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Return of the metal benders.

"Our state's share of U.S. manufacturing has increased in the past decade in virtually every measure," proclaims Morton J. Marcus, director of the Indiana Business Research Center at Indiana University. "We are up in our share of value added by manufacturing in the United States, we have gained in share of national manufacturing employment, and we have attracted to Indiana more than our share of new capital expenditures."

Sure, the skeptics counter, Indiana looks so good simply because it's been slower than some other states in divesting itself of manufacturing. Nonsense, Marcus says. "I reject that explanation. The indicators suggest that the competitive international market sees Indiana as a good place for manufacturing activity in the U.S. I believe Indiana is well situated to succeed, with manufacturing at the heart of its economic-development program."

Indiana already is succeeding in germinating new manufacturers, according to Harris Publishing Co., which keeps tabs on industrial companies across the country. Harris reports that Indiana led the Midwest in new manufacturing start-ups in 1991. The company counted 1,103 new manufacturers in Indiana that year, up 58 percent. The only other state anywhere near Indiana that had an increase at all was West Virginia, which saw start-ups advance by 9 percent. Other neighbors fared poorly, Harris found: Start-ups were down by 16 percent in Illinois, 27 percent in Michigan and 56 percent in Ohio.

Given Indiana's Harris numbers, it should come as no surprise that manufacturing employment is doing fairly well here. "Indiana has outperformed the nation in that for quite some time," says John Carter of the Bureau of Business Research at Ball State University in Muncie. "Comparing all 50 states, Indiana had a 0.8 percent manufacturing growth rate over the 12 months ended September."

The state ranked seventh of the states that experienced a manufacturing increase, he reports. Some 19 states, meanwhile, reported decreases in manufacturing employment. "Indiana's total employment growth of 1.5 percent ranked 11th in the country. October manufacturing employment totaled 632,500 workers, the greatest number since October 1990," Carter reports.

Why are so many comparatively good things happening in Indiana manufacturing? The reasons are numerous, but they begin with the business climate. The state's comparatively low taxes have lured quite a few existing businesses from other locations; for example, Indiana taxes compared with those in Illinois and the Chicago area are a big reason Northwest Indiana has had success luring businesses.

Indiana's labor is comparatively inexpensive, in spite of the fact that the state has many workers with manufacturing experience. The average private-sector weekly wage is below the national average--about $400, compared with about $430--and lower than that in all but one neighboring state. Also, just one neighboring state delivers electricity to industrial customers for a lower average cost than Indiana, and, what's more, all energy used in the manufacturing process is free of sales tax.

Such pluses no doubt played a role in Whirlpool Corp.'s decision to launch a $159 million expansion and modernization at its refrigerator plant in Evansville. The project is a boon to the Evansville area and has had a ripple effect as suppliers grow in the market. Wabash Plastics Inc., which makes components, is planning to invest $8 million to add 60,000 square feet to its 130,000-square-foot plant, and some new hires are planned. GenCorp Polymer Products, which makes magnetic gaskets for refrigerator doors, hired 20 additional employees and may need more. Inland Container, which produces shipping boxes, has made a $7.5 million investment in machinery. Indiana Tube, which supplies coils of refrigerator tubing, is installing a new mill at a cost of $3 million. American Sheet Extrusion is installing new technology worth $750,000.

The state's favorable manufacturing climate also may be one reason Indiana made it through the recent rounds of General Motors Corp. plant closings without losing any of its facilities. GM, the state's largest private employer, is selling some of its Indiana operations, but did not name any Indiana sites when it spelled out the 21 plants it will close in the coming years.

Jerry King, a spokesperson at the company's Fort Wayne Assembly, says, "Things look very favorable but very normal for us. I don't know if we are an indicator one way or another. It's pretty much business as usual. We're still working eight hours a day on both shifts, as we have been right on through this recession, making the full-size Chevy and GMC pickup trucks. Our employment levels are pretty constant at 2,700 people."

A lot of other companies in Indiana already went through this kind of downsizing and restructuring, which is holding back employment growth in other parts of the country. "We really weren't affected as dramatically by the recession as the rest of the country was, primarily because in the '82 and '83 recession we were affected much more than other locations were," notes Thomas McDermott, president and CEO of the Northwest Indiana Forum. "As a result, plants in the early '80s really downsized and became very competitive. We went through this one relatively unscathed."

Having already passed the tough parts, Indiana companies can profit today and build for tomorrow. Take Cummins Engine Co. in Columbus as an example. It has been through some tough years of late, but has found ways to reduce its costs. As a result, the company reported late last year that it's on track to post its first profitable year since 1987. And business is expected to continue to improve.

