THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, February 27, 1995 TAG: 9502250152
SECTION: BUSINESS WEEKLY PAGE: 11 EDITION: FINAL
TYPE: Cover Story
SOURCE: BY CHRISTOPHER DINSMORE, BUSINESS WEEKLY
DATELINE: NEWPORT NEWS LENGTH: Long : 174 lines
Nearly all the work Main Industries Inc. used to do was on Navy ships.
The Newport News-based painting company worked as a subcontractor for shipyards throughout Hampton Roads, blasting clean the worn hulls of Navy vessels and coating them with fresh paint.
After the Cold War ended, the Navy fleet and its budget began shrinking. As the Navy changed the way it maintained and overhauled ships, the jobs that once flowed to Main Industries started getting smaller and less frequent.
``In order to get out of that situation, we had to almost destroy this company,'' said Mike Challoner, Main's president and one of three brothers who own it.
Now the military accounts for about 50 percent of the revenue Main Industries pulls in. The rest comes from a blend of paint jobs on commercial ships and industrial properties such as bridges, factories and even locomotives.
Main Industries' voyage of the last five years is a lesson in the difficulties of defense conversion.
Many Hampton Roads firms are in the same boat as Main. Federal contracting boomed in Hampton Roads in the 1980s as hundreds of businesses sprung up to meet the demands of the region's growing military presence. But the wild ride came screeching to a halt after the Soviet Union collapsed.
The gravy that once flowed heavily from Washington to Hampton Roads slowed to a trickle. Many businesses that were once totally reliant on the military found themselves with far less business from their sole customer.
To survive, many have gone looking in the commercial marketplace for other customers. But private companies are driven more by price and reputation than by being able to meet the exacting specifications of the military.
Family-owned Main Industries has weathered the initial storm of defense cutbacks and charted a passage to a safer, more diverse mix of customers.
Now it has to work hard to build its reputation and survive in a highly competitive market. It surely isn't the only painting and coating company in Hampton Roads.
Main Industries grew out of a small soap company owned by Mike Challoner's father. The elder Challoner was an estimator at Newport News Shipbuilding and manufactured household detergents in his home on the side.
As a youth, Mike Challoner would make 7 cents for each bottle of his father's soap he sold at local grocery stores. After a brief stint in college and the Navy Reserves, Challoner went to work for his father, and they expanded their line, selling degreasers and other solutions to gas stations.
The turning point came when their small company became the local sales representative for a major manufacturer of marine coatings. Challoner founded Main Industries in 1976 and began contracting to do sandblasting and painting as well.
``The military buildup and the need for people who understood marine coatings was there,'' Challoner said. ``We got really concentrated in Navy work.''
Main won numerous subcontracts from shipyards such as Newport News Shipbuilding, Norshipco and Colonna's Shipyard Inc. to do the stripping and painting part of regularly scheduled overhauls of Navy vessels.
By the mid-1980s it was doing about $8.5 million of work a year, nearly all of it on Navy, Military Sealift Command or Maritime Administration ships.
Then the world changed. Communism collapsed, the Berlin Wall fell and the Soviet Union dissolved. The Navy no longer needed to project a 600-ship fleet to counter the Red Navy.
The Navy began to scale back the fleet to about 340 ships and changed the way it maintained them. For Main Industries it meant one thing - less work.
``About five years ago we realized it was going to slow down,'' Challoner said. ``We didn't realize it was going to be so dramatic.''
Main started seeking industrial customers and immediately ran into several roadblocks, Challoner said.
The military always knew exactly what it wanted, and a contractor just had to meet its needs. Commercial customers often didn't know what they wanted done or what was required by the Environmental Protection Agency and the Occupational Safety and Health Administration.
To keep costs down, commercial customers don't want the same quality of paint or level of surface preparation as the military. A Navy job typically required 40 to 50 specialists; a commercial job usually only takes three or four people who can do anything.
Commercial customers required their contractors to be bonded so they were insured against mishaps and business failure. Main Industries couldn't get bonding because some of the shipyards it worked for were so weak financially.
