N.J. manufacturing exec: Trump’s tariff plans for steel would hurt U.S. companies

Strato CFO Corridon: 'The notion that you’re going to bring steel manufacturing back to this country is crazy. It’s not going to happen. It’s just not.'

By Tom Bergeron
Randolph | Apr 9, 2018 at 7:15 am

As chief financial officer of Strato Inc. in Piscataway — a manufacturing company that makes parts for the structural components of railroad cars — Michael Corridon knows all about the global steel industry.

Strato interacts with it every day.

“Everything we do is for the railroads, both passengers and freight,” he explained. “We deal with the hardware of the car, the structural components, the air-brake system, the wheels, axles, all the support for that. There’s a lot of steel.”

And, as someone who has worked in manufacturing his entire career, Corridon said he would love to see steel manufacturing come back in this country.

He’s just not sure if that’s possible.

And he’s certain the way President Donald Trump is going about it — threatening a tariff war with China — is not going to make it happen.

Corridon said as much during a break at the State of the State of Manufacturing, an influential conference put on by the New Jersey Manufacturing Extension Program last week at the County College of Morris in Randolph.

“It sounds nice what we’re trying to do,” he said. “I’ve worked in manufacturing my whole career, I’d love to see manufacturing come back.

“I’m excited to come to events like this and hear about all the manufacturing that’s going on in the state, but the notion that you’re going to bring steel manufacturing back to this country is crazy. It’s not going to happen. It’s just not.”

The reason: The U.S. can’t handle the demands for steel it already has, Corridon said.

Strato does about $80 million in revenue a year, with about 125 of its 150 employees at its Piscataway location.

It’s not a small company, Corridon said, but it’s far from some of the giants who have giant needs for steel.

And Corridon said U.S. steel makers can’t handle Strato’s needs.

“We actually started to do business with a foundry in Michigan,” he said before rattling off the reasons why.

“They were local. You don’t have to deal with the shipment delays coming from China. They have a really good engineering staff. They’re in the same time zone so there’s not a 12-hour difference,” he said. “It was somewhat more expensive, but once you factored in all the logistics costs, it was close enough.”

Corridon soon discovered the only downside.

“They couldn’t keep up with our demand — and this is before any tariffs come into play,” he said. “The ironic thing is, they couldn’t hire enough people. And this was a year or two ago. They were busing people in from outsider towns and they still couldn’t keep up. I think that’s a fallacy that we can build these jobs. They can’t get the employees now.”

And Corridon said adding more of these businesses won’t be easy, either.

“That type of manufacturing is dirty,” he said. “We couldn’t put one in New Jersey, because with the environmental regulations in New Jersey, you’d never get started — you’d never even get close to doing that.”

Corridon said it’s too early to tell what — if any — impact Trump’s talks will bring. In fact, he said he thinks (and hopes) this ultimately will not result in much of anything.

“I do think this is his M.O., this is how he negotiates,” he said. “I really believe this is a negotiation. I think he’s really just positioning the country to drive to change in China. I give him credit for that. And I think he’s smart enough to know he can’t go through with this.

“I saw some statistics that there are 80,000 jobs in this country related to the production of steel. That was dwarfed by that by a factor of 10 or 20 to companies like ours who use steel. As wild as he may be, I don’t think he’s that crazy. I think he knows that and I think you can see it in the way Wall Street is reacting. I think everybody realizes this is a negotiation.”

But Corridon admits he has to be ready for the possibility.

“I’m worried about it and what the impact is on our business,” he said. “You have to be.

“The first wave of tariffs only really affected a couple of smaller (items). But now that it’s escalating, it’s starting to get more serious. It hasn’t yet, but I think what’s on the table now could have a very serious effect on us.

“And it’s not just going to be us, a lot of people will be hurt. This is going to ripple through industries that employ tens of thousands of people.”

Corridon detailed a worse-case scenario.

“If this goes through, I don’t know where they’re going to get all the workers for the foundry business, which is actually making all the components, for starters,” he said.

“So, you’re going to have all this demand, and they’re now going to be price-competitive, so they’re going to go out and be able to recruit more people because they’re going to be able to pay them more money and then they’re going to need to pass those costs on to companies like ours.

“That’s fine, but we’re going to need to pass them on to the railroads and the people who buy those trains, and they are going to have to pass that on to the people whose goods they ship or the passengers who they are taking to Manhattan every day, so what are we really doing?”

Corridon said the issue hasn’t been thought through.

“I just feel like there’s a guy with the green eye-shade visor in the basement of the capital who’s saying, ‘If I do this here, what happens here and what happens there?’

“I don’t have a clue what he’s looking at, because it’s not going to really work out well in the end for anybody.”