Transcript
Speaker: When you open your garage door tonight, chances are it was made by the Overhead Door Company, a company outside Dallas. Their story tells the story also about how mid -market manufacturers are thriving in America today. Welcome to The Market That Moves America, a podcast from the National Center for the Middle Market, which will educate you about the challenges facing mid -sized companies and help you take advantage of new opportunities.
Speaker: October 6, 2017 is Manufacturing Day in the United States. But when you say manufacturing, you really mean middle market companies. We'll talk about what it takes for manufacturers to succeed and how to help them do better.
Speaker: I'm Tom Stewart. I'm the executive director of the National Center for the Middle Market at the Ohio State University Fisher College of Business. We're the nation's leading research center studying mid -sized companies which account for a third of private sector employment and GDP and the lion's share of economic growth. These companies, with revenues between $10 million and a billion dollars, are the market that moves America.
Speaker: The National Center for the Middle Market is a partnership between Ohio State and some trust banks, Grant Thornton LLP and Cisco Systems. With me today are three special guests. The first is John Wilson, who is the CFO of Overhead Door, a manufacturing company just outside Dallas. John, welcome.
Speaker: Good afternoon, Tom. Nice to be with you today. And with him also from overhead door is his CMO. So we have the CFO and the CMO together, Joe Dokowitz. Joe.
Speaker: Hey, Tom, it's a pleasure being here. Thank you for having us. And with them is Jeff French, who's actually not with them. He's a due north of them, but about as far north as you can get. They're outside of Dallas, and Jeff is based in Appleton, Wisconsin. And Jeff heads the manufacturing practice for Grant Thornton LLP, the tax audit and advisory firm. Jeff, thanks for joining us, too.
Speaker: Tom, thanks very much for having me and happy to be here and celebrating Manufacturing Day in America.
Speaker: And every year, the Manufacturing Institute sponsors Manufacturing Day, which is designed to do that, to celebrate and support the manufacturing sector in the US. When most people think of manufacturing, they think of big factories employing thousands of people. Automobile assembly plants and aluminum rolling mills and gigantic shops where Boeing assembles aircraft. But 40 % of US manufacturing comes from the middle market. And one of those companies is Overhead Door.
Speaker: John, tell us about the company. Well, we're a leading manufacturer of garage doors and openers for residential and commercial applications. We're headquartered here in Lewisville, Texas, which is just near the DFW Airport. We have five divisions in the company. First is the Access Systems Division, and this is the
Speaker: the part of the company that actually manufactures garage doors under the overhead door and the Wayne Dalton brands. We also have the Genie division, which designs and manufactures commercial and residential garage door opening systems. And we have Horton Automatics, which designs and manufactures automatic doors for pedestrian use. We have another division called Todco, which produces truck doors, upward rolling truck doors. And then finally, we have
Speaker: our installation and services division, which includes about 30 branches that install and service garage doors under the brand's Creative Door Services in Western Canada and Nationserve in the United States. So Joe, when did this company get started? I mean, the overhead garage door was invented by the founder of Overhead Door, is that right? That's correct. C .G. Johnson actually created the original overhead garage door in 1921.
Speaker: And he also developed the first electric garage door opener a few years later in 1926. When I heard that, that surprised me because in my family, we had a garage door for a long time.
Speaker: the electric garage door opener came a whole lot later. I mean, I remember growing up outside Chicago, jumping out of the car and, you know, running to open the garage door. Maybe it's because my dad was too cheap to buy the electric garage door opener. But I'm sort of amazed that the electric garage door opener is as old as what, nearly 100 years old? What is it, 91 years old? Yes. It wasn't very prevalent, of course, in the early years, the opener.
Speaker: Later on, Overhead Door acquired the Genie company, and it was actually Genie that really commercialized the garage door opener and made a unit that was mass -produced, and that began around 1954. Amazing thing is this is one of those products that everybody uses every day, and somebody makes it, and we sort of forget that somebody makes it. How's business?
Speaker: You guys must be pretty dependent on the construction cycle, I would imagine. Yes, we've been growing steadily really since 2010, and that marked the beginning of a recovery in both commercial and residential construction. 2010 was also our first full year following the acquisition of Wayne Dalton, and that was a competing garage door company at the time.
Speaker: with Wayne Dalton that gave us a strong position in in residential and that went along well with overhead doors, strong commercial business.
Speaker: Cool. Hey, Jeff, you've worked with these guys and Grand Thornton does. I mean, when you look at a company like garage door, look at them in particular, what are some of the strengths they bring to it? The things that they can do to push off, hold competition back or really, you know, what do they bring to the table that makes them succeed so well?
