Northwest Business Magazine

The 2017 Manufacturing Leaders Roundtable

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Rockford’s future is, in many ways, tied to the fate of manufacturing. In a world of radically evolving technologies, volatile political climates and global power shifts, there’s much to concern us but much to make us hopeful. We sat down with six local manufacturing leaders to reflect on Rockford’s positive transformations and issues that most impact their companies.

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Rckford’s history is inextricably linked with manufacturing, whether it’s making furniture, supporting the war effort or building aerospace components.

Sure, our region’s taken some hard hits over the past few decades, but manufacturing is still a powerhouse. After all, nearly 20 percent of all jobs here are tied to manufacturing, according to the U.S. Department of Labor, making it the area’s single largest industry cluster.

It should come as no surprise, then, that our strongest producers are playing a major role in the effort to transform Rockford. They’ve made big strides in the past few years, but there’s a sense that much work remains to be done.

This April, we sat down with leaders from six area manufacturers to learn more about the industry’s comeback and the potential threats to it, including those at the state and national levels. As you’ll read below, the conversation at Giovanni’s Restaurant & Conference Center, in Rockford, raised both promising signals and concerning issues.

Rockford’s long manufacturing heritage is an advantage to firms that hire skilled craftsmen, says Tom Busse, president of Rockford Toolcraft, a tool and die firm in Rockford. He adds that some other parts of the country don’t possess the same legacy and work ethic.

Rockford’s long manufacturing heritage is an advantage to firms that hire skilled craftsmen, says Tom Busse, president of Rockford Toolcraft, a tool and die firm in Rockford. He adds that some other parts of the country don’t possess the same legacy and work ethic.

What advantages are there to doing business here?

Rydell: A few months ago, we mapped out where all of our customers are, and it was amazing how centrally located we are. And we’re close to O’Hare. With all of the traveling we do, that certainly is a plus.

Busse: Because Rockford has been a manufacturing center for the past 100-plus years, we’re benefitting from the sons and the grandsons of craftsmen. You go south and set up a manufacturing company, you’ll have a lot of trouble finding people with not only the skills but the work ethic.

Anderberg: We hear from some of our customers that the number of disciplines still available in Rockford is amazing. If you have a difficult project, you can have it plated, ground, machined, whatever – all those disciplines are here in Rockford. And that’s very unusual elsewhere.

Beach-Shelow: Around the northern Illinois/southern Wisconsin area, we have about 75 Nadcap-registered companies and about 200 AS9100-registered companies. The supply chain is here for my company to be able to take direct contracts from Boeing. Recently, I was trying to outsource work to companies in California and Minnesota. They were giving me 28-week lead times. I found a local source and was given two-week lead times.

Carter: If you draw a 150-mile radius from here, you can get anything you need – any talents, any material manufactured, with any special process involved. The Rockford Area Aerospace Network is a great example of our region’s capabilities and small-business entrepreneurialism.

What role are Rockford Public Schools, Rock Valley College and the new RVC/Northern Illinois University engineering partnerships playing in developing talent locally?

Rydell: The RVC/NIU project is critical because the hardest-to-find employees are engineers. Good engineers can have the warm weather, the mountains or the oceans if they want them. Our feeling is that we can take local people and train them to be engineers, knowing that, because their families are here, there’s a greater chance of them staying. When we’ve imported people from elsewhere, they stay for awhile, but then they move on.

Derry: We’ve seen success with Rockford Public Schools. They’ve finally gotten away from the mentality that everybody’s going to college. When I was in high school in the early ’90s, it was always, “What college are you going to go to?” For the schools to now say, “Let’s talk about college or career readiness,” I think is important.
The jobs we do involve a lot of math. Employees are running very expensive and technical machines, but they don’t need a four-year degree for it. We’ve seen success where students are coming out with some idea of the basics. You still need craftsmen and skilled people, though.

Carter: I think it’s important that we bring well-rounded people into the manufacturing world. You have to be able to write today, you have to be able to speak in front of people. We put people in front of customers all the time. Today, when a customer comes in, you’ll bring out the person who’s involved. They have to be comfortable in a speaking environment, and they need to be able to write. One of the biggest concerns I hear from people is that our kids today can’t write.

