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Car trouble hits Haas – Oxnard toolmaker revamps strategy after layoffs

By   /   Sunday, May 10th, 2009  /   Comments Off on Car trouble hits Haas – Oxnard toolmaker revamps strategy after layoffs

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When the global economy crashed last fall, Oxnard-based Haas Automation found itself in the middle of the worst crisis in the history of American car-making.

Demand for its machine tools plunged 60 percent and Haas had no choice but to cut 400 workers — a quarter of its employees.

But here’s where Haas and General Motors, Ford and Chrysler part company. With no debt, a diversified product line and growing relations with global car brands, Haas thinks it can get through the worst of the economic meltdown and prosper when the car business turns around.

“If people aren’t going to buy Chrysler and GM cars, they’re going to buy somebody else’s cars — and they’re going to need machines to make those cars,” said Bob Burrows, Haas Automation’s business manager for North America.

Over the years the privately held company has expanded its customer base to include automotive industry suppliers who make parts for a variety of international car-makers, including Toyota, Honda and BMW. Meanwhile, America’s big three auto companies have turned more to their own suppliers for machined parts, ultimately demanding fewer tools from Haas.

Although American car-makers account for 65 percent of Haas’s auto-related sales, the foreign car-making suppliers have been increasingly interested in buying American-made machine tools. That’s mainly because more and more car manufacturers have set up plants inside U.S. borders in recent years.

“It’s been difficult in the past to penetrate [foreign car markets] because most of the decisions ended up being made in the home base,” Burrows said. “But in the last year and a half, that’s kind of changing and easing up. A lot of them before were shipping their machines from Japan and Korea to here. And now with currency fluctuations and with the cost of shipping machinery, they are looking for more local sources.”

Still, the skid of American car sales has hit Haas heavily. Burrows said last summer, that Haas was selling 1,200 to 1,600 machines a month. Now, it’s been holding steady at 500.

In addition to layoffs, Burrows said Haas has done away with overtime pay and also shuts down its manufacturing operations one or two Fridays every month.

The company now employs about 1,000 people at its Oxnard headquarters and is ranked as the fourth largest private company in the Tri-Counties based on 2008 revenue, which for Haas was $927 million.

The cutbacks coincide with plummeting car sales nationwide. According to Westlake Village-based research firm J.D. Power and Associates, new vehicle retail sales for the month of April are expected to be 33 percent lower than the same month a year ago. In March, light vehicle sales were 37 percent less than the same month in 2008.

But Burrows said not all news has been bad news for Haas lately. He said his company is actually in a prime position to gain market share.

“Indications from the sources that we have is our market share is up a few points already, and also we hear rumors of a lot of competitors having a lot of real tough times right now,” Burrows said. “We’re still pretty healthy — being a debt-free company has helped us out a lot.”

Haas’s extremely diverse client portfolio has also helped the company navigate the economy’s slippery roads. Car-related machine tool sales account for about a quarter of Haas’s business — the rest is spread out over aerospace, defense, health care and essentially any other industry that requires manufacturing. It calls organizations such as Nike, NASA, Boeing, Northrop Grumman and Baxter its customers, among scores of others.

And while Burrows said almost all industries have seen declines, a few customers are holding their own.

“The only industries that I’ve seen doing extremely well are gun companies,” he said. “They can’t make them fast enough. They’re working three shifts seven days a week and ordering more machinery.”

Haas Automation’s other good news is that its owner, Gene Haas, who has served 16 months in prison after convicted of tax evasion, is scheduled for early release May 10. Whether he’ll be able to engineer a turnaround at the company is up for debate.

Burrows couldn’t say when Haas’s overall drop in sales would turn around, but he’s optimistic that things will be all right in the end. He noted that because Americans scrap more cars annually than are produced, there may be a surge in demand down the road, which will mean big business for Haas.

“We’re scrapping about 12 million cars a year. If you’re scrapping 12 million and you’re selling 9 million, after a few years, those cars are going to have to be replaced,” he said. “It’s a matter of shifting who’s going to get that business. And the transplant companies — the Korean transplants, the Japanese transplants, the German transplants — are setting up factories here.”

J.D. Power and Associates is also optimistic about car sales and expects 20 million units to be sold during the next five years. Experts there said in an April 23 press release that the uptick in demand will be driven primarily by an increase in the number of households, consumers returning to the market, an improved credit environment and an improved economy that will yield “enhanced consumer options in the automotive market driven by new-vehicle launches.”

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