The oldest forging machine at Phoenix manufacturer Valley Forge & Bolt dates all the way back to 1930. Plenty of other forging equipment was bought used and then refurbished to help the business keep down costs and maintain its generous benefits for employees. In fact, this type of equipment is the most expensive outlay of capital for the company, according to CEO Michele Clarke.
Thanks to the 2017 tax reform law, however, Valley Forge was able to buy new forging equipment for the very first time. It is “a huge game changer,” said Clarke, “when you can buy state of the art equipment.”
She said as much to Senator Kyrsten Sinema, during the senator’s visit earlier this month to Valley Forge’s facility. Along with CFO Byron Harrod, Clarke spoke to us recently about tax reform’s full range of benefits for their company—and why policymakers should not threaten the gains they and other Arizona manufacturers have made.
A small manufacturer on the rise: Valley Forge is poised to have its best sales year in its almost 50-year history, thanks in large part to the new equipment. Though the pandemic put a temporary dent in its progress, it has seen a marked jump in sales since 2017.
- The company also boosted its employment by 15 to 20% in 2018, rising to 100 workers for the first time, according to Harrod.
Benefits secured: The company makes a point of providing expansive health care coverage, with only a nominal fee for employees. The savings from tax reform has helped it maintain this commitment to employee health, as well as its 401(k) match program.
- Meanwhile, workers benefit directly from the increase in sales as well. The company has a longstanding incentives program, handing out quarterly bonuses once key goals are met.
- “Every employee gets money back if we do well,” as Clarke put it.
A better place to work: The new equipment has made Valley Forge not only more productive and profitable, but also a more comfortable working environment.
- One of the machines it purchased was robotic equipment to grind bolts. “Worst job in the company,” said Clarke. The grinding process removes forging flash so the bolts don’t cut people when handled, and it involves a lot of flying metal chips.
- “The robot probably costs close to $300,000, and we had to build a special room,” she added. It’s taken a whole year for engineers to program and set up the machine, but the benefits are worth it—“it replaces jobs that nobody wants to do.”
How tax reform helped: In addition to the lower corporate tax rate, certain other provisions in the law were crucial to the company’s equipment purchases.
- Take full expensing, which allows companies to deduct the full cost of equipment in the year it is bought. “We went each year [since tax reform] to the maximum for full expensing, sometimes more,” said Harrod.
What’s next? The company must keep adding new capacity, said Clarke, so that it doesn’t join the four or five bolting companies that go out of business around the U.S. each year. “We stay alive because of the technology we’ve developed, and we keep making it more advanced.”
- The company is beginning to produce fasteners with Bluetooth or radio frequency wireless, which can transmit information about their load and whether they have come loose right to your phone.
- It’s hoping to market these fasteners to the wind industry: “They have men who climb up the towers to tighten the bolts,” Clarke explained. “But the work life in that job is a year and a half.”
- Thanks to the new bolts, these workers would only have to make that daunting climb when they know the bolts are loosening.
This is why even the threat of a tax increase is so damaging to manufacturers, according to Clarke and Harrod. They need to be certain that their tax burden will not go up in order to plan confidently for the future.
- “Planning is paramount,” Clarke reinforced. “It takes maybe two years from when a customer first sees [a new product]” until they put in an order.
The NAM says: “Valley Forge is yet one more example of how the 2017 tax reform law helped to power growth for manufacturers,” said NAM Senior Director of Tax Policy David Eiselsberg. “Unfortunately, Congress is considering a major tax on the manufacturing sector that if implemented would reverse the gains from tax reform and hurt the sector’s future competitiveness. As it has done for the better part of year, the NAM will continue to fight against tax increases targeting manufacturers.”
The bottom line: When policymakers start talking about tax increases, “You start to cut back, you think about not replacing engineers who leave,” said Clarke. “You think the government is not on our side; let’s just cut back and make do.”
Washington, D.C. – Ahead of the midterm elections, the National Association of Manufacturers released its policy roadmap, “Competing to Win,” a comprehensive blueprint featuring immediate solutions for bolstering manufacturers’ competitiveness. It is also a roadmap for policymakers on the laws and regulations needed to strengthen the manufacturing industry in the months and years ahead.
With the country facing rising prices, snarled supply chains and geopolitical turmoil, manufacturers are outlining an actionable competitiveness agenda that Americans across the political spectrum can support. “Competing to Win” includes the policies manufacturers in America will need in place to continue driving the country forward.
“‘Competing to Win’ offers a path for bringing our country together around policies, shared values and a unified purpose,” said NAM President and CEO Jay Timmons. “The NAM is putting forward a plan filled with ideas that policymakers could pursue immediately, including solutions to urgent problems, such as energy security, immigration reform, supply chain disruptions, the ongoing workforce shortage and more. Manufacturers have shown incredible resilience through difficult times, employing more workers now than before the pandemic, but continued resilience is not guaranteed without the policies that are critical to the state of manufacturing in America.”
The NAM and its members will leverage “Competing to Win” to shape policy debates ahead of the midterm elections, in the remainder of the 117th Congress and at the start of the 118th Congress—including in direct engagement with lawmakers, for grassroots activity, across traditional and digital media and through events in key states and districts as we did following the initial rollout of the roadmap in 2016.
The document focuses on 12 areas of action, and all policies are rooted in the values that have made America exceptional and keep manufacturing strong: free enterprise, competitiveness, individual liberty and equal opportunity.
Learn more about how manufacturers are leading and about the industry’s competitiveness agenda at nam.org/competing-to-win.
The National Association of Manufacturers is the largest manufacturing association in the United States, representing small and large manufacturers in every industrial sector and in all 50 states. Manufacturing employs more than 12.8 million men and women, contributes $2.77 trillion to the U.S. economy annually and accounts for 58% of private-sector research and development. The NAM is the powerful voice of the manufacturing community and the leading advocate for a policy agenda that helps manufacturers compete in the global economy and create jobs across the United States. For more information about the NAM or to follow us on Twitter and Facebook, please visit www.nam.org