Making It in America

In the past decade, the flow of goods emerging from U.S. factories has risen by about a third. Factory employment has fallen by roughly the same fraction. The story of Standard Motor Products, a 92-year-old, family-run manufacturer based in Queens, sheds light on both phenomena. It’s a story of hustle, ingenuity, competitive success, and promise for America’s economy. It also illuminates why the jobs crisis will be so difficult to solve.
The Remnant Workforce

Tony Scalzitti, the factory manager, guides me through the logic of Maddie’s employment. He’s bookish and thoughtful—nothing like my mental image of a big, hulking factory manager. Trained as an engineer, he is constantly drawing charts and making lists as he talks, in order to explain modern American manufacturing. Sitting at a table in his office in the administrative area off the factory floor, Tony takes out a pen and writes down the definitions.

“Unskilled worker,” he narrates, “can train in a short amount of time. The machine controls the quality of the part.”

“High-skill worker,” on the other hand, “can set up machines and make a variety of small adjustments; they use their judgment to assure product quality.”

To show me the difference between the two, Tony takes me from Luke’s station through an air lock and into Standard’s bright-white clean room—about a quarter the size of the dirtier, louder factory floor—where dozens of people in booties, hairnets, and smocks, most of them women, stand at a series of workstations.

Tony points out that most of the factory’s parts go through roughly the same process. Metal is cut into a precise shape in the “unclean” part of the factory and is then washed in a huge industrial washing machine to remove any bits of dirt, flakes of skin, or other contaminants, and, pristine, enters the clean room. Here, machines build the outer housing of the fuel injector, the part that is open to the engine and doesn’t require anything like the precision of the inner workings.

The injectors progress through a series of stations, at each of which an unskilled worker and a simple machine perform one task. The machines here are much smaller, and are in one key respect the opposite of the Gildemeisters; these machines can work in only one way and require little judgment from the operator. This is not a throwback to the old system, in which workers manually ran single-purpose machines. This new technology is the other side of the computer revolution in manufacturing. Computers eliminate the need for human discretion; the person is there only to place the parts and push a button.

Take Maddie’s station. She runs the laser welding machine, which sounds difficult and dangerous, but is neither. The laser welder is tiny, more like a cigarette lighter than like something you might aim at a Klingon. Maddie receives a tray of sealed injector interiors, and her job is to weld on a cap. The machine looks a little like a microscope; she puts the injector body in a hole in the base, and the cap in a clamp where the microscope lens would be. The entire machine—like most machines in the clean room—sits inside a large metal-and-plexiglass box with sensors to make sure that Maddie removes her hands from the machine before it runs. Once Maddie inserts the two parts and removes her hands, a protective screen comes down, and a computer program tells the machine to bring the cap and body together, fire its tiny beam, and rotate the part to create a perfect seal. The process takes a few seconds. Maddie then retrieves the part and puts it into another simple machine, which runs a test to make sure the weld created a full seal. If Maddie sees a green light, the part is sent on to the next station; if she sees a red or yellow light, the part failed and Maddie calls one of the skilled techs, who will troubleshoot and, if necessary, fix the welding machine.

The last time I visited the factory, Maddie was training a new worker. Teaching her to operate the machine took just under two minutes. Maddie then spent about 25 minutes showing her the various instructions Standard engineers have prepared to make certain that the machine operator doesn’t need to use her own judgment. “Always check your sheets,” Maddie says.

By the end of the day, the trainee will be as proficient at the laser welder as Maddie. This is why all assembly workers have roughly the same pay grade—known as Level 1—and are seen by management as largely interchangeable and fairly easy to replace. A Level 1 worker makes about $13 an hour, which is a little more than the average wage in this part of the country. The next category, Level 2, is defined by Standard as a worker who knows the machines well enough to set up the equipment and adjust it when things go wrong. The skilled machinists like Luke are Level 2s, and make about 50 percent more than Maddie does.

