M & A 101: Lessons Learned From Decades of Deals March/April 2021

Are US Wire Harness Plants Ever a Low-Cost Option?

My short answer to the above question is “Definitely.”

And why does this important, fundamental question continue to be asked? Probably because our perceptions are clouded by awareness of all the high-volume automotive and appliance harness manufacturers that have moved to Mexico, China and a variety of other “low-cost” locations. In actuality, however, multiple locations in the United States have low-cost harness shops with the capability to provide users a competitive product. These companies––many of them situated in low-profile towns around the country––enjoy strong positions with their customers despite threats from Mexico and China. Furthermore, in many cases their proximity to customers is a real advantage.

My initial awakening to skewed perceptions about geography and the people who populate our unsung towns occurred when I moved my wife and our three teenagers from Boston to Monona, Iowa––population, 1000––where I had bought a struggling wire harness manufacturer to become an entrepreneur. Particularly memorable is one of my first trips to the post office.

As I was opening our PO box, I noticed several farmers in coveralls pointing at me. Then one of them was designated to come over. Looking me up and down in a friendly way, he asked, “Do we know you?” And so began our acquaintance. Certainly, nothing this direct had ever happened to me in New England or in Cleveland, where I grew up.

After the first snowfall, when I slid off the road into a ditch, I was relieved to see the very first pick-up truck to come along pull up beside me. With what was now familiar Monona efficiency, the driver got out, hooked his truck to my car with a chain, and pulled me out of the ditch in under five minutes. Little conversation; no fanfare. These people were the kindest bottom-line types I had ever known.

It was only natural, then, that the workforce I was fortunate to be associated with in Monona consisted of exceptionally hard-working and loyal people. And in the years since my time there, I’ve observed harness companies in many states in this country characterized by similarly dedicated staffs and high productivity, enabling them to compete with offshore “low-cost” labor quite effectively.

Moreover, the can-do picture I am painting is hardly restricted to small towns. I am familiar with an excellent low-cost wire harness option in the heart of Los Angeles. Directly across a freeway from a neighborhood that sports $10 million homes, the plant sits in an enclave consisting mostly of recent immigrants eager to compete with offshore workforces. From coast to coast, in pockets of major US cities and in towns like Monona, Iowa, our industry is blessed with plenty of high-quality, low-cost wire harness options.

I believe there will continue to be a vibrant mix of wire harness manufacturers in the US for many years––and, unfortunately, I expect that misconceptions about US low-cost options will continue for many years as well. I hope my view helps chip away at this perception.

 

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