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Corporate Q&A

“I’m hopeful about manufacturing in Arizona” Snapshot Name: Dawn Grove

Sector: Manufacturing

Company: Karsten Manufacturing Corporation – Ping

Export revenue: Approximately 50% of sales

Job title: Corporate counsel

Time exporting: About 50 years

GTR: Tell us about the company and its exporting journey. Grove: We are a privately-held family business started by my grandfather, Karsten Solheim, in his garage over 57 years ago. We have about 1,100 employees worldwide and distribute products in approximately 80 countries. When my grandmother, Louise Solheim, received our first international order from South Africa for two putters in the mid-60s, she went to the state office of the US Commerce Department to try to figure out how to ship them. Eventually, she came to the generous conclusion she should just send the putters as a gift because of the complexity. She later took a college class to understand exporting, which was essential as worldwide demand for Ping products continued to grow. All product development comes from our Phoenix headquarters, supported by our team of more than 60 engineers and researchers, with the vast majority of our product being assembled there. We have an assembly plant in England for distribution to Europe and one in Japan for distribution to Asia to support our global efforts. GTR: How do you finance your exports? Grove: We are probably highly unusual in the manufacturing business in that we are a debt-free company. When my grandfather first decided to build golf clubs, he went to a bank and requested US$1,100 to acquire a milling machine to make the molds for casting putter heads. The bank told him it would lend him money just this once, but he shouldn’t

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expect to come back for more, and after that he didn’t need to. That’s one of the ways we as a company have been able to manage the twists and turns in the golf market over the decades, by doing most of our own financing. We do extend credit to our customers, as we recognise that the world operates on credit, even if we try our best not to. We find we do not need to use trade finance products. GTR: What are the biggest challenges you face as a US manufacturer exporting internationally? Grove: One of our greatest challenges is the burden of regulations within the US: increasingly burdensome administrative and reporting requirements squeeze profits that could be better spent investing in new jobs or in increasing exports. When the US has one of the highest corporate tax rates in the world, it makes competing on a global playing field more challenging. We have our own foundry where golf club heads and other precision castings can be made, but decades ago we used to have several domestic foundries from which we could source golf club heads. Because of burdensome federal government regulations and competitive pressures, these other foundries stopped producing golf club heads or left the US altogether. In order to meet demand and stay globally competitive we have had to rely on selected foundries in other countries from which to source many of our golf club heads. Ping has teams embedded in the regions that work closely with global suppliers to ensure top quality and performance. Another challenge is wrongful tariffs and the difficulty involved in correcting them. For example, Ping pays a higher

tariff rate to import a component of a golf club than it would pay to import a golf club wholly made in another country. Instead, tariffs should be regularly reviewed and wrongful “inverted” tariffs corrected when needed. We are encouraged that the Miscellaneous Tariff Bill process has begun again in Congress after several years of being stalled. GTR: How do you feel about free trade agreements like the TransPacific Partnership (TPP)? Grove: Together with other Arizona manufacturers, we have been supportive of the TPP. We have seen an uptick in our exports to countries where the US has free trade agreements. GTR: Are you optimistic about the future of US manufacturing? Grove: I’m very hopeful about the resurgence of manufacturing in Arizona and the US. I see a growing understanding of the importance of actually making a product here and exporting it to the world. It benefits the world too, as many American manufacturers source essential components from around the globe. Manufacturing jobs pay higher wages than any other sector, and other states and countries are competing for these jobs. Government should provide a positive business climate for the manufacturing sector because manufacturing is a magnet for other supplier and service jobs. Arizona’s governor understands that and is doing a fantastic job attracting manufacturers, and Arizona is gaining jobs that are leaving California’s highly regulated and taxed environment, for example. In the US as a whole, there is some encouraging talk about the importance of promoting manufacturing, but a disconnect when it comes to federal policy and administrative actions, which hurts manufacturing in the states. Nonetheless, I’m encouraged that the US government is publicly recognising the importance of manufacturing to any growing economy and perhaps federal policy will catch up.

www.gtreview.com

November/December 2016 issue  
November/December 2016 issue  
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