Should Ruger Be Planning For Expansion In North Carolina?
BY Herschel Smith
11 years, 4 months ago
Some “experts” think not.
A manufacturer of a robustly popular product wants to capture what it perceives as missed-opportunity sales by opening a third production plant, this one in North Carolina.
The company is pledging to create hundreds of jobs and bring a renowned brand and sure-fire economic shot-in-the-arm to the community.
However, there are analysts skeptical of the expansion plans, saying the company already is facing saturation of its product in the U.S. marketplace amid formidable competition. They aren’t sure consumer demand will continue to outpace supply even though the short-term future is bright.
The company: Dell Inc., the world’s largest PC manufacturer. The time: summer 2004. The community: Winston-Salem.
Fast forward six years, and Dell is preparing to close its $110 million plant and finish eliminating the remainder of a workforce that reached 1,400 at its peak. The company is shifting production to third-party vendors after falling laptop prices eroded its market share for desktops and consumers proved increasingly indifferent to a customized product.
Fast forward another three years, and you find Rockingham County reveling in what local officials and residents consider as a godsend – an announcement that Sturm, Ruger & Co. Inc. has chosen a 220,000-square-foot plant in Mayodan as its preferred site for a third firearms manufacturing plant.
If an unknown amount of local and state incentives are approved in August, local economic officials say they are confident Ruger will commit to spending $30 million on capital investments and hiring a workforce of 300 to 700 full-time employees. The plant would be expected to open by early spring.
It would be the first manufacturing expansion for the Southport, Conn., company since 1988. The company also has plants in Newport, N.H., and Prescott, Ariz. There are about 2,100 employees companywide.
Still, there are analysts who question whether opening a third Ruger plant is prudent. They wonder how many firearms gun buyers want or need before feeling fully stocked.
“While most industry executives believe this surge in demand should still have some steam left in the tank, it’s safe to say it certainly won’t last forever,” said Steve Symington, an analyst with The Motley Fool.
Yes, our “expert” is with The Motley Fool. Give yourself time to quit laughing and let’s cover what’s really happening here.
First of all, Ruger is having trouble meeting demand, and the U.S. is as in love with its guns as it has ever been. There is always a demand for good gun manufacturing, especially with firearms made in the U.S. (including every part and component).
But second, take note of the location of the home office. Connecticut. What this “expert” with The Motley Fool doesn’t understand is the loyalty of gun owners, or conversely, the wrath of their judgment wrought upon gun manufacturers disloyal to America. For a brief primer on this, consider the Smith & Wesson boycott.
Ruger is betting on expansion, but not just any expansion. They’re relocating South. Look for operations in Connecticut to decrease over time. If Ruger doesn’t take this step, they will go out of business, just like Remington in New York.
If firearms manufacturers stay in the North, they will become obsolete and eventually go out of business. If they relocate to the South, a welcome party awaits. So much for the “experts.” Ruger knows what they’re doing.
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On July 16, 2013 at 11:21 pm, Matt said:
Just the fact they are building a plant in NC will buy them many years of loyalty from folks who would have boycotted them for being in CT, even if they keep the CT facility open.
On July 17, 2013 at 7:42 am, DCP said:
I work in Greensboro, NC, right next to Mayodan and Winston-Salem.
Dell built a factory to make desktop PC’s at a time when desktops were clearly on their way out, and had become comodities. If you buy several different desktops from different manufacturers and take the covers off, you will find that all of the componenets were made by the same 6 Chinese firms in Hong Kong. Desktop PC’s are also incredibly cheap. We used to upgrade out machimes every 12-16 months. No more. It is now cheaper to replace them.
I don’t even buy new anymore. I buy Dells that have come off corporate lease. They are usually less than a year old and have a 90 day warranty.
Six months ago, I bought a Dell, 3GHZ processor, 4GB RAM, 250GB HD, keyboard, mouse, wireless wifi, etc. It also included a 19″ flatscreen.
The price was $201.00, delivered.
