K&M Machine-Fabricating, Inc. News Why Small Manufacturers Are Going Green

Why Small Manufacturers Are Going Green

OCTOBER 31, 2008
By John Tozzi

As a maker of conveyor systems for manufacturers, Shuttleworth always changed with the times. The 100-employee Huntington (Ind.) company’s strong business in electronics dropped off about five years ago as more production moved overseas. After that, the company focused on conveyors for food, health care, automotive, and paper products-until this year, when it entered what could be its most profitable niche yet: solar panels.

“It’s got some of the biggest potential of the markets we’ve been in,” says Jim Bonahoom, Shuttleworth’s vice-president for finance. Even though Shuttleworth only just entered the market, the company expects solar to account for one-fifth of its roughly $20 million in revenue this year, Bonahoom says.

The green movement has become increasingly mainstream in the small business world (BusinessWeek SmallBiz, Summer 2006) in recent years as small consumer companies have embraced environmental principles to address shoppers’ concerns about climate change. Now small manufacturers like Shuttleworth are also betting on growth in green industries. Market researcher Clean Edge predicts that making and installing solar power systems will grow from a $20 billion to a $74 billion industry globally in the next decade, and the firm expects wind power installations to grow from $30 billion to $83 billion. Clean energy advocates envision a sea change on the scale of a “low-carbon industrial revolution,” as a recent Deutsche Bank (DB) report called it, to halve carbon emissions by 2050.

New Frontier for Manufacturers
Both presidential candidates have proposed caps on carbon emissions. Barack Obama has called for $150 billion investment in clean energy technology over the next decade; John McCain has pledged $2 billion annually toward advancing clean coal, among other initiatives. Policymakers also hold out clean energy as a panacea for America’s troubled manufacturing sector, which have shed 3.7 million jobs in the past decade, or more than 20% of its workforce, according to the Bureau of Labor Statistics.

A September report by the Center for American Progress, a progressive think tank, calls for an economic stimulus plan that would create 2 million green-collar jobs through $100 billion in tax credits and direct investment. Van Jones, a senior fellow at the center and author of The Green Collar Economy, says small businesses that offer ways to use less energy and produce it more cleanly could grow fast. For example, construction firms can focus on retrofitting buildings to be more efficient, and manufacturers can supply components for renewable power sources. “Wind in particular has some features that make building stuff here smart, because [facilities are] heavy,” Jones says. “The towers are 20 tons of steel. The turbines are made of 8,000 parts.”

One entrepreneur ready to create such green-collar jobs is Richard Wheat, president of Eagle Hoist in Louisville, Ky. The company makes heavy-duty lifts to move people and materials at high-rise construction and industrial sites. A wind farm developer asked him eight months ago to design a hoist that could fit inside wind turbine towers, so technicians don’t have to climb 20 stories-with their tools-to get to the top.

Wind in His Sales
Wheat built a prototype and is now in talks with some 50 wind farm developers. He has spun off a second company, Wind Turbine Personnel Hoist, to handle the jobs, and he expects to hire 25 to 35 people to double the size of his current 30-person staff. Wheat says the turbine hoists will double his sales by 2010, more than making up for the dip he has suffered from stalled high-rise construction. “All the projections are that [wind power] is just going to continue to explode in percentage growth,” he says.

That wasn’t always the case. K&M Machine Fabricating in Cassopolis, Mich., started working with wind power companies 12 years ago, but it was unclear how viable the industry would be until recently. “I think a lot of stars have aligned over the last three to five years,” says Gary Galeziewski, chief financial officer of the 250-person firm, which specializes in making large metal components. He says high energy prices, state-level commitments to buy renewable power, and more consistent support for clean power tax credits have combined to make wind power a booming market. Demand is sustained enough that K&M, which has sales of less than $100 million, expects to add at least 100 employees over the next two years to build parts for wind power companies.

But Galeziewski warns that entering green industries isn’t necessarily easy for every company, and clean energy may not be the salve for U.S. manufacturers that some predict. “There’s a lot of automotive companies trying to retool themselves to get into wind power,” he says. But the quality standards for wind components are as stringent or more than for autos. And at K&M, he says, the biggest challenge is recruiting qualified operators from what he calls “highest rung of the machining industry” to work on expensive components. “These are not people just kind of standing on a line pushing buttons.”

Still, for small manufacturers looking for growth markets, clean power appears to be a rare bright spot in a dismal economy. By aligning themselves with green industries, small companies in struggling sectors can build more sustainable businesses in the long term, says Van Jones. “There is a big opportunity to turn this breakdown in our financial and economic system into a real breakthrough,” he says. “If you make a bet in the direction of the green-collar economy, I think you’re going to be able to prosper.””

Tozzi covers small business for BusinessWeek.com

This article originally appeared in Business Week Online.

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