[Extensions of Remarks]
[Pages E1310-E1311]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

RECOGNITION OF EXTRUDE HONE CORPORATION

______

HON. MELISSA A. HART

of pennsylvania

in the house of representatives

Wednesday, July 11, 2001

Ms. HART. Mr. Speaker, I submit the following Wall Street Journal
article printed on Friday, July 6th. The story discusses the importance
of small manufacturers in our economy, and specifically talks about the
success of Extrude Hone Corp. in Irwin, PA. This company is located in
my district and produces a special abrasive putty to smooth metal
products. Along with thousands of other successful small businesses in
western Pennsylvania, Extrude Hone Corp. represents the hard work and
entrepreneurial spirit that helps to sustain and drive the American
economy.

[From the Wall Street Journal, July 6, 2001]

By Resisting Layoffs, Small Manufacturers Help Protect Economy

(By Clare Ansberry)

Irwin, PA.--Extrude Hone Corp. is one of the reasons that
the bottom hasn't fallen out of the U.S. economy.
Quietly, but profitably, the company is going about its
business: making machines that use a special abrasive putty
to smooth out rough edges on aircraft engines, fuel-injection
systems, artificial knee joints and heart valves. By itself,
Extrude Hone, which has a work force of less than 200 locally
and 400 world-wide, hardly registers beyond its rural
hometown near Pittsburgh and the large community of its
customers. But its broader significance lies in the fact that
it's far from alone.
Extrude Hone is just one of about 4,000 manufacturers in
this southwest corner of Pennsylvania, nearly all with fewer
than 500 workers. As a group, they employ about 170,000
people, and their payrolls total $7.1 billion annually. Most
are too small to show up on Wall Street's radar screen. But
these stealth manufacturers, principally durable-goods
makers, have an outsized impact on the nation's economy, and
many of them are showing surprising strength.

Layoffs vs. Hiring

Though there have been some recent signs of a pickup, the
durable-goods sector, which produces big-ticket items
designed for repeated use, has borne the brunt of the
manufacturing slump that began in the second half of 2000.
Many of the sector's publicly traded giants, such as General
Electric Co., Eaton Corp. and International Paper Co., have
responded by announcing major layoffs.
But despite all that, about 60% of south-western
Pennsylvania's durable-goods manufacturers plan to add
workers this quarter, according to a recent survey by
staffing agency Manpower Inc.
Why? Larry Rhoades, Extrude Hone's chief executive, can
cite several reasons. So can Kurt Lesker III, whose family-
owned company makes vacuum systems, or Robert Moscardini of
U.S. Tool & Die Inc., who has nearly tripled his work force
to 110 people since 1994 and whose board wants him to
increase it to as many as 500.
All three businesses have been understaffed in recent years
and have had to invest heavily in recruiting and training.
Mr.

[[Page E1311]]

Moscardini figures U.S. Tool & Die spent 3,000 hours training
workers last year, even paying an outside welding company to
help it in the effort. ``You figure every hour is worth $60
to $100,'' he says, ``That's a big investment. You don't just
let those people go.''

Eight Great Years

Nor are many small to midsize manufacturers elsewhere in
the nation rushing to cut back. Though some have had no
choice but to lay off employees, even many of those whose
business has softened are holding on to their workers, both
out of loyalty to their communities and employees and out of
fear that they will be left without much-needed talent when
the economy strengthens. And, without public shareholders
breathing down their necks demanding that they maximize
returns, they have the flexibility to eschew layoffs in favor
of longer-range business goals.
``They're not crying the blues because they had eight great
years,'' says Dean Garritson of the National Association of
Manufacturers, a trade group based in Washington. Most such
businesses keep overhead low, and their owners can still
afford to put ``dollars into the company,'' he says.
``They're less apt to let people go, and that creates a
stabilizing force.''

Upbeat in a Slowdown

And a significant one. Those largely anonymous businesses
account for about 9.8 million, or more than half, of the
nation's manufacturing jobs. And their seeming resistance to
layoffs helps explain why consumers, who are also employees,
have remained relatively upbeat, despite the current
slowdown.
Jerry Letendre owns Diamond Casting Corp. in Hollis, N.H.,
where he and his 50 employees pour molten aluminum into
shapes for high-tech pumps. Last year, his profits dropped
50% and sales fell 30%. But rather than make big layoffs, he
decided to hold off buying a new computerized milling machine
and dug deeper into his own pockets to rebuild inventory and
introduce new products. Twenty-five percent of his products
were introduced in the past 10 months.
``During good times you conduct yourself so you can
comfortably sustain not-so-good times like now,'' Mr.
Letendre says. And, he adds, ``I don't have Wall Street
calling me asking, `What have you done for me this week?' ''
Here in southwest Pennsylvania, industrial stalwarts such
as U.S. Steel Corp., Alcoa Inc. and Westinghouse Electric
Corp. drove the economy, spawning thousands of smaller
operations that were formed solely to supply and serve them.
Many of those operations dried up over the decades as
Westinghouse left town and steel's presence here shrank. The
small manufacturers that have survived the shakeout have done
so by keeping in step
Extrude Hone is one of them. Mr. Rhoades's father started
the business 35 years ago in the back of a tire shop. The
company's purpose was to polish rough edges and holes in
metal parts. Though that sounds like a minor adjustment, such
fine-tuning can greatly enhance a product's performance.
Having a smooth hole, rather than a jagged one, in a fuel-
injection system, for example, even when the hole is only
twice the diameter of a hair, can increase the flow of fuel
by 20%. That means improved fuel economy and lower emissions.
When it comes to heart valves and knee joints, the difference
means better blood flow and less chance of contamination.
When it comes to aircraft engines, it means more power.
And if the customer doesn't want to do that kind of work
itself, Extrude Hone will finish the parts for it in one of
its several shops around the world, from Ireland to Japan. It
also sells the proprietary putty used in its machines.

