We spoke to Bill Cox, President and CEO of Cox Manufacturing, in San Antonio about his buiness, competing with Chinese parts, and the state of manufacturing in Texas.
Please excuse any typos, this is a hasty transcript.
Matt Register: Hey guys, welcome back to the show, Texas Business Radio. We’re down here at Freeman Coliseum. At the San Antonio Manufacturers Associations, South Central Texas Manufacturing Trade Show and Conference. That’s a mouthful. That’s where we are,we’re down here. Manufacturing is alive and well in Texas and this show is evidence of that. And we’re bringing you the best of the show. We got some very, very interesting businesses down here that, you know, I enjoy. I’m a machine shop guy. I love talking to these machine shops. And we got a whole lot of information for you. So, buckle your seat belt. Get your calls in at 844-814-8144 our 24 hour call in line. And don’t bother taking notes. We’re going to have links to everybody right there on a Web site, Texasbusinessradio.com. I’m your host Matt Register here as always with Jay Curry. Jay, talk to me.
Jay Curry: One of the things I’m seeing is a kind of a little twister. For a year and a half we’ve been… you know the Texas economy has kind of been hurting and stuff. I’m beginning to hear some light at the end of the tunnel. Some very interesting stories. I think Bill’s going to tell us a little bit about China and things like that. We’re seeing some activity. This is a great place. I’m delighted to be here.
Matt Register: Yeah, no doubt. OK. Bill Cox president and CEO of Cox Manufacturing Company out of San Antonio. Bill welcome to the show sir.
Bill Cox: Thank you.
Matt Register: So tell us about Cox Manufacturing. What do you do? Who do you do it to?
Bill Cox: Well, OK, we’re actually this year a 61 year old company and I’m the third family member to take the helm of the business. I’ve actually been the presidents since I was 24 years old. So I’ve been at it a while.
Matt Register: All right.
Bill Cox: And what we are is a contract manufacturer. We do high volume production machining out of bar stock. Make small precision parts.
Matt Register: So, small precision parts. We’re talking about it in our business we refer to those as kind of screw machines, right? You’re making very small parts in very high volumes. Right?
Bill Cox: Correct. I hate the term screw machines.
Matt Register: Ok.
Bill Cox: Only because people that don’t understand it jumped to the wrong conclusion.
Jay Curry: Old name.
Bill Cox: At the hardware store variety screws are not even made on this type of equipment. That for the last years…
Jay Curry: This is high precision, right?
Bill Cox: Yeah. These… a lot of parts don’t have threads. Many of the parts have no turn features. They’re milled pieces, just milled smaller components. A screw machine as an automated lathes and the first automated lathe was originally designated as a screw machine because that was the most common application. Today’s screw machine products go to a broad range of end uses. For example… and what we service 10 to 15 percent of our sales are medical device industry. Firearm components, automotive and trucking components, electronic components, defense components.
Matt Register: But the common thread of that is high volumes of small manufactured precision parts, right?
Bill Cox: Exactly.
Matt Register: Well that sounds very similar to what China has gotten very good at over the last several years, right? Talk to me a little bit about… because I’m sure you run into them, right? How has, as a Texas manufacturer, you stood the toe to toe and continued to grow through the face of competitors like that.
Well, it’s been a challenge. It’s been a challenge for our whole industry and we’ve seen a lot of people throwing their towels and just give up. In my career, I’ve been fighting against China for a good twenty five years, in my career. The… How we dealt with it is not giving up and try to tighten up and refine, be more automated than the Chinese. Where we can take on jobs and still be cost competitive. Or we can take on jobs that they just can’t satisfy the quality requirements.
Matt Register: So are you finding that it’s that that is quality, that it’s automation. Where you can squeeze more cost out of the parts than anybody else. Is it delivery is it? You know, what have you found is your most effective weapon against something like that.
Bill Cox: It’s all of the above. You really nailed it. It’s, it’s reliable quality, it’s, it’s, it’s, reliable delivery and it’s a shorter supply chain. In fact in the last year we’ve seen a growing trend that more and more companies have, have done a better job of counting the cost of subcontracting to China. The long supply chain, if there is a design change or if there is a quality problem. They have so much product forever on the boat. It takes a long time to turn it around. So one of our good customers they were coming to us with our emergency rush orders to repair the Chinese parts. And after they did that several times. They just gave it, gave it up. And we’ve been making that part hundreds of thousands of them a year for years.
