Nov 11, 2013
Components for industries
By Becky Hurley
Tony Fagnant’s bet on US manufacturing is paying off - in business and as a profitable social enterprise
Qualtek, a Colorado Springs-based metal manufacturing company built its 50-year- plus statewide reputation on four main lines of business: metal stamping and finishing, heat treating, hard anodizing and wire EDM (electrical discharge machining).
But CEO and President Tony Fagnant’s vision has taken a core manufacturing operation to new levels.
It all started when Fagnant and his wife, Mary, took over company leadership in 2000, just as the tech bubble burst.
Manufacturing companies began shifting millions of jobs overseas to low-cost factories in China, Singapore and India. By 2005, the husband-and-wife team was on a plane to China to determine whether or not Qualtek could compete in its category with low-cost Asian factories.
“We decided to stay in Colorado Springs, and I’m glad we did. Today you see a lot of (manufacturing) business coming back – especially high quality and difficult-to-manufacture production,” he says, adding that Chinese production costs will only increase as its workers demand better conditions and higher wages.
To keep overhead expenses low, Qualteck outsources administrative functions like payroll, human resources and benefit programs to. At the same time, it has set itself apart by venturing into innovative social enterprise, sustainability, cleantech consulting and employee training initiatives – and has watched annual business grow by an average of 10 percent annually.
In September, Qualtek Manufacturing earned Silver Partner designation from the Colorado Environment Leadership Program. An overview of the company’s sustainable practices was published in July, highlighting the company’s electric and water cost reduction programs, risk mitigation, waste management, corporate culture and employee well-being initiatives.
Last spring Fagnant also signed a contract with Colorado Springs Utilities to buy renewable wind power for its 42,000-square-foot facility. While utilities costs rose slightly, the company’s carbon footprint was reduced by 16 percent – an accomplishment Fagnant believes will ultimately result in offsetting almost one-third of his carbon emissions.
In a move outside day-to-day manufacturing, the owners also created a 501(c ) 3 social enterprise, Blue Star Recyclers. The nonprofit company recycles electronics as it creates jobs for those with disabilities. To date the program has created 17 local jobs – 11 of which are people with disabilities -- recycled more than 2.5 million lbs. of electronics and hosted hundreds of community events.
As a result of his community initiatives, this year Tony Fagnant was nominated for Colorado Springs Regional Business Alliance “2013 Business Citizen of the Year” honors.
He doesn’t mention the community and cleantech projects on a plant tour, instead focusing on how work gets done. Qualtek runs two 10-hour shifts during the week and three 12-hour shifts on weekends to meet production deadlines.
“We supply parts direct to other manufacturers for assembly,” he says, adding that Qualtek uses its own truck and common carriers for deliveries up and down the Front Range.
Bottom line, the Fagnants’ innovative business model is working. Employee turnover is almost nonexistent due, in part, to distribution of 30 percent of annual profits to employees (minus business costs and taxes to employees, over and above wages).
“Our balance sheet is strong. We make it a practice to tell our employees about the company’s financial status. That way they can have peace of mind and know the company will be around years from now,” Fagnant says.
Challenges: “We train and employ both highly skilled and low skilled workers. Much of our work is automated, but a lot of it - maybe 35 percent -- is not. We currently have three tool and die workers on the payroll,” he says, adding that a student apprentice from the local community college machining program was recently hired.
Opportunities: “Since 2010, we’ve seen consistent 10 percent annual growth. Metal stamping accounts for 40 percent of our business, but metal finishing is our biggest growth area,” he explains. “We’re the premier anodizing operation in the state right now with more work than we can handle.”
Needs: Help at from Colorado legislators. “We need legislators who will evaluate the state’s business personal property tax. A call center employs 70 people with little need for equipment. A manufacturer employing the same number of people keeps paying tax on machinery and equipment year after year. Qualtek probably pays double the state taxes that a call center pays,” he says.