Manufacturing in Illinois: In crisis or in transition?Nimble manufacturers do survive

CHICAGO - Symbols of the new era of manufacturing stand out like icons on the sprawling factory floor of Prince Industries in the western Chicago suburbs. Stacked boxes carrying metal parts ready for assembly bear labels in Chinese lettering as well as English: "Prince USA. Made in China." Across a brightly lit aisle, company president Greg Roskuszka shows off a Swiss-made laser-cutter that cost $650,000 and does the work of three older machines, or dozens of humans before that. With a new plant in Shanghai, a factory in Carol Stream crammed with ultramodern automated equipment and a commitment to change, Roskuszka dismisses gloomy industry talk of the disappearance of U.S. manufacturing as "a big lie." "There's a lot of crying-in-your-beer stuff going on" because of China, lost jobs and other pressures, he said. "But you have to change. ... Manufacturing is hitting another level of evolution. You can't produce things the way you used to." The changes to manufacturing have claimed their share of victims in Illinois - particularly since they started slicing factory jobs with the alacrity of Prince's nifty new laser robot. Machine-tool makers, circuit-board makers and small tool-and-die shops, and the employees and towns who depended on them, are among those that have been knocked down or out by costs and competition. But numerous companies such as Prince - a contract manufacturer that makes or assembles precision metal products - have managed to prosper by adapting quickly to the changes and switching strategies, products, locations or even entire business models. The most successful companies saw the tides shifting while the good times were still rolling in the 1990s, and they began retooling. "Over the past five years there have been dramatic shifts," said Mary Rose Hennessy, director of Northern Illinois University's business and industry services division, which does corporate training for Illinois manufacturers. "But if you haven't been changing gradually over the past 15 years ... the whooshing sound to China is much more dramatic." The biggest threat Illinois companies face, according to Hennessy, is competition from the developing world. Those that make commodity parts - mass-producing easily made items like screws or computer parts - have learned they can't compete with China, India or Korea on prices because of cheaper labor. The advice of NIU counselors when they go to a company is "Don't depend on one industry any more" and "Don't keep doing the same things you've been doing." That can be tough counsel for old-line manufacturers or those in a cash crunch. But Hennessy said even those unable to open a plant overseas have found sources in China to make their commodity parts, and others are successfully developing niche markets for higher-end products that can't be easily duplicated in China with less sophisticated technology. "It's different now," Hennessy said of Illinois manufacturing. "It's not going to be business as usual, the way we've always done it. It'll be more sophisticated, more robotics and automation ... and more niche. The leaders of Bridgeview-based Hydrosol Inc., which makes aerosol products under major brand names, adopted the credo of the NIU corporate training program: "Faster, better, smarter." But it was already clear to them that the 56-year-old business would fold if it continued to churn out low-margin items such as carburetor cleaner and brake cleaner. Relying on innovation and its team of seven lab chemists, Hydrosol acted in 2001 to dump those commodity items for higher-margin products with value added - various household products and shoe and leather protection products. It started filling fewer cans and making more money. And it didn't get slowed down like others, its president Alan Howarth says, by focusing unduly on all the barriers supposedly in the way. "I go to meetings with CEOs of other manufacturers and they complain about China, about it not being a level playing field - counterfeiting, currency manipulation and just in general," he said. "Well, we're never going to have a level playing field. We're never going to meet their lower labor rates, so we need to stop whining about it. ... It's not all gloom and doom." In the hard-hit Rockford area, a lack of flexibility and a preponderance of old-style manufacturers has limited the number of companies that have been nimble enough to make a smooth transition to the new era. One that has bucked the trend is Seward Screw Products Inc., which turns metal bars into parts for motorcycles, all-terrain vehicles and race cars. The company boldly pumped money into an expansion, including an extensive upgrade of its equipment and facilities, when the outlook for similar businesses was bleak. While pouring millions of dollars into new machinery can be an expensive gamble for companies without proven markets, it proved well worth the risk for the Seward-based company because it successfully targeted customers - most notably motorcycle maker Harley-Davidson. "We found a niche," said secretary-treasurer Lloyd Falconer, whose father founded the firm in 1954. "Part of the equation is innovation. The other part is choosing the customers you think will be around through thick and thin." Innovation might help manufacturers, but will it do anything for the Illinois employees who lost their jobs? Some of those positions might come back when the improving economy picks up speed, although perhaps not the lower-skilled ones that were eliminated during the slump of the past three years. "With significant opportunities for investment, we expect to see a manufacturing recovery that includes a rebound in production employment," said William Strauss, senior economist at the Federal Reserve Bank of Chicago. At Prince, where automated machines and the trend toward overseas labor have increased profits but eliminated dozens of jobs, Roskuszka knows there are limits on the number of positions available for humans. But he has no apologies, noting that the skill level of available factory jobs and the quality and price of consumer products have improved because of the combination of sophisticated technology and low labor costs. "Is it painful to see jobs disappear? Yes," he said. "But it's a double-edged sword."