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THE HERALD BUSINESS JOURNAL    EVERETT, WASHINGTON

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M.L. Dehm / For HBJ 
(click to enlarge)
Machinist Steve Beak sets up parts by one of Cobalt Enterprise's state-of-the-art Mori Seiki milling machines. Even when finances were tight, company President Frederick Schule was determined to buy the highest quality equipment available.
M.L. Dehm / For HBJ 
(click to enlarge)
Hailey Francis assembles panels at Cobalt Enterprises’ warehouses in Granite Falls. The company that began as a precision machine shop in 2004 now also offers assemblies and paint for customers. Vertical integration is one of Cobalt’s goals, said company President Frederick Schule.
M.L. Dehm / For HBJ 
(click to enlarge)
Machinist Scott Parris tools parts for Cobalt Enterprises. Parris came to Cobalt after 11 years at Kimberly-Clark before the Everett paper and tissue mill closed in April 2012. Parris enjoys the Granite Falls location and not having to fight traffic to get to work.

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Jim Davis, Editor
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Published: Wednesday, December 12, 2012

Tech manufacturer flourishes in Granite Falls

GRANITE FALLS — Aerospace is a key industry in Washington state, one that is still growing, and Snohomish County is home to many leading aerospace related firms.

One local company that manufactures precision machine parts and assemblies for aerospace, defense and other commercial industries is the AS9100-certified Cobalt Enterprises Inc. in Granite Falls.

Cobalt Vice President Paul Clark admits the company tends to run under the radar.

“We don't have a sales force,” he said. “Work comes in by word of mouth.”

Even so, the company that is housed in two small warehouses off the Mountain Loop Highway is projected to bring in more than $6 million in sales this year. Some of their customers include Crane Aerospace, Northwest Aerospace, Jamco America, Systima Technologies and General Dynamics. It's an impressive list for a company that is just eight years old.

“I started it in a garage,” said company President Frederick Schule. What he often doesn't tell people are the stressful circumstances around the start up. The company that Schule had been working for had closed. His wife, Debbie, who had a pre-existing heart condition, found she needed open-heart surgery. Because the company shut down, she was left with no health insurance.

“COBRA (the federal Consolidated Omnibus Budget Reconciliation Act that allows former employees to remain on a company's insurance plan) doesn't apply if the company goes out of business,” Schule said. “Most people don't know that.” The medical bills began to pile up along with his worries for her health.

Meanwhile, some customers at the company he used to work for had been left hanging. Schule had to choose between accepting some offers to work for someone else or take a chance, start his own company and take on these customers. He decided to start Cobalt Enterprises Inc.

After four or five months of working out of his garage, Schule noticed some warehouses being built nearby. It seemed like a good location. It was certainly an easy commute and the quality of life was good in Granite Falls. By 2005, Cobalt had moved into the new warehouses and continued to grow.

From the start, Schule laid a few ground rules for his new company that he felt sure would lead to success. He would not do sub-tier work — work for other machine shops. No customer should take more than 25 percent of Cobalt's manufacturing capacity and quality was paramount. Better to be a little late than to compromise quality, he believed.

“We were even growing during the tough times because of the quality,” Schule said.

He brought in the best state-of-the-art equipment from top company Mori Seiki. It's a name that carries a lot of weight with customers who are in the know. Then Cobalt started to vertically integrate. Currently they not only offer machining, they can also do assemblies and paint for customers.

When Cobalt was founded, the company's customers came from a variety of commercial industries. By the time of the 2008 economic downturn, the focus had shifted more towards aerospace. The timing of the shift was good. But because the level of equipment they were purchasing was very high, there were still significant economic constrictions.

In late 2008, Schule met with his employees and let them decide whether they would accept an across-the-board wage cut or if they should let some co-workers go instead. The employees opted to take the wage cut and keep the team intact.

The team's move impressed Schule and left him touched by their dedication both to the company and to one another. “I never heard any complaints,” he said. After Cobalt posted some profitable quarters, he was glad to be able to restore the employees' wages.

It was around the time of the economic downturn that Cobalt began taking on additional business from companies that were going under. They were also able to start making small motors for defense industry UAVs, the unmanned aerial vehicles more commonly referred to as drones.

In 2011, Clark joined Cobalt as vice president. A banker introduced Schule to Clark, thinking they would be a good match. They were.

“We come at it from opposite ends,” Clark said. “Fred's from the production side and I'm coming from the financial industry.”

Together they plan to refine and grow the business. They are researching lean practices and discovering ways that they can include more vertical integration, not just building a part and sending it but making full assemblies for their customers.

“This level of equipment and capability isn't usually found in a little town like Granite Falls,” Schule said.

While most of Cobalt's employees live in the Granite Falls and Lake Stevens area, there are a few that live farther away. These are often the employees who hand-deliver parts to their customers as part of the company's service.

Another person who delivers parts for the company is Debbie Schule.

“She's doing great,” Schule said.

Remembering his own troubles with health insurance, Schule makes sure his employees are fully covered. He also makes sure they are fully trained in-house and is willing to listen to any suggestions they may have for the firm.

“The only thing we're not open minded about is quality,” he said.