In what has become the go-to rags-to-riches Silicon Valley story, one of Morgan Hill’s fastest growing companies started in a garage. From those humble beginnings in San Jose, Golden State Assembly has grown to employ more than 500 people. The company this year expects to exceed $250 million in sales, and they plan to break ground on an expansion of their property on Butterfield Boulevard within months.
Golden State Assembly Owners Cesar and Yesenia Madrueno are the protagonist of this rags-to-riches story.
“There are two things I am firm on: lean manufacturing and automation,” Cesar Madrueno said. “With those things implemented efficiently, we can boost our efficiency from 90 to 95 percent. Even as expenses go up, we can manufacture products here and still sell them cheaper than in any other state.”
Golden State Assembly specializes in the manufacturing and assembly of custom-made electrical components for high-tech companies like Tesla Motors. Founded in March 2007, Golden State Assembly’s garage operation got their first big order, $26,000 in electric cables for SNK Electronics, who remains one of their most steady customers.
“I saw an opportunity to improve the process,” Madrueno said. “I spoke with my wife, and she said if you can do it better, why not start your own business.”
Expansion and relocation have been a constant theme in the history of Golden State Assembly. They have moved operations eight times and expanded three times, in each case to outgrow the space they were in. They now have over 250,000 square feet of manufacturing space in Fremont, Reno and Morgan Hill. Now, less than two years after coming to Morgan Hill, Madrueno bought the parcel of land next to his facility at 18220 Butterfield Boulevard for $1.6 million and plans to build enough space for 60 more employees.
“I was told there would be about $1 million in fees when we get started,” Madrueno said. “I was like, whoa, I did not know that.”
For Bay Area business owners like Madrueno, the cost of doing business is hard to manage, even as the economy continues to grow. He is challenged by high taxes, building costs, labor costs—along with everything else that drives some to abandon the area for other, cheaper, parts of the world. For GSA, the ability to expand rests on efficiency, diversification and the proximity to their clients.
“I think the biggest problem in California, aside from taxes, is that it’s very expensive, and we need to pay our people enough and still sell our product cheaply,” Madrueno said. “That is part of our philosophy. Whether the economy goes up or down, we want to pay our people more every year, and we want to be 20 to 30 percent above our competitors. We do that through efficiency.”
Madrueno considered a 150,000 to 250,000-square-foot facility in the Central Valley. But in Morgan Hill, he found the right combination of what he needed when he explored his last expansion.
“I passed Morgan Hill and Gilroy all the time on my way to Los Angeles, and I didn’t realize how close they were to San Jose,” Madrueno said. “It’s more expensive here than the Central Valley, but we can serve our clients better here. Our clients can get here in a few moments rather than take half a day to get to the Central Valley.”
Golden State Assembly does not have a sales team; all of their business comes from referrals. One of their biggest clients, Tesla, came via referral. Their sales strategy appears to work well. As of today, GSA has approximately $65 million in sales, and they expect to top $250 million by the end of the year.
“The economic indicators are good, but we can’t let ourselves be distracted, we need to focus on the basics,” Madrueno said. “We need to continue to diversify and improve.”
Hard work pays off
Cesar and Yesenia met almost 20 years ago while Cesar—a native of Jalisco, Mexico—was studying English in the Bay Area. The couple, who have a 5-year-old son, recently moved to the outskirts of Gilroy near Christopher High School. They enjoy the peace and natural beauty of their new home.
“I wanted to know what it felt like to make as much money as a doctor,” said Madrueno, who at one point worked seven different jobs. “I knew that would be tough. I worked at several restaurants during the day, a manufacturing company, and technology company at nights. At one point I was working 24 hours a day. I did that for 10 years.”
Aside from his drive to succeed, Madrueno worked with his family in mind, and he used this ultimate dream for motivation.
“It wasn’t about the money; it was about family, and I wanted to give my child an opportunity to go to school and learn what they want,” Madrueno said. “It was hard though, and I wasn’t sure I was going to make it to 50-years-old. But it’s all about family, and that’s what I tell my employees.”
Madrueno believes that in the end, it’s the customer that pays most for inefficiency from higher costs to later delivery times. By incorporating automation, GSA can manufacture parts in house, for one-third of what they were paying from a supplier and they can guarantee the quality of the work.
“Efficiency applies everywhere; it’s a domino effect,” Madrueno said. “If the front office doesn’t do its job, that will affect manufacturing, which will impact delivery.”
In Morgan Hill, Golden State Assembly has about 50 employees, including engineers, accountants and human resources and manufacturing. Manufacturing workers, who start earning $13 an hour, make up 40 percent of the workforce.
“When you use automation, that does not mean you’re going to get rid of jobs. People and robots can work side by side,” Madrueno said.
