TESTIMONY OF

Jay Carlson
G&R Manufacturing, Inc.

Hearing Before The
House Committee On Small Businesses

"Lost Jobs; More Imports — The Unintended Consequences of Steel Tariffs"

September 25, 2002

Good morning. Thank you very much for inviting me to testify about the consequences the Steel 201 tariffs have had on my company. My name is Jay Carlson and I am President of G&R Manufacturing.

G&R Manufacturing is located in Naugatuck, Connecticut. The Company began operations in 1972 primarily as a metal stamping house and we have grown into a full-service "turn-key" manufacturing facility. G&R Manufacturing provides everything from basic stampings, progressive stampings, transfer press eyelets as well as intricate multi-component assemblies. We currently employ 40 workers.

G&R Manufacturing requires 550 tons of steel each year. We buy our steel domestically through service centers. The steel tariffs imposed by the President in March have reduced the availability of steel in the market to the point that our supply of steel is not reliable. Our service centers have been put on allocation. As a result, we have experienced severe shortages of certain steel grades, as well as unacceptable increases in lead times for others. Lead times have increased from 4-6 weeks to 16 weeks or more.

These increased lead times have placed some of our automotive customers in potential line-down situations. In order to avoid this situation, we have had to pay extra for expedited shipping and obtain our steel from alternative sources. This has increased our costs significantly and it could potentially jeopardize the quality of our products. The alternative sources that we have to utilize are not necessarily the best quality but they are our only alternative.

In addition, we have to face steel price increases of 40-60%. This translates into additional costs for us of $100,000 to $200,000 a year. G&R Manufacturing is a small business and can not absorb these costs. Nor do we have the power to pass these higher costs on to our customers. We are already competing in a global market that is a rather uneven playing field in terms of labor, health, and environmental costs. The steel tariffs have tipped the scales even further by making my steel costs substantially greater than those of my foreign competitors. On top of all of that, our foreign competitors are able to import their product to this country duty free. As a result, GR Manufacturing like many other small and mid size companies has a difficult time competing and finds it difficult to stay in business.

I can tell you that GR Manufacturing's experience is not unique. As a founding member of the Manufacturer Leadership Group of Connecticut, which consists of 180 small businesses in the Waterbury Connecticut area, I know that the tariffs have had a ripple effect. As U.S. steel consuming industries lose business, so do the companies that supply those industries, such as service centers, finishers, platers and assemblers. The situation is only getting worse.

The steel 201 tariffs need to be lifted as soon as possible. We operate on tight margins in a very competitive market. The hardship of these tariffs and our inability to pass on any price increases will cost not only jobs, but will also affect G&R Manufacturing's ability to survive.

Thank you very much for this opportunity to testify.