Trump budget puts lifelines for manufacturers on chopping block
Aero Tech Designs, a young but growing manufacturer of athletic wear for bicyclists, wanted to adopt more efficient techniques to grow into a new facility on the North Shore.
Bollman Hat Co., a hat maker based in Adamstown, Pa., needed to see that the remarkable decision to haul equipment back from China — and bring jobs once again to Pennsylvania — made business sense.
Both companies recently turned to a relatively unknown government-funded support system with a record of helping small to mid-size manufacturers stay in business and grow jobs.
Namely, two Reagan-era programs have saved more than 6,000 Pennsylvania jobs in the last five years and boast a 9-to-1 return on federal investment. Because of those marks, they have earned bipartisan support at the state and local level in particularly divided political times.
But they also face the potential for major cuts under the Trump administration, which last month proposed sweeping reductions across 18 government agencies in order to help pay for increased spending on defense, homeland security and veterans affairs.
Beja Isakovic of Whitehall sews a bike jersey at Aero Tech Designs. (Pam Panchak/Post-Gazette)
President Donald Trump wants to eliminate funding entirely for the Manufacturing Extension Partnership, a $124 million program of the U.S. Department of Commerce that funds regional centers providing free and subsidized technology consulting and other expertise to businesses.
The budget proposal also could mean cuts to the Steel Valley Authority, a $1.5 million-a-year, state-run initiative based in Regent Square that offers free turnaround services to struggling companies on the verge of mass layoffs and facility closures. The Trump budget suggests unraveling the nation’s $3.4 billion workforce training law that funnels money to layoff aversion efforts.
Cutting the programs “seems contradictory to the president’s agenda to invest in manufacturing and grow manufacturing jobs,” said Petra Mitchell, president and chief executive officer of Catalyst Connection, the Manufacturing Extension Partnership office in Pittsburgh.
During his campaign, Mr. Trump won votes from blue-collar Pennsylvanians by pledging to revitalize American manufacturing in part by shaming companies that ship operations overseas. But here, Ms. Mitchell said, are programs that have been saving tens of thousands of jobs over three decades.
“We believe it would be nearly impossible for any one person or one company to be able to keep up with the rapid pace of change,” she said. “It’s really a modest investment of taxpayer dollars, with enormous impact on the economy.”
A lifeline to companies
The programs have been operating in the background as American steel and manufacturing have encountered tremendous economic and technological change.
Today, the Pittsburgh region is home to 1,600 manufacturing companies that employ about 63,000 people. Measured in February, the Pennsylvania manufacturing wage averaged $59,564 — about 14 percent higher than the average wage of $52,160 across all industries, according to data from the Pennsylvania Department of Labor and Industry.
Many of those companies are smaller, family-owned businesses in a supply chain that ends with larger manufacturers or customers, said Thomas Croft, executive director of the Steel Valley Authority.
A native of Georgia, Mr. Croft’s experience with workforce programs began in the 1970s when he advocated for lumber workers in Northern California who had been displaced by an expansion of national parkland and by the 1980 recession. He then helped shipyard workers in Seattle facing a cutback in naval spending.
In 1988, his first trip to Pittsburgh was to head the Steel Valley Authority, which had been established to help save the collapsing steel industry. Seeing the industrial decay “made me sick,” Mr. Croft recalled from the group’s modest offices above a yoga studio on Braddock Avenue.
For the first few years, the authority thought it could save the major steel players, Mr. Croft said.
He tried to convince companies to sell plants that could maintain jobs. He even tried to use the government’s power of eminent domain — usually reserved for forging new projects deemed as a public good, like roads and pipelines — to keep plants from shuttering.
When those efforts by and large failed, the group shifted focus to struggling supply-chain businesses across more than a dozen industry segments. The group finds struggling companies through a variety of sources, including unions, local workforce agencies, investors and banks. The group estimates it’s saved roughly 21,500 jobs since the authority first got state funding in 1993.
