THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, May 15, 1995 TAG: 9505130192
SECTION: BUSINESS WEEKLY PAGE: 12 EDITION: FINAL
TYPE: Cover Story
SOURCE: BY TOM SHEAN, BUSINESS WEEKLY
LENGTH: Long : 172 lines
For Curt Womble, the risk seemed worth taking.
In the past, Marine Hydraulics International Inc. had been slow to pay, but Womble decided last summer to rent one of his trailer-length electric generators to the Norfolk shipyard.
It was better to stick by a customer, even one that wasn't always prompt at paying its bills, figured the president and owner of Womble Generator Service Inc.
``I've had rough spots and people helped me out,'' says Womble, a blunt-speaking retired naval officer. ``If you're cold-blooded and purely statistical, your business will suffer in the long run.''
But Womble's Suffolk company came up short in January when Marine Hydraulics filed for bankruptcy court protection from its creditors. For a larger company, this might have been an irritation. For Womble Generator, the action hurt.
``In a good year, we might have a $50,000 to $100,000 profit,'' says Womble, ``so when you lose $15,000 to $20,000 (from a bankruptcy), you're talking about a pile of money.''
Hundreds of small companies in Hampton Roads have been bloodied in recent years from the Chapter 11 bankruptcies of three Norfolk shipyards: Marine Hydraulics, Jonathan Corp., and Colonna's Shipyard Inc.
Their losses have coincided with the downturn in Navy ship-repair contracts, which has forced suppliers and sub-contractors to scramble for other sources of business. As the Navy scales back the size of its fleet, its need for ship overhauls and repairs has been sharply reduced.
When the heads of rapidly growing small companies from throughout the country gather in Norfolk Thursday for Inc. magazine's Inc. 500 conference, their discussions may capture the dynamism of owning and running a small business.
Inc., a monthly that compiles an annual list of the 500 fastest growing private companies in the country, is conducting a three-day program that includes talks on topics like business strategy and marketing via computers.
But the owners and managers of many small companies in Hampton Roads will be wrestling with grittier details like keeping track of their slow-paying customers.
At Womble Generator, much of his time is still consumed ``worrying about cash flow and thinking about new sources of business,'' Womble admits.
Another company searching for customers to offset the decline in its Navy ship-repair work is American Oceanic Coatings Corp.
In April, the Virginia Beach company completed a deck-repair job aboard a ship in Brooklyn. It was the company's first contract outside Hampton Roads, says Jerry Copelli, president and part-owner of American Oceanic.
While some companies that relied on the ship-repair industry for sales have been forced to look outside the region for customers, others have been helped by a recovery in the Hampton Roads economy.
After being squeezed by the recession of the early 1990s, many companies are much stronger financially and better prepared to expand, says Robert J. Keogh, president of Heritage Bank & Trust in Norfolk.
James V. Strickland Jr., president of the public accounting firm Strickland & Jones, P.C., in Norfolk, said some clients scaled back their operations during the recession. ``Many small companies had too much debt and overhead,'' he said. ``When things were going well, they were reluctant to change.''
Today, however, several of these companies are building up their inventories and hiring new employees, says Strickland.
In fact, employment statistics indicate that small businesses account for most of the job growth in Hampton Roads. For the July-through-September period of 1994, the number of jobs at business establishments with 100 to 249 employees, grew by almost 9 percent, according to the Virginia Employment Commission.
Among the hundreds of small companies in Hampton Roads that do business with local shipyards, the impact of declining Navy ship-repair work has varied widely. Here's how four companies have adjusted.
Diamond/Goodson Equipment Co.
Bruce C. Goodson can attest to the upturn in employment in Hampton Roads. For the president of Diamond/Goodson Equipment Co., it has meant greater competition for skilled labor.
After months of searching for three mechanics to overhaul diesel engines and other types of equipment, he has landed only one.
