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Between a Rock and a Hard Place
You gotta build stuff. That's what makes middle America. Service industry doesn't build an economy. You gotta have "rust belt" stuff…heavy industry making steel, sending it down to the next guy. The cycle keeps the wheel spinning…
--Kevin Cadwalader, Sales Manager, REMco
Finches twitter in the elm outside my window. Winter's brown ivy hedge is gone, replaced by hand-sized waxy green leaves that spill over onto each other. Despite the frost on my rooftop this morning, spring's arrived. What shall I write about on a day like this, a day for kite-flying and bike-riding and turning one's SPF-50 slathered face to the sun? Vertical Shaft Impactors, perhaps? Just what you were thinking, right? Read on:
Good Afternoon Tina,
I work for a California, Bay Area manufacturer of heavy equipment, which is an oxymoron for California, let alone the United States. The equipment we build is used for heavy infrastructure projects (roads, bridges, dams etc.) which are mostly funded by tax payer dollars. The ironic thing about this industry is the intrusion of low cost, Chinese-made equipment into the market. Think about it. U.S. tax payer dollars collected from every day workers, have their tax money spent overseas, which will at some point affect their job and their ability to pay the taxes to build the infrastructure they want. We have a story to tell and would like to tell it to you. Please contact us.
Cordially, Rachelle Enriquez
REMco / Sales Support
My sole point of reference for heavy equipment (unless my vacuum cleaner counts) is repeated readings--with my kids snuggled beside me on the sofa--of Virginia Lee Burton's 1939 classic Mike Mulligan and His Steam Shovel. Hope that's good enough.
In Ms. Burton's beautifully illustrated book, progress threatens a steam shovel named Mary Anne and its devoted owner-operator, Mike Mulligan. In the good ol' days Mike and Mary Anne "cut through the high mountains so that trains could go through and dug the deep holes for the cellars of the tall skyscrapers in the big cities." But times changed, and "along came the new gasoline shovels and the new electric shovels and the new Diesel motor shovels and took all the jobs away from the steam shovels. Mike Mulligan and Mary Anne were VERY SAD."
Progress happens, the author seems to say, whether we like it or not. The next new thing bulldozes, so to speak, over once thriving livelihoods. But this is a picture book. All is not lost. To prove their worth, Mike Mulligan and Mary Anne dig a massive hole in the town of Popperville in "just one day." It's a triumph. The problem is, the hole's so deep that Mike and Mary Anne can't possibly climb out. Popperville decides to let them stay. The town builds its basement around Mike and Mary Anne and the town hall above them. Mike happily smokes his pipe and Mary Anne, smiling beside him, chugs steam into the furnace that keeps the town hall meetings warm. Past, present and future peacefully, respectfully co-exist.
Now imagine if the story had gone like this: "Then along came the new, made in China steam shovels and took all the jobs away from the steam shovels made in the U.S.A. Mike Mulligan and Mary Anne were VERY SAD."
How would this version of the story end? As her email demonstrates, Rachelle Enriquez sees where the heavy equipment industry is headed and is trying to do her part to change the outcome for her employer, REMco (Rock Engineered Machinery Company). REMco manufactures the equipment that makes the materials needed to create our roads, bridges, and dams. All those Mike Mulligan-ish bulldozers and cranes and mechanized shovels are part of the infrastructure-building team. But even more critical, it seems to me, are the VSIs (Vertical Shaft Impactors) companies like REMco make.
According to REMco's website, a VSI is "a mineral crushing machine that uses velocity and impact to reduce the size of minerals fed to it to a smaller size." REMco makes three types of VSIs. Each can be configured 30 different ways to "meet specific product requirements." Roads, bridges, dams, all infrastructure projects require materials unique to them. As my Dad would say, "Ya gotta have one of these. Period."
CEO Damian Rodriguez founded REMco in 1982. Over time, he's watched the steady influx of Chinese goods into the heavy equipment market increase. He says it isn't fair. "I'm happy to compete product for product. But it's not a level playing field. A Chinese company doesn't have to comply with any of our country's environmental restrictions."
Clearly Mr. Rodriguez wishes the U.S. government would do something to defend its domestic-made products. "When other countries sell to us, there's no barrier. When we sell to them, there's a 20-30% tariff," Rodriguez explained. "And yet countries like China do not comply with our specifications. It goes way beyond dog food and baby formula. If you buy a bolt, for example, in the U.S.A., it's grade 5 or grade 8, and you know what you're getting. If you buy a Chinese bolt, you have no idea…so many Chinese components don't comply with industry standards. They're way behind. There's a lack of awareness on the part of Mr. and Mrs. U.S.A. about the consequences."
REMco is the last surviving manufacturer of VSIs in California. Based in Livermore, California, REMco has 30 full-time employees--engineers, salespeople, and those who fabricate, weld, and assemble. The company also manufactures and sells heavy equipment in India and Brazil. "If we built it here and sent to India, we'd have to pay 22% in protectionist tariffs," REMco sales manager Kevin Cadwalader explained. Valued at about $10 million, REMco's considered "the small fish in a big pond." Some of REMco's competitors in this country, despite representing themselves as American, no longer manufacture here. "They can add an accessory that's manufactured here and the call the whole thing a product of the U.S.A.," a frustrated Cadwalader said. "Or Chinese suppliers will hire reps here to put an American face on their products."
As Ms. Enriquez's email says, state and federal governmental agencies purchase VSIs for taxpayer-funded projects all over this country. You would think REMco--or at least one of its competitors within the United States--would have a lock on this country's infrastructure business. Not so. Budgets are tight. The lower the cost, the better. Out with U.S.A.-made, in with the imports. But those less expensive Chinese-manufactured products don't always cooperate. If something breaks down on a piece of Chinese-made heavy equipment, Ms. Enriquez wonders who will repair it. Because REMco manufactures its equipment, she says, the company knows every inch of what it makes, and also manufactures replacement parts, should they be required. Repairs are a phone call away. "Who are you going to call in China if something goes wrong? Can you communicate with them?"
Getting back to my twisted version of the Mike Mulligan story, I guess it's easy to predict the outcome: those cheaper, Chinese-made bulldozers keep digging away--and cheaper, Chinese-made goods keep arriving on city-block-sized ships in Popperville and beyond--until all of America is in a hole and can't climb out.
But then I think about the small but mighty REMco bunch. They sound so determined to keep their California manufacturing facility alive and well. Maybe there's hope. At last month's ConAgg/ConExpo in Vegas--held only once every three years, it's the largest equipment exposition in the construction materials industry--REMco displayed a huge, custom-made banner with the heading: "The Real Cost of Buying Chinese."
Ms. Enriquez, who designed the banner, says it attracted attention and made attendees actively discuss the issue. Some promised to buy American equipment from here on out.
Look, I'm not in the market for a bazillion-ton Vertical Shaft Impactor. But the next time I notice a taxpayer infrastructure project around town, I'll see if I can find out who made the equipment. And if I'm ever stuck between a rock and a hard place, I'll give REMco a call. I'm pretty sure they'll know just what to do.