One hundred-year-old Twin City Die Castings began 2020 with a teeming order book that continued into the final week of March, even after the coronavirus pandemic began shredding the U.S. economy.
Over the past two weeks, customer cancellations wiped out about 25% of its April bookings, taking the month’s revenue expectations from about $4 million to just under $3 million.
Last week, Chief Executive Todd Olson reluctantly furloughed 40 of the 225 employees at the Minneapolis-based firm, a specialist in custom aluminum and magnesium die casting. He said the prospect of laying people off kept him awake for two weeks.
“The coronavirus situation takes us in so many directions in just one day,” Olson said. “I’m confident that this is not just a four-week problem. The economy is in a deep valley. I’d rather weather this now than kick the can down the road.”
Hospitality, storefront retail and service industries plunged into an instant recession in mid-March as health authorities and government leaders urged Americans to spread themselves out and have less contact as a way to slow the deadly virus.
The hit to manufacturers came more recently and leaders like Olson have just as suddenly been forced to adjust.
“Like most businesses now, we will have a tough stretch,” he said. “We will have to manage expenses and cash flow.”
He is accelerating a strategy already in place to increase TCDC’s work for medical-products makers, particularly as demand has fallen rapidly in its main customer group, the automotive industry.
Last month, the company made a deal with Seattle-based Ventec Life Systems to supply parts that will be used in a venture Ventec has with General Motors to build ventilators.
Over the past few years, TCDC’s growth has come from making parts for Medtronic-built ventilators and hospital beds. It reduced its reliance on supplying auto-parts manufacturers with electronic enclosures, throttle bodies, fan drives and mirror mounts.
With the Ventec deal, Olson shifted even more workers from automotive parts to medical-equipment parts.
“If it wasn’t for our medical diversification, our [April] sales would be under $2 million,” said Olson, a 16-year veteran of TCDC. “We are lucky we had the foresight to have some diversity that enabled us to ‘shift gears’ from automotive transmissions to life-medical devices.”
His single-best weapon: dedicated employees who also own a majority of TCDC.
“We will survive due to our diversification,” Olson said. “More importantly … we communicate transparently with our employee-owners. They see our financials. There is more of a sense that we are in this together.”
The company has two Minnesota plants and one in South Dakota, which Olson hopes will be an advantage if larger manufacturers turn in the future to more domestic suppliers. Some analysts speculate the pandemic will shrink global supply chains and be a boost to domestic firms.
“We are able to react quickly, increase production in a matter of hours, even bring new products into production in days,” Olson said. “Reliance on overseas suppliers would cripple this ability. You have your normal manufacturing time plus an additional four to six weeks transit time on the ocean. Airfreight is very tough to come by right now.”
Olson hopes Twin City Die Casting is back to full strength in 2021 and setting new revenue records.
“It’s going to feel great when our employee-owners reap the rewards that their dedication, perseverance and hard work contributed to,” Olson said.
The employee ownership structure is a big reason why. Octavio Rodriguez switched three weeks ago from making transmission parts to making brake parts for hospital beds.
Arlan Cook, a senior die cast engineer, recalled that late CEO Steve Harmon liked to chat with fellow employees on the factory floor.
“Steve would say, ‘It’s your company, take care of it,’ ” Cook recalled. “I’ve worked for a couple other companies that didn’t operate that way.”
A few years ago, Steve Harmon’s brother Doug Harmon, 68, the retired CEO who is chairman of the board, turned down higher sale offers from private-equity firms and competitors.
He sold 51% to the employee stock program.
“Doug could have made a bigger bundle selling to somebody else, but he sold the company to us,” Cook said. “They always treated us as equals. And it is our company.”
Neal St. Anthony has been a Star Tribune business columnist and reporter since 1984. He can be contacted at firstname.lastname@example.org.