Made in the Midwest

By Dennis Boone

Missouri and Kansas are right in the thick of a resurgence in American manufacturing.

“We don’t make anything anymore.”

That lament of the industrially illiterate still gets way too much ink and airtime in a 24/7 world of business misinformation. The truth is, manufacturing output in the U.S. is up 21 percent since hitting a recessionary trough in 2009.

That growth has been fueled by a surge in durable-goods output, up by more than one-fourth to nearly $1.1 trillion in 2013, while non-durable goods surged 16 percent, to nearly $984 billion. And since the World Bank started tracking those figures in 1998, that’s up 45.73 percent in constant dollars.

All told, the $2.08 trillion in manufacturing output comes to 12.4 percent of the nation’s $16.77 trillion GDP for that year.

So there’s your national context. But what of this region? The figures are even more meaningful for Missouri and Kansas: Even as Boeing was winding down its significant operations in Wichita throughout 2013, manufacturing accounted for 15.93 of state domestic product in Kansas. Manufacturing in Missouri also beat the national figure, at 13.1 percent.

Vehicle manufacturing is driving much of the momentum in each state. The Missouri figures have been bolstered by Ford’s Claycomo plant, coming off a $1.1 billion upgrade, expansion and hiring binge that has made it one of the biggest employers in the Kansas City region, and by General Motors, which added a third shift to its Wentzville plant last fall. On the Kansas side, GM invested heavily in upgrades to its Fairfax assembly plant, where production
is also up.

With those projects completed, and the region’s increasingly well-known value proposition as a center for logistics, distribution and low labor costs, Kansas City has also attracted more than half a dozen auto suppliers in recent years, bringing with them nearly 1,400 jobs and an aggregate payroll of more than $50 million.

“Our market has been blessed in that we’ve got two automotive plants and the companies that are supplying product, different suppliers delivering parts to the Ford Claycomo and GM plants,” said Ed Elder, president of the local Colliers International office. “But these aren’t your Dad’s manufacturing jobs. They are higher tech, if you will, with higher skill sets required, and the pay is commensurate with that. It’s very positive for the metropolitan area.”

That’s because economic activity doesn’t stop when you flip the switch on a new assembly line.

“It’s hard to track the multiplier effect,” Elder said, “but just in concept, it’s pretty easy: When they have good jobs, people buy houses and cars, their kids are in the schools, and they buy stuff in stores.”

One project Colliers was involved with was brining Challenge Manufacturing to the area, leasing 425,000 square feet near Kansas City International Airport. “It’s just an absolute test case,” Elder said. “If certain investments are made in this community, in this case the GM facility, the suppliers should and do follow. This isn’t moving parts, this is manufacturing the undercarriage of the Malibu. These are high-paying jobs, and we’re talking in the hundreds when they are fully ramped up in 2016 and ’17.”

And therein lie the seeds of change in manufacturing in this region: While overall manufacturing employment isn’t what it was in the great American industrial heyday—and likely never will be—the increased efficiencies, low cost structures and quality workmanship here are steadily eroding the cost advantage once ascribed to overseas production. The jobs are cleaner, safer, and higher-value than in preceding generations. And it’s not just limited to the boom in auto production.

“Missouri is so diverse in what we supply and export,” said Dusty Cruise, president and CEO of Missouri Enterprise, a Rolla-based organization that offers business and process-improvement services to companies in the state. “The food
industry is a big thing and becoming more and more so.” That processing, packaging and distribution of the state’s considerable agricultural output will have global overtones in the coming years, he said.

“All the associated checks and balances and safety in regards to food and organic products grown is becoming more and more of an issue,” Cruise said. “We’re getting more projects helping companies correct quality certification to meet
requirements from the FDA. We all like to eat and nobody wants to get sick,” and the quality standards set in the U.S. are commanding a premium from consumers in other countries that have less reliable methods.

The Jobs Difference

The reason those manufacturing jobs matter, even in an era where policymakers focus far more attention on STEM professions, is that they pay considerably more than other jobs on average.

In the Kansas City region, including Topeka and St. Joseph, the manufacturing work force of slightly more than 92,000 has an average annual wage of $56,433. While that’s well short of the $66,123 for entry-level STEM jobs, according to Boston-based employment consultancy Burning Glass—but manufacturing in this region still pays 25.72 percent more than the average U.S. wage of $44,888.

One reason for that: Technology. There are far more robotic and computer-driven applications across the manufacturing spectrum, work-force professionals say. And that is leading to a new kind of manufacturing employee base.

“What we need in the work force is changing,” says Kim Inman, CEO for the Missouri Association of Manufacturers. “In advanced manufacturing, things that are emerging and widespread are robotics, Six-Sigma, Lean Processing—those are the buzzwords, but the emerging technologies behind them over the next two to seven years will entail 3-D printing, automation of knowledge work, next-generation robotics, artificial intelligence and high-performance computing. What we’re seeing now are emerging, new technologies.”

Yet there’s a concern about who will fill those jobs in the coming years, she said. “Even in junior high and high school, kids don’t say ‘I’m going to be an electrician or a plumber.’ But in 3-D technologies, you need electricians, and they need to be advanced.”

There remains a disconnect, Inman said, between employers and educational institutions to produce workers with those advanced skills. “Where manufacturing is advancing is in technology, but educators are not teaching advanced tech—they themselves are not being educated in that, in order to be able to teach it. So I think we’re going to see more manufacturers and educators trying to come together.”

Soaring Demand

If they do, it will be none too soon, says Dave McDowell, president of Austin Nichols Technical Search. His staffing company works with plant managers, CEOs and others in the manufacturing community, and “I can’t tell you how many have asked us within the last six to 12 months whether we can place maintenance techs, welders, electricians, pipefitters, and so on. I can tell you that with maintenance techs, in particular, we’re getting barraged with telephone calls for those types.” So much so, he said, that the company has changed its model to add those recruiting lines to its services. “Traditionally, we have not placed those kinds in the past, but the demand has been incredible,” McDowell said. “Those skills are very difficult to come by right now. We’ve placed a number, but candidates are scarce.”

And they’re getting even more so.

“I read not too long ago that the average age of an electrician in the U.S. is 57,” McDowell said. “I don’t have the data to sup- port that, but I believe that, based on the candidates we have exposure to. A lot of skill sets as related to craftsmen have been lost.”

Why? “The large firms that used to have apprentice programs for those kinds of skills have done away with them,” McDowell aid. “The unions weren’t in favor because they saw them as a threat, as a way for companies to cut costs. So they mutually agreed to do away with those programs, and they haven’t been effectively replaced. Some community colleges are teaching some of those skills, but not to the extent they used to be taught.”

The placement challenge is amplified as you go up the skills ladder, he said.

“The higher level skills, they are in demand as well for automation skills, programmable controllers, other control systems—those are very much in demand. So it’s not only for the Fords, but a large contingency of companies supplying Ford.”

Roughly 75 percent of his customer base is actively hiring now, he said, “and we don’t focus on the automotive area, so I’d have to say there’s a broad spectrum of manufacturers that are doing very well and adding people. I’ve been doing this for 36 years and this is the best job market we’ve seen since the ’90s. It’s not as good as the ’90s yet, but nonetheless, it’s an exceptional job market.”