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Thursday, 26 January 2012 10:13

Manufacturers ride the rebound

Written by  Rod Kackley
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Manufacturers ride the rebound PHOTO: Joe Boomgaard

WEST MICHIGAN — The manufacturing sector grew in 2011 and there is no reason to believe that 2012 will be any different.

That’s according to Rich Antonini, managing partner of Plante Moran who concentrates his practice on that sector.

“They have seen nice growth, there is a good backlog (of orders), and demand is pent-up,” he told MiBiz. “I can’t imagine this not continuing.”

There is no doubt that innovation is leading the push, but there could be a problem over which manufacturers have little control. The worst-case scenario is it could cripple the sector’s revival.

The issue stems from a lack of qualified talent. While there is plenty of factory capacity, manufacturers may have gotten way too lean when they sliced payrolls during the dark days of the recession.

However, West Michigan’s factories are starting to move forward again. One of the West Michigan manufacturers that has shown consistent growth is Benteler Automotive Corp. Grand Rapids city records show the company has invested $28 million in process improvements, facility upgrades and new equipment since 2000 at its Hall Street SW plant, along with another $27 million in tooling.

In 2010, the company installed a $2.5 million press and furnace for hot stamping defense and automotive products.

Benteler is also planning a $7.6 million expansion to handle more aluminum bumper and other automotive supply chain work at its West 24th Street facility in Holland.

The Benteler story fits right into what Brian Long, director of supply management research for Grand Valley State University’s Seidman College of Business, said late last year. He believes “some of our local auto parts suppliers are doing better than they have done at any time in their history. Of course, that requires more people, more capital equipment, more everything.”

Long noted the second strongest group for November was industrial distributors, many of which appear to be having a good year. He said the office furniture firms appear to be plateauing at the current level.

Antonini said that during the worst years follow the nation’s economic collapse in 2008, most West Michigan manufacturing companies saw sales fall 40 percent. “They are working on taking care of that capacity,” he said. “We are not back to 2006-2008 levels. But they are working on it.”

A lot of manufacturing companies got very lean the last few years, and that could be a problem going forward. Antonini said that factories were able to get more productive and reduce payrolls because of technology investments.

But now there is some fear that a lack of skilled workers will slow growth.

“Part of the problem is the aging of the workforce,” he explained. “There hasn’t been a pipeline to replace workers who are retiring, and that is starting to show.”

The worker pipeline is going to have to include very computer-oriented, technical, highly skilled training to meet the needs of the region’s advanced manufacturers.

Antonini said the federal government could help with grants for green initiatives, advanced battery technology and sustainability. That would help spur manufacturing growth. But for the most part, he said, manufacturers understand the need for innovation and process improvement, and they should be able to do that without much assistance from Washington.

An RR Donnelley study of advanced manufacturers found Michigan-based manufacturing companies have invested more than $1 billion in new research and development projects as the sector pulls out of some of the worst years the state’s economy has ever seen. The January issue of Site Selection magazine lists Michigan as the top state in the country for R&D facility project announcements.

Another West Michigan company that has been growing even during the bad times is RoMan Manufacturing Inc.

President Bob Roth told MiBiz the Grand Rapids-based company is expanding its signature line of water- and air-cooled resistance welding transformers into new industry sectors.

“The fundamentals are the same,” Roth explained. “But the nuances and the applications take a lot of development work. It’s like they say about monkeys and men. ‘The difference between them is only 2 percent, but that is a very important 2 percent.’”

For RoMan, the move is all about taking advantage of opportunity. Roth sees growth potential in moving RoMan into industries in which the company has not been participating. It is also about correcting a problem. Roth said because the company was so closely tied to one product category and one industry, it was too vulnerable to cyclical industry and economic swings.

He is putting RoMan’s money where that opportunity is, as well as toward correcting that problem. The company’s R&D budget is twice as high as usual. Roth pegged it at approximately 7 percent of sales.

“Quite frankly, 2011 was a record year for the company,” he said. “We have been working on this process for these new industries for the past three to four years. In 2011, we started to see the early fruits of that effort.”

However, this story is not at its happy ending: Roth is worried about a lack of engineering talent.

“Hiring an engineer today is a monumental task,” he said. “If you are coming out of school with an engineering degree right now, you can almost write your own ticket.”

Finding talent has been a struggle for RoMan. Roth said they are working “diligently” to upgrade talent from within, “but you get to a capacity problem. There are only so many hours in the day and so many hours in the week. It just gets to the point where you need more people. It is a challenge.”

Here’s the big question. Is this lack of engineering talent going to force U.S. manufacturers to send more R&D overseas to find the talent it needs?

“My personal belief is that when it comes to the overseas issue, we have the tailwinds with us,” answered Roth. “I think you are going to see a lot more work coming back to the U.S. Productivity has never been better. But we have to keep developing the talent.”

Read 2066 times Last modified on Monday, 13 August 2012 12:39

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