Back on Track

REVIEW SUMMARY

Company. Haynes Corp.

Industry. Manufacturing

Key. Municipalities on the Gulf Coast are more receptive to employers' needs because of the recession.

Manufacturers are cool again.

Just four miles from the ritzy shops and wealth managers of Fifth Avenue in Naples, workers at Haynes Corp., in a gritty industrial zone near the Naples airport, are busy making parts that keep American commerce moving.

More specifically, Haynes machinists are making fuel injectors and other engine parts for diesel locomotives that ferry goods on rails across the country, earth-moving machines and nuclear plants that power homes and businesses. Its customers include giants of industry, such as General Electric, General Motors and Caterpillar.

Naples is about as unlikely a location for Haynes' facility as a Tiffany jeweler in Arcadia. But there's nothing like a recession to make niche manufacturing such as this a prime target for economic development. Collier County, which used to chase away manufacturers with its high taxes and exorbitant cost of living, is now welcoming these employers with fast track permitting, training grants and tax waivers for new construction.

Haynes tried to expand in Naples a few years ago but the county government officials demanded “several hundred thousand dollars” in taxes on new construction, also known as “impact fees,” says James Dixon, president of the company. Essentially, local government was charging companies for the privilege of creating jobs.

Now, county officials are “much more receptive to expanding the business,” Dixon says. It's easy to understand why: Collier's unemployment rate was 13.1% in July. Two years ago, it was 7.7%.

Good thing, too. In the months ahead, Haynes plans to spend $4 million to relocate a California facility to Naples and add a building to house its expansion. “Now is the time to do it,” says Dixon, who also decided to remodel his own home in Naples.

Collier opens its doors

Collier County has long had a reputation as one of the most difficult places to do business on Florida's Gulf Coast. It still has the highest taxes on new construction in the state and builders say capricious bureaucrats run the permitting process.

The high hurdles to doing business in Collier didn't seem to matter during the real estate boom that sent median-priced homes to the $500,000 mark, the costliest on the Gulf Coast. Businesses that wanted to locate in Naples paid up or never came.

Some manufacturers simply left town. For example, truck-component manufacturer Shaw Development moved its operations to Bonita Springs in neighboring Lee County in 2008 from Naples because paying thousands of dollars in county government fees for a new building was too costly.

But if the government incentives Haynes received recently are any indication, it seems that the municipal attitude toward manufacturers is changing for the better, at least while the economy is slumping.

On July 28, Collier County commissioners voted unanimously to grant Haynes a waiver of the above-average wage requirement for incentives worth about $162,000 to offset construction taxes. “They finally woke up and accepted lower wages,” Dixon says.

Haynes will build a 22,000-square-foot addition where it plans to consolidate its 20-employee California operations and hire another 60 machine operators. Currently, Haynes' facility on Mercantile Avenue measures 33,000 square feet and houses 45 employees with millions of dollars worth of sophisticated equipment.

Dixon, who credits the Economic Development Council of Collier County with helping it navigate through government approvals, considered moving the business to neighboring Lee County but says it would have cost $500,000 to move. He even considered moving the company back to where it was founded by his father-in-law: Jackson, Mich. “In Jackson, they give you the land,” Dixon chuckles.

Shooting M-16s

Naples has never been known as a manufacturing center, so Haynes' arrival in Naples in 1988 was by happenstance. That year, Dixon had acquired the diesel fuel-injection devices made by a company called Bendix and it had a fully equipped plant in Naples.

Bendix gave Haynes all the sophisticated equipment in its Naples plant if Dixon agreed to keep employees there. Dixon was more interested in the engineering know-how he was acquiring than the physical plant, but he agreed. “It was really kind of a no-brainer,” Dixon says looking back.

At the time, the sophisticated equipment in the Naples plant was certified for military manufacturing and Bendix was making M-16 rifles for the military at its Naples facility, among other products. Behind the Haynes building is a large yard where employees fired the rifles into a big dirt pile to test them.

Eventually, Dixon shut down the Jackson plant and headquarters and moved them to Naples in 1993. Dixon acknowledges that the move was a difficult decision because Naples wasn't on the map for manufacturing talent. “Now it's a lot easier to attract people to Naples,” he says.

And it's easier to entertain clients in Naples than Michigan. At one time, Dixon owned a 42-foot Sea Ray boat to entertain customers when they visited in the winter. Southwest Florida International Airport in Fort Myers lets its sales representatives visit customers in summer. “It doesn't matter where we're located,” Dixon says.

Electronic injection

While large-scale manufacturing has shifted overseas, niche manufacturers in the U.S. continue to outrun their competitors.

In Naples, Haynes Corp. is betting on an electronic diesel locomotive fuel injector. It's a critical component that will help train operators control emissions as dictated by government bureaucrats.

Currently, fuel injectors are mechanical devices that aren't as efficient as the electronic ones Haynes is developing. “We're taking it to another level,” says James Dixon, the president of Haynes. It's a big market: There are about 30,000 diesel locomotives in North America and fuel injectors must be replaced every few years.

Haynes has been working to develop electronic fuel injectors for a long time, starting in 1995 when it landed a $500,000 research grant from Enterprise Florida, the state's economic-development arm. Dixon says the firm has invested “millions” in the technology.

Traditionally, Haynes has acquired existing technology and this is the first time it has developed a new product. “We reinvest in the company all the time,” says Laura Dixon, Jim Dixon's wife and the chief executive officer of the woman-owned company.

The Dixons, whose son Scott and daughter Brandie also work in the business, expect sales to rise 20% this year. In the last three years, the company's revenues have ranged from $16 million to $20 million annually, they say.

While the railroad business makes up the bulk of its business, Haynes also provides engine parts to off-road diesel vehicles for companies like Caterpillar and backup generators for nuclear plants. About 30% of its business is international.

The Dixons are banking on a national economic recovery and say that train operators have reactivated 5,000 locomotives that were idled by the recession. Railroad operators have also become more efficient, taking business away from trucking.

Because Haynes gets orders for industrial parts as long as six months in advance, its executives know when the economy slows or picks up long before others. “We feel business will grow substantially,” Dixon says.