Remanufacturing America

One hundred and forty miles east of Seattle, in a part of Washington State identified with apple orchards and aluminum smelting, an economic transformation is taking place. Fiber-optic lines are going underground, and a new technology center is going up in Chelan County, a 60,000-person community in the rain shadow of the protective Cascade Mountains. The future of the Alcoa Inc. smelter near Wenatchee remains in doubt. But Mark Urdahl, executive director for the Port of Chelan County, a local economic development agency, leaves no doubt that manufacturing will be part of the area's economic future. Washington State's Chelan and next-door Douglas counties are not unique. As once-dominant manufacturing firms become less a factor or even fade from the scene in communities from the East Coast to the West and from North to South, new manufacturers are setting up shop. Call it the remanufacturing of America. To be sure, the 2001 recession slowed things, almost stopping the recruiting of new companies in several places and, in others, putting a damper on expansion. During 2001, the U.S. economy was shedding manufacturing jobs at the rate of 109,000 per month, figures the Washington, D.C.-based National Association of Manufacturers. Nevertheless, the reindustrialization process of the past several years continues, emphasize Jim Donaldson, vice president for Michigan economic development at the Michigan Economic Development Corp. (MEDC) in Lansing, and other economic-development experts. Much of the evidence is anecdotal. But there are some solid statistics as well. For example, in 2001, Pennsylvania's Lehigh Valley had slightly more than 53,000 manufacturing jobs, some 21.1% of the region's economy and the largest number of manufacturing jobs since 1996. Meanwhile, manufacturing jobs in Phoenix totaled 143,600 this past July, slightly better than the 142,300 it could claim in 1994. But less-publicized changes are taking place as well -- in areas such as Washington's Chelan and Douglas counties. There's still an aluminum industry in the U.S. Northwest. But it's not what it was as recently as two years ago. The dynamics of global aluminum supply and demand and domestic energy consumption now are dramatically different. "I don't want to say [the smelter] is going to close, but we would really be ostriches with our heads in the sand if we weren't concerned and weren't trying to do anything about it," stresses Port of Chelan's Urdahl. To try to assure economic stability and diversity, the area is keen on thinking small -- in terms of ten 50-employee manufacturers or fifty 10-employee companies rather than a single 500-person manufacturer. Bainbridge Manufacturing Corp., which employs 43 people to produce plastic hardware for cabinets, closets and furniture, moved its entire operations from a Seattle suburb to Waterville in Douglas County in July 2001. Through August of this year, sales were up 16%; the company is paying 50% less for 40,000 square feet of space than it did for 18,000 square feet before; and it's saving 70% on electricity, says David Soderstorm, Bainbridge's vice president and general manager. The savings have been diverted into marketing, "basically anything you can think of to generate sales," he states. "If we wouldn't have moved, we would have seriously had to rethink what we want to do as an injection-molding company," he says. "We wouldn't have been able to stay in the low-cost plastic hardware business." In Grand Rapids and Grand Haven, Mich., office furniture, plastics and auto-parts producers have replaced a power tool maker, a piano maker and much of wood-furniture manufacturing. A life sciences industry is emerging in Grand Rapids -- along with an IT industry that includes such companies as Provia Software Inc., a producer of supply-chain software. What's more, many of the 2,400 manufacturers in the four-county region around Grand Rapids, even during the recent manufacturing recession, have employed lean-manufacturing practices "to really become worldwide competitors," stresses Birgit M. Klohs, president of The Right Place, which promotes Grand Rapids' economic development. The diversification of the manufacturing economies in Grand Rapids, Grand Haven and other western Michigan communities has been led by a strong entrepreneurial spirit, says MEDC's Donaldson. Amway Corp., a unit of Alticor Inc. with manufacturing, distribution, and its corporate headquarters within the Grand Rapids metropolitan area, is probably the most storied example. But these days, such companies as Lacks Enterprises Inc., a Grand Rapids maker of automotive plastics, is among the newer firms keeping the entrepreneurial spirit alive. In the area around Newport News, Va., computer-hardware and software producers are among the high-tech industries that now complement the shipbuilding