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John M. Stropki: The State of Manufacturing

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Partner:: Chautauqua Institution
Location:: Chautauqua Amphitheater
Chautauqua, New York
Event Date:: 08.11.11
Speaker:: John M. Stropki
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Summary: Nick Glunt | Staff Writer

In today’s economic climate, success stories in the business world range from creative geniuses thinking up that perfect invention to investors funding that risky venture.

John Stropki’s story is more traditional than that.

Stropki began work at Lincoln Electric Holdings, Inc., 35 years ago. Over the decades, he’s climbed the ranks literally from bottom to top. Today, he’s president, CEO and chairman of the company — and he has been since 2004.

As the fourth speaker for Week Seven, a week titled “The U.S. Economy: Beyond a Quick Fix,” Stropki presented his PowerPoint lecture at 10:45 a.m. Thursday in the Amphitheater.

Stropki spoke about how Lincoln remains a successful corporation despite global economic turmoil. On a secondary note, he addressed the role China has played in keeping the business afloat — and the role it will play in recovery efforts.

Lincoln is a Cleveland-based welding company with plants in 19 countries around the world.

Founded in 1895, it retained its success using various techniques and market practices, including pay-per-product style of wages and disuse of layoff policies. Business students worldwide study Lincoln in classes, most notably at Harvard Business School.

One of the innovations the company has made is to submit to the Green Movement, at least partially.

It’s reduced waste, from 6 million pounds in 2007 to 2 million pounds in 2010, while recycling almost 3 million pounds. For every 1 lb. of steel welded at one branch, the amount of water used has been reduced from one liter to almost nothing — it’s using evaporation and recycling water now.

“The program that we’re most proud of, at least in terms of recent investments,” Stropki said, “is that we’ve put a wind tower on our property in Euclid, Ohio.”

The wind tower, a $6 million investment, produces about 10 percent of the facility’s electrical power. It will take about 10 years to return on the investment, but it’s “created a tremendous amount of enthusiasm,” Stropki said.

Its second purpose is to show the company’s customers’ support in wind energy generation. As a welding company, it builds steel used in wind towers.

These practices have helped to keep Lincoln afloat during the economic crisis. Stropki explained the ins and outs of the economic crisis before applying it all to the steel and welding industry.

Then the topic switched to China.

China’s global domestic product is about $10 trillion, and it’s increasing almost 10 percent every year — a feat Stropki said would be like the U.S. “finding the Holy Grail.” The U.S. has a $14 trillion GDP, but it’s only growing at 1 percent each year.

“It doesn’t take long for one to overtake the other,” he said. “The predictions from the (International Monetary Fund) are that China’s total GDP will exceed the U.S. in 2016. That’s just around the corner.”

He said this shouldn’t be viewed as a negative progression. China’s growth, he said, along with that of other countries, is fueling the global economic recovery efforts. However, he said foreign growth only helps countries that are still participating in global trade.

Greece’s bankruptcy and the “teetering” economies in Spain, Portugal and Italy don’t look good for global recovery, he added.

“Something that’s kind of close to home for us that I think is a great barometer to show what’s happening in the world economy is steel,” Stropki said. “Steel is a primary building component to so many things in our life — transportation, appliances, bridges, roads. There aren’t many things that don’t use steel.”

Then, to audience laughter, he tagged: “In fact, everything should use steel from my perspective.”

China consumes 45 percent of the world’s steel, while the U.S. consumes just 6 percent. Stropki said to think about how much more use steel is getting in China. Because of such use of welded steel in China, he said Lincoln has the opportunity for market growth.

In 2001, 71 percent of Lincoln’s sales went to North America, while 3 percent in all of Russia, Brazil, India and China. In 2010, 49 percent went to North America, with 19 percent to Russia, Brazil, India and China.

He added further that sales in North America have more than doubled — meaning international sales to Russia, Brazil, India and China have jumped at least 18-fold.

In 2001, Lincoln was a $1 billion company. If things stay on track this year, he said, it should end up a $3 billion company.

Stropki tried to explain why China is suddenly increasing in power; part of it, he said, is the modernization. People are moving from rural areas to urban areas in China, which also is increasing the use of energy.

China and the U.S. use about the same amount of energy, but China’s energy use per person is about one-fourth as great. Car ownership per person is significantly less, as well, but it is increasing.

Stropki, in the end, said international trade is important to global economic health.

“I believe this is the biggest driver for the growth of U.S. manufacturing right now,” Stropki said. “It’s not the strength of the U.S. economy — it’s the growth of the global economy.”