For Maddie to achieve her dreams—to own her own home, to take her family on vacation to the coast, to have enough saved up so her children can go to college—she’d need to become one of the advanced Level 2s. A decade ago, a smart, hard-working Level 1 might have persuaded management to provide on-the-job training in Level-2 skills. But these days, the gap between a Level 1 and a 2 is so wide that it doesn’t make financial sense for Standard to spend years training someone who might not be able to pick up the skills or might take that training to a competing factory.

It feels cruel to point out all the Level-2 concepts Maddie doesn’t know, although Maddie is quite open about these shortcomings. She doesn’t know the computer-programming language that runs the machines she operates; in fact, she was surprised to learn they are run by a specialized computer language. She doesn’t know trigonometry or calculus, and she’s never studied the properties of cutting tools or metals. She doesn’t know how to maintain a tolerance of 0.25 microns, or what tolerance means in this context, or what a micron is.

Tony explains that Maddie has a job for two reasons. First, when it comes to making fuel injectors, the company saves money and minimizes product damage by having both the precision and non-precision work done in the same place. Even if Mexican or Chinese workers could do Maddie’s job more cheaply, shipping fragile, half-finished parts to another country for processing would make no sense. Second, Maddie is cheaper than a machine. It would be easy to buy a robotic arm that could take injector bodies and caps from a tray and place them precisely in a laser welder. Yet Standard would have to invest about $100,000 on the arm and a conveyance machine to bring parts to the welder and send them on to the next station. As is common in factories, Standard invests only in machinery that will earn back its cost within two years. For Tony, it’s simple: Maddie makes less in two years than the machine would cost, so her job is safe—for now. If the robotic machines become a little cheaper, or if demand for fuel injectors goes up and Standard starts running three shifts, then investing in those robots might make sense.

“What worries people in factories is electronics, robots,” she tells me. “If you don’t know jack about computers and electronics, then you don’t have anything in this life anymore. One day, they’re not going to need people; the machines will take over. People like me, we’re not going to be around forever.”

The Fragility of Industrial Profit

It’s tempting to look to the owners of Standard Motor Products and ask them to help Maddie out: to cut costs a little less relentlessly, take slightly lower profits, and maybe even help solve America’s jobs crisis in some small way.

I tracked down the people who run Standard to put this possibility to them. I was surprised to learn they were based in Long Island City, Queens, a quick subway ride from my house.

Standard’s headquarters is in the same massive but elegant Art Deco building, curving along Northern Boulevard, that has been its home since 1936. Until the late 1990s, Standard made many of its auto parts here as well; the company filled the six floors with machinery and workers. But running a factory in New York City is expensive and filled with logistical hassles, and over time, these problems became more severe. As early as the 1960s, the company had begun to move some production to lower-cost locations: Puerto Rico; Independence, Kansas; Grapevine, Texas; Mexico; Poland; and, of course, Greenville. The last part made in Queens—a distributor—came off the line in 2008. The building was sold soon after and is now home to a variety of small offices and an art gallery. Senior executives of Standard Motor Products and a host of engineers and salespeople occupy much of the second and sixth floors.

Larry Sills, age 72, is nothing like what I imagined the CEO of one of America’s largest aftermarket auto-parts companies would look like. His easy smile, scattered curiosity, and rumpled look seem more characteristic of a college professor. His hair—thick, brown, and tightly curled—looks almost like a joke wig sitting on his head. I met him in his large office—dominated by his wife’s paintings and mementos of their time in Africa—and asked him about his business. But before he got into that, he said he wanted to show off the crazy thing up on the roof, an organic farm: some young hipsters had brought 650 tons of dirt to start it. (“That was scary,” Larry says. “We didn’t know if the building could hold it.”) They grow fresh vegetables and have a farmers’ market every Wednesday. “Sometimes someone gets a bit excited with a pitchfork and cuts through our roof and we got water on a desk. But I love it. I love it.”

Larry was born into Standard Motor Products. The company was founded by his grandfather, Elias Fife, a Jewish immigrant from Lithuania who knew nothing about cars but saw an opportunity, in 1919, when he learned that many people were frustrated with Ford and the other car manufacturers because they never made enough replacement parts, since all the money was in building new cars. The tiny aftermarket auto-parts industry was a mess: countless mechanics and hobbyists made parts by hand in their garages, and many of these parts didn’t fit or would break. Fife decided to build a trustworthy, reliable brand whose products met or exceeded the quality of the original parts.