``It's a great big switch in the way you do business,'' Challoner said. ``We went through a real learning curve. We had to identify the market and what the needs of that market are.''
In the meantime sales slacked off, and the company started losing money. Sales dropped to $5 million in 1993. While it did a few commercial jobs, its profit margins were so thin, and the learning curve so steep, it wasn't making any money on them. ``We had some terrible years,'' Challoner said.
Main Industries pared back to a core of 120 employees and supplemented with temporary help as needed. It stopped doing work for weaker shipyards and eventually was able to get bonded, which meant it could compete for state and bigger industrial contracts. It learned to manage a lot of small jobs as opposed to a handful of large jobs.
And it continued to invest in equipment and the latest technology. For example, it used to have all electric-powered sandblasting gear, because shipyard piers had easy hookups.
Electrical hookups sometimes aren't readily available at industrial sites, so Main started buying diesel-powered equipment. It also bought new sponge blasting technology and recently paid about $150,000 for an ``ultrahigh'' water pressure blaster, which pushes water out at pressures in excess of 30,000 pounds per square inch.
``From a technological standpoint, the marine industry was actually ahead of the industrial coatings market,'' said James R. Herndon, a former shipyard executive and the consultant Main hired to help with its turnaround.
Main is turning its technological and environmental control edge to its advantage.
``We used to say it was very difficult to compete with a guy with a pickup truck and a compressor who could just pull up and start to blast,'' Challoner said. ``Now with EPA regulations and OSHA regulations, it's becoming easier for us to compete.''
Main has tried to target potential customers who are as much aware of their environmental responsibilities as it is, Herndon said.
``We had to find people who were willing to pay for our expertise,'' Challoner said.
Main has gone after big companies with a lot of infrastructure that needs to be maintained, such as Norfolk Southern Corp.
The company had some success in 1994. Sales bounced back, and it turned a profit. Last year about 50 percent of its $9.2 million in sales came from Navy subcontracts; anadditional 20 percent came from marine coatings on commercial ships.
The remaining 30 percent came from its burgeoning industrial business. In the past few years its customers have included the Planters Peanut factory in Suffolk, Virginia Power and Dominion Terminal Associates, a Newport News coal terminal. It even painted the gates on a dam in Goshen, Va.
``The level of their craftsmanship is incredible, and they're very affordable,'' said Mike Zafris, supervisor of maintenance control at Dominion Terminal Associates, which loaded ships with about 12.3 million tons of coal last year.
Zafris said there are a lot of painting companies in Hampton Roads, but few were qualified for the kind of work Dominion Terminal Associates needed. Main Industries has painted everything from the terminal's metal superstructures to the locomotives that move the coal trains around the facility.
Herndon, the consultant, thinks Main Industries is just hitting its stride. ``Opportunities are beginning to really increase,'' he said.
But to get where it is today, Main changed nearly everything about its business. It had to burn bridges with longtime customers, get rid of longtime employees who were unwilling to change and adjust to a whole new way of doing business.
Showing a recent visitor to his office photos of a yellow bulldozer before and after a paint job, Challoner remarked: ``It's just amazing to go from painting big Navy ships to jobs like this.'' ILLUSTRATION: [Cover]
PROFILE: MAIN INDUSTRIES
JIM WALKER/Staff [color photo]
Johnnie Walters, left, of Main Industries and Jim McElhaney of Flow
International set up an ultra-high-pressure water blaster.
Main Industries
Founded: 1976
Headquarters: Newport News
President: Mike Challoner
Number of employees: about 120
Sales: $9.2 million in 1994
LAWRENCE JACKSON/Staff [color photo]
Johnnie Walters, a mechanic with Main Industries, strips paint off
part of a cement-treated aggregate plant owned by Jack Massie
Contractors. Norge, Va.-based Jack Massie bought the plant, which
mixes cement with rock aggregate for road beds, in Florida and hired
Main to paint it before reassembling it. After stripping the plant
with high-pressure water, Main will sand, prime and paint it.
JIM WALKER/Staff [color photo]
Mike Challoner, above left, Main Industries president
KEYWORDS: DEFENSE CONVERSION by CNB