The Price School – USC Center for Economic Development regularly meets with manufacturing business owners, managers and service providers on behalf of AMP SoCal to learn how the collaboration can support the region’s companies – building a stronger, better Southern California. AMP SoCal Industry Profiles offer a glance at different businesses and the range of concerns, solutions and best practices that local manufacturers encounter every day.

 

 

Q: Can you tell us about the evolution of ACE Clearwater?

KJ: ACE Clearwater is a third generation family-owned business, which my grandfather Ray Wyckoff started. He set up a welding shop behind his house in El Segundo, mostly welding coffee pots and the odd repair jobs here and there. One day he got a call from a friend at Aerojet to bid on a small metal basket that was part of an ignitor used to start jet engines at the time. He got the job for thousands of them at thirteen cents each. When asked the name of his company (which didn’t have a name) he blurted out “ACE welding,” and that was the start of ACE.

My dad Tim Dodson learned to weld at Ray’s shop, and started bringing in orders through friends who worked at McDonnell Douglas and Garrett AiReasearch. Eventually he took over ACE with a strategy to acquire machining and tube-bending capabilities to enhance what ACE could offer the customer and move up the value chain. ACE Welding bought one of its biggest vendors at the time, Clearwater Tool and Die, a large drop hammer metal forming facility in Paramount and ACE Clearwater Enterprises was born.

Most of our growth has been organic, except our largest acquisition of Honeywell’s metal forming business. We are one of their largest vendors, and one of our core competencies was the forming operation, so they contacted us and asked if we were interested in buying their metal forming division. We invested nearly $5 million in the deal, most of it being the expense of relocating a lot of heavy equipment. The acquisition included 680 part numbers that they built internally, and about 25 employees.

Q: What is the company’s philosophy? Moving forward, do you feel like that is the vision you will continue?

KJ: Through our evolution, it has been important for us not to lose sight of our core competencies: the forming and welding of exotic materials. Everything else is a support function. We do not farm out just machining or bring in just machining; our machine shop is just to support the parts we are making internally.

GJ: Yes, our philosophy has worked so far. We have thought about getting into composites, but that’s not what we do. Our vision is that we are going to continue making things out of metal because it will be around for the rest of our lifetimes, but we can invest in other technologies that make doing this more efficient, whether it is cutting technology or modeling technologies.

Q: What distinguishes ACE from its competitors?

GJ: ACE is unique because we do everything under one roof. So when we go into a negotiation for a part, the customer will come to us and say, “you are 15% more expensive than your nearest competitor,” and we will say, “that is true, but our nearest competitor is outsourcing 50% of what they are doing; so do you want parts, or do you want problems?” That has always been our strategy. If there is something that we think we can do better ourselves and it justifies the cost, then we will invest in it. We don’t have a board to go to; we discuss and make decisions ourselves. We also pay our employees well and provide a good working environment: we know most people’s kids and do what we call management by walking around. We have a very high retention rate and hardly anyone leaves.

Q: Can you share some general impressions and thoughts on the outlook and future of manufacturing in Southern California?

KJ: I think California has a competitive advantage over other parts of the country when it comes to aerospace manufacturing. We still have an incredibly great infrastructure in place, and by that I mean our processing houses. ACE does almost everything internally, except for outside processing, so we still have a large ecosystem that other states do not have.

Q: What are some realistic steps that we could work towards to improve the business or regulatory climate?

GJ: I have no problem with some regulation, it’s over regulation and the lack of sunset clauses (which allow lawmakers to review the unintended consequences of some of their decisions). It is important to revisit what the cost of the regulation is and to figure out effective ways to deal with the true impact.

KJ: Many of the regulations are redundant. They are always changing and don’t always live up to their promises.  Regulations disproportionately affect manufacturers compared to other industry sectors, which is compounded for small businesses because we don’t have the economy of scale.  The cost of having have an environmental director, an environmental attorney on the outside, and two environmental consultants as well as a compliance officer is money that could be invested in our people, or our capabilities, and facilities.

Q: What trends do you see related to price pressures from OEMs?

GJ: OEMs are dealing with the same issues; Honeywell is dealing with the Boeings that are demanding price reductions, Boeing is trying to sell the planes to the airlines, and airlines want the prices down – and that’s the way it works. There is always going to be some give and take, but we are under a serious pressure. Gradually things have lean out; you have to become more efficient and invest in new technology to stay ahead of the game.

Q: Where do you see the opportunities and what macro trends do you see in regards to commercial air, defense, and the drones and satellites industry?

