[Congressional Record Volume 147, Number 96 (Wednesday, July 11, 2001)]
[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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