Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, January 26, 1992 TAG: 9201270175
SECTION: NEW RIVER VALLEY ECONOMY PAGE: 25 EDITION: NEW RIVER VALLEY
SOURCE: KEVIN KITTREDGE NEW RIVER VALLEY BUREAU
DATELINE: CHRISTIANSBURG LENGTH: Long
SMALLER OFTEN MEANS BETTER
This may be the age of the mini-factory.As some of the New River Valley's biggest industries cut their work forces or close altogether - as did AT&T - the numbers of factories have increased. But they employ fewer workers.
From 1980 to 1991, the valley lost 1,500 manufacturing jobs, according to figures from the Virginia Employment Commission's Economic Information Services Division in Richmond.
At the same time, the number of industries in the valley increased from 139 to 167.
Thus, the industry of today seems a trimmed-down, fighting version of the model of a decade ago - with fewer employees and the ability to adapt more quickly to market demands.
Virginia Tech finance Professor Vittorio Bonomo said manufacturers everywhere are beginning to see advantages to being small.
"There may not be those economies of size there once were," said Bonomo, noting antitrust laws have made it difficult for bigger companies to buy their supplies more cheaply in bulk.
In addition, Bonomo said, some big manufacturers are finding it cheaper to have some work done by outside contractors instead of keeping full-time staff on board to do it.
The 1990 shutdown of the AT&T plant in Fairlawn - which eliminated 1,000 jobs - is a case in point, Bonomo said.
"That facility was designed to make parts for AT&T. It turned out they [AT&T] could buy them cheaper off the shelf," he said. "Quite frankly, I don't think big businesses can compete with smaller companies. They have to pay people more, and there's too much management."
Still, Bonomo said, there is little evidence so far that smaller industries are taking over the New River Valley's economy.
"This is basically a service economy," he argued.
In fact, the valley's industrial employment has declined by nearly 8 percent in a decade - from 19,404 in 1980 to 17,909 in 1991, according to VEC figures.
Overlooked, however, is the increase in the number of industries during the same period - 29 more now than 11 years ago, according to the VEC.
Many of the 1991 companies are small ones, with 50 or fewer employees. There also has been growth in some high-tech areas - including fiber optics - that some say augurs future economic growth.
At least 16 companies in Roanoke, Salem, Christiansburg, Blacksburg and Radford are involved in the manufacture of fiber-optic products, said Wendell Hensley, vice president for marketing at Force Inc. in Christiansburg.
Force, with about 50 full-time employees, has produced fiber-optic products for six years.
Smaller companies, some industrial experts believe, may hold the key to the valley's future.
"Statistically, 80 percent of all your growth occurs in small businesses," said James Stewart, director of the Office of Technology Assistance and Transfer at New River Community College.
But Stewart also said the slow economy has been a barrier to starting new companies.
"The environment is just not conducive to people taking chances and aggressively looking for new opportunities," he said.
Not everyone has been deterred.
Ted Hudson started H&W Electronic Controls Inc. in Christiansburg in late 1988, about the time the local economy started to sputter.
The former nuclear powerplant construction engineer returned to Christiansburg to start his own small company because of the easy pace of Southwest Virginia life.
"The New River Valley offered a style of life that we wanted," said Hudson, who does contract work on weather-surveillance equipment for the federal government. "I can call the bank today and they'll say, `OK, Ted, what do you want?' Around here, people will try to help you out."
Hudson got his company going with the help of a lawyer and an accountant who agreed to work on credit. He now has 15 full-time employees in eight states.
"I took a real chance, I guess," Hudson said. "Sometimes you just do things based on hope."
H&W also has a contract to repair audio-visual equipment for the National Park Service and is hoping to launch some product lines of its own.
Lynn "Boh" Bohmer, who runs Mert's Tool & Design Inc. in Christiansburg, once worked for AT&T. The engineer was retiring from the soon-to-be-defunct AT&T plant when the tool-and-design shop's owner, Mert Hansen, fell ill.
Bohmer took over the management in October 1990 and has struggled to keep Mert's afloat on an ebbing economic tide.
Hansen - whose widow, Kathe Hansen, now owns the company - had done most of his work for AT&T. Bohmer now has local customers as well as clients in Texas, Mexico and Israel.
"It's been a lot of hard work," said Bohmer, whose shop designs and builds custom-manufacturing machinery. "We've got the edge on the companies we're in competition with because we do total design."
Bohmer built the business little by little - in part with a reputation for quick turnarounds. Mert's has been known to finish work in a day or two.
"It's helped build us a little bit of a reputation," said Bohmer, whose shop also offers several of its own product lines.
Bohmer now has a full-time staff of six, including himself, and uses part-timers - graduate students and retired Virginia Tech faculty members - to hold costs down.
"I call them my flexible resources," Bohmer said. "There's a wealth of resources in retired people."
Despite the recession, Bohmer was planning to hire two more full-time employees this month - which is two more, of course, than AT&T has hired lately.
Hudson of H&W Electronic Controls recalled a potential employee who decided on a bigger company because he figured it would be more secure. After a few layoffs, the worker came back looking for a job.
"A lot of people used to work for bigger companies because of job security," Hudson said. "I don't think anything's secure anymore."