Domestic industry facing many pressures

Matt Whetstone | Cadillac News Lee Richards, president and CEO of Avon Automotive in Cadillac, spoke about the challenges of manufacturing in northern Michigan at a business luncheon Friday.

CADILLAC — Before an employee in Cadillac even lays a hand on a product, Avon Automotive already has $7,000 invested.

The cost comes from health insurance. It’s something manufacturers in the United States face that those in many other countries do not. For example, Avon President and CEO Lee Richards said the cost per employee for health care in Cadillac is greater than the annual wages paid to a factory worker in Mexico.

Richards, who represents 4,000 workers nationwide, talked about the challenges northern Michigan manufacturers face during the Lecture Luncheon Series, presented by Baker College and the Cadillac Area Chamber of Commerce.

First and foremost, manufacturers who supply domestic automakers are in crisis mode.

“I have the feeling the fallout will be significant and it’s not over by any means,” Richards said.

Avon has worked to diversify its product base. Instead of focusing completely on domestic auto business, the company is increasing its presence in the fuel hose market and providing products to companies like Harley Davidson and Briggs and Stratton. It’s also working to create business deals with Japanese automakers.

Besides diversity, manufacturers must have a highly engineered product, be in a market that has high barriers to entry or be in a market under less cost pressures than domestic automotive.

Avon is seeing firsthand the pains of restructuring by Ford, General Motors and Chrysler. Avon announced plans to close its Manton plant this summer, leaving about 100 people out of work.

In making the decision, Richards is working with employees, the state and other manufacturers to find jobs for those people. It also is working with the city to find another business to occupy its Manton facility.

A well-trained workforce that understands industry is a strength northern Michigan has in its favor. Richards said other positives in the area help industry, such as a supportive government, active business community and other manufacturers who are willing to work together.

It’s an environment that has kept employment levels in industry consistent over the last five years and it’s one that will help the sector make it through tough times, he said.

“Industry must and will remain an important part of the Cadillac-area economy,” Richards said.

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Health care worries:

In 10 years, studies say health care spending will double to $4.1 trillion. The situation has manufacturers taking new approaches to spending and health-care plans, said Lee Richards, president and CEO of Avon Automotive in Cadillac.

Avon spends about $7,000 per year, per employee. If the cost doubled, it would be financially impossible to fund while still trying to maintain a profit margin.

Increasingly, manufacturers are looking to increase knowledge about health care costs to their employees. There also is greater focus on preventative health care and health savings accounts, which allow employees to take a more active role in health care spending.

mwhetstone@cadillacnews.com | 775-NEWS (6397)