A group of panelists addressed a variety of issues at the Corridor Business Journal’s Mid-Year Economic Review held June 22 at The Hotel at Kirkwood Center in Cedar Rapids. Panelists included Patrice Carroll, president and CEO of ImOn Communications; Brent Cobb, CEO of World Class Industries; Charlie Rohde, president of King’s Material; Sarvjeev Sidhu, head […]
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A group of panelists addressed a variety of issues at the Corridor Business Journal’s Mid-Year Economic Review held June 22 at The Hotel at Kirkwood Center in Cedar Rapids.
Panelists included Patrice Carroll, president and CEO of ImOn Communications; Brent Cobb, CEO of World Class Industries; Charlie Rohde, president of King’s Material; Sarvjeev Sidhu, head of emerging markets strategy for AEGON Asset Management; and John M. Smith, chairman of the board of CRST.
Here, in lightly edited form, are comments made by each panelist to questions presented by moderator Jack Evans, chair of the board of the Hall-Perrine Foundation.
Mr. Evans: Patrice, building (fiber) networks is challenging. How have supply chain issues affected this process?
Ms. Carroll: Supply chain issues have had a significant impact on the way we do things. Historically, we would design an area out, determine what we need and then place an order. Today, we’re ordering 18 months ahead, which means that we’re making broader estimates about what we’re going to need for the ’23 and ’24 build seasons. We’ve already ordered for ’23. Most telecommunications materials come out of Asia and then go to Mexico to be assembled. So, we’ve got the COVID lockdown issues in multiple countries. It’s hard to build fiber networks without fiber. We’re trying to manage it by being way ahead, so we have our place in line for supplies coming in.
Mr. Evans: Tell us about the deal between ImOn and Goldman Sachs.
Ms. Carroll: Goldman Sachs now owns the vast majority of the company. We entered into a process in 2021 with the objective of raising capital so we could accelerate the pace that we were building out fiber networks within our core communities, which are Cedar Rapids-Marion-Hiawatha, Iowa City-Coralville and the Dubuque area. Our objective was to complete our fiber infrastructure and provide service to all residents in those communities in a three-year period. We wanted to increase the pace. Prior to the transaction, we would typically deliver about 4,000 new addresses a year over a 10-month build schedule. This year, we’ll deliver 30,000 addresses over that same 10-month schedule.
Mr. Evans: Brent, could you explain to us how you’re managing your inventory, and what are the challenges?
Mr. Cobb: For us, we talk about having 98 of the 100 components that we need to ship and assemble. So some of our inventory increases are not something that we’ve specifically chosen. That inventory is trending up because we can’t get the availability of everything we need. At this stage of the recovery, we’re still seeing a number of suppliers that are having constraints and aren’t caught up yet.
Mr. Evans: How about on the demand side from your customers?
Mr. Cobb: We have strong orders throughout the rest of this year and even out into ’23. We’re challenged by the factories that are working at full capacity, and that comes back to the availability of parts. A lot of the assemblies that we do are directly sequenced to the (assembly) line, so if a vehicle is not produced, that build slot is missed and we’re not going to be able to replenish with modules the next day. Last month, 20% of our firm orders didn’t ship because of factory instability or performance issues on the part of the customer.
Mr. Evans: Charlie, have you been able to keep adequate cement inventory for your plants, and what have you seen in terms of prices?
Mr. Rohde: The timing was interesting in the last month and a half. The same day a certain portion of our workforce went on strike, we also got the largest price increase letter we have ever received from our cement suppliers. Very quickly, I will explain the difference between cement and concrete. Cement is a gray, powdery substance which is the glue that goes into concrete. So when cement prices go up, obviously the price of our finished product, concrete, is going to go up.
We are lucky in the Midwest — not only is our farmland good for growing things, we have very rich minerals in terms of limestone underneath various portions of Iowa. Most of the cement that we use comes directly from mills primarily along the Mississippi River, but there is cement that speaks in many languages right now — Mexico, Greece, China. The price of imports is going up, not only because of the price of the product, but because of the cost of transportation. We’re also seeing a shortage of fly ash, which is an essential ingredient (in making) cement react better. It’s also the safest disposal method of spent coal.
However, with the green movement of coal-fired power plants closing down around the United States, it’s hard to believe, but we’re importing fly ash from as far away as China. We’re taking their garbage to make our concrete and help our infrastructure. This used to be a product that utilities had to pay to dispose of, and now it’s a product that we’re paying dearly to obtain.
Mr. Evans: Sarvjeev, could you comment on China concerning its lockdown, and what future do you see there?
Mr. Sidhu: It’s unprecedented for the most populous country to implement this zero-COVID policy. It’s something that the West is obviously awed by, and it has had profound implications for China’s connectivity in terms of the supply chain and how it has impacted pretty much every part of the world. So, the most recent lockdowns of Shanghai and Beijing and Dalian, and a couple of other cities, have significant impact on the global supply chain, but also on the aggregate demand within China.
Certainly, the growth has slowed down significantly. The early indicators of activity suggest that April was the trough for China’s growth, because as they relax their restrictions, we have started to see growth come back. The property sector remains depressed in China. And most recently on (May 25) when Premier Li addressed the National People’s Congress, they are committed to growing their economy for the third and fourth quarter between 5% and 6%.
They’re also in the midst of a political transition, so new leadership is coming in different cadres of the Communist Party, and they are very anxious. These new appointees could demonstrate that they also want to get promoted down the road, so they will probably be working doubly hard to deliver on that number. So the prospects for China’s growth in the second half looks a lot more promising than the first half.
Mr. Evans: John, any comments on fuel?
Mr. Smith: We don’t have any refineries for diesel. Diesel is more expensive than gas, and historically that’s not been true. You’re probably talking about a little more into the future, and there is a revolution going to be coming. We don’t know what it is exactly. It’s going to be non-diesel. I remember going from gas to diesel. That was a big deal, and that happened very quickly. And we will go to an alternative, some sort of electrical battery. A hydrogen fuel battery truck is going to probably work for the trucking industry, but there’s huge (obstacles) still out there.
We’re hopeful. Our major supplier, Freightliner, is working with hydrogen to try to figure out how to make it work, because we can’t function going 200 miles and recharging, or even exchanging batteries, and the size of battery (required) to move 80,000 pounds with the current technology is just too heavy, and you lose too much payload. So, I don’t see the battery alone as a factor. Nobody’s making them right now, (but) something will happen in a few years. And it will be good for our environment. I’m just not 100% sure what it will be, but somebody will do it.