As coronavirus grips Italy, Louisville importer wrangles supply shocks and bad information
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LOUISVILLE — Rob Volkert endured what could be the most anxiety-producing six hours of his life Wednesday.
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As the CEO of an importer of Italian-made car detailing equipment, Volkert’s company Rupes USA Inc. has faced a cascade of developments regarding the spread of the COVID-19 virus in Italy and here in the U.S. that have forced him to spend millions for additional inventory and could force his growing business to the brink of closure due to forces outside of his control.
But Rupes USA’s story is one of thousands of companies both in the U.S. and abroad whose supply chains have been slowed or severed by the spread of the virus and threaten their ability to operate.
Italian engineering lands in Colorado
Rupes S.p.A formed in Milan in 1947 and made its mark in inventing speciality tools for the automotive market, particularly for sanding and dust extraction.
In 2008, it introduced the first car polishing tool with a random orbit, allowing the pad to rotate on a free axis rather than in a fixed circle. That random polishing pattern made it far less likely that a car detailer would produce swirls with the car’s wax or scratch the paint, solving an issue that all but the most experienced car detailers were bound to encounter.
“This tool was one of the first, amazingly enough after all these years of people doing this stuff, this was one of the first that could remove these swirls very effectively, even for an inexperienced person to use a tool like that,” he said. “That was the revolution.”
Shortly after the “Bigfoot” line of polishers went on sale in the U.S., Rupes acquired and rebranded a Longmont company called Cyclo Toolmakers and spent millions to build a brand-new warehouse and training center in Louisville’s Colorado Technology Center. That new building opened in 2017, and that’s when Volkert came aboard.
Since then, the company has found success in the American detailing industry. Volkert said the company of about 30 employees grew from $2.5 million in revenue in 2015 to $12.5 million in 2019 and was expecting to pull in $14.5 million by the end of 2020.
Then, the area of northern Italy surrounding Milan became a hot zone for the spread of the COVID-19 virus.
Getting supply on the boats
Rupes USA usually spends between $7 million to $9 million over the course of the year from its Italian parent. Volkert said he has spent more than $4 million since mid-February to get shipments onto cargo ships and toward American ports in case of a total shutdown.
That gives Rupes USA a total of about nine months worth of inventory on hand compared to its usual three months, which puts a strain on the company’s cash flow.
Volkert said that crunch will force the company to slow its hiring, pull back from marketing events and make other cuts to offset the sudden spending.
“Even though that will make us whole with at least our customers and have product here, we’re still going to be in a situation where…we can’t do much else, because the money we’re spending on inventory is going into inventory instead of regular operating expenses,” he said.
While Volkert said laying off staff is a “long way away,” cutting employees has been a consideration in trying to keep the company afloat.
It’s not clear yet just how much Italy’s temporary shutdown will affect trade with the U.S. Data from the U.S. Census Bureau shows Colorado companies have imported between $230 million to $250 million in Italian goods over the past three years, and import value figures through January 2020 are par for the course. However, Italy wasn’t facing the outbreak it now is trying to contain until the middle of February.
Karen Gerwitz, president and CEO of the World Trade Center Denver, said manufacturing companies will see a delay in production because of international supply chain changes. However, the cancellation of international trade shows will also cut off vital channels to meet with customers.
In times like these, Gerwitz said business owners should be re-evaluating their risks and looking for guidance on how to avoid foreseeable problems.
“International business is a long-term game; it’s not a quick fix or a short term sprint,” she said. “…So you really do need to be looking strategically at the long-term game and making sure you’re looking at your risk factors.”
Six hours of misinformation
As Volkert was speaking with BizWest reporters Wednesday afternoon, the Italian government placed a blanket order suspending all business activity across the country except for groceries and pharmacies. Before then, Italian authorities were only quarantining specific cities in northern Italy.
When asked about that breaking piece of information, Volkert sighed. Although he said a complete shutdown wasn’t surprising, it was yet another curveball in the company’s plans.
Then, during his primetime address to the nation that night, President Donald Trump said the 30-day suspension of travel from European countries to the U.S. starting Friday at midnight included both travelers and cargo.
Those two pieces of news combined, Volkert said, gave him the most anxiety he has ever experienced as a business owner.
But neither pieces of news were accurate.
Later that night, the White House said Trump misspoke, and the suspension between the U.S. and Europe was only for travelers, not cargo. Until that correction was issued, Volkert was panicking, wondering if the ships carrying Rupes’ inventory would be ordered to sail back to Italy.
Then, on Thursday morning during a daily call to Rupes in Milan, Volkert found out that Rupes’ Italian factory wasn’t required by the government to shut down, likely because its message was lost in translation. While the factory there will close voluntarily until March 25, workers there will be able to assemble one last shipment and send it to the ports before it arrives to the U.S.
For several hours, Volkert had feared the worst for his company based off two pieces of incorrect information from federal governments.
“It’s difficult, because people are looking to me for some answers, and you just don’t get complete answers or fully truthful answers,” he said Friday. “…It’s been a hell week for sure, and I am not used to this kind of thing selling tools.”
The U.S. Small Business Administration has also announced it would offer loans of up to $2 million for companies hit by a COVID-19-related economic effect.
“Who puts this on their SWOT analysis?”
Stability is the one universal trait that every business needs to function properly. For the past few weeks, Volkert hasn’t had much of that as the COVID-19 virus spreads within the country he relies on for goods, and his staff relies on indirectly for employment.
He hasn’t slept as well as he usually does, and he worries about the outside chance that the company could no longer be viable if Italy remains locked down over the next several months.
For the foreseeable future, the COVID-19 virus will dominate how the world goes about doing business. The only thing Volkert and other companies like his can do is to cope with the new reality.
“We were pretty excited about things, and all of a sudden, it kind of gets a pause and we think, what happens to the strategic plan now?” he said. “Do we need to adjust it? Who puts this in their SWOT (strengths, weakness, opportunities and threats) analysis? Normally, people don’t say a pandemic is one of their concerns.”
