Q: How is Brek Manufacturing positioned in the A&D market?
MH: Our business is split 70 percent in defense and 30 percent commercial. Right now, we are actually growing both defense and commercial sectors, almost at the same rate. We like that combination; different companies are geared towards high production and will do much better in commercial. We can adapt to both.
Q: How is Brek Manufacturing preparing for future opportunities?
MH: Brek still has plenty of open capacity, which provides flexibility for growth without requiring additional capital investment so you can focus on growing your business externally. At one point, we looked at acquiring other companies to bring synergies or complementary services between companies. We do not look at acquisitions as buying more capacity, because it is much cheaper to go and buy machines rather than buying companies. To do that, there has to be a synergy.
Q: Are you making new investments in technology?
MH: Brek invested over $6 million of capital in new capabilities and technologies. The investments allow us to produce more complex quality products efficiently. We will continue to invest in newer technologies to strengthen our competitive position. For instance, the company was using a computer with software that was good and powerful but not productive. To address this, we purchased three new sets of programming software that is more flexible and productive.
Q: Have you also diversified product offerings?
MH: Definitely. We have diversified customers, products, and levels of complexities. This company previously focused on producing products made from one type of material. Over the last four years, we expanded it to many different types of materials. We also targeted more complex higher assemblies.
Q: Where do you see the greatest risks to the industry right now?
MH: Consolidation in the aerospace industry is probably one of the riskiest things that I can really see in the future. It makes it much harder for the entrepreneurs to have a startup company; there are a lot more consolidation than start-ups. There are many roll-ups, where they come in, roll up a bunch of companies, and then sell them to a conglomerate. At some point, it’s going to make it more difficult for the small entrepreneur to survive.
Q: Are there opportunities internationally?
MH: Right now, it is much tougher to work internationally because of the exchange rate. We still do some business outside the U.S., but it is limited to contracts we already have, and we do not see opportunities increasing in the near future. We were doing Airbus work, and whether it is on the Euro side or the Pound side, a 20-30% drop in their currency exchange rate will make it prohibitive for foreign companies to buy machined products from the U.S. However, these dynamics are subject to change.
Q: What can AMP SoCal do to strengthen A&D manufacturing here in Southern California?
MH: The first step for AMP SoCal is to make the legislature aware of all the challenges companies face. You need to better educate the people who make the decisions about rules and regulations that burden the businesses with additional costs that negatively influence the company’s competitiveness. We are not advocating to abolish every piece of legislation that was put in place for the past 20 years. Rather, over time, move to rebalance and reduce the pressures that are most harmful to the industry. This is really about getting local government to change a select set of regulations so that it will positively affect manufacturers. It will take time and it is difficult to change laws, but this would continue to enhance the A&D industry outlook in California.