October 2, 2004
By JENALIA MORENO
Copyright 2004 Houston Chronicle
Snapping turtles, used tires and even wads of cash sometimes drift through storm sewers. But finding profits once proved elusive for water and wastewater treatment plant equipment supplier Headworks.
For nearly nine years, the company sold millions of dollars worth of stainless steel screens to catch debris before it clogged up sewage systems. Chief Executive Officer Michele LaNoue watched revenues grow by double digits as she sold more and more equipment to city governments across the globe, but the Houston-based company was only breaking even because of labor costs.
"We would have all that growth and no profit, which is really crummy," LaNoue said.
So in March 2003, the company began placing orders with a plant in northern Mexico and reduced its labor and material costs by 10 percent to 25 percent.
HOT-BUTTON ISSUE
Such outsourcing has sparked heated debates as more and more manufacturers, technology companies, apparel makers and call centers send orders and work overseas.
Some in President Bush's administration have described offshoring as good for the economy, while Democratic presidential candidate John Kerry proposes ending tax breaks for companies that shift jobs to other countries.
Critics of outsourcing say it reduces U.S. jobs, but LaNoue, 52, plans to add five more positions to the 21 people she employs at Headworks' administrative office.
Outsourcing experts said some companies experience similar employment growth.
"There are a lot of cases in the U.S. where companies have actually outsourced lower-end jobs to low-cost centers elsewhere in the world and have actually added more jobs at the higher end of the spectrum," said Nirupam Bajpai, director of the South Asia program for Columbia University's Center on Globalization and Sustainable Development.
'THE WHOLE POINT'
After outsourcing, LaNoue's company is earning a profit.
"People keep forgetting that in this whole outsourcing hoopla that if you can't make money, then your business goes away, and there goes all the jobs," said LaNoue, who started Headworks with her husband, Gerald Seidl, out of the couple's dining room. "If it wasn't for outsourcing, we wouldn't make a profit, and we wouldn't be able to hire people."
Besides making a profit, revenue is up. This year the company will have $10 million in revenue, 60 percent more than last year.
"That's the whole point of outsourcing, so you can rise and grow and be more profitable," said economist Ray Perryman, the president of Waco-based Perryman Group.
BIG BREAK, BIG DEAL
LaNoue stumbled into her business more than a decade ago when she met Seidl on a beach in Greece.
A former oil and gas attorney, LaNoue was looking for a career change at the time.
Seidl was then based in Hong Kong and working as a marketing representative for the Austrian inventor of the technology that Headworks now uses. The couple later bought the patent from the Austrian and named their new company Headworks, after a part of the equipment in a wastewater treatment plant.
She sold screens for $40,000 to $500,000 to customers in Hong Kong, Singapore and the United States.
Three years ago, the Everett Water Pollution Control Facility in Washington state needed to upgrade a water treatment plant and ordered a Headworks screen.
"Headworks was one of the few companies — it turned out to be the only company — that would serve our needs," said Charles Johnstone, who was then an operations supervisor for the facility in Everett.
BOOSTING SALES
Despite such praise from customers and distributors, Headworks struggled.
So LaNoue sent some orders south of the border. And she continued to place other orders with a Houston subcontractor.
Gary Grey, a mechanical engineer for the Washington Suburban Sanitary Commission, didn't know Headworks had some equipment made in Mexico. But he was pleased with the quality of the more than
$1 million worth of screens the commission has installed.
Headworks recently received help from the Department of Commerce's Gold Key program, which set up appointments with potential customers, provided logistical support and hired interpreters for her in China, said Duaine Priestley, director of the agency's Export Assistance Center in Houston.
Now LaNoue plans to seal a deal in China.
jenalia.moreno@chron.com
http://www.chron.com/cs/CDA/ssistory.mpl/business/2826872