Delkor technician Bryce Yokom used a water bottle as a test subject while fine tuning Delkor's Vision System which will automatically divert any products that don't meet manufacturer's standards.

Glen Stubbe, Star Tribune

Delkor Systems CEO Dale Anderson showed the company's Spot-Pak, a patented packing process that uses much less packaging.

Glen Stubbe, Star Tribune

Some jobs gone for good

  • Article by: LIZ FEDOR
  • Star Tribune
  • January 20, 2010 - 7:54 AM
As the recession spread across the globe, Minnesota manu- facturers large and small couldn't cut jobs fast enough. All told, manufacturers cut 36,500 jobs in Minnesota over the past year. That represents 11 percent of the state's manufacturing workforce. As the economy begins to recover, what will it take to regain those jobs, or are many gone forever?

Many experts believe at least some of those jobs are gone for good. The economic recovery to date has been more gradual than robust, so many employers are taking a cautious approach and are still fixated on controlling their costs.

Hiring is scarce, a fact that economists note agrees with recent history. After both of the most recent recessions, in 2001 and 1991-92, hiring remained anemic even as the gross domestic product was expanding.

But even long term, when the Great Recession has finally faded into the pages of history, some experts predict more tough times for American workers.

"Most of these job losses in manufacturing are never coming back," said Ernie Goss, a Creighton University economist who conducts a monthly survey of manufacturing companies in the nation's midsection. "That's very dispiriting for some people to hear."

Goss said the research that he's done shows that many companies are focused on raising productivity with the workers they employ, instead of adding more employees.

Toby Madden, an economist with the Federal Reserve Bank in Minneapolis, concurred. "They are not looking to hire additional people or put in extra capital investment," he said. He has fresh data on manufacturers' plans based on a November survey the Fed and state of Minnesota jointly conducted in Minnesota, Montana, North and South Dakota and portions of Wisconsin and Michigan.

Collectively the 532 manufacturers who responded to the survey only expect a "small bounceback" in their businesses during 2010, Madden said. Last year, 72 percent of those manufacturers experienced a drop in orders and 61 percent of them cut employment.

In addition to the drive for even more productive factories at home, American workers are still dealing with the outsourcing phenomenon. Cutting American manufacturing jobs is part of a slow, long-term trend that has moved many plants overseas, where land, labor and other costs are cheaper.

In November, about 294,200 people worked in Minnesota's manufacturing companies, down from 395,200 in November of 1998 -- the year in which manufacturing employment hit its peak in the state.

Dan McElroy, Minnesota's commissioner of the Department of Employment and Economic Development, has seen the discouraging job numbers and recognizes that thousands of unemployed workers are waiting for the economic recovery to reach them.

Describing himself as a "short-term realist and long-term optimist," McElroy is focusing on some positive developments that he anticipates will lead to some job growth.

"We are seeing some manufacturing come back from China particularly because of quality control and intellectual property concerns," McElroy said.

Getting workers to full time

At a recent meeting of metal manufacturers, held in Villard, Minn., in the west central part of Minnesota, McElroy said that he was told orders are picking up so "most of them are back to working full workweeks."

Before employees are recalled or new hires are made, many companies are electing to get their current workforces back to 40 hours a week.

McElroy also noted that some original equipment manufacturers are no longer focused on buying the cheapest parts for their manufacturing processes. They are more concerned with "speed of delivery" of the parts they want, he said, so small manufacturers who are flexible and can turn around work quickly for their larger customers can gain an advantage.

"Technological and productivity gains clearly have replaced some of the workers," said Bob Kill, CEO of Enterprise Minnesota, which provides consulting services to manufacturers.

As the economy strengthens, Kill projects that fewer manufacturing jobs will replace those that were lost during the recession. However, he said, "Many jobs in the manufacturing sector will be higher skilled, higher paying and higher value."

One success story

On a recent weekday, Delkor CEO Dale Andersen navigated his way among stainless steel packaging equipment that he sells for six figures, and he spoke confidently about the revenue growth he expects this year.

He's seen a strong enough uptick in orders that the Circle Pines businessman is adding a half-dozen jobs to his payroll of about 90 employees.

"Actually, 2010 will be our best year," said Andersen, who on Wednesday secured a $1.1 million order for packaging line equipment from a large dairy processing plant in Ecuador.

At Delkor, which manufactures the packaging line equipment for Fortune 500 food companies, Andersen cut seven employees during the recession, hired eight people at the end of last year, and now plans to hire electrical and mechanical engineers and an operations manager to oversee manufacturing.

Delkor, whose customers include Kroger and Safeway, also employs many technicians who are graduates of two-year technical school programs in robotics.

Delkor has sold many pieces of equipment to customers in Mexico, and now Andersen wants to expand his sales territory to Chile, Ecuador, Peru and Colombia.

"Small manufacturers are getting a lot smarter about finding new opportunities, including international ones," Kill said. As more companies capture business outside the United States, he said they'll be in a position to increase their job bases.

Customized training

While the number of jobs in manufacturing has declined, John Engler, CEO of the National Association of Manufacturers, said that many manufacturing workers are at retirement age and companies are concerned about getting well-trained workers for the future.

"There is a lot of production that can be achieved without very much hiring," Engler said, but jobs will still come open over time and prospective workers need to look for training that is customized for specific sectors.

"Every child doesn't need to go to college to become an investment banker," Kill said. But he hopes that young people will consider getting an education for the manufacturing jobs of the future, even though those openings are likely to be fewer in the next several years.

As the economy tries to regain its footing, Kill said he anticipates it "is going to grow in fits and starts." There still will be opportunities for people to secure middle-class jobs in the manufacturing sector, which is highly diversified, Kill said. "People are starting to understand that manufacturing is not about blacksmith shops, it's about high technology."

Liz Fedor • 612-673-7709

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