May 31, 2009 in Business

Buck has local edge

By The Spokesman-Review
 
Photos by Kathy Plonka photo

Nanci Brum, 62, of Post Falls, works in the heat treat department at Buck Knives in Post Falls on May 20. Buck Knives is focusing on producing more of its knives in Post Falls and reducing imports, which had crept up to 40 percent of production, but are now at 20 percent to 25 percent.
(Full-size photo)(All photos)

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The timing could not have been better for Post Falls-based Buck Knives to move production lines back to the United States from China. A renewed spirit of nationalism, driven by a deep recession and a desire to create jobs at home, is prompting more of its dealers to seek American-made products.

“We did not plan for that,” said CJ Buck, CEO of the 107-year-old, family-run company. “We were just trying to bring products into this factory because we have more control over what we build in this factory than in what we import. The cool part is that we are running into this recession-created national mentality that our dealers are responding to. I’d love to say we did it on purpose.”

Other North Idaho businesspeople say they see that type of commercial nationalism growing in the area – or at least becoming a hot discussion topic. In Spokane, the economic development organization Greater Spokane Inc. recently launched a “Buy Local” campaign to promote Inland Northwest businesses and jobs.

But some warn that a “Buy American” mindset can backfire when interpreted by trading partners as protectionism.

For Buck Knives, moving production lines back to the States was part of the company’s long-range plan. Following its 2005 move to Post Falls from California and two years of getting organized, its reliance on Chinese production crept up to about 40 percent of all knives.

Now imports are down to 20 percent to 25 percent, and sales were stronger than expected in the first quarter. The increased domestic production also has caused the knife maker to add 10 new workers to its 220-person employment base, offsetting some of last year’s layoffs. Though overall production is expected to drop below last year, domestic production should increase by about 20 percent, Buck said.

Dealers have noticed. In a normal year, Buck Knives’ retail customers will pick up three or four new products, Buck said. But this year, they’re adding as many as 20 from the company’s array of 65 new knives. “Our dealers are saying we would much rather pay that small premium and have a U.S. product than an imported product. We’ve gotten very good placement on these products so far.”

Buck Knives’ experience reflects a sentiment playing out at the nation’s highest levels as business and government interests do what they can to preserve American jobs. A “Buy American” clause in the $787 billion stimulus bill requires domestic contracts for iron, steel and manufactured goods, while not running afoul of international trade agreements. As U.S. car companies negotiate bankruptcy proceedings with the federal government, United Auto Workers members are seen in the news, beseeching American consumers to buy American cars.

“What you drive drives America,” read one sign held up by a General Motors employee at a UAW rally earlier this month.

“The tenor of the times is such that … there’s a sentiment that people should buy local products if at all possible,” said Jonathan Coe, president of the Coeur d’Alene Chamber of Commerce.

That has long been the order of business at another Post Falls-based business, Ground Force Manufacturing, which makes trucks for the mining industry. Company President Ron Nilson said his clients in Wyoming and Nevada have come to expect that his products will be made in this country with American parts.

From a practical standpoint, Nilson said he’s seen an increasing number of companies learn that the costs of overseas production can stack up, despite savings on labor. Once quality, delivery times and the danger of losing intellectual property are factored in, he said, some companies have realized the savings are not as great as expected.

“We’re seeing a lot of companies say ‘We went overseas and we didn’t realize the profits and savings,’ ” Nilson said. “I think we’re going to see … people are willing to pay a small premium knowing that this is supplying U.S. labor and putting people back to work.”

Buck said keeping production in Post Falls means better control over products. It means being able to switch assembly from one product to another within an hour to rapidly respond to large orders. And it means shipping to customers within three days of receipt of a purchase order.

“Try to do that with an import product,” Buck said. “The response would be, ‘I’m sorry, that’s going to have to be back-ordered, because the next shipment is coming in in four weeks.’ Bringing those jobs back internally helps us better supply and better deliver to our customers.”

The tradeoff: labor and benefits costs that are eight to 12 times more expensive in the United States than in China, company officials said.

Despite the potential gains, taking the “Buy American” sentiment to the extreme can result in backlash and accusations of protectionism from trading partners, as a recent Washington Post story revealed. Tensions escalated when one Indiana town spending stimulus dollars rejected Canadian suppliers only to have some Ontario towns strike back and bar U.S. companies from municipal contracts.

“You can’t isolate yourself because commerce works two ways,” said Tim Komberec, CEO of Hayden-based Empire Airlines. Though his company always tries to buy locally made products and proudly flies domestically for Federal Express, he said his aircraft repair business also relies on domestic and international customers.

“Anybody who thinks we can do it all ourselves in this day and age, it’s just not true,” Komberec said. “We are part of international commerce and it has to exist for us to thrive.”

Eastern Washington University economist Patrick Jones said it’s not unusual for the labor force to “batten down the hatches in times of crisis.” Washington, however, is the most trade-dependent state in the country, he said.

“If we have a ‘Buy American’ attitude, we shouldn’t be surprised if that same attitude doesn’t prevail among our trading partners. I think we have to be very mindful of that,” Jones said.

He thinks most Spokane-area businesspeople are proud of the strength of Washington’s export sector, which produces big dividends for the region.

“It is ethically problematic and economically suspect if we expect to do all the exporting we want, then minimize the imports,” said Jones, who directs EWU’s Institute for Public Policy and Economic Analysis.

CJ Buck said Buck Knives has been importing since the late 1990s and has been regularly criticized for it by customers who expect the knives to be American-made. That’s one of the reasons the company decided never to import hunting knives.

“The hunting knives would always be the foundation of our company and they would always be American-made,” he said. “In 2007, we decided we would put a real push on American-made.”

Despite that, he said, the company likely will always import certain knives because overseas production costs are too low to compete effectively in this country. Some pocket knives, filet knives and multitools will continue to be made in China by companies that build to Buck Knives’ design specifications, he said.

“China tends to be about 20 to 30 percent less expensive than we can make it here” for those products, Buck said. Making multitools here, he added, would cost “hundreds of thousands of dollars to tool-up for all those parts.”

Grant Forsyth, an associate professor of economics at EWU, said he’s not surprised at Buck Knives’ resurgent success with its American-made hunting knives as consumer interest in that arena tends to be product-specific.

“America has a long tradition of creating high quality (weaponry),” he said. “To collectors, being made in the USA is an important thing. With hunting, the location of the manufacturer can have a big influence on a person’s decision to buy.”

Contact Alison Boggs at (208) 765-7132 or alisonb@spokesman.com.


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