Exploiting Advantages

The fact that Extrude Hone is growing makes it an anomaly
among the nation's machine-tool producers, whose overall
sales have slumped since the late 1990s. In a recent speech
before a business group in Birmingham, England, where the
decline of heavy industry has paralleled that of
Pittsburgh's, Mr. Rhoades shared his company's survival
strategy with an audience eager to know how his manufacturing
business had weathered the U.S. steel industry's diminished
local presence.
The key, Mr. Rhoades said, was exploiting the advantages
inherent in being a small manufacturer. Having relatively few
employees, he said, helps his company to remain flexible and
stay close to the factory floor and customers. Making things
more economically, precisely or consistently isn't enough, he
told the group. A small manufacturer, he said, has to make
something distinctive and difficult for its customers to do
without, and that requires investing in new designs and
processes.
Mr. Rhoades spends about 15% of his company's sales on
research and development, a surprisingly high percentage for
a machine-tool maker. Many small and private companies are
conservative and cautious about spending, in part because
they don't have public investors to help them raise cash.
That's where being private has its limitations, he says. The
upside, he says, is that he is freer to focus on the long
term, rather than on quarterly results.
Mr. Rhoades's newest and most promising technology,
invented at the Massachusetts Institute of Technology, is a
process for custom-making hundreds of different parts using a
single machine. Rather than stamping a piece out of metal,
the new process uses a computer scan of a part to create a
copy of it, building it up layer by layer from a mixture of
powdered metal and glue, which is then fused in a furnace.
Mr. Rhoades says the process eventually could be used by
airlines or by auto shops that want to make replacement parts
on site, rather than waiting for them to be delivered.
And that's why he's hiring. He needs metallurgists and
people with computer and software skills, many of whom as
recently as two years ago wouldn't have considered working
for a machine-tool maker. ``It just got to an unhealthy point
where people were being drawn out of the work force and into
dot-coms when they could make a bigger economic
contribution'' by working in mainstream manufacturing, he
says.
Manufacturers create a local multiplier effect. They go
through a lot of nuts, bolts, grease and paper clips, often
relying on other local businesses and keeping their dollars
in the community. They use the local delivery service, the
local trucking company. Home sales here rose 41% in May, and
while there's no direct correlation between robust real-
estate sales and an uninterrupted flow of coated metal, it
can't hurt either.
Last year, U.S. Tool & Die spent $467,853 buying office
supplies, gloves, cleaning materials, fasteners, bolts,
grinding wheels, sanding belts and lifting devices such as
slings from local suppliers. Steel to make its products comes
from nearby Allegheny Ludlum Corp.
U.S. Tool & Die has survived by evolving. Formed about 50
years ago, it was engaged in the most basic aspect of
manufacturing: making parts under contract for customers in
the steel industry. In the mid-1970s, it began making racks
to store spent nuclear fuel. It didn't change its business,
remaining a contract manufacturer, but it changed markets
completely. Now, it has contracts all over the world.
While U.S. Tool & Die's Mr. Moscardini credits the
company's strong sales to dominating a particular niche,
others seem to be doing well, too. ``People I associated with
in metal working and manufacturing, everyone seems healthy.
We probably have 15 to 20 machine shops supporting us with
subcontract work, and these guys are all busy.''
John Ross, executive vice president of manufacturing at
Kurt J. Lesker Co.,
Last year, Lesker, which has 200 employees and $40 million
a year in sales, expanded its work force by 15%. This year,
Mr. Ross says, it plans to expand another 7%. He says
Lesker's biggest problem is a shortage of skilled workers,
such as welders and machinists.
A few years ago, Mr. Ross got together with some other area
manufacturers to discuss the problem. With the help of
Duquesne University in Pittsburgh and a local foundation,
they developed a training program aimed at people who had
planned to go to college and indicated an interest in a
career but had ended up in dead-end jobs. So far, Lesker has
hired about 15 graduates of the program, which is called
Manufacturing 2000, including Dan McKenzie.

More Earning Power

Mr. McKenzie, 27, had just finished a stint with the Marine
Corps and was working in a pizza shop. He saw the program's
ad for free training and jumped on it. Now, he works for
Lesker as a machinist and has taken some college courses
toward an industrial-engineering degree. As a result, Mr.
McKenzie, who made $8.50 an hour delivering pizza, has seen
his earning power increase substantially. The average annual
wage in the manufacturing sector here is $42,000. The sector,
which employs about 15% of the region's workers, accounts for
20% of the region's wages, according to Barry Maciak of
Duquesne's Institute for Economic Transformation.
Local companies paid $1,250 for each Manufacturing 2000
graduate and considered it a bargain. ``We don't have the
resources to train and recruit that larger companies have,''
says Lesker's Mr. Ross. Once it gets people, the company is
loath to lose them.
Moreover, the average age of machinists, welders and tool
grinders is 43, and welders rarely wait until they are 65 to
retire because their work is so physically demanding. So, the
company has to think about the future.
But Lesker also feels a loyalty to its work force, a luxury
many public companies can't afford. Kurt Lesker III, Lesker's
president, remembers sales plummeting after the fall of the
Berlin Wall dried up the company's defense-related business.
``We went through several years of break even. We could have
laid off. We decided to keep everyone because it had to get
better,'' he says. ``If it was a public company, I would have
been fired.''

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