CEO: Tough times at MSE

MSE Technology Applications – the research and development engineering firm based in Butte's Industrial Park – has had a tough couple of years due to the national recession, and has cut its staff by more than half, according to its president and CEO Jeff Ruffner.

"My one regret is that we did not start making changes until last March," he said during a recent wide-ranging interview with The Montana Standard, indicating that cost-cutting should have started sooner.

The sprawling engineering service center now employs about 80 people – the majority engineers. It is considered one of Butte's major employers and has an annual payroll of about $5 million. It let go 10 workers this month and furloughed nine others in September. If the work returns, the company will call back the employees, he said.

Business began to slip in 2009, forcing cuts of about 20 percent of the workforce. Employment has fallen from a high of 175 in 2008.

"People need to understand that we need to continuously adjust our workload," Ruffner said. "Last March, we started seeing delays in projects that kept being put out one month, then two, then three. Things got very slow for our type of business across the country.

"In hindsight, if my crystal ball had been good enough, I'd have taken some action in March. But I kept hearing that projects would pick up," said Ruffner, who has been CEO for the last 4½ years.

PAY FREEZES, CUTS

The firm has experienced pay freezes and pay cuts as well. All management personnel at one point took a six-month pay cut.

"We feel an obligation to the company and the community to make it successful," Ruffner said of the moves.

MSE, located south of town, was formed in the 1970s to test and engineer magneto-hydrodynamics technology, a form of energy production from burning coal at high temperatures. In 1989, the company largely abandoned that endeavor and branched out as a testing facility, taking on work from a variety of government agencies and private corporations. Besides Butte, it has offices in Oak Ridge, Tenn., Pasco, Wash., and Morgantown W.Va.

"We have to go where the work is, where we can offer our services," Ruffner said. "Not all of the work can be found in Butte."

Last year, Ruffner said 55 percent of the company's business came from government earmarks. He said MSE was working hard to diversify its revenue base and hoped to post profits this year similar to its all-time high in 2008.

"Times are still challenging because things are still slipping to the right," he said. "It's consistent with our business nationally."

However, MSE will post profits this year, he said.

The current political climate in Washington against earmarks has necessitated a "much more and dramatic change" in the plant's goals.

"Our goal always has been to diversify, take advantage of government contracts, but as a private entity," he said.

Earmarks, or projects handed out by the federal government, are now being looked down upon as political pork barrel.

MSE was at one time operating 100 percent on earmarks. Now, it's down to 30 percent.

"And, we are trying to get leaner in a down economy, which makes change much more difficult," Ruffner said.

STRONG MODEL

MSE's business model is still strong, as evidenced by the recent $5.6 million USDA loan guarantee the firm received at the end of October. The loan came in the nick of time thanks to U.S. Sen. Jon Tester, D-Mont., and his staff. Granite Mountain Bank took the lead on the loan and Glacier Bank in Butte has also helped.

"I can't thank Tester's staff enough," Ruffner said, "and the Butte Local Development Corp.'s director Jim Smitham and loan officer Andy Zdinak."

In September, the BLDC loaned MSE $600,000 for operations while it got its commercial loan in place. That money has been paid back with interest.

New government contracts should be approved in January, Ruffner said.

The loan from Granite Mountain Bank will be paid off from MSE's ongoing operations over the next 10 years. It is expected that the government contract to pay off the USDA loan will be approved in January, he said.