How One Manufacturer Bet Big on Trump
The bet paid off–but not precisely according to plan. Drew Greenblatt, CEO of Marlin Steel, reflects on the economic turmoil of the last few years and the outlook for American small manufacturers.
By Michaela Cavallaro
When Drew Greenblatt bought Marlin Steel in 1998, the Brooklyn-based company specialized in making wire baskets designed to hold bagels. But as the popularity of carb-heavy snacks waned and competition from China increased, Marlin Steel began losing money and Greenblatt was forced to rethink the company’s path.
That path started to emerge in 2001, when Marlin received a small order for wire baskets from aerospace giant Boeing, which needed baskets engineered to exacting specs to hold parts used on its production lines. Greenblatt realized there was a market for these specialized steel baskets beyond Boeing, and found willing buyers elsewhere in the aerospace industry, as well as with automakers, health care companies and others. The company now operates out of Baltimore, Md., where more than 40 employees and a handful of temporary workers produce high-tech metal containers for hundreds of clients from 39 countries.
In early 2020, Greenblatt expected Marlin to generate nearly $7 million in revenue. Then the Covid-19 pandemic struck, turning the American economy upside down. As the aerospace industry struggled, Marlin saw order after order canceled. With some quick thinking and timely pivots, Greenblatt turned what could have been a disastrous period into the company’s best year ever. In fact, Marlin generated $8 million in revenue, outpacing his original projection. Greenblatt expects revenues to continue to rise to $10 million this year and $15 million by 2023.
He attributes the company’s recent success in part to the Trump administration’s small business tax policies, which Greenblatt says prompted him to take a big leap and invest $2 million in his factory to increase efficiency and productivity—while also boosting demand from his domestic customers.
We checked in with Greenblatt to find out more about how the pandemic and the Trump administration policies affected him and what he sees for the future of America’s small manufacturers. This conversation has been condensed and edited for clarity from four interviews.
In a year that posed so many challenges to the business community, how do you explain your company’s positive outcomes?
We were planning on having an exceptional year because of orders from the aerospace industry. But all of a sudden, they were having trouble making payroll and began canceling orders. So we made a series of pivots that saved the company. We had clients in the medical space, and the CDC pulsed them [asking], “Hey do you know anyone who could help us out on a high-quality, high-precision project?” We ended up making all the test tube racks for the CDC’s Covid tests. We teamed up with a domestic manufacturer of sanitizer and got into the sanitizer stand business, and that was an enormous market for us. [China] was making a lot of the IV poles for American medicine and they were not delivering good quality; they were not delivering on time. We stepped in again and got our biggest order in company history and made a lot of IV poles. We’re still making them now, and we’re still getting reorders. We had our best year in company history for revenue, for profit, for cash flow, for reducing debt, for hiring people, for buying equipment and for meeting new customers. So we’re very enthusiastic and optimistic for the future.
You expected the corporate tax cuts in the Tax Cuts & Jobs Act of 2017 to create positive momentum for your company. Did that happen?
Yes, I think those policies were very effective. We went all in and put over $2 million of new technology into our factory in January of 2018, because we were so confident that the tax improvement would benefit American factories. We shut down the factory for three weeks and added all kinds of new robots, technology and automation so that we could make better quality products and ship faster. We added seven-and-a-half times more electrical power to handle all the new robots. It was very disruptive in one sense, but it was a wise strategy.
How did the tax cuts play into your decision to make those investments?
Rather than spreading out investment tax benefits over 10 years, domestic factories got a shot in the arm [by expensing them in] the first year. In the past, say a factory needed to invest in a $2 million washing machine to wash parts for a new product line. They would then have to spread out [those deductions] over seven or 10 years. Now with the new tax regime, you could write off that investment in the same year. So the payback is now easier and sooner—which is prompting more American factories to expand. And, by the way, if you need a $2 million washer, you probably need $200,000 of baskets, which means Marlin will get a sale now.
So you were able to write off the $2 million you invested in 2018 that same year?
Yes. That made it more palatable to go big. That was part of the math.
Would you have not made the investment without the accelerated depreciation?
The Trump administration also rolled back a lot of regulations to help businesses. Have you benefited from any of those rollbacks?
No. However, I think our clients are enjoying the benefits—there’s less paperwork and less drama.
You had hoped the tax cut was going to pay for itself and result in GDP growth of 3 percent to 4 percent. Even before the pandemic, we were sitting at about 2 percent. What do you think happened?
I think the economy was poised to do 4 percent plus. However, when I was making those predictions, I did not anticipate the trade wars, which temporarily depressed domestic GDP. I think if we had only had the tax cut, and we didn’t have some of the trade issues that are going on, we would have been at 4 percent, 5 percent or 6 percent growth. But I think it’s a short-term [issue]. In the long term, I think the trade talks will be beneficial.
The prices that you paid for domestic steel went up because of the tariffs on steel. How did that affect your business?
Here’s the problem: My competitors in Germany, Mexico and China didn’t see price increases due to the tariffs. But even though I’m buying only American steel, I’m still effectively paying the Chinese penalty. That’s frustrating. However, the 30,000-foot view was that the economy was still healthy and strong, so the tariffs’ impact was just a rounding error.
Do you feel the Trump administration was right to pick a fight over China’s trade policies?
The Trump administration was a very challenging negotiating partner. China was pumping out steel the world didn’t need, because they didn’t want unemployed steel workers rioting like they do in Hong Kong. As a result, the Chinese government subsidized steel, they subsidized the labor and they were giving the company a cash rebate to export it. On the other hand, if we could have a level playing field, I could hire more unemployed steel workers in Baltimore City. I could hire more engineers.
It’s a challenging process. When the smoke settles, I don’t think it’s going to be a one-sided American win. But at least we were negotiating, and at least we were trying to get a rational trading partner.
You predicted in 2013 that Marlin would hit $50 million in revenue within five years. What happened?
I’m surprised I would say the number 50. It was a slow economy—we didn’t have as much wind behind our sails. We went through a long time where people were kicking the can down the road and not making any investments, not taking chances, just hoarding cash and pulling their horns in and waiting to see what would happen.
That’s the worst for me. I have a great market when people are excited and optimistic and have new products—that’s how I make a living. It’s tough when people are like, ‘I’m not sure if sales are going up 2-3 percent or down 2-3 percent—or they might be going down 10 percent. I don’t know what’s happening, so I’m not going to do anything.’ Because of that, few people started a new product line. We did ok, but we didn’t grow like I thought we were going to grow.
What’s your goal now? How big do you think Marlin can get?
We want to be $10 million in 2021, and $15 million in 2023. It’s going to come from a combination of growing our patented products and hiring more engineers to come up with really innovative products that differentiate us. Then we’ll have a big, fat moat around us.
You were very public in your support for the Trump administration’s economic policies. Now that his term is over, do you still feel the same way?
I think his policies were effective. In terms of economic policy with a broad brush, it improved the lives of millions of Americans, because they were able to receive more compensation and they were able to have a steady job. When you look at pre-COVID times, we were at the highest employment rate ever. So my perspective is that’s points on the board, though obviously the closing act was disgraceful.
How do you feel today about the prospects for small manufacturers in America?
I don’t see normalization coming anytime soon. You know, the supply chain is very fragile, as everybody learned with toilet paper. People are realizing how reliant they were on China and how foolish that was. I think that people want to near-source. And I think a lot of people are pivoting to a more thoughtful approach when it comes to how to make sure you have vendors that are respectful, responsible, timely and consistent, and produce good quality. So that is good news for American manufacturers.