There are no firesales on firearms. No where in this country. And I understand that Ruger is still working on a significant backlog. The point about supporting, or not, gun manufacturers who support the 2A is also very real. I own 175 firearms (+/-), including several Remingtons. I won’t even buy Remington Ammo anymore.
I work with a guy who is from Rockingham County. Most of his family still lives there. He told me that before Ruger let the word out that they were even looking at this area, they came down here. The had people come down, stay in the towns, eat in the restaurants, shop in the stores, go to church, check out the schools, etc. They had a very good understanding of the strenghts and weaknesses of the area BEFORE they actually entered into any negotiations.
I expect that the gulf between Red and Blue states will continue to widen, over guns and other issues. I don’t see it closing anytime soon.
DCP
On July 17, 2013 at 8:31 am, Jeff B. said:
Well put, Herschel! The “expert” is working within a purely economic framework to arrive at his analysis and uses the Dell experience as evidence supporting his case.
What he misses, that you highlight is the social and cultural aspect to the case. If firms (Remington) elect to remain in the Blue Zone, they’ll eventually feel the economic inpact of that decision as buyers opt not to purchase their goods because of the politics of the region where they are located. I’ve got one Remington R1 1911. I love it, I would have purchased at least one more, but because Remington has made it clear that they are sticking with Ilion, NY as their main location, will not. You can extend this out to millions of firearms purchasers… the politics of gun control will have as much to do with the ultimate survival of firearms manufacturers as economics will.
On July 17, 2013 at 8:57 am, dad29 said:
There is a huge capital expenditure in putting up a gun plant: acquisition of the building, machine tools, conveyors, (and installation thereof), storage (secured), IT system installation, etc., not to mention hiring and training.
That’s the reason that other gun manufacturers haven’t simply pulled up stakes and relocated, regardless of silly state laws. Politics are one thing; hard money, in the 10s or 100s of millions, is another thing altogether.
As you hinted, Ruger now has leverage on its New Hampshire plant (like Boeing’s situation.) Ruger may or may not need 3 plants in the future, but the NH plant WILL be closed if demand falls. Score for Ruger: both a new plant with ideal layout AND a new, less expensive workforce.
On July 17, 2013 at 9:00 am, Chuck said:
As DCP points out above, guns are not computers. There is no equivalent to Moore’s Law for guns. If I buy a laptop or a tablet it is nearly obsolete before I get it out of the packaging. Because of this, those who fail to stay ahead of the market in developing the next big thing will fade away probably sooner than later. On the other hand, there are firearms manufacturers that are centuries old. If I buy a Ruger SP101, chances are my son will still be shooting it long after I’m gone. This may be where the whole “market saturation” concept gets applied to firearms, which, by their nature are very durable and last for decades.
What these outside observers who just don’t get the whole “gun thing” fail to grasp is that buying guns is like eating potato chips or (I’m told) like getting a tattoo. You just can’t stop at one. I can’t tell you how many times I’ve thought my collection was perfect one minute only to realize a minute later that I “needed” another one.
On July 17, 2013 at 10:18 am, Sando said:
My dad and I have bought Rugers for more than 40 years. They build quality firearms and understand buyer loyalty.
Plus, I just read this morning via Instapundit that there are 88 guns for every 100 Americans. I will be buying more Ruger firearms in an effort to increase that proportion.
On July 17, 2013 at 4:17 pm, Mark Matis said:
I would only note that ANY gun manufacturer or gun parts manufacturer who dares relocate to the South should expect the FedPigs will give them the Gibson treatment. We no longer are under Rule of Law. The Thugs with Guns do as they want, and NONE dare touch them.
On July 17, 2013 at 8:40 pm, Al Reasin said:
I will be buying another Ruger tomorrow as a backup carry firearm. I agree with dad29, Ruger will eventually rid themselves of their northern facility if sales decrease.
On July 17, 2013 at 9:25 pm, scott s. said:
Given the import/922r/sporting purposes test there will always be a good market for US manufactured guns.