Speaker: Well, I would, I would say, you know, that, uh, obviously they have a long history. So they have weathered the storm, you know, many times in terms of the economy, construction growth, those types of things, obviously quality products, you know, that they're obviously high demand. They have a high market share.
Speaker: And that obviously helps, but innovation is something that I think is key and is security and those types of things become very important. You know, they've been able to innovate, I believe, and for each quality product.
Speaker: All that helps stand the test of time. Joe, talk to me a little bit about that. As you think about it, you're the CMO, and how important is innovation? It sort of kind of seems, again, like a standard product, but Jeff is talking about the central role of innovation. How does that show up? Absolutely, Tom. The innovation in garage or industry is a little different than what most people would think.
Speaker: Yes, there is innovation around electronics, and we do have many products that connect to the internet. We have Overhead Door Anywhere and Genie Aladdin, which are products where you can control your remote and your door from anywhere in the world through the internet. We're connecting to smart homes all across the country with products like that. Where we also see a lot of innovation on the residential side, it would
Speaker: would be on the design side. People are realizing that the garage door takes up a fair amount of space to the front of their home and they could do a lot to their garage door. It's no longer just a white garage door. People want various colors, various designs. So we spend a lot of time as a company focusing on how can we innovate around design and make the homes more attractive to consumers.
Speaker: That's funny, I was just in Santa Fe, New Mexico and walking down the street and there was a guy, there was a garage door that was printed or painted or whatever so that it looked like it was a barn door with Mr. Ed looking out.
Speaker: One of the things that I think is we're talking here about a manufacturing company in America on Manufacturing Day. When you listen to the public discourse about manufacturing, you hear two things. One of the things you hear is, oh, there's a crisis in manufacturing. We don't make things anymore. It's impossible to make things in America anymore. American manufacturing is going away. It's in deep trouble.
Speaker: And the other thing you hear is there's a renaissance in American manufacturing. Things are coming back from offshore. Things are growing. We're learning to manufacture in ways with sort of ingenuity and innovation that nobody else can do.
Speaker: As you look at the situation, and I think all, I'd love to hear all three of you talk on that. So maybe we can, let's see, let's do it in alphabetical order. So that'd be Jeff, Joe, and John. Crisis or Renaissance? Well, Tom, I think, you know, if you talk to our client base at Grant Thornton, I don't think you would hear that the industry is in crisis.
Speaker: I mean, clearly there are companies, you know, there's mixed experiences. There are companies that are growing and those that are not. And the ones that are not may take a different view. But we do see challenges, especially with finding labor. I mean, that continues to be a pervasive problem around the sector.
Speaker: But yet, we're seeing clients that are automating. They're doing things to really improve operations. And the innovation, much like an overhead door, is happening with products, but it's also happening on the shop floor. And I think those are the reasons that people are talking about a renaissance. The technology side is really improving to improve quality, to improve efficiency,
Speaker: And, you know, so I think that's what most of our clients are seeing and what they're, they're saying. John, Joe, do you see, I'm trying to remember what alphabetical order is. You see, how do you see that? Do you see, do you see, you know, crisis or renaissance? But I would see closer to a renaissance and maybe renaissance isn't the right word. I would use the word as, you know, it's a really an evolution and
Speaker: There are points of time where the economy is soft, where companies fall behind in investing in manufacturing, and then they wake up one day and they realize they are behind, and they have to scramble and do something. What we try to do is stay on top of that, and I think the evolution is what Jeff talked about in regards to how do we continue to increase efficiency, improve labor, and
Speaker: increase our output. And I think as long as companies are focused on that, those areas and looking at outside their industries for new technology, or for new process improvements, then, and that's something that hasn't changed since the beginning of manufacturing. And that's why I see it as much more of an evolution than maybe a Renaissance. John, as you say, John, about being midsize,
Speaker: How does being a mid -sized, I mean, in this sort of the environment that Joe and Jeff have described, how does being the size of overhead door set an advantage? Is it a disadvantage? I mean, Jeff mentioned earlier, you've got a long history and an install base, and you've got the resilience you can take a look in and keep on ticking.
Speaker: Would you rather be a lot bigger? I mean, everybody wants to grow, but do you like being the size you are though growing? Well, in our business, we have one of the broadest product offerings and that does give us the opportunity to meet most of our customers needs from our factories and distribution centers across the country.
Speaker: Smaller companies sometimes could be more specialized on certain products and potentially a little bit leaner in some respects, so that does keep the competition fierce. I would say, considering our size, mid -size, we're large enough that we do need to have some of the corporate functions that the larger companies have, and we are owned by a public company, so that brings some requirements.
Speaker: probably we could grow larger and get more leverage out of the investment that we already have.
