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Redefining business when manufacturing wanes

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February 8, 2007

By JOHN FLOWERS

ADDISON COUNTY — The latest setbacks for Specialty Filaments and Standard Register are emblematic of what has been a multi-year slide in the manufacturing industry both locally and statewide, prompting economic development officials to refine the manner in which they recruit new businesses.

Addison County last month receive two doses of bad news from the manufacturing industry when Specialty Filaments and Standard Register announced they would be closing, resulting in the elimination of a combined total of 287 jobs.

Specialty Filaments received a reprieve when the Illinois-based Thomas Monahan Co. bought the business out of bankruptcy and reopened it on Monday with roughly 60 percent of its previous 175-member workforce. But Standard Register will lay off the last of its 112 Middlebury employees next month, while putting its 115,000-square-foot building on Route 7 South up for sale.

The news came after announcements over the last 24 months of manufacturing downsizings and closings in Middlebury including notices that:

• Questech Corp. and its 65 employees would be relocating from its headquarters off Exchange Street in Middlebury to the former Tambrands plant off Park Street in Rutland.

• Vermont Electro-Mechanical Assembly Services (VEMAS) and its 45 workers would be relocating to Poultney.

• Geiger of Austria would be ceasing production of its clothing in Middlebury, thereby resulting in the loss of around 15 jobs.

Statistics provided by the Vermont Department of Labor (see chart) covering 1990 to 2005 show a steady erosion in manufacturing jobs in Addison County and statewide.

While the county in 2005 had the same number of manufacturing businesses it did in 1990 (a total of 64), the number of jobs decreased from 2,607 to 2,075. An economic surge during the late 1990s had temporarily pushed job totals up to 2,221.

Still, manufacturing payroll increased by at least the rate of inflation during the same time period, statistics show.

Statewide numbers for manufacturing have shown an even more marked dip during the past 15 years.

Vermont boasted 1,269 manufacturing businesses employing 43,312 people in 1990, compared to 1,196 businesses employing 36,840 people in 2005, the most recent year of complete statistics available through the DOL.

State figures also show that while the number of manufacturing businesses in the county was the same in 1990 and 2005 (64), the number of manufacturing jobs — as a percentage of the total Addison County labor force —has declined significantly during the past 10 years.

In 1995, 2,004 of the county’s total 11,492 jobs (17.4 percent) were in the manufacturing sector. In 2005, the county boasted a total of 14,071 jobs, of which 2,075 (14.7 percent) were in the manufacturing sector.

“We’ve seen much greater job growth in other areas,” said Addison County Economic Development Corp. (ACEDC) Executive Director Jamie Stewart.

Trouble is, jobs created in other sectors haven’t been paying the wages that the manufacturing industry can provide. The 2,075 manufacturing jobs in Addison County in 2005 were responsible for $90.5 million — or 18 percent — of the total $456.6 million in total payroll generated by county businesses during that same year.

“It’s not just that those jobs are key, it’s the quality of those jobs that are absolutely critical,” Stewart said.

Middlebury Town Planner Fred Dunnington stressed the value of the good paying manufacturing jobs can’t be underestimated.

MULTIPLIER EFFECT

DOL figures show the average annual wage of a manufacturing job in Addison County in 2005 was $43,634. But that wage has a much higher impact on the economy — sometimes referred to as the “multiplier effect” — when one considers the local services and businesses that salary supports.

“Most important for the local economy is the payroll,” Dunnington said.

“It’s many millions of dollars we are losing in our local economy as a result of the loss of those jobs,” agreed Stewart. “You lose those jobs, and if they get replaced by service sector jobs that don’t pay the same wages and don’t provide the same benefits, that has a tremendous ripple effect that is negative on the region.”

Consequently, county officials have been working to replenish manufacturing jobs when they get the chance. And more often than not, the emerging businesses have had a local flavor.

“The vast majority of successful industrial activities that have occurred here have not been with outside companies building and growing here,” Stewart said. “The majority of what we have here has incubated here and grown here from the very beginning.”

Those homegrown, expanding companies have included Otter Creek Brewing, Autumn Harp, Connor Building, Questech, VEMAS and Maple Landmark. In most cases, these are businesses that have begun with an idea and just a few employees, and grown to around 150 workers, according to Stewart.

He explained that the county tends to lose businesses when they grow to a point where they require economies of scale in such services as power, utilities and transportation — services they can get more cheaply in an urban setting.

Middlebury, and Addison County in general, does not have a major airport, features some above-average property taxes and does not have a heavy concentration of workers that could be readily tapped by a manufacturing giant. Consequently, when major players in the manufacturing sector look to Vermont for expansion, they tend to look at Chittenden and Rutland counties, where there is more infrastructure, larger airports and larger populations of prospective employees.

“We just can’t compete with other areas where the economies are so robust,” Dunnington said, “and we shouldn’t try to … fight economic gravity to compete with areas that don’t have those costs.”

“It doesn’t make sense for us to keep looking for that big entity, but if we can find the smaller guys that want an opportunity to grow — we’ve been successful in accommodating these types of businesses,” Stewart said.

It’s a formula he said has produced a nice mix of employers.

“One of the strengths that we have is the diversity of our industries,” Stewart said. “We don’t have a significant sector in any one area, but what we do have is pretty incredible diversification across the board. So if one sector is down, another one is up. That helps provide us with some excellent balance.”

That balance, Stewart said, has helped the local manufacturing industry absorb small numbers of workers who are periodically laid off. He recalled that most of the approximately 15 affected workers affected by the Geiger production layoffs had located new jobs before ending their respective tenures with the clothing manufacturer.

EFFECTS OF LARGE LAYOFFS?

Still, Stewart conceded the Addison County economy is not entirely equipped to absorb layoffs from a business the size of a Standard Register or a Specialty Filaments.

“That’s the problem — it’s not just replacing jobs, this is replacing high-wage manufacturing jobs,” Stewart said.

ACEDC officials are working with Standard Register and the DOL to find new jobs for the Standard Register employees who will find themselves unemployed next month. In the meantime, Stewart said he has fielded calls from several people inquiring about the availability of the 115,000-square-foot Standard Register facility on Route 7.

Dunnington believes entrepreneurs will continue to consider Addison County as a spot to establish manufacturing businesses because of the area’s educated and skilled workforce, the quality of life it offers and the relative safety its residents enjoy during this post-9/11 era.

“These are things that will help us for awhile to rise above places where transportation costs may be a little less,” Dunnington said.

He added the county should reach out more to businesses that can readily tap into local natural resources and product niches — such as renewable energy — and that don’t rely on a lot of imported materials for their products.

“To me, our strategy should be to focus on industries that have an economic reason to be here,” Dunnington said.

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