Getting help to fight back; small manufacturers hurt by foreign competition can get federal assistance to meet the challenge

Nation's Business, Feb, 1994 by Robert Sullivan

Low-cost Canadian snowshoes threatened to drive Ed Kiniry's company, Stowe Canoe and Snowshoe Co., in Stowe, Vt., out of business. "We were being undercut by inferior-quality imports," he says. "Canadian maple was underselling our ash frames at 60 percent of our lowest price."

Rather than give up, Kiniry got help. He turned to a federal program designed to help small manufacturers recover business lost to imports. The Department of Commerce's Economic Development Administration, through 12 regional Trade Adjustment Assistance Centers, pays up to 75 percent of the cost of consulting services needed to turn around small firms adversely affected by foreign competitors. The regional trade centers can deliver help in as little as 60 days after a company applies.

The New England Trade Adjustment Assistance Center, in Boston, helped Kiniry get a $40,000 grant from the Commerce Department to hire consultants. Upon their recommendation, Stowe Canoe and Snowshoe developed an aluminum snowshoe that became an instant market nit. Since introducing the product last year, the company has doubled its work force to 30 employees and has captured 30 percent of the growing metalsnowshoe market, which is projected to reach sales of $5 million this year.

"If the business needs help, we provide it directly or contract with independent consultants for the expertise," says Richard McLaughlin, director of the New England Trade Adjustment Assistance Center.

Although the center covers only "the soft costs," such as consultants' fees, and does not pay for equipment or inventory, Kiniry says the $40,000 grant made it easier for his company to spend $110,000 of its own money to sell the snowshoe.

Under the program, participating comparties are required to pay at least 25 percent of the cost of the consulting services. McLaughlin says New England area companies that complete the program realize an average 120 percent increase in profitability, a 10 percent increase in sales, and a 5 percent increase in employment.

The centers provide three levels of service: certification of a company's injury from imports, consulting services to prescribe a remedy, and help in implementing consultants' recommendations.

Certification is free A company must demonstrate that imports threaten its sales, production, and jobs. The center handles all of the paperwork, and the program is confidential. In 1993, 249 small manufacturers nationwide received Trade Adjustment Assistance Center certification, clearing the way for the next level of assistance.

Once a company is certified, professionals spend two to four weeks determining the firm's strengths and weaknesses. A result is an "adjustment proposal," which is similar to a business plan. It outlines a strategy for recovery and includes a grant proposal for consulting services submitted to the Department of Commerce for approval Proposal review takes about two weeks.

Last year, the Department of Commerce funded 143 adjustment proposals. Congress appropriated $10 million for the program in 1994, down $3.7 million from the previous year.

Once a grant request is approved, the company and the Trade Adjustment Assistance Center select consultants through competitive bidding.

A $50,000 grant for trade adjustment assistance helped revive Roger Leib's ailing company, Add Interior Systems Inc., a Los Angeles manufacturer of upholstered institutional seating. In 1990, import competition cost Leib's firm more than $750,000 in potential sales, and the company lost money for the first time in its 13-year history.

With help from the Western Area Trade Adjustment Assistance Center, in Los Angeles, Add Interior was able to redesign its production layout, install an incentive-pay system, nearly triple the pace of production, increase overall quality, integrate its management-information system, and enhance customer responsiveness. It also streamlined its product line

"It was amazing how many cost and waste factors were identified and changed," Leib says.

He says sales have climbed 100 percent since he implemented the center's recommendations. Employment has risen to 73 from 52.

"During the past few years, our return on investment of federal funds has been 320 percent," says Dan Jimenez, director of the Western Area center. "Fiscally, socially, and practically, this program works."

For more information or to obtain the address and phone number of the center nearest you, call the Trade Adjustment Assistance Division of the U.S. Department of Commerce in Washington, D.C., at (202) 482-3373.