Economic Conditions

Strong Dollar Puts Pressure on 'Made in USA' Firms

Strong Dollar Puts Pressure on 'Made in USA' Firms
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The first quarter of 2015 has been dominated by a storyline impacting companies of all sizes in the U.S.: the continued strength of the dollar. The dollar's climb means prices for American-manufactured goods are higher for customers around the globe.

Despite some losses due to Friday's weak jobs report, the U.S. dollar in the past six months has risen nearly 15 percent versus the euro, and is up nearly 9.5 percent versus the yen.

Smaller exporters, in particular, can be particularly vulnerable to such currency swings, as they often can't afford the luxury of having onshore and offshore facilities, nor do they have the ability to lower prices.

Preliminary data from the U.S. Census Bureau shows that as of 2013, nearly 95 percent of all identified U.S. exporters were small or medium-size businesses, with 295,241 exporters accounting for more than $477 million. This is the most recent data available for small exporters.

"Private companies with international customers or plants face stiffer competition from foreign competitors that haven't had their prices go up," said Libby Bierman, an analyst with financial information company Sageworks. "They may be going to other competitors for sourcing."

"American manufacturers may be trying to beef up their domestic operations to find new sources of clients," added Molly Day, a spokeswoman for the Small Business Exporters Association of the United States.

For manufacturers like Garrett Blake, who started the Upstanding Bicycle Company in Chapel Hill, North Carolina, over a year ago, a more robust dollar means pricing pressure. Blake makes about 200 carbon fiber bike support stands in his facility each day with a staff of five. He has distributors in Japan, Australia, Singapore, Thailand and Greece; overall exports make up about 30 percent of his business.

"I just received an order from Japan, and (my distributor's) orders are down a bit. Distributors tell you that the product has to be priced higher for them to keep their profit margin, so that does have an effect on us," he said. "We've tried to cut where we can to help our distributors, which slows our growth down from a monetary standpoint for capital to keep investing in our business."

In the past three to four months he's also seen the company's direct consumer orders drop off overseas via his website, in response to the dollar's climb.

CFM Consolidated isn't seeing smaller orders yet on the array of products the company manufactures, said Lisa Chissus, president and owner. But she fears customers will begin clamoring for discounts.

The company, a Fife, Washington-based manufacturer, exports a variety of plastics that are used in everything from engine-cooling products to fish hatcheries. One of the products, Cascade Plastics, which is the "C" part of her business, manufactures custom injection molding products for their business as well as others. The "F" stands for Flex-a-lite, which makes engine-cooling products for the after-market. And the "M" is for MariSource, which produces incubation systems for trout hatcheries, which are exported all over the world.

"We have competitors out of China who mimic our products, so the more strong the dollar becomes, the more expensive it is for them to buy our products," Chissus said. "So if we can't offer them a deeper discount then they're going to take more of their business to offshore competitors, so we'll lose revenue."

To add insult to injury, Chissus said the West Coast ports slowdown over the past year has also hurt her, with the International Longshore and Warehouse Union and the Pacific Maritime Association squaring off over labor issues, bringing the ports to a standstill.

Despite the expenses added with manufacturing in America, both small companies say they're committed to being "Made in the USA." The only question is how much that may cost.

"Fundamentally, because we have maintained our manufacturing in the United States, and that's core to our values is to continue to do that here, I'm not trying to be the cheapest manufacturer for my customers. I will continue to try to be innovative," Chissus said.

And Upstanding Bicycle's Blake echoed that sentiment, adding that he doesn't plan on lowering prices just yet, but will be flexible with overseas distributors.

"We will do what we can. We're all in this together and want to be successful, not greedy."

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