Ryan Bentley (231)439-9342 ¿ email@example.com
10:59 AM EST, December 26, 2012
For Northwest Michigan's manufacturing sector, the 21st century's first decade was one that often delivered gloomy circumstances.
Several of the area's factories announced closings through those years, and the larger U.S. economy's 2008-09 recession magnified challenges for some companies.
But in the years since the recession, job growth has once again entered the local sector's product mix, based on annual Industry Census of Employment & Wages data reported by the Michigan Department of Technology, Management and Budget.
As observers of the local economy note, manufacturing's climb back hasn't always been easy, and the pace of rebound has been modest. But overall, they see positives for the field.
"I think we are done seeing major plant closings as we did a few years ago," said Andy Hayes, president of regional economic development organization Northern Lakes Economic Alliance. "The good news is that many companies have made it through the past few tough years. The bad news is that many of them have used up whatever 'war chest' they had. This makes it difficult to respond to some opportunities.
"On the flip side though, there are also companies that are doing well and have had good years and are in a strong position ... Just hesitant due to the economy."
Northwest Michigan Council of Governments regional planning and community development director Matt McCauley -- whose organization compiles a variety of statistics on the region's economy -- notes that employment levels aren't the only factor to consider in gauging manufacturing's health. Productivity gains, for example, sometimes allow companies to remain profitable even if employment levels are flat or shrinking. Even so, he sees the job growth trend as a positive sign for the sector.
"Manufacturing is not dead. It's not dying," McCauley said. "Many Northern Michigan manufacturers are doing well, and those that are doing well have found a way to diversify to fit a niche or niches."
Finding an advantage
McCauley pointed to Precision Edge -- a Sault Ste. Marie-based manufacturer of surgical tools that opened a second production location earlier this year in Boyne City -- as one example of a company that's been able to fill a niche with specialty products.
"There's global demand for that product," McCauley said.
Operators of ACAT Global, a manufacturer of catalytic converter components that's been setting up operations in Charlevoix this year, believe their products' unique features offer growth potential as well.
The company -- now occupying part of the former Hoskins Manufacturing building along M-66 -- is building substrates to be used in catalytic converters. These substrates help to absorb some of the substances in engine exhaust.
"We are the new guy on the block," said Randy Waffle, the company's director of manufacturing engineering. "We have innovative, technologically advanced product that we're introducing."
ACAT Global believes its product design offers advantages over competitors' in terms of exhaust gas conversion, and that the limited use of precious metals in the products will help make them cost-effective. With the increased emphasis on automotive fuel economy seen in the past few years, the company believes customers also may embrace the substrates based on their relatively light weight.
Ramping up production in Charlevoix has taken a bit longer than ACAT officials expected -- based on the complexities of building some production equipment in-house -- but Waffle expects the company can begin shipping out products around the beginning of 2013.
The company believes the automotive replacement parts market will be a key part of its customer base to start, but it also aims to build parts for converters used in motorcycles, small engines and industrial devices. The company currently employs 10 people locally, and aims to soon hire about three more.
"Probably by the end of (2013), I could potentially see us at 20 people," Waffle said.
Several of the local manufacturers that faced challenges or closures during the 2000s had significant ties to the automotive sector. Detroit-based automakers faced financial struggles prior to restructuring efforts late in that decade, competition from foreign parts makers increased and domestic and import auto brands alike saw sales slide during the recession. Some auto-related companies sought to shift production from outlying facilities to those closer to the industry's southeast Michigan hub.
Up North Industries, Continental Structural Plastics and The McLaughlin Co. in Petoskey, Northern Diecast in Harbor Springs and Charlevoix Manufacturing Co. were examples of automotive-focused companies that closed local facilities in the mid- to late 2000s.
The Northwest Michigan Council of Governments' McCauley noted that some other local manufacturers have found it helpful to diversify beyond an automotive customer base in recent years.
"Those who survived the recession and those who are now thriving are those who diversified their market or their product base beyond just the auto industry," he said.
Petoskey Plastics, a maker of plastic bags and films, is one locally based company that has seen reason to diversify. A few years ago, automotive products -- such as plastic slipcovers that protect vehicle seats during assembly or repair -- made up roughly half of the company's business, and sales of those products suffered when auto production was cut back sharply during the recession.
In the past few years, the company has sought expanded business opportunities for lines such as consumer bags and recycled products.
"We're much, much more diversified," said company president Paul Keiswetter.
With auto sales having regained part of the volume lost during the recession, fortunes have improved for Petoskey Plastics' automotive offerings -- which Keiswetter said remain important to the company, currently accounting for about 20 percent of its business.
Petoskey Plastics' staffing levels have been on the rebound at its Petoskey locations and company-wide since the recession, and numerous capital investments have been made recently.
During 2010, employment at the company's Petoskey manufacturing and headquarters sites averaged about 191 people. As of mid-December, it stood at 203.
"We're going to have a record year (for sales) this year, which is very exciting," Keiswetter said.
The company also is refocusing product lines among its facilities. Since they're closer to major markets, Keiswetter expects plants in Indiana -- where the company has a focus on recycled products and is in the process of expanding employment by about 30 workers -- and Tennessee will concentrate more on commodity products. Since the Petoskey plant faces the costs associated with longer transportation distances, Keiswetter said the company aims to use it more for product lines with higher profit margins.
"Petoskey is expected to be more value added," Keiswetter said. "We'll start to move some more into medical and some food packaging."
McCauley said he's seeing officials in Northern Michigan communities paying more attention to manufacturers' logistical needs as part of their transportation planning.
"Our region, our communities are starting to realize that they play a larger role in that transportation planning isn't just about going to the beach or spending time with friends and family," he said.
While the field's job-growth prospects may be concentrated more among smaller niche operations than large-scale employers, McCauley sees encouraging signs for the sector nationwide.
"Long-term, I think you are going to see manufacturers come back to the states," he said.
While it can be difficult for the United States to compete with some overseas labor markets based on cost, McCauley expects the skill level of the U.S. workforce may offer advantages looking ahead.
"As products become more technical in nature and quality is required, manufacturers are going to demand a higher skill level in their workforce," he said.
While business categories such as retail, lodging and tourism are also important to the Northern Michigan economy, McCauley noted that the manufacturing sector's relatively high wages -- and the related multiplier effect for the local economy -- have some unique significance.
"We're talking about head-of-household wages, middle-class wages," he said. "Manufacturing still provides that at a level that (virtually no other industry) does."
And while manufacturing in general has faced a stigma from an environmental standpoint in recent decades, McCauley noted that traditional smokestack images don't fit many of the operators in the industry.
"Some of our most successful manufacturers in the region, you might drive by and not even realize that a manufacturer is there," he said.
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