that 20 years ago totally dominated the Tidewater community. The area's economic-development strategy is to attract high-tech, private-sector jobs by leveraging the resources of the National Aeronautics & Space Administration's Langley Research Center in Hampton, Va., the Thomas Jefferson National Accelerator Facility, the Virginia Advanced Shipbuilding & Carrier Integration Center at Northrop Grumman Newport News Shipbuilding, and the Virginia Institute of Marine Science, explains Richard D. Weigel, president and CEO of the Peninsula Alliance for Economic Development. "We're specifically targeting companies that would do well to be located just outside the gates, so to speak, of these various sources of technology development," says Weigel. This year Newport News landed the East Coast software facility of Symantec Corp., a Cupertino, Calif.-based company perhaps best known for its Norton anti-virus software package. Japan's Canon Inc. also is on board -- producing laser printers and toner cartridges. Gateway Inc. is manufacturing in Newport News as is Siemens VDO Automotive, a unit of Germany's Siemens AG. Meanwhile, in the Lehigh Valley of east-central Pennsylvania, where there have been no production jobs at once-dominant Bethlehem Steel Corp. since 1998, industrial parks are playing a major role in economic redevelopment. For example, nearly 400 companies in the six industrial parks put together by Lehigh Valley Industrial Parks Inc. encompass more than 1,500 acres, account for 16,000 jobs and help generate more than $450 million in payroll. Britech Inc. is one of the companies. A contract manufacturer of electrical and electronic sub-assemblies, it added 50,000 square feet of space this past March, retaining 40 jobs in the Lehigh Valley and adding 40 more. Outside the industrial parks, Guinness UDV North America Inc., a unit of Diageo PLC, is now producing Smirnoff Ice malt beverage in the former Pabst Brewing Plant in Fogelsville, and Newstech PA LP, an affiliate of Newstech Recycling Partnership, is turning waste paper into papermaking wood pulp at a former pulp mill in Northampton County. Although the Lehigh Valley has yet to gain back the number of jobs lost as steel declined, Megan J. Distler, the not exactly disinterested director of marketing for the Lehigh Valley Economic Development Corp., credits a "very knowledgeable" and "very flexible" workforce with much of the area's success so far in re-industrializing. "[It's] a great work ethic that you are getting from folks who may have previously -- or their moms and dads may have previously -- worked for Bethlehem Steel. They still have that all-American [attitude] that you need to give 100% to your employer," she says. In the past four years, as General Electric Co.'s appliance business, the Otis Elevator division of United Technologies Corp. and other major manufacturers have downsized their production facilities in south-central Indiana's Monroe County, manufacturing employment has plummeted to less than 6,000 from 10,000. However, Bloomington, the county's largest city and home to Indiana University, is having success growing a pharmaceuticals cluster with such companies as Baxter International Inc. For example, Baxter, which develops and manufactures medication delivery devices, bought Bloomington's Cook Imaging a year ago and has increased the number of employees to 478 from 308, a 55% gain. For decades following World War II, the sun shown on Phoenix's aerospace industry -- particularly on the production of aircraft engines. Over the years, measuring instruments and, more recently, semiconductors have been added to the community's manufacturing mix. Now the mix is changing again, a result of globalization, consolidation, cost pressures and labor issues. Consequently, says Rick Weddle, president and CEO of the Greater Phoenix Economic Council, his city is in a renewal mode. For example, while betting that silicon-based technologies may have another 10 to 20 years, Phoenix -- in partnership with some universities in Arizona, the governor's office and a few other communities -- has successfully attracted the Translational Genomics Research Institute and expects to commercialize its work. "I think you need to look at regional economies much as you would look at your own investment portfolio," says Weddle. "[You have] some [companies] that are mature and just paying dividends and some that are going to be growth stocks. And you need to be diversified so that you have a sustainability over time." Emphasizes Don Moss, president of the Rockingham, N.C. County Partnership for Economic & Tourism Development, "You don't change a local economy just overnight." However, like many others across the U.S, his community on the Virginia border, which has lost tobacco and textile jobs since 1996, is working hard to make manufacturing change happen.