Elias worked until he died, at which point his son, Bernard, and son-in-law, Nathaniel Sills, took over the company. Larry, Nathaniel’s son, was never particularly interested in cars and dreamed of being a reporter for The New York Times. He spent a few years as a country manager for Pfizer in Ghana, where he had some adventures. But by 1967, he knew it was time to come home and start work at Standard. “Nobody ever told me I had to,” he says. “I just knew it was expected.” He’s never regretted that decision, he told me.

When Larry came to work, the aftermarket had matured since its wild early years, but was still a fairly sleepy business. Standard was one of hundreds of aftermarket manufacturers and distributors, many still owned by the founder, in many cases an immigrant, or his children. These companies sold to thousands of small garages or distribution warehouses, many also run by old families that the Sillses had known for years. It was rare for a customer to demand lower prices or to stop buying from Standard altogether. Even if one did, the bottom line didn’t suffer all that much.

“Our biggest customer was about 1 percent of our business,” Larry says. “That’s changed. Now, our biggest four customers are more than 50 percent of our business.”

As Autozone, Napa, and other huge auto-parts stores expanded their reach, they used the bargaining power that comes with size to pressure companies like Standard to lower their prices. Failure to do so could cost them the chain stores’ business, which could mean bankruptcy. Larry says this new price pressure came exactly when many of his old friends in the parts trade were retiring and couldn’t persuade their kids to join the business. Throughout the 1970s, ’80s, and ’90s, dozens of Larry’s old friends and competitors gave up and sold out. Larry’s son, Eric, decided to work at Standard after college and now runs many of the company’s manufacturing operations.

As his friendly competitors retired, Larry bought many of their companies. He paid for these acquisitions by borrowing money or selling more company shares. For years, Standard had been, technically, a publicly traded company, but since the Sills and Fife families owned most of the stock, it had been run more like a family business. But eventually, to fund acquisitions, the families gave up majority ownership. They now hold less than 10 percent of the company stock.

Standard might have grown too quickly. The company was deeply in debt in 2009 when the financial markets seized up. Like countless companies during that chaotic time, Standard couldn’t raise enough money to pay off the bonds it had already sold. Larry began to fear bankruptcy. “It was awful,” he says. “The only time in my career I lay awake worrying.”

Acting quickly, he sold the building in Queens, laid off 10 percent of the administrative staff, and cut costs everywhere he could. Standard did survive, of course, and is actually doing quite well now. Larry paid off most of the debt, and by concentrating on what the company is best at, he has increased its profits. Economic slowdowns are, perhaps paradoxically, a good time for the aftermarket auto-parts business. Many people delay the purchase of a new car, instead replacing parts on their old one.

While the business is doing well today, “the main thing I think about is survival,” Larry says. Standard is now the last of the old breed of family-run companies. Its stock is worth about $400 million, which is far more than Larry’s grandfather would have dreamed of; but that’s only a small fraction of the market value of Bosch, Denso, or NGK—three of the big, global parts suppliers the company competes with.

To keep the business of the giant auto-parts retailers, Standard has to constantly lower costs while maintaining quality. High quality is impossible without good raw materials, which Standard has to buy at market rates. The massive global conglomerates, like Bosch, might be able to command discounts when buying, say, specially formulated metals; but Standard has to pay the prevailing price, and for years now, that price has been rising. That places an even higher imperative on reducing the cost of labor. If Standard paid unskilled workers like Maddie more or hired more of them, Larry says, the company would have to charge its customers more or accept lower profits. Either way, Standard would collapse fairly soon. (Industrial profit margins are notoriously thin to begin with—typically in the low single digits—and reduced profits or losses would drive down Standard’s stock price, making it a likely target for predatory acquisition.)

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Adam Davidson is a co-founder and co-host of NPR’s Planet Money.

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