Other Indiana manufacturers have had great success in getting closer to the customer through niche marketing and outstanding service. One such company, truck trailer maker Wabash National Corp. of Lafayette., has earned national attention for its accomplishments. Founder Donald J. "Jerry" Ehrlich recently graced the pages of Inc. magazine as its Entrepreneur of the Year.

"Wabash National has achieved a compounded growth rate of over 20 percent since its inception," Ehrlich says. "During 1992, our growth has accelerated to almost 50 percent. While this growth rate is somewhat faster than we would like, and has caused us some deterioration in our manufacturing margins, generally we are happy with our current position and prospects for future growth."

Wabash started building trailers in an abandoned prefab-home factory seven years ago. When the '92 figures are in, the firm will likely be crowned the largest manufacturer in the field. Wabash produced nearly 20,000 units with a flexible work force, innovation and partnership with customers. The key is niche marketing. The company builds, for example, a trailer to carry glass for Libbey-Owens-Ford and a special model for the Walt Disney Co. to haul 2,000-pound loads of laundry underground through low-clearance tunnels at Disney World.

Between 1986 and 1991, the company's output rose by 150 percent, and its market share climbed from 3.1 percent to 10.1 percent. One reason for Ehrlich's success is that he looked at the corporate mission statement and decided, "In the past we said we were in the trailer business. Now we say we are in the transportation business. Our product isn't trailers, it's change."

Wabash National, in fact, is one factor in the promising future of Indiana's steel industry. "Much of the steel that we use in manufacturing our trailers is purchased from Nucor, located in Crawfordsville, which was only a dream in the past," Ehrlich notes.

He takes pride in the fact that his company has proven wrong the nay-sayers who had written the Midwest off. "When Wabash National was started in 1985, the Midwest was known as the Rust Belt. There were many who thought our capability to compete internationally was gone. Today, Wabash National may be the largest trailer manufacturer in the world, and is competing internationally."

Indiana manufacturers also are benefiting because the high technology they employ in the manufacturing process is producing high-technology products. Hurco Manufacturing Co. of Indianapolis has a success story in computer numerical controls, software and machine tools. It competes worldwide with formidable firms including Hitachi, Siemens and Bosch in a $43 billion machine-tool industry. The firm has 635 employees, and operations are located in Indiana, Michigan, Germany, England, France and Singapore.

By 1990, the United States' share of the world machine-tool market had shrunk to 10 percent. But between 1987 and 1990, Hurco's sales doubled from $45 million to more than $90 million. Profits ballooned from break-even to $8 million. For fiscal year 1991 half of the company's sales were outside the United States, with customers in 32 different countries. The results were so noteworthy that the company was featured on a Tom Peters PBS-TV special honoring manufacturing excellence.

"Hurco Manufacturing Co. is thinking long-term," says Hurco's CEO, Brian McLaughlin. "We are willing to do things we have never done before and have crafted a strategy which involves, one, the development of worldwide strategic alliances; two, changing the design and implementation of computer controls, software and motion-control technology, which in turn invites an entirely new structure in the industry; and three, refocusing our efforts on competing internationally--because over 90 percent of market growth is occurring outside the United States."

Across town is Universal Machine & Tool Works Inc., which had $4.3 million revenue in 1991 and employs 53 people. The company has doubled its business in the last five years and is going into exports. Joseph Coutz, vice president, feels optimistic. "From our point of view Indiana manufacturing is definitely on the rebound. We are a family-owned and -operated contract machine shop specializing in precision machining and manufactured, engineered-to-order tooling, fixturing (clamping systems) and special machinery," he says.

"If the amount of quoting we are doing is any indication of an economic rebound in manufacturing, then 1993 could be a very good year for growth here at Universal in particular, and Indiana in general. We have had to expand our engineering department and are constantly upgrading our computer-aided design capabilities just to keep up with the requests for quotations on the design and building of special machinery." The company, in fact, is shooting for 1993-94 sales growth of 20 percent to 30 percent.

Ford Motor Co. has brought some of the benefit of global opportunities to Indiana. The automaker employs more than 8,000 people in its steering-components plant in Indianapolis, an airconditioning facility in Connersville and a fuel-systems component plant in Bedford.

Traditionally, the 35-year-old Indianapolis plant was the sole supplier for steering components for all Ford vehicles in North America. Now, after a $150 million retooling, it not only manufactures parts for cars and trucks in the United States and Canada, but also makes parts for European cars. Their value is expected to reach $100 million by the end of 1993 and keep growing over the years. In 1994, the plant is scheduled to produce 450,000 steering columns, 450,000 steering gears and 400,000 steering pumps for Europe. The factory supplies parts to 26 other plants in the United States, Mexico, Canada, Belgium and England.