Rydell: I agree with you, Steve, and I’ve felt that way for a long time. They don’t use proper grammar. Even some engineers who are very highly educated can’t be put in front of a group because they don’t use good grammar. The schools have to do a better job of teaching how to write and speak effectively.

Carter: Some people say that Rock Valley needs to be focused only on career orientation. That’s true, but you can’t ignore the “creative skills” that need to go with it – writing, reading, public speaking. That’s all part of education, not only STEM but STEAM. We need well-rounded people who can do the technical work we do. If you want to be a better person, or a better member of our community, you need to focus on the broader educational aspect.

Busse: A lot of teachers tour our plant and ask us, “What can we do to better prepare our students?” I tell them we need more of the soft skills. Come to work five days in a row. Start when you’re supposed to. As humorous as that sounds, a lot of kids don’t have mentors in their lives to teach them this. They don’t think they need to come to work every day. They don’t think they need to do the kinds of things that are imperative to keeping a job. Our company has a need for some engineers. We need some skilled tool and die makers, but also we have a lot of press work and entry-level work. But with every job, you need to show up. You have to be there every day.

Employees in a manufacturing setting need to be well-rounded, says David Rydell, chairman of Bergstrom Inc., in Rockford. He finds that some engineers, despite their extensive educations, can lack good grammar and public speaking skills.

Employees in a manufacturing setting need to be well-rounded, says David Rydell, chairman of Bergstrom Inc., in Rockford. He finds that some engineers, despite their extensive educations, can lack good grammar and public speaking skills.

Carter: And how many of us use teams? You’ll have to work with a team at some point. If you can’t get along with people, it’s going to be hard. The person in the shop, in our case, has to go and talk to the designers and engineers. Assemblers come in and talk with them. If you can’t interact with people, it’s going to limit your ability to be successful. It won’t be too long before we’re going to have the majority of workers in this nation representing the millennial generation. They have a totally different view of what they want out of the working life, and we need to be prepared for that.

Anderberg: Millennials communicate much differently than the rest of the workforce today, and what they want out of life and a career is apparently different, as well. A few years ago I attended a dinner, and a lady talked about how to understand millennials. She was up there telling everybody that you’ve got to give them flex time; let them work when they want to. How do you run a manufacturing operation when everybody’s coming and going as they please? Our biggest challenge is who’s going to do the work. We have a 20-year deficit of when vo-tech programs were shut down and when we opened them up again. The large corporations no longer train, because it doesn’t make sense to their quarterly numbers. Until recently, the smaller companies just fed off the larger corporations’ trained staff. Every manufacturing company, no matter how big or small, has to start training again.

Derry: The generation that’s coming up is different. They communicate differently and think differently. But, I think we, as employers, need to realize that and flex to them. I’m not saying that it’s come-and-go whenever you want. But if that’s the talent we’re going to have, we’ll have to find ways to work with them and to be more flexible.

Beach-Shelow: They’re going to find solutions that we haven’t thought of yet. I set a 3-D printer out in our shop and have made it available for any employee to use. It’s my 38-and-under workers who are using the 3-D printer. We had a tool in the shop that was bulky and didn’t work for multiple tasks. Our young people designed and 3-D printed a new one. We made this heavy tool for 20 years, and now it’s obsolete because we were creative. Einstein talks about play being one of the best ways to invent. I noticed an attitude change among my younger people; I noticed attendance being better, just by going along with them and new technology.

Are the schools developing enough talent to meet demand?

Busse: If you go back 30 years, we had vo-tech classes held next to Jefferson High School. There were many disciplines, not just manufacturing. It had nursing, legal secretaries, food service. In the early ’90s, it all went away. Now, we want it to grow again. Well, it took 20 years to disintegrate, so it’ll take time to get back.

And how easy is it to recruit from outside the region?

Rydell: There’s one organization in Rockford that has to recruit a lot of professional talent. Interestingly, someone there told me the challenge isn’t the crime rate; it’s the allure of wanting to work in Chicago. People like the lifestyle, and we can’t provide that. Even with all of the great things in our community, we can’t have all of the things that are in Chicago or another metropolitan area.

Carter: Although we don’t recruit many people into the area, I’ve never had a problem recruiting. I’ve talked to people who’ve lived all over this country, and they say Rockford’s the nicest place they’ve lived. The people who are hardest on Rockford are the people who’ve lived here most of their lives.

