Janesville28.5°

Local manufacturing scene a mixed bag

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JAMES P. LEUTE
April 27, 2008
— Steve Scaccia says Freedom Plastics is struggling as never before.

On the other side of Janesville, Terri Roessler says United Alloy just closed the books on another record year.


Although national news stories paint the economy in gloomy hues, the vitality of Janesville’s manufacturing economy appears mixed.


Some companies are struggling, occasionally reporting layoffs, although none of the layoffs in recent months has risen to the level where the state’s Department of Workforce Development must be notified.


Other companies report that business is flat.


Still others say they’re prospering, which indicates that the broad, national brush doesn’t paint an accurate picture of the local manufacturing economy.


The mixed manufacturing reports reflect the cyclical nature of the economy, said John Beckord, president of Forward Janesville.


“This is not a new development; it’s part of the cycle that’s inherent in manufacturing,” he said. “Manufacturing does not move along as one giant, uniform part of the economy.”


James Otterstein, Rock County’s economic development manager, agrees.


He tracks a wide variety of indicators that influence the local manufacturing and warehousing sector. While some are in good shape and others are off, all factor into what Otterstein calls project or pipeline activity that helps define the overall state of the local economy.


“Overall, Rock County’s industrial and warehousing pipeline is less robust than previous years,” he said.


The number of projects Otterstein is dealing with is down and the time for those projects to move from concept to reality has gotten longer.


“Certain areas of the economy are doing well, and some—such as those tied to the auto industry, credit or specific plastics markets—are not.”


Jeff Hazekamp, president of the architectural, engineering and interior design firm of Angus-Young Associates in Janesville, said his firm has been busy. That’s a positive sign for the area’s economy, because busy architects typically lead to busy builders.


“We’ve picked up a couple of really nice projects,” Hazekamp said.


He recently hired three new staff members and always is looking for engineers.


“Overall, we’ve been filling up with work pretty quickly.”


But times are tough at Janesville-based Freedom Plastics, which makes PVC pipe and fittings. While Freedom employs about 150 in Janesville, it also has plants in Florida and Idaho.


The depressed national housing market has seriously crimped the demand for Freedom’s products. At the same time, the costs of the company’s raw materials—primarily from petroleum and natural gas—have gone through the roof.


“We’re getting slammed on all fronts,” Scaccia said. “There is no (profit) margin right now.”


Freedom hasn’t laid off anyone in Janesville, but some employees have accepted voluntary layoffs. The company is cutting expenses and is not filling vacant positions quickly.


Freedom is positioning itself for the day when the housing market rebounds and oil prices stabilize. In Janesville, the company has a joint venture with Tigre, a Brazilian manufacturer of small-diameter pipe and fittings, that will allow Freedom to sell a complete package of products.


“The housing market will come back, and in the municipal marketplace we’re facing a crumbling infrastructure in this country,” Scaccia said. “There’s a huge future for our business.”


That’s why Freedom has resisted layoffs. The company is spending lots of money on training that will make its good employees even better when the business cycle swings back, he said.


The domestic auto industry is struggling, too, both on the national and local levels.


In the face of sagging sales, the General Motors assembly plant in Janesville has cut its production of full-size sport utility vehicles by about 15 percent and trimmed its local workforce of 2,500 by about 8 percent.


A United Auto Workers strike against supplier American Axle also has resulted in layoffs at the local GM plant.


Lear Corp., which supplies the GM plant with seating systems, laid off about 100 of its 775-person workforce earlier this year in advance of GM’s production cuts.


Workers at Lear and LSI, which sequences and delivers parts to GM, also have been affected by the American Axle strike.


But not all Janesville manufacturers tied to the auto industry have laid off employees.


About half of the business for SSI Technologies is supplying the auto industry with powdered metal components.


“The auto side of our business has been soft for several months, and it’s been compounded by the American Axle strike,” said Bruce Corner, SSI’s senior vice president. “But we saw that coming and budgeted accordingly.”


On the non-automotive side of SSI, which employs about 325 people at two Janesville plants, business has been much better.


In fact, Corner thinks his company will be in a position to hire employees in the next six to eight months.


“I think this is just one of those cycles that come and go,” he said. “We saw the last one in 2001, and they seem to come around every five or six years.”


Whatever the cycle, United Alloy hopes it continues.


The Janesville manufacturer of fabricated metal parts and components posted its most profitable year in 2007. Last year was the company’s eighth consecutive year of sales increase, its fifth consecutive year of decreasing labor costs, its fourth consecutive year of improved on-time delivery and increased operating profit and the third consecutive year of debt reduction activities.


United Alloy, which employs 80 people over two shifts, targets the industrial and power generation markets. Both have grown in spite of the struggling national economy, said Terri Roessler, United’s chief executive officer.


In addition to a range of core competencies, Roessler attributed the company’s success to its ability to supply quality products that meet highly specialized building code requirements in different parts of the country.


Roessler said United is starting to feel the effects of the global economy, as stiff competition for steel has sent its price skyrocketing. After two years of stable prices in the metals markets, United has been forced to pass along two price increases because of steel prices.


A third will take effect this week, but Roessler said the blow has been softened by United’s track record of containing labor costs.


“When I talk to people around Janesville, I don’t hear a lot of the doom and gloom that’s been expressed on the national level,” said Forward Janesville’s Beckord.


“The local scene is truly a mixed bag, and I think the local economy has benefited from diversification and not getting too overheated.”



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