After a few hot years for Miami Valley manufacturing companies, local executives remain optimistic for 2019 but say prospects further down the road are looking “murky.”
President Doug Borchers of Superior Aluminum Products Inc., a producer of aluminum rail, fence and columns for the construction industry, said his Russia-based company is targeting 10 percent sales growth this year as opportunities boom.
“In the national market, it feels pretty good. Requests are coming in from all over the country,” Borchers said. “You’ve got the first apartment project in years going up in Centerville, and there’s one going up in Oakwood. There’s a big project going up in Toledo, and Columbus has got 15 of them going on.”
Even though Borchers has seen sales increase up to 400 percent on certain products, he predicts a future slowdown in sales to single-family, multi-family residential and institutional customers as material costs continue to rise. Tariffs on imported aluminum and steel that President Donald Trump’s administration imposed in 2018 have had a “huge effect” on his business.“Our aluminum cost went up 18 to 20 percent within the first couple months of the announcement of those tariffs,” Borchers said. “Even though the tariffs weren’t in effect, the market just started charging more. The raw aluminum market just went crazy in anticipation of the tariffs. It’s since come back down a little bit, but our raw material costs skyrocketed about this time last year.”
Over in Springfield, Champion GSE custom produces large metal shipping and storage containers for high-value assets like nuclear warheads or power turbines. Its vice president and general manager, Don Clouser, also serves as chairman of the Dayton Region Manufacturers Association (DRMA). He said the 25 percent tariff on imported steel and 10 percent tariff on aluminum has impacted Champion “the same way it impacted all members of DRMA” — by raising raw material prices 60 percent from fall 2017 to summer 2018.
“You throw out the threat of tariffs, and everybody gets scared and says, ‘Oh, we better buy their steel now,’ so demand goes up and the price goes up,” Clouser explained. “Then the tariffs actually go into place, and then supply dries up because there’s not as much going in, so then prices go up again.”
On April 11, DRMA hosted economist Brian Beaulieu of ITR Economics for a speech in Fairborn. Beaulieu predicts local manufacturing growth will slow over the next 12 to 18 months.
“It’s kind of a pause button. We’re not going back. Growth’s just going to slow down compared to where it’s been the past couple of years,” Clouser said. “He says by Q2 of 2020, we’re going to start growing again at a good size. It’s like a runner getting to a point where they’ve got to catch their breath a little bit before going on.”
Clouser noted that power generation is down across the globe as interest shifts toward renewable energy, hitting all the big players like Rolls Royce, Siemens and General Electric. On the other hand, military orders with Champion GSE for containers to transport jet engines, warheads, and armored vehicle engines and transmissions have been ticking upward. National defense spending has increased in each of the past four years, so “that won’t be a surprise to anybody who’s tied to the military,” Clouser said.
Many local manufacturers work by contract rather than filling a warehouse with their products and then selling them, which DRMA President Angelia Erbaughpointed to as a particular strength of Dayton’s diverse manufacturing ecosystem.
“Contract manufacturing gives us a benefit in that companies who are smart have a capability,” Erbaugh said. “They’re very good at what they do and find customers who need that capability in various industries. If one goes down, the other one’s up.”
Despite this diversity, low unemployment nationwide means that local manufacturers almost universally struggle with a shortage of skilled workers to staff their assembly lines. DRMA polls its 400 member companies annually on the issues keeping them up at night, and Erbaugh said workforce concerns have been No. 1 for the past six years running.
One reason for the shortage, Clouser said, is that schools and society have spent the past few decades telling young people to go into debt to attend college to land a professional job and increase earning potential over their lifetime.
“How many people are coming out of college with student debt and not a great professional job?” Clouser asked. “Society is now starting to say, ‘I don’t want my kid to go into debt. Is there another way that they can start earning money?’”
DRMA has led the charge to enhance awareness of manufacturing careers among young people and their parents by promoting national Manufacturing Day on the first Friday in October. Erbaugh said more than 4,300 students attended 50 open houses at DRMA member facilities across Dayton in 2018, and there were at least 10 other open houses at non-member companies.
“Manufacturers across the country open their doors inviting students, educators, parents and the general public in so people not in manufacturing can see what contemporary manufacturing is really like and to dispel that Industrial Revolution concept of what manufacturing is,” Erbaugh said. “I have seen a real shift in the attitude of educators where everybody now is shaking their heads and totally understands that we as society really did a disservice over the last two or three decades in convincing everybody that the four-year degree path was the only path to success.”
Superior Aluminum participated in the open houses in 2017 and 2018, and Borchers said he performs mock interviews and speaks at high schools in Darke and Shelby counties to drum up awareness of manufacturing careers.
Until this workforce gap closes, companies like Superior Aluminum that historically have only supplied materials are forced to adapt. Borchers said a lack of skilled trade laborers at its general contractor customers means they’re now getting asked to provide installation quotes.
“We don’t send people out from our facility to do installation, especially when we’re selling to Texas and Florida and those kinds of places,” Borchers said, noting Superior Aluminum now tries to line up preferred installers to provide labor quotes in far-off markets where they’re shipping products. “You can sit back and say, ‘Woe is me,’ or you can get proactive and figure out how to get the customer what they want, and that’s what we’re trying to do right now.”