Local Manufacturers see Rebound

Chambersburg Public OpinionPublished 5:45 p.m. ET Aug. 14, 2017

 

CHAMBERSBURG — The local factories that make road rollers, lifts and cranes are seeing brighter prospects.

Their recent financial reports offer hope for more local manufacturing jobs in the near future. Also looming in the background are expectations for a major infrastructure investment from the federal government.

“We’re seeing a rebound, albeit, I think it will be a bigger rebound when we see a federal bill investing in infrastructure – transportation or telecommunications or utilities,” said L. Michael Ross, president of the Franklin County Area Development Corp. “That will really create a boon for Volvo, JLG and Manitowoc. This year has been better than the last several years.”

Volvo Construction Equipment in Shippensburg makes machines that build roads. JLG Industries in McConnellsburg makes machines that lift people and materials. Manitowoc Co. in Shady Grove makes cranes for heavy construction.

Their most recent financial reports foreshadow an improving economy.

That’s good news for the community and the thousands of local workers linked to the cyclical nature of the construction industry. Manufacturing jobs pay good wages. A manufacturing job generates three other jobs in the economy, according to the Manufacturers Alliance for Productivity and Innovation.

The economy of the eight-county region of south-central Pennsylvania, including Franklin County, relies heavily on manufacturing. Manufacturing has the greatest economic impact on the region’s economy, according to SCPaWorks, the South Central Workforce Investment Board that focuses on regional workforce issues. Workers likely are commuting into the region to work for manufacturers.

“We feel very good right now about what is taking place in Franklin County and throughout the region,” Ross said. “There’s a lot of economic development now. I think we’re in a turnaround.”

The FCADC is fielding inquiries at a pre-recession level, according to Ross. Banks are lending money, and real estate agents are showing commercial properties.

The Associated General Contractors of America, however, is concerned about the government’s most recent numbers on construction spending. Public-sector spending on construction declined from May to June.

“There has been a steep decline in public investment in nearly all types of construction over the past year,” said Ken Simonson, the association’s chief economist. “Private nonresidential construction is still rising overall, but generally at slower rates than was occurring a few months ago.”

Association officials urged Congress and President Trump to fund upgrades to the nation’s aging infrastructure. The investment would protect against further deterioration of the nation’s public works and offset a slackening demand for construction.

 

“Washington officials need to act quickly to rebuild our public works before bad roads, unclean water and unreliable power systems begin to serve as a drag on broader economic growth,” said Stephen E. Sandherr, the association’s chief executive officer.

Joey Brown, spokesman for U.S. Rep. Bill Shuster, did not indicate when Congress might act. Shuster, chairman of the House transportation committee, represents Pennsylvania’s 9th Congressional District, including Franklin County.

“During this Congress, the Transportation and Infrastructure Committee has held hearings on opportunities to reform and invest in the nation’s infrastructure, and Chairman Shuster is currently working with the Trump administration to craft an expansive infrastructure package that will include all the transportation modes to build a modern, 21st century infrastructure system, including an effort to reform and modernize the FAA, the 21st Century AIRR Act,” Brown said.

Improving the nation’s infrastructure has been one of Shuster’s top priorities, he said.

A local factory supplying parts to original equipment manufacturers has already taken the plunge.

Vetter Forks Inc. has moved to a larger location and bought its own building. The German-based company makes steel forks for forklifts.

“They have a solid foothold in their industry,” Ross said. “This is another arrangement where the supply chain for Volvo and JLG is a driving factor for them to be in the U.S. and specifically here.”

Vetter recently purchased 1711 Opportunity Ave. from FCADC for $1.8 million, Ross said. The building in the Cumberland Valley Business Park had been empty for more than a year after the bankruptcy of Edge Rubber.

Vetter in 2014 leased space at 5785 Sunset Pike to be closer to its customers, Ross said. The plant employed nine people. At its new location, Vetter’s employment is expected to rise to 30 in 12 to 14 months.

“Sales are up,” Ross said. “They have more confidence in the future. It was more optimism before.”

Their customers’ business is improving and their orders were increasing, according to Ross.

Here’s the financial outlook in a nutshell from major local manufacturers as taken from their most recent quarterly reports:

  • Volvo CE reported that quarterly sales increased by more than a third and orders for equipment rose by 54 percent. Demand increased in most major markets – China up 65 percent, Europe up 14 percent, North and South America both up 4 percent. There was a clear recovery in mining in many parts of the world.
  • Oskosh Corp., the parent of JLG Industries, reported that sales of access equipment increased about 3 percent from a year ago, primarily because of more sales of aerial work platforms. Oshkosh President and CEO Wilson R. Jones said the results were “stronger than expected.” The company anticipates delivering higher earnings for investors.
  • Orders improved 9 percent for the Manitowoc Co. Inc., although net sales were off 16 percent compared to a year earlier. The company shipped fewer crawler cranes in the Americas and fewer rough-terrain cranes, primarily in the Americas and the Middle East, mainly due to continued weak demand in oil and gas market. Both cranes are made in Shady Grove. The company recently moved its crawler crane production there.

“Considering our year-to-date performance and future market outlook, we have improved our full year 2017 guidance,” said Manitowoc President and CEO Barry L. Pennypacker. “This underscores that our team can deliver improved results using the principles of The Manitowoc Way. The relocation of our crawler crane production is complete, on time and under budget.

“In the second-quarter we have seen order improvement in most product categories except lattice boom crawler cranes. We have experienced pockets of improved demand in specific markets like the Permian and Eagle Ford basins in (Texas) North America. European markets continue to experience moderate growth, mainly in residential and non-residential construction markets.”

 

“Cautiously optimistic” Pennypacker said Manitowoc is positioned to achieve double-digit operating margins by 2020 and to become “the leading global crane company” as the market recovers.

Industry giant Caterpillar recently raised its expectations for the year. Annual sales for the maker of construction equipment should end at more than 6 percent above its original outlook.

Although jobs in manufacturing are declining in the region, the regional manufacturing employment remains 53 percent above the national average, according to SCPaWorks. And during the economic slump, manufacturing layoffs have accounted for 14 percent of unemployment, much higher that the state average (8 percent.)

As a whole the counties of Adams, Cumberland, Dauphin, Franklin, Juniata, Lebanon, Perry and York have seen job growth in health services and warehousing/transportation.

The region has more jobs than prospective workers. The eight counties currently have 55,000 job openings with just 30,000 people unemployed, according to Ross.

Jim Hook, 717-262-4759