July 2012 Newsletter

Welcome to new member PIP Printing and Marketing, Wayne Reese, CEO, 7533 Tyler Blvd., Mentor, W.Reese@pip.com.

Two Buddies

James Hambrick, CEO of Lubrizol Corp., is thinking big now that the Wickliffe-based specialty chemicals company is owned by Warren Buffet’s Berkshire Hathaway Inc.

“There’s no reason in my mind why we shouldn’t be a $10 billion company,” Mr. Hambrick told Bloomberg. “Warren and I talked about that.”

Since Mr. Hambrick became CEO in 2004, Lubrizol’s annual revenue has tripled to about $6.2 billion. Bloomberg reported that in February, Mr. Buffett said Lubrizol will have “many opportunities for bolt-on acquisitions.” Indeed, Mr. Hambrick “has already struck at least three deals since the chemical maker was acquired by Berkshire in September for about $9 billion.

Mr. Hambrick said the acquisition strategy to reach $10 billion of annual sales will put an emphasis on acquisitions for Lubrizol’s advanced-materials unit.

It also seems like things are going pretty well with the high-profile new boss. Mr. Hambrick said he and Mr. Buffett talk “a couple times a month” over the phone and in person and have “good, robust discussions.”

“Warren makes it pretty easy,” Mr. Hambrick told Bloomberg. “It didn’t take very long for either one of us to get right into a good dance step.”

Source: Crains

Homeward Bound

Recently news about manufacturing moving overseas would not have been as big a news story as overseas manufacturing moving back to the United States. But that’s what’s happening and will happen a lot more in Northeast Ohio with the help of two local organizations dedicated to growing regional manufacturing: WIRE-Net and MAGNET.

It’s called “reshoring,” and it’s a national trend. Although no one can say for sure how much previously “offshored” manufacturing is moving back to the United States- and the overall number of jobs coming back is small compared with those expected to stay overseas- there’s no doubt that reshoring is a reality.

What is happening now is that manufacturers are seeing the hidden costs of offshoring- lost staff productivity due to extensive travel, intellectual property protection issues, growing inventories and loss of flexibility in dealing with changing customer demands.

“Reshore” comes for The Reshoring Intiative, an industry- led effort to bring manufacturing back to the United States by demonstrating the competitive value of doing so. The initiative works with manufacturers to help them to recognize the business benefits of reshoring, as well as how using domestic suppliers and production workers strengthens the national economy because it increases demand for the very products being made.

MAGNET and WIRE-Net are joining forces to make things better for Northeast Ohio manufacturers. MAGNET specializes in new product development, helping small to middle-size manufacturers grow their businesses by developing new products. WIRE-Net’s focus is on supply chain and sourcing as an important part of new product development. So there’s an excellent synergy that our two organizations have joined together to exploit.

Factors include the cost of energy, the cost of transport, increasing prices, trade disputes with China and Asia, the cost of labor in China going up about 20 percent a year for several years, and wages likely continuing to rise as China’s economy expands. Additionally, the value of the Chinese yuan has risen significantly over the last 12 months, and inflation has been rising and is currently at 6 percent.

The products of China are not as cheap as they used to be. When you throw in potential quality issues and the cost of product change or quality resolution-where you may have to fly someone to China to work with that factory-many manufacturers are taking a second look at their sourcing and deciding that America is the first choice.

In order to keep costs down and manage the long distance required for shipping to North American customers, overseas production-services and parts providers tend to require that product be ordered in large, consistent quantities with lengthy lead times. Producing locally, by contrast, lets manufacturers place orders more frequently and in more flexible quantities, so they can better match inventory to demand, and free up cash.

Such cost/benefit calculations increasingly favor places such as Northeast Ohio, which has a rich history of manufacturing.

Source: Neoeconomist, 5-12

Poor Ethnics Common

When it comes to ethics, no state in the U.S. is a standout star. That’s according to a new, first-of-its-kind report analyzing states’ mechanisms for controlling corruption and ensuring transparency. No state got an A, according to the Sate Integrity Investigation report, a collaboration between the Center for Public Integrity, Global Integrity and Public Radio International. Only five states-California, Connecticut, Nebraska, New Jersey and Washington- received a B.

Some surprises: Corruption-prone places like New Jersey(which ranked 1st) and Illinois(10th) are likelier to have enacted stronger ethics laws in recent years. Across the board, though, the report found that most states’ integrity measures “lack one key feature: teeth.”

Ohio and West Virginia received a “D,” Pennsylvania, Kentucky, and Indiana received a “C.” Eight states received an “F,” including Michigan. For more information visit stateintegrity.org.

Source: Governing 5-12

Small Business Innovation Grant

Chase Bank has partnered with “Living Social” to establish a small business grant of $250,000 for business innovation. Visit www.missionsmallbusiness.com to review the program rules and register. For further info contact Dave Merkel at Chase Bank, at 440-352-6221 or david.t.merkel@chase.com. Registration deadline is June 30th.

Local Market Outlook

Industrial
Sales activity will continue to remain stronger than leasing activity, as was the case in the first quarter. The oil and gas industry will continue to be the primary force behind this activity. The marcellus and utica shale, which has already lead to some significant investment in the eastern portions of Ohio, will continue to remain active as the activity heads west. Quality product is becoming a premium and prices will continue to increase slowly. Although the demand exists for new construction, activity will remain slow because of the cost.

Office
The Cleveland Outlook continues to look bright. Bloomberg News reported that last year, Cleveland ranked #1 nationally as the city with the biggest growth in Tech jobs as was recently confirmed, for instance, by the announcement of the Cleveland Clinic opening its new 135,000-sf Pathology and Laboratory Medicine Institute creating an additional 350-400 new medical/tech jobs over the next several years. Greater Cleveland continues to be business proactive with the approval of the new Cuyahoga County $100 million Economic Development Fund.

Source: Cushman and Wakefield Resource, Spring 2012