Going strong in tough times

Electrical Apparatus, Sep 2002 by Jones, Kevin

An Ohio service company thrives by reinvesting

in its business and maintaining a diverse customer base

YOUNGSTOWN, OHIO-Conventional wisdom has it that during recessionary times, manufacturers choose more often to repair than to replace their large electromechanical machinery, making up with repair orders what service companies lose in new product sales.

In times as economically troubled as these, however, even those repair orders may decrease or vanish as manufacturers either postpone repairs or cease operations altogether. Idle plants order neither replacements nor repairs.

So an electromechanical service and sales company that has managed not only to survive but to prosper in times such as these is worth a close look. Such a company is City Machine Technologies, Inc., a service and repair firm that has maintained a steady course by pursuing a systematic program of expansion and diversification since its founding nearly 20 years ago.

At a time when many companies are struggling for survival, City Machine Technologies, or CMT as it is commonly known, is looking to expand further and to hire more people. An audit is under-way to have the company certified to ISO 9002-2000 by the end of the year.

How has the company managed to sustain a successful record of growth in these difficult times? The answer has to do with diversification and reinvestment of capital back into the company-two habits that the company's founder, Michael Kovach, has practiced unrelentingly since buying a struggling machine shop called City Machine and Welding Co. in 1985.

"This was a severely economically depressed area" back then, recalls Kovach. Steel companies that traditionally formed the backbone of the Youngstown economy were scaling back production or shutting down. Fortunately, loans were available from the city and state for companies that might boost employment. In order to obtain these loans, though, applicants had to establish hiring goals and demonstrate that they were capable of meeting them.

Kovach applied for and received loans totaling $75,000 from the Mahoning Valley Economic Development Corp. and $10,000 from a lowinterest loan fund managed by the city of Youngstown. What set CMT apart from others seeking financing was that Kovach and company "meant what we said" when applying for the loans and forecasting hiring, says Kovach.

An industrial campus

A visitor to the company today is likely to be impressed by the sheer scale of the operation, which occupies several buildings on what might best be described as a campus. There are currently 65 employees. The space the company occupies gives no hint of the company's modest origins and the patience and persistence with which Kovach has built the business.

The company's first shop was an 8,500-square-foot building today occupied by CMT's Lifting Magnet Division. Kovach used that modest location "as a springboard," he says, "to start making money as soon as we put the key in the door." Cash flow from the outset was essential, Kovach says, because of the debt he had assumed to start the business. Within the first year, Kovach had added a 15ton crane and a 7,500-square-foot expansion to the building.

Meanwhile he was hiring peopleexperienced people. "We were training people who had lost their jobs in the steel industry," says Kovach. This hiring of a highly visible pool of idle labor didn't go unnoticed by the press, which also saw in the shop's physical expansion an attractive photo opportunity. Soon articles about this successstory-in-the-making began to appear in the Youngstown Vindicator and the Youngstown/Warren Business Journal.

Ohio Governor Richard Celeste visited the company during its first year of operation. "For people who said there isn't a future for young businessmen, young people in the Mahoning Valley," the Governor told the Vidicator, "this is the way jobs will be grown." He also held up the company's practice of hiring laid-off steel workers as an example of the benefits of job training.

In 1989 the company bought a 17,000-square-foot building behind what is today the Electric Machinery Division shop. That same year, Kovach made a decision-one he has never regretted-to devote one building to electrical service and one to machining activities.

"That methodology"-physically separating the electrical and mechanical operations-"seems to have worked well for us over the years," Kovach says today.

In 1990, Kovach bought a 7,500square-foot building, also near the first, for the temporary housing of vacuum pressure impregnation, burnout, and field service operations. These operations remained in that building for six years. Today the building serves as a warehouse for storing spare inventory, both for CMT and for customers whose stock is held on consignment.

Also in 1990, City Machine Technologies entered the ranks of the Inc. 500, the prestigious list compiled each year by Inc. magazine of the 500 fastest growing companies in the U.S. The company had doubled in size in a year and had increased sales a whopping 1,555% in five years, securing it a spot on the list at number 199. It was one of only 20 companies in Ohio to make the list that year.