Matt Register: That’s always nice when you get a chance to solve a problem that competitors caused. Right?
Bill Cox: Yep. Yes.
Jay Curry: Bill, is that a trend that you’re seeing now?
Bill Cox: Absolutely. For the last year I would say we’re averaging one or two inquiries from either a current customer or prospect. Where they have a project that is currently being purchased in China that they’ve resolved to discontinue in China and sourced domestically. Or a new generation of design that they’ve designed. They’ve decided they will not build in China in the future. And the reasons are not just the long supply chain. But also the risk of theft of intellectual property. Which is a real big threat.
Matt Register: Which is almost a guarantee, right?
Bill Cox: It really is. It really is. And then the other thing is, is that the integrity issue. They… there… One of our customers had a situation where the initial pilot runs were done with one grade of material and they tracked OK. And then they tested the material later and to their shock that Chinese had changed the raw material on them. And that was a total nightmare.
Jay Curry: That’s the reputation, that is bringing it back to America. I mean you want the quality, the reliability, the quick turnaround and you’re seeing that happen.
Bill Cox: And the battle is not over. It’s going to… we’re going to be at it for a while. I think our accountants have gotten smarter too. And realize that there’s more to the cost equation than the price on the invoice.
Jay Curry: Right.
Bill Cox: I know it’s easy to look at two numbers and say well this one is smaller than the other but you’ve got to look at the whole strategic picture.
Matt Register: No, that’s exactly right. And you’ve got to… especially in your business, you’ve got to run your company very, very efficiently to be able to compete against something like that. Yeah, great. So, tell me a little bit about who your industry is you service because you were talking during the break. You were quite a range.
Bill Cox: Well firearms for example. We supply a number of firearm industries. We make a lot of little small parts and they go into a variety of different components and different products. And one of the parts we’re really proud of is, we actually make a little test piece out of copper, that there’s a firearms industry association that selected us as a supplier to produce this park part and sell it to all the major firearm manufacturers like Winchester, Remington. All of those guys, the guys making a 22 rimfire are buying the copper test piece from us.
Matt Register: OK.
Jay Curry: Now another thing was that when you started you were kind of in the oil business pretty heavy and then you really got away from it. That was a key for you and stay in business. Now it’s beginning to come back. What’s the story there?
Bill Cox: Kind of rewind a little bit. As a kid, the industry was 80 percent electronics. In fact my dad had started the business. He latched on to a market where we were making. My dad didn’t know anything about the industry when he started. He bought one Swiss machine that was a machine designed to make Swiss parts. And he thought…
Jay Curry: The hard work sweat.
Bill Cox: He thought he could start a business out and he did. And he latched on to a market where every bit of computer memory required one bobbin. And so he found five companies that were buying these parts. And the East Coast, West Coast and the Midwest. And that’s how the company was founded. So we were latched into that market. But like any market, it has a life cycle. And at a very young age, at 12 years old, I knew that my dad had passed away and my mom was taking over the business. And we both know that this isn’t going to go on forever. We’re going to have to learn to diversify. And it was a few years later.
Jay Curry: It’s paid off well for you.
Matt Register: Well, yeah. No doubt, they’re smart because they’re all down simultaneously, right? The goal is to smooth that out a little bit. Bill Cox president and CEO of Cox Manufacturing Company. Thank you very much for joining us.
Bill Cox: Thank you.
Jay Curry: Great story.
Bill Cox: Guys were up on the hard break. We’re going to pay a couple of bills. We’ll be back right after this. Don’t go anywhere.
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In addition to hosting "Texas Business Radio," Matt is an investment banker and serial entrepreneur from Montgomery, Texas. He is the owner of RREA Media and Register Real Estate Advisors and a Managing Director and Principal at Corporate Finance Associates. He has a BS from the United States Military Academy at West Point and an MBA from Rice University in Houston. You can read more about Matt HERE.