Beach-Shelow: The younger engineers often have a hobby. They’re brewing their own beer or planting gardens. There are a lot of farmers markets, bicycle and walking paths, and other quality-of-life amenities for them to enjoy.

Carter: We’re in a great triangle. Besides easy access to Chicago, you’ve got Milwaukee, which offers a lot of great things, and Madison [Wis.], with lots of interesting attractions. You’ve got Galena and northern and northwest Wisconsin nearby. We don’t have beaches; we don’t have palm trees. But there are a lot of things that are here that are attractive to people. People are friendly here, and that’s a big difference from a lot of places in the country. I’ve heard a lot of people say, “What is it about you Midwesterners? You all say hello and smile at me. I want that.”

Let’s shift our focus to state issues. All of Illinois’ neighbors have passed right-to-work laws, which bar compulsory union membership. What impact does that have on Illinois, which is not right-to-work?

Rydell: We’re not going to attract a lot of larger businesses to the state of Illinois. They’re going to go to a right-to-work state. If we can’t grow the tax base, then I don’t know how this state can ever get out of the terrible financial position it’s in. I just can’t see any way out. And nobody in our legislature can give me an answer as to how they can get us out. A for-profit or nonprofit firm would have to declare bankruptcy.

Carter: And I think a lot of that has to do with public employee pension obligations, which continue to grow.

Rydell: At the state and local level, it’s unsustainable what we’re doing. People can start to work at 20, retire at 50 and draw 80 percent or 70 percent of their wages, live until they’re 80 or 90 and probably draw wages longer than they worked. You don’t have to be a mathematician to know it’s not going to work.

Businesses are fleeing Illinois and avoiding a relocation here because of the high cost of doing business here, says Eric Anderberg, of Dial Machine, in Rockford.

Businesses are fleeing Illinois and avoiding a relocation here because of the high cost of doing business here, says Eric Anderberg, of Dial Machine, in Rockford.

So, how do we address these conditions?

Anderberg: As long as the state has the situation in Springfield that we have had for more than 30 years, I see little hope of much progress being made in Illinois to align itself more competitively with respect to taxes, regulations and right-to-work. Wisconsin, Indiana, Missouri and now Kentucky will be more attractive, not only to organizations looking to locate to the Midwest, but also to companies currently in Illinois and looking for better economic conditions.

Beach-Shelow: Somebody has to stand up. Mayor [Larry] Morrissey tried, but the flaw for him was taking on the public unions, and being unable able to negotiate keeping their current benefits while modifying benefits for new and future employees. I stayed in Illinois with my company. I could have gone a few miles north from where I am and had a brand new place. But I stayed in Illinois because I was really hopeful for [Gov. Bruce] Rauner. It’s brutally disappointing that we can’t come together and make a change that positively affects my company and others around the region.
What about issues like workers’ compensation and environmental regulation? How are those affecting manufacturing?

Anderberg: Businesses are fleeing Illinois because of the cost to stay and do business in this state. For example, workers’ compensation insurance costs are roughly five times more than in Indiana. For many small- to medium-sized companies, that amounts to hundreds of thousands, maybe millions, of dollars per year of extra cost for each company.

Derry: If we were a bunch of doctors sitting around here, we’d be having the same conversation about malpractice insurance.

Carter: The politicians aren’t willing to do anything. There used to be a time when things would come down in the middle. Now, we’re way on one side or way on the other side, and neither one wants to meet in the middle to get things accomplished.

Derry: They don’t have to, because they’ll still have their jobs next year. If you don’t make tough decisions in business, you go out of business. You don’t make a tough decision in government, you just blame somebody else and you still get re-elected.

What’s the single biggest threat to doing business here?

Rydell: If they start a $15 minimum wage, that would throw the state for a loop. In the first place, it would put nonprofits out of businesss. A lot of businesses can’t afford to start someone at $30,000 a year and then have a health policy that costs another $8-9,000 on top of it – all for a job that you can train someone to do in a few hours.

Carter: A lot of those minimum-wage jobs were not intended to be primary jobs for a family. The conversation often goes to how you can’t make a living from a minimum-wage job, when that may not be the intent.

