a way to either protect a seal, maintain fluid
in an assembly, secure a wire, or assist in protecting a
sensitive area during an assembly process. Quite literally
thousands of tons of material are annually sent to landfills as
a result of this seemingly innocuous process. We estimate
approximately twenty (20) million pounds of plastic sent to
landfills or dumps each year. Just because a plant has plastic
material removed from their site does not qualify them as a
zero landfill facility. Either they pay a waste company to
dispose of the product or they put in it a ``dump'', which has
a slightly different definition than a landfill. Regardless of
how they ``dispose'' of this product, they should not be able
to qualify themselves as zero landfill unless they have been
certified as such.
LEEDTM has become the standard for buildings
erected or modified throughout the country. It is now time to
establish a new standard for the manufacturing processes
throughout the country that incorporates the same need to
respond to environmental concerns. Plastic plugs and caps,
cardboard, metal, fluids and chemicals, waste from grinding
services, and by-product from non-traditional manufacturing all
require consideration in assessing opportunity to enter a dump
or landfill. Why not certify, via outside independent auditing
and government oversight, whether a plant or facility really
has done all that is possible to either reduce or eliminate the
waste product entering our soil.
Again, thank you for the opportunity to present this
testimony. I hope the two primary ideas I offered will be
respectfully considered by this Committee as reasonable and
possible. Further to this hearing I pledge my continued support
and vigilance to these ideas and look forward to your desire in
kind.
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