rss icon

Sunday, 02 August 2015 22:00

Automotive industry drives Southwest Michigan’s manufacturing growth

Written by 
Rate this item
(1 Vote)
Clemens Food Group. Clemens Food Group. COURTESY PHOTO

Southwest Michigan’s manufacturing sector has clipped along at a moderate but steady growth rate over the last year.

That growth in Kalamazoo and Battle Creek has been buoyed by the expanding automotive industry, a trend that’s played out in the years after the depths of the recession. But while analysts believe the industry is largely on track for more years of record production, local officials including Southwest Michigan First CEO Ron Kitchens believe the region’s dependence on the automotive sector could be cause for concern.

Kitchens would like to see more diversification among manufacturers in Southwest Michigan.

“(The current growth) is good, but it’s a little scary in that when auto declined, we saw a lot of companies focus on diversification of product,” Kitchens said. “Well, there wasn’t the margins and volume that there was in auto and so they’ve kind of dumped their diversification plans and they’ve gone back to the drug that is auto.”

While the automotive industry catalyzed growth for the manufacturing sector in Southwest Michigan, there’s little evidence pointing to a substantial downturn in the near future, said Mark D’Amato, director of regional economic planning services at the W.E. Upjohn Institute for Employment Research. That’s mostly due to the robust outlook for car makers, combined with the lessons in efficiency learned by suppliers in the recession years, he said.

North American automotive production is slated to reach 17.5 million units by 2017 and could top 19 million units by 2022, according to data from IHS Automotive.

“In Southwest Michigan, automotive manufacturing will always be a key part of the growth cycle because they are such high value-add and because they are such a big export industry,” D’Amato said. “It really increases the productivity of the region.”

But automotive is far from the only Southwest Michigan manufacturing sector that’s expanding, D’Amato said. A handful of other industries, including companies in the life sciences, pharmaceutical and medical device manufacturing sectors, have grown in the greater Kalamazoo area. Those are industry groups D’Amato believes will become “significant drivers” for the area in the coming years.

Overall, manufacturing employment in Kalamazoo grew to 20,720 in the first quarter of 2015, a 2.3-percent increase from the first quarter of 2014, according to data from the Upjohn Institute. In Battle Creek, manufacturing employment stood at 11,500, up nearly 4 percent from the same period a year ago.

Kitchens said creating manufacturing diversification in the region will come by developing a labor pool of workers with technical skills that can be exercised in various industries. To do that, Southwest Michigan First has advanced its “middle-college” initiative, which provides an additional year of training after high school that results in an associate’s degree in a technical skill that’s not particular to the automotive industry.

FOOD PROCESSING SLUMP?

In comparison to the rapidly growing automotive sector, the food processing industry has stagnated in Southwest Michigan over the last year, D’Amato said. In particular, Battle Creek-based Kellogg Co.’s decision to relocate 300 to 600 employees to its new business services center in Grand Rapids has D’Amato concerned about the strength of that industry going forward.

“Food processing really took a big hit over the past year,” D’Amato said. “It’s the story of one industry growing (automotive) and one kind of wilting (food processing).”

While Kellogg (NYSE: K) may be on pause for the moment, other food processors are starting to take a renewed look at the region, Kitchens said. He pointed to Clemens Food Group’s new pork processing facility in Coldwater as an example of a food processor that “brought that industry back in our state.”

For his part, Kitchens plans to continue to court food processing companies to Southwest Michigan, particularly those in western states that are experiencing persistent water shortages.

“We haven’t had great results, but we continue to try and continue making inroads,” he said.  

Staff Writer Nick Manes contributed to this report.


Sidebar: Notable Manufacturing Projects

  • Clemens Food Group: In December 2014, the Pennsylvania-based food processor announced plans to open a pork processing facility in Coldwater Township in nearby Branch County. Clemens aims to create 810 jobs and invest $255 million in the new 550,000-square-foot facility. The company broke ground on the project on July 23 and hopes to be operational by late 2017.
    Why it matters: Clemens’ decision to open a production facility in Southwest Michigan underscores the region’s strong track record in the food processing industry and could bolster the industry’s performance in the area, Kitchens said.
  • FAiST Light Metals: After establishing its North American headquarters at the Business Technology and Research Park in Kalamazoo in May, Italy-based FAiST Light Metals is in the process of hiring engineering and sales talent from the pool of Western Michigan University graduates. The manufacturer of aluminum die-casting, precision machining and plating for the automotive and telecommunications industries established its office in Kalamazoo to be close to its largest customer, Eaton Corp. of Galesburg, as well as to provide engineering services to customers in eastern Michigan.
    Why it matters: Attracting international manufacturers is an important part of diversifying the Southwest Michigan economy, and FAiST’s entry not only supports other local companies but also furthers the automotive supply chain in the region.
  • Forest River Inc.: In February, the Indiana-based Forest River Inc., a manufacturer of recreational vehicles, pontoon boats, cargo trailers and buses, announced plans to build a new manufacturing facility in White Pigeon in nearby St. Joseph County. The company, which is owned by Berkshire Hathaway, has invested $7 million in the project and expects to create nearly 400 jobs with the new facility. The project broke ground in mid-May and is slated to open by October of this year.
    Why it matters: Beyond the significant number of jobs the project could create, Forest River also aids in diversifying the region’s manufacturing base away from its reliance on the automotive industry.
  • Summit Polymers Inc.: Portage-based Summit Polymers Inc., a Tier-1 automotive supplier, planned a series of expansions at its manufacturing facilities in Portage, Vicksburg and Sturgis for a total investment of $7.3 million. The manufacturer of interior trim, consoles and other decorative interior products expects to create nearly 200 jobs with the expansion. Summit chose Michigan for its expansion over other sites in Kentucky, Ohio and Missouri.
    Why it matters: Large Tier-1 supplier growth is indicative of the current strength of, and robust future projections for the automotive industry. Summit’s expansion in Michigan versus competing sites may also represent the importance of incentives in retaining business in the state.
  • Mann+Hummel USA: Mann+Hummel USA, a German Tier-1 manufacturer of powertrain components for the automotive industry, finished its $70.5 million, 220,000-square-foot expansion project in late 2014. The company added space in the now defunct Mueller Plastics building adjacent to its facility. Mann+Hummel also expects to augment its initial investment with an additional $17 million in building improvements and equipment, and it projects to hire an addition 70 workers through 2017.
    Why it matters: Mann+Hummel’s decision to expand came at the forefront of the wave of increased global automotive manufacturing activity and was, in part, a result of the globalization of automotive platforms, according to industry experts interviewed in a previous MiBiz story. 
Read 4468 times Last modified on Sunday, 09 August 2015 09:38
John Wiegand

Staff writer

jwiegand@mibiz.com

Breaking News

December 2017
S M T W T F S
26 27 28 29 30 1 2
3 4 5 6 7 8 9
10 11 12 13 14 15 16
17 18 19 20 21 22 23
24 25 26 27 28 29 30
31 1 2 3 4 5 6

Follow MiBiz