Business

Posted on Thu, Nov. 05, 2009

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For machine shops, it's a balancing act

BY RICK PLUMLEE

The Wichita Eagle

The squeeze on Wichita area machine shops is getting tighter.

No surprise.

Many have their work tightly wrapped up in aircraft, so that industry's troubles are cascading over the shops.

But that's not all.

Even shops that don't do a lot of aircraft and are more diversified are feeling the economy's effect. Regardless of a shop's stripes, many have cut back hours of operation and reduced their work forces.

"The next six or eight months will be the make-it or break-it for most shops," said Drew Hanus, part owner of Mockry & Sons Machine Co., which does about 70 percent automotive and about 20 percent aircraft.

He said it picked up for a few months, then tailed off as customers used up inventory.

At one time, Hanus said, Mockry's customers would order 150 to 300 parts at a time.

"Now they're ordering 25 to 50," he said.

There are an estimated 150 to 200 machine shops in the Wichita area, ranging in size and many second- and third-generation owned.

As owner of Professional Sales Services, Dennis Daugherty is in a position to see the broad view of what's happening. He sells machines to shops, so he's one of the first to feel the pulse — or lack of one.

He said that while 90 percent of the shops have some tie to aircraft, "it's all down. Agriculture, automotive, hydraulics, you name it."

"There's not one manufacturing base in our state that's strong," Daugherty said. "It's been devastating."

Some shops have closed their doors.

"It's the little guy, fourth tier down that's dead in the water," said Ellen Shofler, president of the Wichita Manufacturers Association and co-owner of Superior Tool Service with her husband, Steve. "The bigger ones outsource during good times, then when it slows down, they pull it back in so they have work."

Not all shops are pulling back.

Cox Machine, which puts 100 percent of its work in the aircraft basket, is getting ready to expand. In January, it will add 30,000 square feet of space.

"We're doing fine," chief technical officer Jason Cox said. "We cut back pretty early — about this time last year — and that preserved a bunch of cash for us."

Not just aviation

While aircraft is certainly the big player in town, there are other industries that draw on machine shop work.

Youngers and Son Manufacturing does very little aircraft work. The 36-year-old company focuses on serving some of the state's other top industries, including agriculture, oil and gas and construction.

"All across the board it's down," said Wayne Youngers. "The ag industry has been good, but with commodity prices down, we're starting to see the effect."

But this isn't his first spin through a recession. He and his brother, Neil, have been involved in the company their father, Gerald, founded since 1980.

"I remember the 1981 recession," Youngers said. "It was somewhat like this. Developing new markets is the challenge."

But he said a shop has to be careful about how it goes about landing business.

Customers know that shops are champing at the bit to grab work, Youngers said, so the bidding has become even more competitive.

That can also result in a shop underbidding on work, which can cause the shop another set of problems.

"You have to be careful not to fill up on a whole bunch of cheap work," Youngers said. "Even though there's some work out there, a guy has to be careful."

Cox said his company is trying to go after that work without cutting its profit margin too thin.

"We're attempting to cut our costs and leave our margin where it is," he said.

Trouble trickles down

Trouble doesn't stop with the shops. It trickles down to other industries, such as those that provide machines and tools to the shops

Superior Tool Service, which makes tools for shops and manufacturers, has 75 percent of its work tied to aircraft. Steve Shofler said his company's remaining work is diversified, ranging from those that make pool cues to race cars.

"Aerospace is king," Shofler said, "but you have to look to do different things."

Making special tools for shops that deal with composites has also increased the last few years, he said.

Composites are also part of the medical field. Current research being done in Wichita could lead to a new generation of medical devices and implants made of composites.

"Hopefully, some of that will come our way," Steve Shofler said.

Daugherty said an untapped work source for shops is the medical industry.

"The medical field is still strong," he said. "But we don't have anyone building medical parts."

Daugherty said the types of machines medical manufacturers buy are similar to those sold to aircraft.

"I think it would be a natural adjustment," he said.

But Mockry's Hanus said medical is a hard industry to crack, in part because the federal certification process is very extensive.

Mockry is finding ways to stabilize.

"We do anything we can get our hands on," Tony Mockry said.

And that includes aircraft. The company recently obtained a certification to do aircraft and last week landed a contract.

With sales of new machines flat, Daugherty has also had to find ways to create new revenue streams.

He said his company has always serviced the machines it sold to customers.

"But now it's taken on a life of its own," Daugherty said. "We're working on all makes and models of machines.

"It's a pretty thin lifeline. We're just hanging by our toenails."

Reach Rick Plumlee at 316-268-6660 or rplumlee@wichitaeagle.com.