House Committee On Small Business
"Lost Jobs; More Imports The Unintended Consequences of Steel Tariffs"
September 25, 2002
Good morning. It is indeed an honor to appear before this committee. My name is Chris Dowding. I am the President of Dowding Industries, Inc., with locations in Eaton Rapids and Springport Michigan. I am second generation of our family's business, which my father started in 1965. We are a steel "user", employing 150 employees. We purchase nearly 7 million dollars worth of steel that is turned into products for the diesel and automotive markets. Our customers include such companies as Cummins, Caterpillar, TRW and Borg Warner.
The Section 201 steel tariff is having a devastating effect on my business. While we as steel "users" want steel "producers" to be state side. I, as a small business now feel like I am David, facing the immense stature of Goliath. As a small business, we do not want the steel producers as our foe. We want to join with our fellow Americans and find solutions to help support the ailing steel foundries. Solutions that do not put the American steel "users" at risk of extinction. Solutions that do not pit 59 steel "user" jobs against 1 steel "producing" job. We need to join forces with a solution that does not put us at odds against one another. There are enough economic constraints facing American companies against global third world competition, such as rising health care costs of 25-30% per year….. Lets NOT sustain, yet another.
We understand that President Bush has his door closed to this issue and in light of the terrorism facing America, I understand the priority. However, President Bush, we pray that you will open your door and hear the voice of the small business steel "user". I am fighting for the survival of not only my company, but the survival of my industry, for businesses all over America. I am fighting for the long-term jobs of my employees, not the next election vote. And, my concern is, how do we get this message directly to President Bush?
God has blessed my father's business and we have worked hard at trying to make good business decisions and investments. As second generation trying to pass on my father's dreams, I graduated from Northwestern University in 1990 with a Masters in Management. We have made a commitment to come out of every recession better than when we went in. We invested in our people through two training grants with our local community college. We have purchased the latest technology in the world, in both laser and machine cutting. We have purchased run-down factories and invested nearly a half million dollars in their renovations. We have survived the economic downturn in the Heavy Truck industry and we were "NOT" one of the ones on the auction block in 2000-2001. My father's dream has been to develop our community and provide jobs for Americans, not move our company abroad. However, due to the steel tariff, we have begun conversations with a Mexico based company. Please understand, this is not in our five-year objectives or goals. However, if that is what it takes to keep our family business on-going, we will pursue it, verses the alternative, which is the elimination of it.
We are seeing an average of 16 to 20% increases in material prices, (with some as high as 66%) or a $50,000.00 per month cost impact. On an annualized basis, this equals more than three times my entire company's profits for either of the last two years, 2000 and 2001. As if piece price wasn't enough alone, we are faced with longer lead-time, premium charges and line down costs due to unavailable material. As a small "user" business, we buy steel through service centers. Before the tariffs were imposed our lead-times on steel use to be two to four weeks. Current lead-times are as much as four to six months and deliveries and quality are unreliable. Recently, a written promise date by our steel supplier was later denied with an, "I'm sorry, we can't do that after all". Upon notifying my customer, we were threatened with "line down charges" which range in the hundreds of thousands of dollars. The only way we were able to avert these charges was by paying a $16,000 premium for expedited delivery of "foreign material". Dowding Industries can not pass these type charges, or material price increases on to our customers, nor can we afford to pay such increases. In fact, our customers demand a 3-5 percent cost reduction each year. We are caught in a pricing squeeze. When we can not give our customers the cost reduction they demand, they go elsewhere. We are being forced to have competitive prices for products produced in Vietnam, Taiwan and Mexico, or lose the business. We are all aware of the un-level playing field when pitted against third world countries, now add steel prices. And I ask, how is the small "user" company supposed to have the ability to play in this arena, any more than the steel producers?
The steel tariffs have brought us to the point that we are now seriously considering moving some of our production to Mexico. We cannot continue to operate when our profit is eroded to a point it doesn't justify the business any longer. This could mean the loss of 150 jobs in Mid-Michigan. That impact extended to our suppliers and their employees is enormous.
Mr. Chairman, all we're asking for is an opportunity to stay in business and remain competitive in this global economy. Without a reliable, competitive supply of steel, Dowding cannot be a successful small business. I am confident there is another solution to help the ailing steel industry without victimizing the small businesses and their employees. President Bush, lets talk!
Thank you, Mr. Chairman for this opportunity to present my views.