Injecting Some Life Back Into Manufacturing

In a small warehouse, in a tiny industrial park, on a miniscule budget, one of my best friends from high school has become a U.S. auto maker. Of all my former classmates, Robert Hamilton is making parts for Ford, Chrysler and even Maserati. His company, E2 Manufacturing Group LLC, is busy running six injection molding machines. Plastic pellets go in one end. Automotive parts come out the other. He's also making parts for various consumer products, including a switch for the Vitamix blender, and parts for medical devices such as a disposable pump used for treating spinal injuries. "Manufacturing is coming back," he declares. Mr. Hamilton, 50 years old, and his two business partners seem to be tooling through the economy with uncanny precision. They sold their last injection molding company in December 2007, a month history records as the official start of the Great Recession. In December 2011, after most of the damage was done, Mr. Hamilton and his partners started E2. I have kept up with Mr. Hamilton over my lifetime. In 2010, for instance, we attended our 30th reunion for Glenbrook North High School in Northbrook, Ill., where we were not the rich kids, and nobody ever voted us likely to succeed. He always seemed in tune with what was going on, though. I am fond of an observation he made before America's unemployment crisis began: "You can't ship all the manufacturing plants to China and then wonder where all the jobs went." Yes, it all seems so obvious now. When the big one hit, Mr. Hamilton took a job, and a steady paycheck, from the company that bought his first injection molding enterprise. A family man with five children, he kept his head low as economic headwinds blew away small and large manufacturers all over the Chicago area. To say that manufacturing is making a comeback is still a wishful notion around the Windy City. Like the broader economy, it has improved from its depths, but only in fits and starts. The Chicago purchasing managers index, for instance, ticked up to 49.9 in October from 49.7 in September. But a reading under 50 still indicates contraction. "This place was a ghost town," Mr. Hamilton says of the industrial park his latest company now occupies. It has slowly filled with tenants. Traffic on surrounding highways seems to have thickened with commuters going back to work. President Barack Obama's auto bailouts--controversial as they were--seem to be improving lots for many Illinois tool shops, says Mr. Hamilton, who had always voted for Republicans in the past. "We would have never done this business if Obama hadn't done that bailout," he said. The economic implosion under President George W. Bush, however, provided amazing opportunities for those willing to sift through the ashes. Mr. Hamilton negotiated a lease for as little as $3,500 a month for more than 7,000 square feet of freshly painted floor space. He also bought injection molding machines from companies that went under, often paying scrap value. "There are always people out there making mistakes," he said, "that are going out of business." In one deal, a large customer simply gave him a machine to use in making its parts. In another deal, he says he paid $5,000 for two machines that cost about $420,000 new. "A lot of times, big corporations don't know what they have. They've amortized it. They've taken the depreciation. So they scrap them," he says. But $840,000 in machinery for the price of a used car? "I got lucky," he concedes. "It was like winning the lottery. That will never happen again. I could be here 20 years." When Mr. Hamilton started his first injection molding business in 1998, he and his partners bought every machine new. They needed technical support from machine manufacturers back then. Now that they've been in the business for nearly 15 years, they've become experts at maintaining and operating the equipment. Another reason they can compete with China is because injection molding is not labor intensive. Their business comes down to three partners and six employees, who are primarily there to inspect parts for quality as they come out of the machines. It's mostly about project management and engineering--designing and building molds, and ensuring precision down to less than thousandths of an inch. Then it's about sales. "We make 40 calls a day," Mr. Hamilton says. His sales pitch is simple enough. Ordering parts from abroad just isn't as cost-effective as it was 10 years ago. "China is going to have to support its own economy," he says. "So China's wages are going up. Also, transportation costs more. ... If you have to keep sending engineers to China when something goes wrong, that can eat up any cost savings right there. ... Then there's the language barrier. ... If you just toss something over a wall over at a guy, you're not always going to get what you want." Not that there's anything wrong with China. Mr. Hamilton, himself, has done business in China. "One of the things you realize when you're 50 years old is that the world is what it is, and you're not going to change it," he concedes. "If somebody said to us tomorrow, 'We want you to open up a plant in China,' we'd do it."