Firms that retool and rebound

A handful of Midwest manufacturers find ways to adapt and save jobs.

By , Correspondent

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    Devastated by the collapse of the motor-home market, Structural Composites Indiana could no longer rely on the RV covers (l.) it had manufactured for years. The new solution: protective tops for coal rail cars.
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LIGONIER, IND.
The future looked bright at Structural Composites Indiana, a small fabricating company building fiberglass tops for motor homes and travel trailers. Set in a small industrial park 20 miles from Elkhart, Ind., the RV industry’s Detroit, the company had flourished. Last March, 130 employees were working two shifts, 5-1/2 days a week.

Then the bottom fell out.

When the market for recreational vehicles collapsed last year, so did scores of companies across northern Indiana. Structural Composites kept its workers as long as it could. Many were friends, relatives, and neighbors. “It really became a heartache to tell people, ‘We can’t support you for now,’” recalls CEO Jim Fearnow, one of the founders. But by December, the workforce had shrunk to just 20.

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The company didn’t close. Nor did it simply hunker down, as many have done, to wait for better times. Even before surging gasoline prices soured Americans on motor homes, Mr. Fearnow and his business partner had been looking for new uses for their fiberglass.

The recession gave that quest a new and powerful urgency. At a trade show in Chicago, representatives of the coal industry had confided a wish to put lids on coal cars. Covers could keep swirling coal dust from escaping during coal’s long journey from the western coal fields. They might also save money by streamlining the cars, reducing drag and lowering fuel costs.

The company went to work designing a fiberglass top bigger than anything it had fashioned before – 58 feet long and weighing three-quarters of a ton. It tested two prototypes in February, lowering them with a crane onto rail cars in Bismarck, N.D. “Nobody knew what was going to happen,” says Roy Huber, who helped design the cover and had his doubts. “They loved it.”

That demonstration on the frozen plains of North Dakota yielded an initial order of 90 covers. Workers are just now making final adjustments on the mold, and the company plans to begin production by mid-June. Six workers came back to make the prototypes; another 10 will return to start production. In a region staggered by recession, they feel grateful.

“We wouldn’t be working now if it wasn’t for the new project,” says David Bacon, one worker who was rehired.

No region of the country is bound to manufacturing more closely than northern Indiana. Indiana is America’s most industrialized state, and its northeastern counties – bordering Michigan and Ohio – rank among the most industrialized in the nation. Small and medium-sized manufacturing plants turn out parts for medical equipment and automobiles and the machines that make those parts, down to the smallest bolt and fastener.

Even before the recession hit, many manufacturers were struggling, as work and jobs slipped away first to Mexico, then to China. But across the region, some companies are fighting back. Like Structural Composites, they are striving to remake themselves, adapting to the new conditions by shifting to new industries and seeking out new opportunities.

There’s a faith here that Americans can still make things.

Nick Busche has been traveling a lot lately, searching for new customers. Ten years ago, when he founded the company that bears his name in the little town of Albion, Ind., it was tied almost completely to the car industry. But a downturn in 2001 and growing financial pressure on partsmakers told Mr. Busche that bigger trouble lay ahead.

“When you have that much concentration in one industry, it was the tail wagging the dog,” he says. He went looking for new customers and found them in companies like John Deere, Caterpillar, Honeywell, and Navistar. The search continues. Busche Enterprise Division, Inc. recently added seven new workers when it started fabricating metal housings for a company that makes precision refrigeration equipment.

“We call ourselves Heinz 57,” says Busche, a gruff, fast-talking, and highly confident executive. “It’s more difficult to deal with 30 or 40 customers than one or two. But if you don’t go through the difficulty and pain, you won’t get the advantage.”

Busche hasn’t given up on cars. Indeed, experts say the industry will almost certainly remain a significant part of the Midwestern economy. But Busche said his strategy is to make “safety-critical components” like steering components – parts he believes carmakers will always want manufactured close by. The company is already picking up business from failed competitors who made steering and suspension parts for Toyota pickups.

“The strong will survive,” he says. “We’ll come out of this with half the competition.”

Not all local manufacturers see diversity as the answer. Some companies are simply yearning to move into industries of the future, like wind power. Last month in nearby Fort Wayne, Ind., hundreds of local business people showed up to hear presentations from wind-power companies seeking partsmakers.

“The same type of skills and expertise used to make engine parts and auto parts can be used in the wind turbine industry,” says John Sampson, head of a regional office promoting economic development in northeastern Indiana.

For others, the answer is medical products. Northern Indiana is already home to a prosperous and well-established medical parts industry.

“Every tool-and-die shop in the nation that used to do the automobile industry wants to do biomedical,” says Brian Emerick, CEO of Micropulse, Inc., a former tool-and-die shop that made the transition a few years ago.

It was not easy. Making surgical tools, implants, and other medical equipment requires far greater precision than making car parts. But the gambit has paid off.

Micropulse employs 160 workers and, despite the recession, has slowly been hiring more. Emerick expects the company to continue growing at a rate of 15 to 20 percent a year. “It was probably a good thing we went into it when we did,” he says. “It’s almost impossible to get into it now.”

Don Wood, a plain-spoken entrepreneur, started 80/20 Inc. some 20 years ago with a vision for a better way to make metal supports for machinery. Instead of welding “and all the hassles you go through,” he used extruded aluminum frames that could be assembled without welding. Five years ago the business had grown to 300 people. Since then, the recession has cut business by 35 percent, and 60 workers have lost their jobs. The company is still gaining customers; they simply have less money to spend.

Mr. Wood is undaunted. “We don’t spend much time at the beach,” he says. Among the company’s new products are frames for solar pan­­els. “This is one we’re cranking up,” he says.

In some ways these companies are the exception. Economic development officials in the region struggle to name more than a handful of companies that are hiring or reporting hopeful news. Yet they celebrate the exceptions as examples of an entrepreneurial spirit that might shape a new manufacturing economy.

“This is a region that makes things and knows how to make things,” says Alan Tio, an economic development official in Whitley County, Ind. “The opportunities in the past have been in automotive. The future will hold other opportunities.”

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