Current Issue

Metals supply chain executives reconvened in Phoenix for the FMA Annual Meeting in February.

Tariffs and trade wars, inflation and interest rates aside, the future of the American industrial economy is quite bright. That was the consensus of a panel of supply chain leaders at the FMA Annual Convention in Phoenix in late February. 

Alliance Family of Companies’ Drew Gross was joined by Ed Grand-Lienard of Special Products and Manufacturing; Ludlow Manufacturing’s Todd Ludlow; and Kirk McCauley of American Engineering and Metalworking to discuss the topic of preparing your business for tomorrow. The men agreed that tomorrow is indeed promising. 

“We are definitely optimistic about the future. American manufacturing is on the way back. Onshoring will occur. The Trump bump will occur,” said Grand-Lienard, whose Rockwell, Texas-based company is a precision sheet metal fabricator and manufacturer.  “It will take time, but as an organization you need to have a vision for the future and what it is you want to go for.”

“We’re definitely optimistic. We might be a rarity, but we’re on track to double in size this year. We’ve got a giant order in data power conditioning world, and we’re spooling up,” said McCauley, president of North Canton, Ohio-based AEM. 

Gross, the COO and president of Alliance, Gary, Ind., said the road won’t always be easy. “There are going to be changes. There is going to be adversity, things you have to work around. Some of these markets are not strong, currently, but then you look at data center, power generation, power distribution. There are gems.

“I challenge everybody to flip over the rock. To learn about a new sector you haven’t been servicing.”

The panelists weren’t too worried about the threats of tariffs, thinking they had navigated through the first round in 2018 and can do so again. 
“As a fabricator, we’re fortunate that when you talk about tariffs, we’re positioned to where they don’t affect us as they might affect others, in the way we negotiate with our customers and how we organize on a quarterly basis – pass through pricings,” said Grand Lienard. 

Ludlow concurred. “We negotiate on a quarterly basis. We bought some steel in December. Last time, we were able to pass most of them through.”

“We’re all going to get through it together. I shoulder the brunt of it to my good suppliers that pay their bills. The last edition probably cost $250 to $300 grand in pure profits that I didn’t pass through,” said McCauley. “My other opinion on where we sit today –macroeconomically, ag, construction equipment, automotive, biggest consumers of steel, they’re flat or down. How can this stick?”

Gross said the industry needs to look at the larger picture. “The bigger question is, what are we doing to protect American manufacturing. We need to bolster American manufacturing. We have to make sure we can be competitive and we need to make sure we’re set up for long-term sustainability.”

A similar mindset has to govern individual companies. Ludlow acknowledged that his company needed to make a major overhaul five years ago. Trying to figure out why his organization was struggling to get material out the door, he realized the culture at Waukegan, Ill.-based Ludlow Manufacturing was lacking. 

“Culture starts at the top, and unfortunately that was me. Our culture wasn’t good. We did an employee engagement of red, blue and green. Of eight different things we surveyed, seven of eight were red,” he admitted. “This year’s survey, seven of eight were in the green. Everyone on the team is willing to put in the time and effort to get it done.”

One key to success is knowing who you are. “There have been a lot of iterations of Alliance Steel over the last 20 years. You can’t be in that state of not knowing who you are,” Gross said. We’ve created a culture behind it. Our employees get excited about it. Through a series of processes, you can accomplish what you set your mind to.”

Kuehl: Consumer Must Do Part
It’s generally understood that two-thirds of American GDP is driven by the consumer. And that’s been true for decades. 

Economist Chris Kuehl pointed out the downside of such a fact during his closing talk at FMA Annual Conference. 

“This country for the last 50, 60, 70 years has favored the consumer, but it came at a cost. It came at the cost of manufacturing capabilities,” said Kuehl, who regularly wraps up the conference.

Kuehl said the approach in the United States is unusual, even among other advanced economies. Elsewhere, people are aware of where goods are produced, and tend to prefer locally made products. 

“We don’t. We buy from Wal-Mart, where it’s cheaper because it’s made in Myanmar,” he said. “If you were worried about U.S. manufacturing, you wouldn’t be shopping at Wal-Mart.”

Now, we’re trying to reverse those years of neglect, which tariffs can play a part of. But so too will the average Americans’ willingness to accept the consequences of that reversal.
 
“If we do make it here, we don’t pay what they do in Myanmar. We don’t pay what they pay in China. We don’t pay what they pay in Mexico. Therefore the products are going to be more expensive and the consumers are going to bear the higher cost,” he said. 

And that is already a problem given the nature of the most recent recovery. He noted how economists love to give names to recoveries based on their shapes – Ws or Vs or hockey sticks. The most recent one was called a K.

“The upper part of the K, the population making $100,000 or more, has barely felt the economic decline at all. They’re still spending,” he said, noting that while prices were going up, they were also experiencing gains in the market. 

In contrast, the bottom third “has been crushed by inflation. Those making $50,000 or less can barely keep up with their bills.”

And the middle? As long as they stayed employed, they were fine, he said. 

Kuehl also spoke of the current and pending manufacturing worker shortage and the lack of attention to it. 

“It’s tragic. There’s been virtually nothing done. By the end of this decade, the entire boomer population will reach retirement age and we’re not ready,” he said. “If 76 million pull out of the workforce, we’re in trouble.

He pointed to Japan as an example of the future the U.S. faces if it’s not addressed. And the way it needs to be dealt with is immigration. 

“We need to somehow approve our appeal to the right kind of immigrant. We have this anti-immigrant attitude. What we do want is the skilled and educated immigrant. It’s a contest now [between advanced countries] that’s going to be fairly intense.”

[Sidebar:]
Lewis Honored as Steel Executive of the Year
Reliance President and CEO Karla Lewis was named the Steel Executive of the Year by the Association of Metal Processors and Distributors. Her selection was announced during a reception at the FMA event.

Lewis becomes the 67th winner of the award, the oldest in the steel industry. She joins many other luminaries from throughout the supply chain, including Steel Dynamics founder Keith Busse, Cleveland-Cliffs CEO Lourenco Goncalves and the 2023 honoree, Worthington Steel’s Geoff Gilmore. 

Lewis has been with Reliance, the country’s largest service center business, since 1992. She began as the company’s controller and was promoted to vice president in 1995 and executive vice president in 2002. 

In January 2021, she succeeded James Hoffman as Reliance’s president and CEO.  

Reliance is, by far, North America’s largest service center company, with 2023 sales of $14.8 billion. The company employs more than 15,000 men and women in 315 facilities across North America
Lewis was not in attendance at the event due to a prior commitment. The award was accepted on her behalf by Carlos Borjas, president of Reliance subsidiary Feralloy Corp. 

The AMPD is the successor to the Association of Steel Distributors, which founded the award in 1956.