A steely resolve: Optimism amid challenges for Northland manufacturing
Editor’s note: This is the first of a three-part series examining the state of manufacturing in the Northland.
For Northland manufacturers, it’s change or die.
“What you’re doing today is different than what you’ll be doing in five, 10 or even one year from now,” said Jeremy Lehman, the machine shop production manager at steel fabricator TriTec in Virginia. “The whole business climate is different than it was 20 years ago.”
In an industry where predictable outcomes are essential, unpredictability has come to be a defining characteristic of American manufacturing. From shifting regulations and technological advancements to the local effects of a global economy, factory work will never be the same.
That doesn’t mean it can’t be better than it was.
“There’s definitely a light at the end of the tunnel,” said Lehman, who also is president of the Arrowhead Manufacturers & Fabricators Association. “I feel this will be an uphill climb, but I’m very optimistic.”
Nationally there has been growth in the industry since the recession, although job gains have recently tapered off in Northeastern Minnesota, and businesses are still closing due to the recent mining downturn.
Some employers point to the global marketplace, trade deals, regulations and taxes — such as the impending franchise fee increase Duluth is imposing on Minnesota Power, which is slated to be passed on to residential and commercial customers — as choking out manufacturing just as it’s coming up for air.
But even where there is room to grow, there is a shortage of appropriately skilled workers due to a generation being pushed into four-year degrees or a misconception of the industry.
“We’ve got to show
it’s not the dirty, back-breaking work it was 100 years ago,” Lehman said. “It’s clean, it’s modern, and it’s a great career.”
And while robots are far from replacing every job, those human roles that remain have been changed forever.
“What has really changed is the focus on employees and skillsets,” said Brian Hanson, president of local business recruiter APEX. “It’s a lot more about brains and a lot less about back.”
Same job, different work
When Jerry Lehman started his machine shop in 1974, everything was done by hand. Heck, just last week he was hand-machining a washer at TriTec, which bought his company two years ago.
“There’s still such a demand for manual work that it won’t ever die out,” said the 62-year-old.
When Jeremy Lehman joined his dad’s company in 2001, he brought computer skills that were just starting to be necessary in the industry. Now the two say they learn from each other to bridge the gap between the manufacturing of the past and future.
“We’re going to have to evolve with the times and with the industry,” said the younger Lehman, 34. “You have to know the computer end of it as well as the machining end of it.”
Advanced machines once reserved for the Boeings and GEs of the world now find their way to the shop floors of smaller outfits such as TriTec as costs come down and firms find they need to compete at that higher level.
At 71-year-old Moline Machinery in West Duluth, both the industrial baking equipment it produces and the machines that produce it are high-tech.
“We’re a very technically advanced company,” president Gary Moline said. “We’ve had to retrain people, and some have adapted well and grown on the job; as we’ve had new hires through attrition we’ve looked for skilled workers locally.”
At nearby Verso, the West Duluth papermaker has increasingly incorporated technology in more of its production process, from automated camera systems to machine-handled rolls. That doesn’t mean they’ve necessarily cut the workforce in favor of robots.
“There has been attrition over the years, but that’s more due to changes in the (paper) industry itself,” said local Verso spokesman Guy Priley. “The same amount of people are doing the work — now they’re doing different work.”
Beyond the challenges and opportunities presented by automation, Verso, Moline and TriTec all are subject to the whims of global supply and demand, be it for paper, bakery machinery or steel.
“There’s always going to be a demand for paper, though it might be less than it used to be,” Priley said. “This mill is one of the top five mills in the world for the type of paper we make.”
Competitive advantage is key to that, and Verso is about to take a hit in that department. It was last month when the Duluth City Council approved the 2 percent franchise fee increase Minnesota Power said it will pass on to its customers.
“Electricity costs already account for around 15 percent of the mill’s total production costs,” Priley said, adding that the increased franchise fee will raise costs up to $600,000 a year. “Any significant increase in costs weakens our competitive position.”
It also could hurt the community’s ability to attract business in the future.
“We’ve always promoted that as a draw for our community — we’ve had the lowest power costs,” said Dan Larson, president of aerospace parts manufacturer Hydrosolutions of Duluth.
Moline also has qualms with the franchise fee and says it adds to an unfriendly business climate in Minnesota, one that can drive manufacturers away.
“It’s mainly the income tax structure; it’s the cost of doing business compared to our competitors,” Moline said. “I would never ever expand here based on that.”
For TriTec, which grew from two to 50 employees since 1996 even as the nation’s manufacturers were hemorrhaging jobs, it’s the mining downturn caused by an oversupply of Chinese steel that has cut revenue in half since 2015.
“We just want to be on an equal playing field on the world market,” said company president Mitch Robertson. “Regulations are smothering, and it’s getting tougher and tougher. We should be doing well.”
If wages rise and workers assert their rights in China, he said, that could help level the playing field for U.S. manufacturers. Until then the local industry remains an employers’ market, keeping wages and job openings down.
“Manufacturing jobs are so important to young people today,” Robertson said. “I feel for younger people who don’t want to be an accountant or a businessman.”
With the deck seemingly stacked against the industry that built the middle class, competitors are sitting at the same table to try to find out what they can do to lift each other up.
“If manufacturing is strong, there’s enough work for everyone,” said Jeremy Lehman, whose Arrowhead Manufacturers & Fabricators Association has been meeting since 1997. “A half-dozen companies thought instead of cut-throat competition, let’s come together and embrace manufacturing in the area.”
That has meant outreach and grants for students and schools to prepare a workforce that, despite all the disruption, is still in need of workers.
“Lake Superior College 10 years ago was close to shutting down the machining program — now there’s a waiting list,” Lehman said. “There’s enough demand up here we need to keep it going.”
Aviation is especially in need of a workforce pipeline as Cirrus, AAR Corp., Ikonics and many of the supporting industries in the region continue to grow.
Larson, whose company supplies the aerospace industry, heads up the Northern Aero Alliance, a cluster of businesses also working to solve shared problems.
“We’re struggling to develop (the workforce), so we’re trying to grow our own workforce internally,” he said. “We’re just trying to grab kids at a younger, unskilled level rather than waiting.”
Recruitment and training is just a bigger part of the game now.
“You do have to put yourself out there, and people here have worked hard to go right into the schools and be visible,” said Jim Petruga, sales manager of Northern Engineering, a machine shop in Superior. “Machinists are highly sought-after people.”
Manufacturers also have to compete for workers against the region’s larger employers in health care, education and the service industry.
Yet for all its changes, manufacturing is holding on to its greatest draw, something those leading industries often can’t provide: the promise of a single income providing for a family.
“We’re able to live comfortably with my wife staying home raising our son,” Lehman said. “I feel very fortunate for that.”