Traverse City Record-Eagle

November 12, 2013

Manufacturing witnessing resurgence

BY BILL O'BRIEN
Traverse City Area Chamber of Commerce

---- — KALKASKA – Kalkaska Screw Products buzzed with activity on a recent weekday afternoon – just like it does in the middle of the night, or in the midst of a long weekend.

Things don’t slow down at KSP these days, as the 28,500 square foot manufacturing plant just north of the village hums along 24/7 as part of a welcome resurgence in the region’s manufacturing sector. After Michigan led the country in manufacturing jobs lost from 2000 – 2010, shedding a staggering 46 percent of the manufacturing workforce, companies like KSP -- that survived the downturn -- are bullish on the future.

“Manufacturing is very strong, specifically manufacturing in the automotive industry,” said Kevin Schlueter, president of the employee-owned plant, which churns out a variety of components for the automotive industry for fuel injectors, air bags, brakes, seat belts and more.

Just a few years ago, the company’s future looked anything but certain. Its workforce shrunk to just 19 employees back in 2009 as KSP struggled through a double blow of major bankruptcies in the auto industry and the overall downturn of the recession.

“Everybody cut back, but we made it through,” Schlueter said.

These days, the company’s workforce has grown to 65 employees, who work in 10-hour shifts around the clock to keep up with the growing workload. Company sales grew an astounding 230 percent since 2010, and by making parts for car makers all over the world, Schlueter said there’s plenty of work to keep his workers busy for the foreseeable future.

“All the economic data we look at -- things look good through 2018,” Schlueter said. “The auto industry, hopefully, has right-sized itself.”

Fortunately for Michigan’s economy the turnaround at KSP, the Traverse City Area Chamber’s 2013 Small Business of the Year, is not an isolated story.

Since the state’s manufacturing sector bottomed out in 2009, the resurgence in the nation’s auto industry is sparking a state-wide revival. Mike Johnston, vice president of governmental affairs for the Michigan Manufacturing Association, said the state added an estimated 88,000 manufacturing jobs from the end of 2009 through March 2013.

“Michigan is leading the nation in manufacturing growth…the recovery has been steep,” Johnston said. “I think that’s staggering for people.”

Despite the significant hemorrhaging of manufacturing jobs in the previous decade, the sector remains an important part of Michigan’s economy. The Institute for Supply Management in August reported that Michigan’s manufacturing output in 2012 totaled $66.2 billion, eighth-highest in the country and representing more than 16 percent of Michigan’s total economic output.

Johnston said the upswing in the auto industry is driving the resurgence.

“The auto industry is investing billions in Michigan – billions,” he said. “The success of the auto industry is great for Michigan.”

But there’s no time for complacency, as many challenges remain. Schlueter said among his obstacles is finding qualified workers with the skills to run the sophisticated machinery used in modern-day manufacturing.

“There’s a lot of people that have left the state, they’re retiring,” he said. “We need to replenish that workforce.”

Schlueter said he wants to draw more young people into the manufacturing sector.

Many still see manufacturing as a low-skill job with visions of a dirty workplace and low wages.

But these days, employees work with sophisticated computerized equipment and receive good wages and benefits.

At an employee-owned shop like KSP, workers also receive shares in the company as part of their compensation.

Schlueter said his company and other local manufacturers are working with institutions like the Traverse Bay Area Intermediate School District, Northwestern Michigan College and Baker College in Cadillac to convince more young people to pursue a career in the sector.

“The challenge is getting kids excited about manufacturing,” he said.

Johnston said there are other possible warning signs ahead. The recent change in the state’s business tax structure including elimination of the Michigan Business Tax has been good for manufacturers. But he wants to see Michigan eliminate its industrial property tax and streamline its regulations on the manufacturing sector.

“Let’s get Michigan more in line with federal regulations and with what other states do,” he said.

Rising energy costs are another concern with pressure mounting in some circles for more regulations on coal-based electricity production. “There’s an all-out assault on coal-based utilities that’s going on,” Johnston said.

Still, the workforce challenges and regulatory/taxation concerns are manageable problems compared to what Schlueter and other manufacturers were staring down just a few years ago.

“I’m very thankful this company made it through 2008 and 2009,” Schlueter said. “A lot of manufacturers didn’t.”

Bill O’Brien is a staff writer and researcher for the Traverse City Area Chamber of Commerce. Contact him at bill@tcchamber.org