Speaker: There's an interesting sort of sweet spot between being big enough to be resilient and small enough to have a lot of runway or enough agility. I think that's one of the reasons that we see so much manufacturing concentrated in the middle market precisely because Joe was saying, you see that evolution.
Speaker: Giant companies remember the history of Bethlehem Steel or of GM. It's hard to move those battleships and sometimes they don't even realize they need to move until it's pretty late. There may be a certain advantage in being close enough to the market that you really feel it's hot breath on your neck as you go ahead. I want to ask a question of each of you because there's also
Speaker: a lot of talk about trade and other things like this. And companies of all kinds have to interact with government. And I don't want to get political here, but you know how sometimes in performance reviews, people are asked this question, what's something that somebody should do or should keep doing, should start doing, and should stop doing? And I'm wondering, taking a look at any level of government, thinking about regulations, infrastructure, workforce investment, whatever it might be,
Speaker: Who would like to offer some suggestions about something that government should stop doing, keep doing, and start doing? Jeff, you want to take it first? Yeah, I'll start out. And maybe I'm going to give you a little more broad perspective than you're looking for. But I would say that most of the manufacturers I talk to, they would like government to be more balanced.
Speaker: That's how I would say, you know, and have a pro growth agenda, pro business agenda, not that they're looking at businesses, you know, unusual benefits, but that they're just creating an environment where manufacturers can grow, where they can sell their products and find new markets and those types of things. So I think they're looking for more balance on regulation.
Speaker: more competitive tax rates when you look at global competitors, and even more collaboration on developing workforce skills that are needed for manufacturing.
Speaker: Joe and John, do you see an infrastructure issue? I imagine that as people who ship things and also people who are putting doors on the backs of trucks, that may also be an area where you think the government could do more or do better? On the infrastructure side, I don't know, we live here in Texas and we build a lot of roads here.
Speaker: We don't really probably see some of the problems that might exist around the other parts of the country. I don't really look to the government to provide the demand for the products. I would say, though, that from an input perspective, our products are mostly made from steel, and we do source most of our steel in the US.
Speaker: And so excessive protectionism would become a problem for us as it started to drive the cost of steel up even higher than it is already. Our concern there would be that the cost of products, cars, building products would start to get to a point that it would reduce the end consumer demand. So that'd probably be the number one I think thing that I would point out is not to interfere so much with the current market forces.
Speaker: And Joe, would you make a similar observation? Yeah, absolutely. I mean, as far as the government and what they can stop and start, one of the things that we would find very helpful, and if we were to ask for assistance in something the government started, is we mentioned, Jeff mentioned earlier about labor.
Speaker: like many companies struggle to find labor. And oftentimes the government has access to a large labor pool through their different various programs that they have, whether it's local or state at the state level. And the company like us, we don't necessarily always necessarily require fully skilled labor. We're just looking for motivated labor that we could train. And so I think there's a partnership that is a strong potential between the government
Speaker: and companies like us who we could work together on solving some of these labor issues. The government has access to labor, and we need labor. And if they could help us with that, then we would help train and develop those folks as well. The National Center for the Middle Market just finished, just released a couple of weeks ago, a work we did with Brookings.
Speaker: on that very problem. Because the middle market is growing so fast, it's where the talent shoe pinches the most. And a lot of the workforce development system, which is at local and state as well as national levels,
Speaker: It doesn't connect very well with the capabilities and resources of mid -sized companies. There's a real opportunity I think to make that bridge work better and you've just underscored that. We're coming to the end of our time and I want to put a couple of things that I heard
Speaker: One, just a reminder of the richness and interestingness and ubiquity of manufacturing in the United States and the fact that when people think about it, it's companies like you guys at Overhead Door who are making a tremendous difference. Jeff, people like you at Grant Thornton that are helping these companies,
Speaker: get the most out of all their resources and operate efficiently. I think one of the things we also heard, and this is really interesting, is the role of innovation
Speaker: coming at you in sort of surprising ways. And I hadn't thought of before this conversation. Of course, smart homes are going to dramatically affect the garage door business. And here we have the internet of things showing up as a potential
Speaker: great innovation for you guys or a potential source of competition and disruption for your business. And so we see this sort of constant interplay of really established companies and technologies that they can either exploit or struggle to deal with. And I thought it was really interesting to hear you guys talk about
Speaker: the pros and cons of size and being mid -sized and this sort of needing to react quickly and being able to, but sort of also struggling sometimes to get all the resources you need.
Speaker: With that, thank you guys very much. Jeff French from Grant Thornton, John Wilson and Joe Daschowitz from Overhead Door, sorry, from Overhead Door. Thank you very much for joining us. If you want to learn more about Grant Thornton, you can go to GT .com. More about Overhead Door, you can go to Overheaddoor .com. And I want to thank you all for listening to The Market That Moves America.
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