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CHICAGO – The Midwest may have just 13 percent of the country’s population, but we still produces more than a third of the nation’s cars, steel and the lion’s share of heavy machinery. And, the rise in manufacturing meant good news for the Midwest economy last year. Here, a perspective on why things went so well for manufacturers last year – and what challenges lie ahead.
Just before you get to the factory floor of Chicago White Metal Casting, there’s a grainy, mural-sized picture of what the floor used to look like in the 1930s, when the business started by CEO Eric Treiber’s grandfather.
Back then, it was on the second floor of Chicago’s Fulton Street Fish Market. Today, the family-owned company operates further north of the city, just west of O’Hare International Airport. Chicago White Metal makes aluminum, zinc and magnesium die casting for a variety of industries, from automotive sector to health care. Die casting involves creating small metal parts – in this case, everything from the rearview mirror mount for cars to components for inside a MRI machine or a tractor.
Treiber said he’s happy that 2011 was brought much more stability for the company. With revenue growth of about four percent, it’s an improvement over 2010.
As measured by the Chicago Fed, Midwest manufacturing output has had 28 months of growth – at an annualized rate of six percent. That’s much better than the rest of the economy.
But there are a few caveats about these good manufacturing numbers. Strauss likes to use a tennis ball as an analogy, helping to explain that the growth numbers look so good because things were so bad before. In other words, the ball bounced pretty low before it went back up.
Now, Strauss said we’re seeing “great demand” at manufacturers, especially for machinery made right here in the Midwest – and not just automobiles.
“Whether it’s from Caterpillar, Deere, or Case New Holland, they are doing extremely well, especially for Caterpillar with those heavy mining equipment that they sell,” Strauss said, adding that demand especially from Canada and Russia is very strong.
Heavy mining equipment – some of which weigh more than 1 million pounds – in turn requires a lot of steel. That helps that industry, too, Strauss said.
In all, Strauss says about 60 percent of the manufacturing output lost during the downturn has come back.
So why don’t the job numbers add up?
One out of every four jobs lost during the recession was in manufacturing – that’s 2.3 million jobs. As of last November, we’ve added back just 308,000 of those jobs.
Remember the mantra “produce more with less?”. Many manufacturers practically perfected that during this recession.
Take Chicago White Metal Casting. Trieber says it had to be focused on productivity in order to stay competitive with business that was moving out of the country. By focusing on training workers, improving machine efficiency and updating equipment, he estimates they’ve had a 29 percent productivity increase between 2008 and 2010. And Treiber is actually hiring. But he’s looking for a few people, such as die cast machinists, especially repair men.
And that, in a crux, is the labor market problem right now with manufacturing – the need is for workers who are much more skilled. So why can’t you hire back those 2 million people out of work?
Strauss said it seems that many of those 2 million people who worked in manufacturing lack the skills that employers now want. He’s also quite optimistic about the future of manufacturing this coming year – as long as there are workers.
I’ll be reporting more on the skills gap later. In the meantime, if you were one of those 2 million people who were laid off, what are you doing now? Feel free to weigh in the comments section.
November 1st, 2011
Midwestern manufacturing activity continued to inch up – albeit a fractional amount – in September compared with August, according to data published by the Federal Reserve Bank of Chicago last week. More importantly, when compared with last year, regional manufacturing in September rose 7.2% from a year earlier. National output increased 4.3% in that same period..
Fast forward to January 2013, when our next president will be inaugurated. What’s your best (and worst) case scenario for manufacturing?
That’s the question we posed to the four panelists who will speaking at a manufacturing breakfast in Chicago on Thursday sponsored by Changing Gears/WBEZ and Crains Chicago Business.
Chicago Assembly Plant Manager, Ford Motor Company
“Manufacturing - and the auto industry in particular – has a key role to play in strengthening our economy and creating jobs. In fact, a recent Los Angeles Times article said that [the] ‘carmakers’ rebound is driving jobs in the U.S. The industry that once needed bailing out could be the one to stave off recession.”
“It’s hard to predict the future for the manufacturing sector as a whole, but by following our One Ford business plan, we expect Ford to be in a strong position as we celebrate our next presidential inauguration. Thanks to our recent UAW-Ford national contract agreement, we will be adding 12,000 jobs in our U.S. manufacturing facilities by 2015 and we will be busy investing more than $6 billion in our U.S. plants.”
Executive Vice President, Ozinga Ready Mix Concrete, Inc.
“Inauguration Day 2013 is less than fifteen months from now. On the one hand, a lot can happen in fifteen months on the other, it is here before we know it. So much of what it will look like will depend upon the attitudes that those of us in leadership have between now and then. I am continually impressed by the spirit of the American entrepreneur, perhaps especially in the Midwest. In spite of an incredibly difficult economy, people in business are working harder than ever to adapt to a new reality and respond appropriately for the future.”
“I am confident and even optimistic that the manufacturing sector in the Midwest is headed for better days. But the leadership issue cannot be overstated. Strong leadership is critical at all levels of a business organization, in the public sector and in the not-for-profit world. If individuals, organizations, communities and our government, don’t take the necessary steps of leadership, in fifteen months, it won’t just be the Midwest manufacturers that will be in trouble.”
Marc S. Schulman
President, Eli’s Cheesecake Company
“Hopefully January of 2013 will be warm and the Bears will marching to the Super Bowl. Good Chicago football and good weather really help people buy more Eli’s Cheesecake & Desserts.”
“For our desserts, it is all about consumer confidence and taking the opportunity to celebrate and have a treat—personally, for your family or for your business. Jobs are critical to that celebration. An economy creating jobs is a good one for a company like ours.”
President/CEO, Chicago White Metal Casting, Inc.
“Best Case scenario for Midwestern manufacturing on Inauguration Day 2013? The Senate comes under the control of policy makers who truly understand that manufacturing is the economic engine that drives our country, and the House remains in control of those who at this time are aggressively supporting responsible manufacturing all across America (i.e., leaders such as Mr. Boehner, Mr. Cantor, Mr. McCarthy, and Mr. Roskam). As for the president, it makes no difference to me if it is a man or a woman, a Democrat or a Republican.”
“I only ask that it is a person who had some prior business experience before turning to politics, and that they can grasp the concept of how job creation in the private sector really happens, as well as being able to understand the policies and legislation that need to be enacted in order to foster such growth.”
Worst Case scenario for Midwestern manufacturing on Inauguration Day 2013? “The complete opposite of the above.”
Join Changing Gears, WBEZ and Crain’s Chicago Business on Thursday to hear more from these panelists.