``The worst frustration is finding employees,'' says Goodson, whose Hampton company rents and sells compressors and other industrial equipment.
While Diamond/Goodson still relies on local shipyards, the company has increased its sales to construction companies.
With the Navy cutbacks, Diamond/Goodson has been scouting for prospective customers as far away as Fredericksburg and Charlottesville.
American Oceanics Coatings Corp.
Jerry Copelli hasn't given up on the ship-repair market, but he has been investigating another market for his deck-repair business: jail floors.
Copelli recently attended a trade show in Charlotte put on by the American Jails Association. ``I got some really good leads,'' he says.
When ship-repairer Jonathan Corp. sought court protection from creditors in late 1993, American Oceanics avoided losing any money, Copelli says. ``I saw that one coming'' because Jonathan had been unusually slow at paying its bills, he says.
Electric Motor and Contracting Co.
While walking through his company's main shop in Chesapeake, Jimmy Lee King stops to examine the coil from a 3,000 horsepower pump motor. Like several of the motors being rebuilt at the shop, it came from a utility power plant.
During the mid-1980s, Electric Motor and Contracting Co. relied on local ship-repair yards for about 30 percent of its sales. But the company stepped up its pursuit of commercial customers beginning in the early 1990s, reducing its sales to shipyards to 15 or 20 percent, says King, president of the family-owned company.
``Fortunately, we saw a little bit of a change'' in the volume of Navy ship-repair business in 1990, ``so we expanded our work in the electric utility market,'' he says.
Today, Electric Motor has a roster of 10 electric utility customers between New York and Florida. Bolstered by this work and by its diversification into repairs of other electrical equipment, the company's sales last year reached $13.3 million, an 11 percent increase from 1993, says King. This year, says King, sales are likely to total $16 million.
To handle the increased work, Electric Motor has added more than 20 employees during the past year, which brought its work force at two shops to 177.
Womble Generator Service Inc.
A tractor-trailer pulls out of the Womble Generator yard and heads east on Nansemond Parkway. On board is a generator destined for Norshipco, the Norfolk shipyard.
But deliveries of generators to local yards are less frequent these days. And Womble concedes that he did not act quickly enough on the evidence that business from local shipyards would eventually decline.
``It's always easy to see in retrospect that when the (defense) budget was cut, somebody would be hurt,'' he says.
Womble has responded by expanding the mix of equipment he rents and having one of his eight employees scour central Virginia for new customers. If there are adequate prospects for equipment rentals elsewhere in the state, he may open a facility outside Hampton Roads, Womble says.
``In a small business, you have to be flexible,'' he says. ILLUSTRATION: [Cover]
HOLDING THEIR OWN
[Color Photo]
Curt Womble
REACTIVE
MICHAEL KESTNER/Staff [color photo]
Curt Womble, owner and president of Womble Generator Service Inc.,
didn't anticipate the downturn in Navy shiprepair contracts and is
scrambling for new business.
PROACTIVE
JIM WALKER/Staff [color photo]
During the mid-1980s, Electric Motor and Contracting Co. relied on
local ship-repair yards for about 30 percent of its sales. But the
company stepped up its pursuit of commercial customers beginning in
the early 1990s, reducing its sales to shipyards to 15 or 20
percent, says Jimmy Lee King, president of the family-owned
company.
GRAPHICS
WHO'S HIRING
HAMPTON ROADS JOBS
NAVY REPAIR CONTRACTS
ROBERT D. VOROS/Staff
SOURCES: Virginia Employment Commission; Supervisor of Shipbuilding,
Conversion and Repair, Portsmouth.
[For a copy of the graphic, see microfilm for this date.]
VIRGINIA COMPANIES ON THE INC 500 LIST
[Information not available electronically. For a copy of the list,
see microfilm for this date.]
KEYWORDS: SHIP REPAIR SMALL BUSINESS NAVY CONTRACT DEFENSE INDUSTRY
by CNB