AURORA — Tax reform is creating growth drivers for Philpott Solutions Group, President and CEO Mike Baach told the U.S. Senate Ways and Means Subcommittee on Tax Policy recently.
Philpott, which operates a manufacturing plant on Gentry Drive in Aurora, has announced it will relocate its operations in China to Aurora. The firm is headquartered in Brunswick.
"It was an exciting opportunity to testify before Congress about the impact of tax reform on small businesses," he said, noting he was asked to speak May 23 by Ohio 16th District U.S. Rep. Jim Renacci.
Baach told the subcommittee tax reform gave Philpott the courage to invest more than $5 million in a new facility, equipment and upgraded manufacturing infrastructure.
"This investment will, in turn, allow Philpott to reshore our manufacturing back to the U.S. and allows us to innovate new products," he told the panel. "This will drive growth in our business, new jobs and increased cash and ESOP compensation for our employees."
Baach has served as president and CEO of Philpott since September 2009, and will retire soon to make way for Jim Vaughn to take over the post ."During my time, our team more than tripled Philpott’s size through creative, domestic market expansion," he said.
Baach outlined to the panel some of the history of Philpott, which was founded 129 years ago. The firm currently employs 40 people. Employees took over ownership in 1977, when an employee stock ownership plan (ESOP) came into being.
Baach told the panel in the 1990s the company formed contract manufacturing relationships with three rubber molders in China, which forced the closing of its U.S. factory in 2003.
"However, quality issues grew, which strained our management and financial resources, and eventually rose to a level where key customer retention was in jeopardy," he explained.
He told the panel the firm’s technical team had a rubber compound re-engineering breakthrough that reduced cycle time for producing parts, thus closing the gap between U.S. to China labor costs.
"At the same time, a more business-friendly environment had emerged in Ohio as a result of its Common Sense Initiative, where unnecessary / overly burdensome rules were modified or rescinded," he said.
That’s when the firm decided to buy and upgrade a 43,000-square-foot building in Aurora and equip it with brand new rubber molding equipment.
"Our reshoring process has been a bit more challenging than we had first anticipated," he told the panel. "However, the revenue miss from our plan has been backfilled nicely due to the current, vibrant economy, which we attribute to tax reform.
"As to specific benefits of tax reform, we gave every employee a $1,500 bonus in December 2017. This amount was in addition to their performance-based cash bonuses.
"Keeping more of their cash due to the lower tax rate makes for even more motivated employees, leading to ever-improving customer service."
Baach told the panel Philpott’s business has already grown significantly in 2018. "Because we sell to other manufacturers, not end users, we usually outperform the market since we sell products to multiple levels in the supply chains," he explained.
Reporter Ken Lahmers can be reached at 330-541-9400 ext. 4189 or email@example.com