In order to compete with foreign foundries that can offer lower labor costs, Bremer Manufacturing Co. Inc. has kept its machines updated with the latest technology.
While the manufacturing industry is sluggish and the political climate uncertain, the Elkhart Lake-based aluminum foundry recently made a big investment. It laid out $110,000 for a new Haas machining center, said president Tom Dolack.
The company, which has 76 employees, already has five similar machining centers, but they’re older models. It uses them to make aluminum parts often used in diesel engines.
“This particular machine has the ability to check the dimensions on the part while the part is in the machine. You know right away whether the part is going to work or not,” Dolack said. “So by using the technology on this new piece of equipment, we can get out more quality parts in less time, which makes us more efficient and more competitive.”
Bremer used an equipment loan to make the investment and assured its clients would stay onboard instead of looking for that capability elsewhere, he said. It’s leasing the equipment back through Brookfield-based First Business Bank-Milwaukee.
“We’re able to match our monthly cost with monthly sales,” Dolack said. “We don’t have to come up with $110,000 and figure out how we’re going to pay for it or save up the $110,000 and then buy it. We can use the machine now.”
First Business Bank-Milwaukee has seen equipment lending increase slightly over last year, said Tom Rude, first vice president of Equipment Finance at First Business.
“There’s been a little softness in the economic conditions here throughout 2016, but the performance of the portfolio is still strong,” Rude said. “There’s a cautiousness, there’s still uncertainty, but there comes a point when companies need to make the investments in their business to stay current with technologies, to stay current with productivity.”
Automation can help businesses become more efficient and deploy human capital elsewhere, he said. There’s been increased activity in the metal and plastic manufacturing sectors this year, as well as niche printing and packaging.
“There are a lot of companies that are looking to acquire equipment to be more efficient, quicker, faster,” Rude said. “The types of deals we’re doing, we’re pretty much looking at companies that are acquiring core revenue-producing equipment. We facilitate financing or leasing for equipment that they’re going to want to keep well beyond the lease term.” These businesses will need to get in touch with companies like California Industrial Rubber Co. to find the right tools and equipment. Furthermore, they may need to schedule an onsite calibration for the maintenance of their tools and equipment.
Equipment lending has been down the past couple of years at Green Bay-based Associated Banc-Corp, said Mike Cornell, senior vice president of Commercial Banking.
“I think what we’re seeing is manufacturers are not expanding and some of them have been deferring replacing equipment,” Cornell said. “A lot of those that are buying equipment are, quite frankly, heavy with cash and they’re buying with cash.”
The slow growth economy, coupled with a mixed and cautious tone among business owners, has caused a number of companies to rein in spending, he said.
“If equipment has to be replaced, yes they’ll push it, but they’re not going to be doing any kind of expansion,” Cornell said.
Automotive and recreation products such as RVs and boats are strong right now, as are manufacturers selling into the food and beverage space and health care equipment manufacturers. Agriculture, mining and oil and gas have been down over the past few years, he said.
“We have a lot of manufacturers that have struggled to grow the top line if they’re selling into those industries,” Cornell said. “Most recently, trucking has definitely seen a decline since the third quarter of last year.”
Port Washington State Bank has seen a number of dental practices and some manufacturers, such as a cabinet shop, buying equipment, said James Schowalter, senior vice president and chief credit officer.
And while equipment lending is up at Port Washington, borrowers are more cautious overall about equipment purchases like 4 in 1 buckets, quick hitch, tractor for sale, etc., he said.
“They’re just at a point where they need to make decisions,” Schowalter said.
“These are operators who don’t want to fall back into having too much equipment and not enough work—they’re not going to speculate,” said Steven Schowalter, president and chief executive officer at Port Washington.
West Bend-based Westbury Bank has seen steady equipment lending, but most borrowers are seeking to reduce their debt loads, said Kirk Emerich, executive vice president of Investor Relations and chief financial officer at Westbury.
“Certainly we’re seeing customers trying to pay off debt as quickly as they can,” he said.
