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Sunday, 12 October 2014 22:00

West Michigan manufacturers see growth opportunity in exports

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Grandville-based Workhorse Irons LLC, a manufacturer of tattoo machines and inks, has seen international sales increase to about 40 percent to 50 percent of its business, depending on the season, said General Manager Johnny Clausen. “Over the last few years, the world has gotten to be a smaller place, so it’s a lot easier to connect and interact with customers,” he said. Grandville-based Workhorse Irons LLC, a manufacturer of tattoo machines and inks, has seen international sales increase to about 40 percent to 50 percent of its business, depending on the season, said General Manager Johnny Clausen. “Over the last few years, the world has gotten to be a smaller place, so it’s a lot easier to connect and interact with customers,” he said. COURTESY PHOTO

When Workhorse Irons LLC formed in 2003, it had little indication that exports would become an integral segment of its business.

But as the Grandville-based manufacturer of tattoo machine products and tattoo ink grew its client base, it found an increasing number of sales coming from international markets.

The company began exporting small quantities of product in 2004 and since then, international sales have grown to 40 and 50 percent of the company’s business depending on the season, said General Manager Johnny Clauson. Workhorse Irons exports its tattoo machines throughout markets in Russia, Scandinavia and Asia.

“With the amount of business we have coming from exports, it definitely supports everything we do and allows us to reach that much larger of an audience,” he said. “Over the last few years, the world has gotten to be a smaller place so it’s a lot easier to connect and interact with customers.”

Workhorse Iron’s story is typical of a growing number of West Michigan companies that have seen export sales making up more of their bottom line. Currently, the company is developing relationships with distributors in previously untapped portions of Europe and predicts its exports to grow approximately 10 percent in 2015, Clauson said.

Across the region, exports increased 42 percent to approximately $7.9 billion last year, up from $5.6 billion in 2012, according to recent metropolitan data from the International Trade Administration (ITA).

The Grand Rapids metro area saw the largest spike, rising 66 percent from approximately $3.2 billion in 2012 to $5.3 billion last year. By comparison, export values rose 14 percent for the prior period in Grand Rapids.

Much of the jump can be attributed to substantial pent-up global demand given the slow economic recovery, said Kendra Kuo, office director of the ITA’s U.S. Commercial Service in Grand Rapids, who noted that exports have steadily risen since the recession before taking a substantial leap in 2013.

“People are more comfortable with exporting than they were before,” Kuo said. “Before, there may have been a hesitancy to figure out what the regulations were, but now U.S. manufacturers see the value in looking to other countries for these growth markets.”

Gains in the automotive, food processing and consumer goods sectors have driven the majority of West Michigan’s improving export market, Kuo said.

FINDING GROWTH POCKETS

With the global economy generally strengthening over the last year, some manufacturers of higher-end niche products have found an emerging market among growing pockets of wealthy international consumers.

As a manufacturer of luxury designer furniture, Kindel Furniture Co. LLC depends on its exports to reach beyond the limited domestic market. The company generates less than $10 million in annual sales and approximately 15 percent of that is attributed to exports, said CEO Rob Burch.

Kindel Furniture exports throughout the Middle East, Europe and to rapidly growing markets in Russia and Asia — where a new class of wealthy consumers is emerging, he said.

“Exporting is huge because of the market we serve,” Burch told MiBiz. “We are a luxury brand manufacturer, so we have a very small market segment anyway. We have to find as much of that market around the world as we can.”

Export values from West Michigan’s furniture industry rose about 75 percent from approximately $383 million in 2012 to $671 million last year, according to the ITA data, which does not break down the numbers between office furniture and home furniture.

One contributor to export activity has been an increase in globalization across the automotive industry, sources said. As automakers push the same platforms across all their global markets, the supply chain sees both opportunity and risk in expanding to meet that demand.

Some suppliers, such as Mann+Hummel USA Inc. in Portage, added capacity to support domestic OEM clients’ international production. The company recently added 220,000 square feet of production space to accommodate its growing global business, as MiBiz previously reported.

“We’re quoting companies with global platforms where they’re using the same parts around the world and they want them to be built the same in different locations,” Timothy Zajac, director of finance at Mann+Hummel, told MiBiz for a report last month. “You just can’t supply the North American (market). You have to have the capability as a company to supply five different continents the same parts.”

INFLATED NUMBERS?

While the export values have increased in recent years, not everyone is convinced that the trend will continue.

Gerry Simons, a professor of economics at Grand Valley State University, said pent-up demand from the recovering global market likely artificially boosted export figures, creating a short-term spike that’s unlikely to continue.

Uncertainty in markets in Asia and a currently sluggish European Union economy all point to export sales not being as strong in 2014, Simons said.

“I think 2013 was an exceptional year because of all the weakness beforehand in the global economy,” he said. “We still have that weakness, so I’m not as optimistic that 2014 will be that good in terms of an increase.”

While increasing exports may seem like an easy way to increase the bottom line, navigating trade barriers, building in adequate production time, forming relationships with international distributors and a host of other issues — including cost — can pose challenges for companies looking to export, sources said.

“We really have to make sure we are staying on our game with connecting with the right contacts and distributors and shipping products appropriately,” said Clauson of Workhorse Irons. “If we mess something up, we cover all that so obviously there’s more cost dealing internationally than in the States.”

RESOURCES APLENTY

With manufacturing exports supporting approximately 275,000 jobs across the state, according to ITA data, federal, state and regional organizations have been keen to develop programs to support and promote further export growth.

The Michigan Economic Development Corp. (MEDC), Van Andel Global Trade Center, Michigan Small Business Development Center, and U.S. Department of Commerce counsel regional manufacturers on various ways to maneuver through the international market.

Beyond providing advice, the MEDC offers grants to qualifying companies through its State Trade Export Program (STEP). The funds cover some of the costs associated with attending international trade shows or conducting foreign market research, for example.

While the number of companies seeking STEP funds decreased from 209 in 2013 to 182 this year, the exports sales of companies assisted by the MEDC are expected to reach $200 million by the end of the year, up from about $132 million last year, said Deanna Richeson, the director of the MEDC’s Export Office.

Along with trade barriers and various other challenges, there’s also concern that the improving domestic economy is a “double-edged sword” that discourages companies from turning their attention abroad, Richeson said.

Going forward, the impact of globalization has made exporting essential as international companies jockey for market share both in the U.S. and other parts of the world, Richeson said.

“Business is global,” Richeson said, “and if our Michigan companies aren’t out there with their products and services, their international competitors will be.”

Sidebar: West Michigan’s exports grow

Historically, Michigan’s export market has been dominated by the larger and automobile-intensive area of Southeast Michigan. But West Michigan’s international business activity is showing signs of life, too.

While the Detroit metro area’s $53.9 billion in exports accounted for approximately 71 percent of the state’s market alone last year, West Michigan has steadily grown its share of Michigan’s exports, according to the latest International Trade Association data.

West Michigan’s share of the state’s exports reached approximately 10.2 percent in 2013, up from 7.7 percent the year before, according to the data.

 

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