In southwestern Pennsylvania today, that means helping the array of companies that supply the coal industry, which has been in decline.
“We saw, really even before it hit, that regulations were going to affect coal,” said Bob Value, deputy director for the group. One of his recent cases has been helping a manufacturer of a special wood coating for supports in underground mines.
“That was almost his entire business, so we’ve pretty much had to recreate the wheel there,” he said. “We’re totally rebranding them.”
In the Bollman Hat Co. case, Jack Bardol, a turnaround consultant based in York, Pa., was enlisted by the authority to perform a financial analysis of moving production of its Kangol hat line from China. Bollman had encountered a major supplier disruption and wanted to get products to market faster, Mr. Bardol said.
“They got burned so badly by the lack of control that they asked us to look at if it made sense to reshore the product,” he said. “We realized that there were a lot of sales opportunities that get missed because of the long lead times.”
Mr. Bardol, who works with roughly 20 companies each year, noted turnaround consultants charge businesses anywhere from $250 to $500 an hour for services that the state offers for free.
“It’s a lifeline to them,” he said.
Fledgling manufacturers grow
Meanwhile, the Manufacturing Extension Partnership targets a different group of manufacturers: healthy businesses that need a boost.
Since 1988, the initiative has worked with nearly 86,620 manufacturers across the country to create and retain more than 797,994 jobs, according to the initiative’s 2015 annual report. It retained one job for every $1,501 of federal investment, and every one federal dollar generates $17.90 in sales growth for manufacturing companies.
Aero Tech Designs, contacted Catalyst Connection in 2012 for subsidized training on more efficient practices to produce apparel as it prepared to move to a new facility on the North Shore, said Ted Rogers, director of operations.
“There’s a lot of little pieces that work into the puzzle” of manufacturing a product, he said. With day-long training sessions spread over four months, Aero Tech learned to improve “how your plant is laid out, where to store raw materials, how you clean and organize your area,” Mr. Rogers said. “The whole idea is to get rid of waste.”
The company, incorporated in 2008 by Mr. Rogers’ mother, Kathy, has boosted production by 65 percent during the most recent year and now employs 48 people at its facility on the North Shore. Worker productivity rose by 25 percent, he added, and raw material costs dropped by 18 percent. Aero Tech plans to open a storefront at its facility this summer that shoppers can visit.
A bipartisan unifier
Despite Mr. Trump’s proposed cuts, program advocates are optimistic lawmakers will keep or even expand the services.
During an otherwise contentious state budget hearing in February, Kathy Manderino, secretary of the Department of Labor and Industry, found a rare moment of agreement with Republicans when it came to the Steel Valley Authority’s work.
Sen. Bob Mensch, R-Montgomery, told her it was a “ray of sunshine in the state government” and pledged to renew funding. He cited Bollman Hat Co.’s decision to re-shore jobs and the program’s efficiency: Last year, the authority received $1.4 million to work with 92 companies, ultimately saving 1,577 jobs.
“The average cost of that is $976 per job,” Mr. Mensch said. “It’s the best bargain ... the state of Pennsylvania makes.”
The Steel Valley Authority’s work was codified in the Workforce Innovation and Opportunity Act, the Obama administration’s sweeping workforce training law passed in 2014. The law required, for the first time, all states to develop layoff aversion programs.
Last week, Mr. Croft visited North Carolina, where he gave presentations to state officials there on how to set up such a network. He’s headed to Colorado next.
Ms. Mitchell, noting Congress unanimously re-authorized the Manufacturing Extension Partnership program, also is hopeful of avoiding the elimination of federal funding, which accounts for about 20 percent of Catalyst Connection’s $5 million budget.
“The scale and capacity to serve companies would definitely be affected — we’d lose over a million dollars in funding,” she said. But “it is this strong congressional support that will keep M.E.P. funded well into the future.”
Daniel Moore: email@example.com, 412-263-2743 and Twitter @PGdanielmoore.