March Newsletter

VOLUME 28 NO. 3

Gem Equipment is a small manufacturer that produces large systems for a small number of customers.  As a result, 1 or 2 large orders can make the difference between a so-so year and a very good year.  Under the best of conditions, forecasting sales and profitability for this company is difficult and often inaccurate.  The Nation’s financial upheaval is making forecasting even more difficult.  In addition to large systems, primarily for french fry potato processors, this company manufactures a wide variety of equipment for Pacific Northwest fruit and vegetable processors.  Rebuilding, upgrading and repairing fryers and other large french fry potato equipment is the fastest growing segment of Gem Equipment’s business.  This work is uniquely suited to this company.  Gem is large enough to have   engineering and technical resources to handle these field jobs and small enough to desire the work.  One cloud on the horizon affecting future business is talk of raising taxes on individuals and businesses that earn more than $250 thousand per year.  Virtually all of Gem Equipment’s customers fall into this group.

Speaking of taxes, some people in Washington DC are pushing to raise taxes on the petroleum industry.  To your writer, who has some white hair (the rest is gone), this appears to be the wrong course of action.  Instead of raising their taxes, the Feds should be encouraging the petroleum industry to explore for more oil and build more refineries.  At this time, a large portion of the most promising areas for oil exploration are off limits for US oil companies.  Cuba has leased out areas of the Gulf of Mexico within 60 miles of Florida for oil exploration.  Under US laws and regulations US oil companies cannot explore for oil this close to the Florida Coast.  Does anyone think the Florida coast is less threatened by foreign oil companies operating under Cuban laws than it would be by US oil companies, operating under US environmental laws?  Encouraging the domestic oil industry to develop more production in this country would produce two strong factors for economic recovery and one factor that would help ensure the safety of US citizens.  More exploration and building refineries to handle this production would produce many high paying jobs and help keep energy prices down.  Maybe the most important factor is that the resulting low oil prices deprive the Terrorists of much of their funding.  

Unfortunately, neither the oil industry nor any other business can expect much encouragement from the Federal Government at this time.  (Earmarks will help a few chosen businesses.)  Gem Equipment and most of its suppliers will survive and sow the seeds for future prosperity.  This will be accomplished by upgrading the equipment manufactured, making sure customer service is good, keeping control of costs and protecting working capital.  One factor that may or may not be caused by this country’s financial upheaval, is much slower turnover of receivables.  While Gem Equipment has adequate working capital, at times during the past 6 months,  slow paying customers has caused Gem Equipment suppliers to be paid late.  It should be noted that if all of Gem’s customers paid no later than Gem’s pays its suppliers, this company’s suppliers would all be paid on time.  To Gem’s customers, who are paying on time, Thank you.  You are making it possible for this company and its suppliers to continue providing customers with top quality service.