Spokane Journal of Business

Exporters ride wave of growth

Strong global economy, weakened dollar bolster export sales

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If the volume of new export sales that companies here are landing is any indication, Spokanes quietly thriving export trade is making some noise abroad.

Companies here say theyre in hot pursuit of new opportunities outside the U.S. and are optimistic about being able to expand their sales in what they describe as a strong global economy. The devaluation of the U.S. dollar against other currencies over the past several years, which helps make American products cheaper abroad, has been helping fuel their export growth.

Kim Hotstart Manufacturing Co. has landed contracts recently with companies in Spain, France, Italy, and South Africa, each worth up to $200,000 a year in sales. Meanwhile, Wagstaff Inc., which now exports nearly all of its goods, has added Greece to its lengthy list of international markets this year.

Pearson Packaging Systems is looking at opening a facility in Mexico, where its business has been going like gangbusters. United Coatings Manufacturing Co. plans to open a sales office in Beijing soon to help serve its customers in China, where it has been capturing a number of multimillion-dollar orders.

At least one company thats just beginning to break into international marketsRathdrum-based modular-home builder Stratford Building Corp.has begun reaping rewards for its efforts quickly.

I think people dont recognize what a lot of our companies do here, says Karen Cooney, trade assistance director at the International Trade Alliance (ITA) here. We arent the Seattle area, but we have a lot of companies that do very well by exporting.

In a survey conducted jointly by ITA and Eastern Washington University last year, more than half of the 284 businesses sampled predicted theyd have an increase in exports in 2006. Only 3 percent predicted a decrease in exports.

Cooney says companies have told her theyre expecting similar, if not greater, gains this year.

For example, export sales at Spokane Valley-based Kim Hotstart, which makes pre-heaters for diesel engines, grew 8 percent last year and are on track to jump at least 20 percent, if not 30 percent, this year, says Terry Judge, the companys director of sales and marketing. International sales now make up 18 percent of Kim Hotstarts $30 million in annual revenue, Judge says.

Domestically, our market share is strong, so were focusing more on international business, because theres untapped potential there for us, Judge says.

One of Kim Hotstarts biggest focuses internationally is Germany, where its currently looking for a salesperson, who would be its first employee based overseas, he says.

In the past few years, the company has hired salespeople to work here who are natives of other countries, because they understand the cultures of the markets the company is targeting and are fluent in other languages, Judge says. Kim Hotstart tries to recruit such workers from the Spokane area, but has struggled to find people with the international background and technical expertise its looking for, he says.

If you want to do business with the world, you have to look like the world, Judge says. Its a challenge to find diversity here.

Another challenge for exporters here involves the different product and safety standards companies must meet to sell their goods abroad, says Trond Liaboe, Kim Hotstarts international market manager and a native of Norway. Those standards affect the entire supply chain, since an exporting company must find suppliers that can provide the components it needs to build systems to its customers specifications, he says.

While some aspects of international trade remain difficult, others are made easier by advancements in technology, Liaboe says. Whereas employees used to have to wait to get back home to catch up with paperwork, they now can use cell phones, Blackberry and other wireless connections, and the Internet to enter orders moments after they receive them.

Being out there and meeting with people in other countries is really an important part of doing business, Liaboe says. Now, you can work on the road and communicate with colleagues, and its just seamless.

Weak dollar

The weakened U.S. dollar has been helping boost Spokane Valley-based Wagstaffs export business, says Paul May, CEO of the companys Spokane operation. Wagstaff, which makes tooling for the aluminum-casting industry, now exports 80 percent of its goods and serves customers in 54 countries, May says. He declines to disclose the companys annual revenues, but says total sales are expected to grow about 6 percent this year.

Our sales effort is way ahead of forecast, and now were just trying to figure out how to fulfill it all, May says.

Part of whats fueling the companys international business is that most of the aluminum industry, which once thrived in the Pacific Northwest in particular, now has moved outside the U.S., he says.

Were just following our customers wherever they go, he says, adding, though, that the company is committed to keeping its main plant in Spokane.

In the ITA-EWU survey, of the 64 countries that companies identified as areas to which they ship products and services, Canada was far and away the leader, followed by Mexico.

For at least one company here, tapping into Mexico and other Latin American markets has proved especially lucrative. Pearson Packaging Systems, the West Plains manufacturer of packaging machinery, has experienced a 50 percent increase in sales in Mexico and Latin America each year for the past two or three years, says CEO Michael Senske. Overall, exports now make up 25 percent of the companys current $35 million in revenue, and are expected to make up a third of the companys business next year. Senske anticipates that within three years, the company will have up to $20 million in sales in Mexico alone.

Pearson Packaging recently opened a sales and service office in Mexico City, and is considering establishing a warehouse and assembly facility in Mexico within the next two years to handle growing demand there, Senske says.

Although countries across Asia are expanding rapidly, China is proving a particularly hot market, ITAs Cooney says.

Spokane Valley-based United Coatings has been involved in a deep-water port project off the coast at Shanghai that has garnered it close to $1 million a year in sales, says Bill Mann, the companys vice president of international sales. The company also is supplying coatings for a high-speed rail line project in China, in what will be about an $8 million job, he says. Additionally, United Coatings is looking at getting involved in a couple of projects related to wind power, which could result in another $12 million in total sales.

A few years ago, the Asian economy wasnt the greatest, but its definitely come back now, Mann says.

While U.S. companies typically are familiar with horror stories about business ventures in China, the Asian country has been encouraging joint ventures with foreign companies in recent years, Mann says. With all of the infrastructure work going on there, potential jobs are plentiful for companies here that are willing and able to establish relationships with the people in power, he says.

United Coatings also has started distributing its products in India, where market potential is strong, despite high tariffs, he says.

Stratford Building Corp.s recent entry into Canada is the result of more than a decade of careful planning. The Rathdrum modular home builder long has harbored export ambitions, but was waiting for economic conditions in Canada to improve before entering that market, says John Davis, the companys vice president and general manager.

Stratford Building received its Canadian Standard Association certification for its products in early June, and by early July had sold its first modular home in British Columbia, Davis says. Its exporting four more homes to that province soon, and is working on lining up contracts with potential customers in Alberta, as well, he says.

The Canadian economy is vibrant right now, and its helping us to offset the slowdown of home building in the states, he says.

Some businesses here that are interested in breaking into foreign markets say theyre simply too busy with domestic work right now, Cooney says. Spokanes tight labor market compounds the problem, because it hinders companies from assembling the work force necessary to accept additional orders, she says.

Its a double-edged sword, because you want to get your products overseas so that when domestic does go down, you still have export sales, Cooney says.

Perennial trade barriers for companies here are the documentation, language skills, and shipping costs, she says. The ITA conducts seminars, disseminates information about trade missions and opportunities abroad, and gets businesses in touch with work force resources if theyre strapped for workers, she says.

Contact Emily Proffitt at (509) 344-1265 or via e-mail at emilyp@spokanejournal.com.

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