Anderberg: It’s supposed to be a starting point to learn a skill or learn how to work. It’s going to hurt the people it’s supposed to help the most.

Rydell: If the base pay starts at $30,000 a year, what does that do to the rest of your payroll? It has a domino effect, and I think that could really start forcing employers out of the state.
What are some of the greatest challenges manufacturers face at the national level?

Carter: We do a lot of military work, and the amount of paperwork that you get from the government is unbelievable. I get thousand-page quality manuals. You have to follow everything in there. You hear things like, “We want to get more small businesses involved.” Tell me how we’re going to do that if you come in and say, “Here’s all the stuff you have to do.”

Anderberg: We do work for a number of federal government agencies and the Department of Defense. We have to fill these massive files just to bid. Billions could be saved in tax dollars if we simplified the process.

Beach-Shelow: Whenever I’ve done grants and bids, there’s a background check on myself and my entire family – before I’m even allowed to participate.

If you had to put a number on it, what percentage of this paperwork do you think is extraneous?

Carter: We all want to produce a quality product. We all want to ensure that no one gets harmed because of a product we make. I don’t know what the right number is, but it seems like every time something happens there’s a new law or new regulation that comes out, and oftentimes politicians use a shotgun, rather than a rifle, to solve the issue. We’re given new regulations not because they address a practice everyone does, but because of what one person or company did. If you don’t follow the exact regulation you’ll get in trouble.

Beach-Shelow: I just finished my third FAA [Federal Aviation Administration] drug and alcohol screening for a Department of Transportation audit. Three times auditors have come, and each time three auditors show up. Recently, we had two issues arise with the way I had released employees who didn’t meet requirements. But, I got a finding because I didn’t document it correctly. Now I have to write a response to the finding. It wasn’t whether I did it or not. I did it – they just didn’t like how I documented it. But two auditor teams before this were OK with what I did.

Rydell: Here’s an example that happened to us; this started under the Bush administration and got worse under Obama. They passed a law that you cannot sell a product that has anything in it that comes from a country that harbors terrorists. We go to our supply base, and they have to guarantee there’s nothing; they go to their suppliers and seek a guarantee, and then you’re down to a lot of small companies. They don’t have the wherewithal to check every part. It costs us a lot of money to comply with that law. There have been many things like that, over the past few years, and it’s costing us hundreds of thousands of dollars every year to keep up.

Carter: Conflict minerals is another one. That means product that includes minerals that come from places like Congo, where there are human rights abuses. There are certain minerals in the world that only come from those places. I don’t disagree with the goal, but it makes it really difficult if you can’t buy product from that country.

Rydell: And you don’t have anywhere else in the world where you can buy them.

Government-required paperwork can be exhausting, redundant and unclear, says Teresa Beach-Shelow, president of Superior Joining Technologies, in Machesney Park, Ill. She adds that auditors are sometimes inconsistent in their expectations for how the paperwork should be done.

Government-required paperwork can be exhausting, redundant and unclear, says Teresa Beach-Shelow, president of Superior Joining Technologies, in Machesney Park, Ill. She adds that auditors are sometimes inconsistent in their expectations for how the paperwork should be done.

President Trump talks a lot about fairer trade agreements. How does that impact manufacturers?

Rydell: The tariffs he proposes are going to wreak havoc. There’s a lot you can’t buy in the United States anymore; it’s not manufactured here. Even if you could find them, they’d be so expensive you couldn’t afford to sell your product.

Anderberg: This country has played by the rules, but we get taken advantage of, and it’s cost us a lot of manufacturing jobs. Everyone thinks of China and Mexico, but there are other players. Brazil’s largest income is import duties. What people don’t know is that the government there subsidizes. They’ll say, “If you want to sell your product here, you’ll have to make some of it here.”
They’re not the only country that does that. Let’s say your product is a large piece of equipment that used to be made in Peoria but today it’s no longer made in Peoria because the Brazilian government mandates that some of those machines be made in Brazil. Even though the Peoria plant is the lowest-cost facility to produce that piece of equipment, it’s still made in Brazil because the Brazilian government will cut a check for each machine made there. That does more than make up the cost difference, and it ends up subsidizing production in Brazil. If you want to have a global trading system, you have to stop the cheating and let countries compete on their own merit, without subsidy.

