New Budget, Old Worries

On Feb. 1, President Obama introduced his fiscal 2011 budget, which he claims includes tax incentives that will help companies to hire more employees and put people back to work. But the President’s optimism hasn’t spread to local manufacturers yet.

“I’m not really sure what they’re going to be able to accomplish, frankly. I just hope it isn’t harmful to small manufacturing,” said Denise McIntosh, CEO of Custom Powder Systems, which employs 60 making equipment systems for pharmaceutical and food industries at 2715 N. Airport Commerce Ave.

Karl Glassman, chief operating officer for Carthage-based Leggett & Platt, a Fortune 500 company and one of the area’s largest manufacturers, said he is optimistic about the future of manufacturing in the tri-state area despite disengagement with the president’s budget rhetoric.

“There are some positive dynamics,” Glassman said of area manufacturing, noting the central location and good highway access for shipping. “This area is one of the lower cost-of-living areas in the country. We expect that statistic (to) stay the same.”

A potential problem rests in the government’s role, Glassman added.

“I would hope that state government would maintain a pro-employer position,” he said. “The state fathers could mess that up a little bit. The federal government seems to be dedicated to doing that.”

In outlining the budget, Obama said the proposal “includes plans to encourage small businesses to hire as quickly and effectively as possible, to make additional investments in infrastructure, and to jump-start clean energy investments that will help the private sector create good jobs in America.”

However, the National Association of Manufacturers issued a statement the same day saying the budget, if approved by Congress, would result in almost $500 billion in new taxes on businesses during the next 10 years.

McIntosh said the most pressing tax concern she has is unemployment.

“CPS hasn’t had major layoffs, but it will probably affect us all to some extent, because you’ll have to spread the cost among fewer companies because there are fewer companies existing,” she said.

The budget does include some tax credits that could help manufacturers, such as an increased credit for research and development that a Milken Institute study said could create 316,000 manufacturing jobs and boost the gross domestic product by 1.2 percent.

“We have not taken advantage of the credits in the past because we haven’t had the accounting criteria in place,” she said. “But it’s on our 2010 to-do list.”

NAM argues that even more jobs would be created if corporate taxes were lowered.

“The U.S. has the second highest corporate tax rate among the other major industrial nations,” said NAM executive vice president Jay Timmons in a press release. “By reducing our U.S. corporate income tax rate to match the average of other industrial nations, we would create an additional 350,000 jobs and boost GDP by 2019 to $375.5 billion, according to the Milken Institute’s study.”

Trouble at home
Regardless of any new legislation, several area manufacturers already have fallen on hard times. Most recently, Ark.-based Twin Rivers Group Inc. announced the downsizing of its poultry processing plant in Neosho, resulting in about 400 lost jobs.  

Paul Mueller’s Springfield plant lost more than 600 employees in the past year, dropping from 974 employees in January 2009 to 341 in January 2010, according to Springfield Business Journal research.

Superior Industries International Inc., a manufacturer of aluminum wheels for cars and light trucks, closed its plant in Pittsburg, Kan., in late 2008. The plant was the second-largest employer in Pittsburg with 600 jobs.

Jasen Jones, executive director of the Workforce Investment Board of Southwest Missouri, said a downward trend in domestic manufacturing predates 2008, when the recession was happening in earnest.

The future of local manufacturing
Jones said the area is home to a number of manufacturers of a type of product that simply can’t be replaced by imports: food.

The General Mills plant in Joplin employs hundreds of people and produces the majority of the company’s bread-based products. The company posted second-quarter net sales of $4 billion, with segment operating profit increasing 13 percent to $880 million.

Jones said companies that target cost-conscious consumers, such as General Mills, which produces foods to be prepared and eaten at home, thrive in a recession.

Corporate restructuring has benefited 3M Co.’s Springfield plant, 3211 E. Chestnut Expressway, after 3M acquired French sealant manufacturer EMFI SA last year and transferred some of its production to Springfield, said plant manager Dean McDowell.

“Last year was about job preservation. (New production) helped offset declines in other areas of the plant,” he said, pointing out that plant sales were down 7 percent compared to 2008.

Liquid adhesives, sealants and primers as well as some films that go into aerospace research all took a hit, McDowell said, noting the addition of the EMFI product line and increased production from a new coater – one that required a 30,000-square foot addition to the building in early 2009 – are expected to push the plant to double-digit percentage growth in 2010. McDowell estimated the Springfield plant currently supports $200 million in annual sales.

The company has positioned itself for future expansion, McDowell said, with the purchase of an adjacent 15.6 acres and a 150,000-square-foot building at 3300 E. Pythian St. The former site of Precision Stainless Inc. is leased by Mammoth-Webco Inc., he said, and 3M has no current plans to expand on the property.

Also poised for growth is Joplin’s EaglePicher Technologies LLC, which develops and manufactures high-tech storage devices such as the batteries aboard the Hubble telescope and the International Space Station. Randy Moore, president of EaglePicher, said that while he is pessimistic about the state of the economy and its potential to recover quickly, he is nevertheless excited about his company’s outlook.

“I think that our recovery is going to go slower and I think we’re going to see job creation at a pretty steady rate, but it’s going to be a very low rate. I’m particularly encouraged about EaglePicher’s business, because there was an article in the Wall Street Journal a few months ago that talked about the five things that could change life on this planet the most.”

Moore said EaglePicher is involved in four of the five items listed: photovoltaic energy generation in space, hybrid electric vehicles, alternative energy storage, and carbon capture and storage.

“I think that where we’re going as a society in terms of the environment and the economics of the future – batteries are playing a bigger and more important part of almost every device, every system,” Moore said. “Certainly for alternative energy, we are just scratching the surface of how important batteries are to stabilizing the grid.”[[In-content Ad]]