SEBRING, Ohio—Many companies in the U.S. rubber product industry and its customer base, particularly related to automotive, have been outspoken in opposition to the tariffs imposed by the Trump administration, saying they have a negative impact on their business.
But Drew Ney, president and CEO of Salem-Republic Rubber Co., said he welcomes the tariffs because certain products the firm used to manufacture at its factory in Sebring have been devastated over the years by what he deems as unfair competition.
"We have been abused, used and cast aside by the Pacific Rim competitors who have dominated our market with cheap, inferior product," Ney said. "Their ability to produce a product with government subsidies, while they're tariffing our products coming in, it's just hardly ever been a level playing field."
When people say they are fans of a free market, the Salem-Republic executive said he's not even sure what they mean.
"There hasn't been a free market for years," he said. "There's been a skewed market where we're competing with governments that subsidize their industries, play fast and loose with their currencies, and dominate our markets with cheap labor with a totally unregulated approach from their governments.
"So I welcome the tariffs," Ney said. "I hope they stay in place. We have to be sane about it. There has to be an ongoing dialogue with some of these countries."
He's anxious to see what the tariffs will actually mean for the producer of custom-engineered industrial hoses and calendered sheet rubber and rubber/fabric composites.
One area where the firm has historically been hurt is in large-diameter dredge hose. At one point it represented about 20 percent of company revenues, he said.
"It was absolutely devastated in the mid- to late-1990s by Chinese competitors. They were delivering hose to the market at our cost. There was no way we could compete. I say this with some prejudice, but I've seen the product, and it's inferior to what we manufacture."
One problem, Ney added, is that a good portion of the marketplace is driven by purchasing departments that are working to make sure they get the best value for their company. "It's hard to measure, because longevity in service is something that we take to market because of the quality of our product," he said. "We're well-loved in maintenance, but we're not well-loved in purchasing."
He said Salem-Republic doesn't sell the least expensive product by any stretch, even when compared with its North American competitors. Instead, they bring a high-quality product that is backed up with a level of customer service he claimed is unparalleled.
"We drive home a relationship that is a customer service-driven model that has been extremely effective at overcoming the price barriers of competing with government-subsidized Pacific Rim products," he said.
James Dunchuck, the firm's vice president of sales and marketing, said some of the difference is when customers are making project-driven purchases. In the marine segment of Salem-Republic's business, when customers are looking at buying such items as fendering for tug boats or ports, or oil transfer hose products, much of that is project-driven.
Competitors from the Pacific Rim can offer goods at half the price of Salem-Republic, so if a buyer can back up the purchase time in the projects to match the longer wait to receive the goods, then they're open to buying the cheap imports.
Ney said it may not be a big risk to buy 20 hoses from China when launching a new installation. They'll work, though there may be some failure shortly after installation. "But you're going to buy enough hose to launch your project, and at the price point they're offering, it's quite appealing."
In other parts of the business, however, Salem-Republic has its share of advantages. "A lot of our customer base in mining, steel manufacturing, and municipal and industrial vacuum markets are customers who see when something is about to break and they have to replace it," Dunchuck said. "That doesn't work with that project-driven purchase mentality, so in some respects those markets can be more insulated than the marine market."
Ney said there is some evidence that the import firms' model of business may be starting to get customers to reconsider their purchasing decisions.
"I think the worm is starting to turn as it relates to their inability to communicate, and their inability and disinterest in the customer service aspect where they have to come and view the application and truly solve whatever application issues there are in the design of the hose," he said. "That's not the model they're offering. They're offering price."
The Salem-Republic president also sees a growing trend toward "Buy American," with an industry movement toward the elements that make that advantageous. In addition, he said the Pacific Rim competitors also are running into cost issues where they may have to raise prices. Those include such elements as rising shipping rates, surging materials costs and the growth of the middle class in those nations where workers are wanting higher wages and benefits.
Dunchuck said when federal dollars are involved—for military spending or where federal grants are funding purchases—the trend toward domestic sourcing is even more evident. "Some other federally funded entities very immediately switched to an almost 'Buy American mandate' when the present administration in Washington came into power," he said. "That's been a benefit to us."
There also seems to be a commitment to being closer to your source of supply, with the service aspect and easier communication playing a role, he added.
"A lot of your basic industries in this country such as steel, mining and aggregate production are staffed by a bunch of hard working, blue collar-esque people who want to buy American," Dunchuck said. "We very proudly market that on our hoses."
Ney also said it's imperative the U.S. maintains a strong manufacturing base. Without it, that leaves banking, service, tourist and potentially alternative energy.
"That will never work," he said. "I think if you're not making stuff you can't make that up and create an economy that involves employment of the broad base of your population in meaningful work that has high wages," he said. "I don't see where that model works. The people who are proponents of that are dreaming. If we do not manufacture hard goods in this country, I do not see us not facing severe, economic long-term irreversible repercussions if we let it continue as it has."
Seeking talented workers
Like many in the rubber industry, Salem-Republic is having a difficult time finding good people to work there. Ney said the company has a strong backlog of business, but could use at least 10 more workers to help get those orders out the door.
"We consider ourselves high-end employers," he said. "We've always paid well and we have a golden benefits package. We're pretty nice people, and we have never had a problem finding talent. We have always been the company that people wanted to work for."
But now he said the firm has had some people come in and leave without notice. Others have come in and said they didn't want to work there after only one day.
Ney said they have been fortunate to find some good people, and that the company has an excellent, hard-working staff, but they've never been in a situation where they haven't been able to bring in enough employees.
Plus, being that the goods Salem-Republic manufactures are so specialized, it takes a bit of time to get new employees up to speed. "It's really difficult to predict the kind of person who could do that job," Ney said. "The formula for finding the right labor force out there has always been quite challenging."
Business for Salem-Republic has been strong this year, with the firm expecting record sales and profits, he said. Its employment is more than 70, up about 20 from five years ago, and is at the highest level ever.
The firm has a number of positives going for it, Ney added. It reached a five-year contract this past summer with the United Steelworkers local that represents its hourly production staff, and plans are in place to bring in two new hose building stations.
Dunchuck said U.S. manufacturing and mining are two especially healthy segments, with others growing as well.
"The hose side is incredibly strong right now," he said. "Tax breaks and incentives combined with some pent-up demand that was unleashed is all working together to make a very strong demand for our products."