Jay and I had the opportunity to talk to Douglas Carlberg, President and CEO of M2 Global, at the San Antonio Manufacturers Association‘s South Central Texas Manufacturers Trade show and Conference about the defense industry.
Below is a hasty transcript, please excuse any typos.
Jay Curry: And we’re back. Hello Texas. Welcome to Texas Business Radio. We’re down here at the Corporate Finance Association broadcast booth at the South Central Texas Manufacturing Trade Show and Conference. This is big, big operation going here. Brought to you by the San Antonio Manufacturers Association. We’re at the Coliseum here in San Antonio and we’re having a blast. Now Matt stepped out. I’ve got George Walden our old partner, not old in age, but our trusty partner has joined us. George glad to have you on board. We’re just having some fun down here.
George Walden: We are, you know, manufacturing is picking back up in Texas. That’s the exciting news. And we have the pleasure today of interviewing one of the leaders of this show, Douglas Carlberg owns M2 Global. What a fascinating story.
Jay Curry: President and CEO, so Doug Carlberg the founder. Is that right?
Douglas Carlberg: That is.
Jay Curry: And a very interesting story of how you got started and how you got to where you are today. Why don’t you tell us a little bit about what M2 Global is all about.
Douglas Carlberg: Well, M2 Global started off in 1999. Actually we formed the company on September the 13th, which is a Friday. Which actually turned out to be my lucky number. And I started off as senior vice president for Harris Corporation and their micro-wave communications division. And we had operations around the world. And at the end they decided to restructure. Basically take all their manufacturing to contract manufacturers like Benchmark and Saia. Another contract manufacturer here in the country. And so I took two years dividing up what we had around the world and getting it offloaded. And what was left was a piece of a product line here in San Antonio, that did microwave components and substances. Which were very important to Harris because they were all approved by the FCC and they didn’t want to lose that technology and get somebody else to do it would give them a competitive edge. So they actually helped fund the program and negotiate a contract with me. Which got us going. And we were right at the Y2K period. The growth in the cell phones were coming up and life was really good. And then 9/11 hit it right after 9/11 like everybody else. Our sales dropped in half, probably less than six months. And everybody was sitting on a lot of inventory and we had to rethink what we were going to do. So we had to make some tough decisions. We had to resize, like everybody else. But then I decided were can I go to be competitive and I said “I’m going to go on the defense market” because I have a background in defense. So I set it up and figured out what we needed to do to get into the radiance and General Dynamics and the Rockwell Collins and put a plan together. And it’s a good thing I did, because when the commercial market came back for point to point more radials or cell phone base stations or backhaul. It all was coming from China and at that time I got to go look at some of the products at trade shows and they were my designs but they were made in China. So they reversed engineered.
Jay Curry: And guess what I have. Right.
Douglas Carlberg: And like everything else there’s really no intellectual property protection in China. So… but it quickly realized that it took a number of years to really get things in the defense market up and approved to the budget. If you had a new design it would take four to five years. In the commercial market we were 12 to 14 months, 15 months. We were get new products out there.
Jay Curry: So.
Douglas Carlberg: Then I switched over to aviation parts that make it grow quicker. So right now we’re a supplier to Bell Helicopter and Lockheed Martin and we’ve got over 800 parts of the new Joint Strike Fighter the F-35.
Jay Curry: Wow very impressive. An amazing story actually. How you had a disaster strike on you. You learned the lesson of dealing with China and you had to completely rebuild your business. Your, you’re up to how many employees now?
Douglas Carlberg: Were up around 60 employees right now. It looks like we’re going to go at least 10 percent, if not more this year. And we’re hoping with the economy and then everybody’s bullish about it. We just heard Drew Goldblatt talk about what he’s seeing, that North American Manufacturing Association and it looks very positive. We’re looking at this growth going forward here for the next, next couple of years.
Jay Curry: We also have a president, I think, who is going to try to rebuild the military and that’s got to help.
Douglas Carlberg: That and deregulation. It is something about the tax thing. If you can incentivize small business to invest in their infrastructure. It’s going to create jobs right away and it’s going to make us more competitive in the global market.
Jay Curry: So, if you had a best practices that you would want to pass on with all these experiences. How do you get through such tough times and come back like you did? Well, what’s the number one.
Jay Curry: All right. Early on I embraced the Toyota manufacturing process. I get involved with the Shingo prize Utah State University. I get involved with Association of Manufacturing excellence and they were running a number of seminars, workshops and bench-marking sessions with very lean companies. I got involved with that. I studied it. And I figured out how to take making cars like we do here in Texas and apply it to a high mix, low volume operation. So I applied lean to and lean principles. But the key is respect for people and getting your people engaged and trained to execute the tools. And as a result, last year from Lockheed Martin I was recognized out of 1,400 suppliers for basically being one of their top 25. That’s a 100 percent on time of delivery with 100 percent quality.
Jay Curry: Wow. Out of fourteen hundred.
Douglas Carlberg: Supplier.
Jay Curry: You had 100 percent.
Jay Curry: On time delivery and a 100 percent quality for a year for Lockheed Martin.
George Walden: That’s amazing.
Jay Curry: That’s that’s a great story.
George Walden: So, I’m curious about something. You talked about downturn you went through. How bad was the downturn from the size you’re currently about 60 employees?
Douglas Carlberg: At the peak period were about 97 employees. And we went down to 38.
George Walden: That’s quite a dramatic change.
Douglas Carlberg: Oh, yes. And what we did is when we finally got down to that size then we ended up with the core team. And then we invested in training and that thing. And they were going to be our trainers as we started growing back, to training and integrating new employees in the organization.
George Walden: All right.
Jay Curry: Have you set up, I mean this is a complete change in your business. Did that have a big impact on the back office? I mean your military stuff.
Douglas Carlberg: We had to do, we have to do everything. We have to start in the back office and go forth. We have to figure out how to automate the paper system. So we came in with a paperless document controls system. I ended up being a beta site. I was on a plane one time sitting next to a guy and he said “what do you do for a living”. He says “I sold this software system that goes to insurance companies”. I said ” Have you thought about manufacturing?” and he goes “no”. I said “this thing could work”. So I was a beta site. We got it today and there some in the aerospace industry.
Jay Curry: So your customers are pretty big customers. But if somebody wanted to learn more about what you’re doing. How would they get a hold of you?
Douglas Carlberg: Well they can contact me at sales@M2global.com or just call at 210-561-4800. A matter of fact I’m doing a tour this afternoon for senior managers for the Association of Manufacturers. They are going to tour my site this afternoon. We do tours probably once or twice a month for groups of people going through. We also do it with kids in schools because we want to get the next generation.
Jay Curry: We need to do that. Right?
Douglas Carlberg: Expose to manufacture.
Jay Curry: Folks, we’ve been talking to Doug Carlberg the president and CEO of M2 Global. Thank you Doug, wonderful story. Very interesting. This is Jay Curry with George Walden. We’re wrapping up just the first of four that you’re going to hear here at the Coliseum in San Antonio the manufacturing association. And we’re going to break here for a minute but get your calls in 844-814-8144. Check out Texas business radio. We’ll be right back.
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George Walden is a Managing Director and Principal in Corporate Finance Associates’ Houston office with twenty-five years experience as a middle-market investment banker. George is a member of CFA’s equipment industry practice group and an expert in the precision machining industry with special emphasis on manual machining, CNC precision machining, and gun drilling services and has been responsible for several industry-leading transactions. You can learn more about George HERE.