When the addition opened in September, Alex Trotman, executive vice president of Ford North American Automotive Operations, told employees, "In today's competitive environment, new business isn't just granted, it must be earned. You've done this by building world-class products at competitive cost levels and by demonstrating that you're prepared to grow in a competitive manner."

And Indiana workers whose livelihood is tied to the defense industry are faring better than some of their counterparts in other states, as their employers shift gears and attack civilian markets. An example is AM General, which makes the military vehicle known as the High Mobility Multipurpose Wheeled Vehicle at a plant in Mishawaka. Better known as the Humvee or Hummer, the vehicle earned respect during the Gulf War and now is showing up in pictures from military operations in Somalia.

But AM General is also hoping to make them show up on American streets. It has launched civilian versions of the tough vehicle, and hopes to benefit from the general public's longing for an ultradependable vehicle for on- and off-road use. Potential buyers, besides individuals, include governmental agencies such as parks and natural-resources departments.

The metal benders are not the only Indiana manufacturers growing. Two examples can be found in the Wabash Valley.

Employing high technology and riding the wave of popular products are the keys to success at Digital Audio Disc Corp., a Terre Haute-based subsidiary of Sony USA. The company recently introduced a new generation of digital audio recording called the MiniDisc. This dawning, gee-whiz format is produced in a new 160,000-square-foot, state-of-the-art facility which can turn out 500,000 discs a month. The MiniDisc is 2.5 inches in diameter and is particularly shock resistant. Like its cousin, the compact disc, it can hold about an hour of music, but unlike the CD, users can record on the disc. The new Terre Haute facility joins an existing 400,000-square-foot plant which stamps out about 10 million CDs per month. Also made in the factory are CD-ROM data discs, a fast-growing segment of the software-media business.

And another Indiana manufacturing success story comes from Eli Lilly & Co. The pharmaceutical giant is in a building mode as it completes a $500 million addition to Clinton Laboratories near Terre Haute. The plant makes the company's new antibiotic, Lorabid, used to treat a number of bacterial infections such as those of the middle ear in children and the respiratory tract in adults. This expansion is part of some $2.6 billion invested by Lilly since 1987 in Indiana facilities located in Indianapolis, Clinton, Greenfield and Lafayette. The company plans to invest an additional $1.1 billion in the state by the end of the decade.

According to Christopher P. LaMothe, president and CEO of the Indiana Chamber of Commerce, "Manufacturing is strengthening, largely due to effective business practices, diversification during the mid to late '80s, and a generally more favorable business climate in Indiana. We have a proud tradition of being one of the leading states in the country for manufacturing output and excellence," he says.

"Manufacturing represents more than $30 billion of a total gross state product of over $105 billion," he continues. "Its strength continues to be a critically important focus for the entire state."

McDermott of Northwest Indiana Forum adds, "We have definitely seen an increase in manufacturers locating and/or expanding in Northwest Indiana. All indications are that we are headed in the right direction. In the next decade, I think manufacturing will play a more significant role."

Dave Arnold, vice president for economic development at Fort Wayne's Chamber of Commerce, reports that "the situation in our manufacturing industry continues to be the story of restructuring and modernization. Most of our employers realize that productivity is the key to survival and many have and continue to invest in process automation. The effect of this on our employment is that the absolute number employed in manufacturing has remained steady or dropped slightly in recent years; however, the jobs themselves are becoming more technical and allow greater potential for advancement."

A recent study by Job Works in the Fort Wayne area gives the chamber there some comfort. It indicates that the majority of firms will be in a hiring mode over the next two years. More than a third of these expected hires will be in the manufacturing sector.

Ken Robinson of Vision 2000, the Evansville area's economic-development organization, says, "Over the past year a number of industrial-related investments within the area lead us to believe that we are experiencing a slow, but steady rebound in this sector."

Joseph Cook of Eli Lilly & Co., chairman of the Indiana Manufacturers Association, is upbeat about Indiana manufacturing, but he sounds a warning note. "The future of manufacturing in Indiana is positive. We are however, facing some very challenging times from an governmental-regulations standpoint," he cautions. "This is especially burdensome for small- to medium-size businesses, and this segment has provided the largest number of new jobs in the past decade. In order for manufacturing to move ahead and be able to create more good-paying jobs we must have a regulatory process that is both fair and enabling."

Well, it isn't over. All of the problems aren't solved. It's a little early to requisition the marching bands to celebrate. However, attitudes are positive, orders are coming in, wheels are turning, torches are sparking and metal is being bent.

Did we hear you say, "About time?!"
COPYRIGHT 1993 Curtis Magazine Group, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

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Title Annotation:manufacturing industry in Indiana
Author:Johnson, Douglas
Publication:Indiana Business Magazine
Article Type:Cover Story
Date:Jan 1, 1993
Words:2741
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