KJ: We are very optimistic in terms of the defense side of the industry. I think there will be a lot of investment by the United States into the military, especially in non-traditional technology like autonomous drones, which will make the military stronger and more robust. We will be the recipients of this new investment and are excited. On the commercial side, there is a lot of growth with the new efficient engines, as well as additive manufacturing, otherwise known as 3D printing.

GJ: The commercial side provides an opportunity because as fuel gets more expensive, airlines will look at more efficient aircraft and at re-engining in some cases.  On the military side, we make a lot of spares, and a large portion of that is for foreign military sales. We have a lot of aircraft that are grounded right now because spares have not been funded and they are running out, so the demand for spares will increase.

Q: Could you talk a little bit about the skills-gap in the workforce and any relationships you have with community colleges?

KJ: About 15 years ago we saw that society was encouraging young people to go to a 4-year college or university, and knew that the baby boomers were going to start retiring. We worried where we were going to get the talent that we need to compete in this global market, so we started developing relationships with schools. These include Hawthorne High with Project Lead the Way, El Camino and Cerritos Community Colleges, and Southern California Regional Occupational Center. We now have some strong relationships, but one issue is that the schools were a little late in reacting to the declining manufacturing workforce. So we are dealing with the skills gap and competing for talent with other industries. I think that is one of our biggest challenges because there are a lot of job options to choose from now. For instance, with the aging population, the medical field is quickly expanding and you can see its presence on community college campuses. You also see automotive shops and nursing programs on the campuses, but you don’t really see manufacturing because that’s not where the latest technology is being funded. So there are many factors that make it hard to attract people to manufacturing, but we offer paid internships, tours, send ambassadors to the classrooms, and we host Manufacturing Day. We have also donated equipment and talent to several local community colleges.

Q: Is there an image problem with manufacturing, which inhibits younger students to consider it for a profession?

KJ: I definitely think there is an image problem, and that’s why it’s so important for students to come to our factories and see what we are doing firsthand. Most of them have lived in this virtual world their whole lives, so they want to touch something, make something, and see what they can produce at the end of the day. When you look at what Elon Musk is doing with SpaceX, or Jeff Bezos with Blue Origin, or Richard Branson and Virgin Galactic, this is cool outrageous stuff. We actually build parts for all three of those companies, and it is our responsibility to share that story with our employees and remind them that what they do really matters.

GJ: If you go to the Air and Space Museum in D.C., I can point out parts with ACE Clearwater stamps on it; it’s pretty cool when you see the mark, but we have to keep reinforcing that. The biggest challenge for us is the workforce: finding them, training them, and keeping them. One of the best things we have done is to pay for continuing education; we pay the entirety of the education bill. Now we have people being trained at colleges and trade schools to learn CAD modeling or anything related to the job, and they come back pumped; they are taking on more responsibilities and making more money.

KJ: We also have a recruiting bonus of $500 cash, so getting new employees through word of mouth has worked really well. The whole reason we have a Facebook page is to show that this a good place to work; our website is also used as a recruiting tool. Many of the new hires say, “I love your Facebook page and I love what you are doing on your website; it looks like a really cool place.”

Q: With a look at the next decade and beyond, what are some things about California that will keep investments coming and enable manufacturing to continue to innovate?

GJ: The legislature is starting to use the word manufacturing again because they have finally realized what we have been telling them for a long time: manufacturing creates and sustains the middle class, period. Our parking lot has new cars and our employees are buying homes. There is good infrastructure here and Elon Musk is bringing in strong brains and reinvigorating the aerospace industry, and that trickles down to us. It is a great state, but we need good, high paying jobs. I think there should be a tax incentive for new equipment investments and incentives for companies to hire; the state should value manufacturing because of the multiplier effect that is associated with it as well. California is now realizing this, I have talked to many workforce development programs and they ask, if we train welding, what kind of welders do you want to see around?

KJ: I think that those of us who have been in California our whole lives perhaps take for granted all of the resources we have in this state that others don’t have. There is a spirit here that anything is possible. If you can be a manufacturer in California, then you can make it anywhere. There is something about our state that I don’t think exists in other parts of the country. My grandfather served in the Korean War and was part of the dust belt migration to Southern California. He came, like so many people, because of the weather, the schools, and the opportunity, and I don’t want us to lose sight of that dream. We can’t just depend on Silicon Valley. We have gone through the tech bubble, the housing bubble, the financial bubble, and manufacturing is a known and proven solution. Manufacturers are tough, resilient, and driven to succeed; something about this state instills that kind of attitude in people.