Rydell: In China the cost to produce is so low. Last time I checked, we had three average wages on the production floor: $1.75, $2, and $2.25 an hour. The average person makes $4,000 a year. Compare that to our base wage, which is up to $40,000 a year, plus health care. Over there, the people are willing to work.

What operations could conceivably return to the States?

Carter: The fact is that we are in a global economy. There are things that should be made overseas. We have to figure out a way to let things trade a little more seamlessly and not penalize others. It needs to work in a way that allows people to be successful.

Rydell: There was a group in our office a few months ago, and one lady said, “Oh, we’re seeing more reshoring [re-establishing plants in the U.S.].” I said, “Yes, but the part of the story they don’t tell you is that this company that first moved to China used to employ 5,000 people here. Now, they’re employing 500 Americans because they can run so much with robots.” You don’t have the jobs, anyway. The people who have to maintain the robots are making maybe $100,000 a year. But all of the people who are making $30,000, $40,000 or $50,000 – you don’t need them anymore. So, I think jobs in the future, because of automation, will present a real problem for society.

Busse: We have people in our company who are doing a very simple job, with the hope of advancing up the ladder. There used to be thousands of decent, good-paying jobs for these kinds of people, but now they’re gone. Now, what does that guy do? He’s on welfare.

Anderberg: My father hired a gentleman in the late ‘70s who was a little mentally challenged. In our company, we needed someone full-time to make sure work areas were clean and metal chips were removed from our work centers and machines to recycling hoppers outside. He did that job superbly until a few years ago when he retired, comfortably. Where else would he have found or had a job like that in the service economy or retail sector? You won’t. Manufacturing offers living-wage jobs and careers for all types of individuals and levels of ability. The service sector doesn’t.

As automation replaces many of manufacturing’s simplest jobs, demand will rise for true craftsmen whose skills can’t easily be replaced by machines, says Lucas Derry, president of Header Die & Tool, in Rockford.

As automation replaces many of manufacturing’s simplest jobs, demand will rise for true craftsmen whose skills can’t easily be replaced by machines, says Lucas Derry, president of Header Die & Tool, in Rockford.

What do you think manufacturing will look like in Rockford in the near term and the long term?

Derry: I think automation’s going to change it. There are adaptive robots that can be working just like we are, where there are sensors and artificial intelligence. The struggle in our world is the art, the craft, the skill. The craft skills that some of these people are soon to retire with – who’s going to be picking that up? What does that do to the end product?

Busse: We’re going to need fewer, but smarter, people in manufacturing because of the technology. But then you’re going to have a whole group of people who won’t have anything to do.

Anderberg: I completely agree with Lucas and Tom. Business in the future is going to be niche, like the job shop guys. You will have to be more than just a machining, grinding or welding operation, and more of a complete solution for the customer. It’ll be higher value added, lower volume. Large companies want to issue one purchase order for something, and large companies want to be more of an assembler. So, you’re going to see more sub-assembly type work and you’re going to have niche and higher value-added to what you make.

Derry: I heard someone talking the other day about how the skilled machinists and the make-just-about-anything kind of guys will be surpassing the engineers when it comes to salaries – they’ll be that much in demand.

Carter: I think in the next five years it’ll stay pretty much the same, but in the longer term I think additive manufacturing, or 3-D printing, will be a big game changer. You have companies like GE that are buying up the producers of additive manufacturing equipment. Additive allows you to do some things that are very difficult to do any other way.

Busse: If somebody like GE is investing in this technology, you know it’s going to change things.

Beach-Shelow: When I heard GE talk at Fabtech two years ago, they said they wanted to make everything; it was humbling. What does that mean when they say they want to make everything? We think of ourselves as job shops, providing them part of what they need to assemble. But they want to make everything.
I think aerospace will be very strong for an extended period of time, and I think Rockford manufacturing, because of what we’ve done with education, is going to win the war on training people. Our companies are going to grow because we’re able to provide the workforce. Artificial intelligence is going to be the partner with robotics, and that’s going to make the difference. I believe we’re still going to have to have people who can program them and monitor them. Whether it’s at home, or in the basement, or in my shop I don’t know, but I think those things, along with additive, are going to change manufacturing.

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