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U.S. factories adapt to stay competitive

Dan Bobkoff Nov 30, 2011

Kai Ryssdal: The Federal Reserve released its Beige Book today, the central bank’s regular look at the American economy region by region. Mostly good news to report. Consumer spending and tourism were up.

As was manufacturing, which is a change from the recent past. American factories have lost millions of jobs. Cheaper labor overseas is the main culprit. So the factories we do have have had to adapt to stay competitive.

Today, in the first of two stories, how American manufacturers are reinventing themselves. From the public media project Changing Gears, Dan Bobkoff tells us about one Ohio company that wants to look more like a startup than a smokestack.

Dan Bobkoff: Don’t tell Matt Hlavin manufacturing is dead. Thogus Products in suburban Cleveland may be in the Rustbelt, but there’s no rust here. Instead, gleaming robots do much of the hard labor while young staff work on computers and iPads.

Matt Hlavin: I wanted to create a Google of manufacturing environment.

Thogus has been around since 1950. And, for most of its history it was like any traditional U.S. manufacturer. It made money through mass production — in this case making making plastic parts for the automakers and the beverage, among others.

The economics were simple: the more you make of something, the cheaper you can sell it. But then along came China and other developing countries that could do the same work for a lot less. When Hlavin took over the company from his late mother in 2008, he realized he needed to take Thogus in a different direction. Now, it’s all about special orders, not economies of scale.

Hlavin: It’s a Burger King economy: it’s have it your way right away. Mass customization, not mass production. India, China are built for mass production.

Thogus now makes low volumes of highly-engineered products like gears with built-in lubrication so they don’t need to be oiled. His customers want help with designs and materials and creating prototypes — services that are not always feasible in China.

Hlavin: I don’t consider us a manufacturing company anymore. We’re a technology and services company.

But this new kind of factory requires a different kind of the worker. Under the mass-production model, people with limited skills could be trained to perform the same manual task over and over. With almost all production automated, Thogus increasingly needs people with high level training or college degrees.

Hlavin: We hired our first engineer. He’s actually standing right behind you. Right out of school.

When Hlavin charted the company’s new direction in 2009, he laid off half of his more traditional factory workers. The company’s staff now includes 15 engineers. But what happens to the mostly unskilled workers pushed aside by advanced manufacturing?

A few miles from Thogus, Darlene Shreffler sits in a computer class at Lorain County Community College. Until the downturn, she’d spent 18 years as a welder, working in factories. But she’s been out of work for three years.

Darlene Shreffler: I’ve been living with friends and doing what I can. It’s hard.

Shreffler says no one has wanted to hire her because her skills weren’t advanced enough. She can weld, but she can’t set up and maintain the kind of computerized equipment needed on today’s shop floor.

Shreffler: They want somebody who knows everything instead somebody who knows one thing.

Besides that computer class, Shreffler is taking pre-algebra and learning to program high-tech machinery. As more manufacturers begin to look like Thogus, Shreffler hopes she and her classmates will be ready.

But America has lost 8 million manufacturing jobs in the past three decades. Even if companies like Thogus keep the sector alive, it’s not going to bring many of those jobs back.

Ron Bloom is President Obama’s former assistant for manufacturing policy.

Ron Bloom: The aggregate number of jobs per se in manufacturing is not going to be huge. But that’s the price of a productive sector. That’s not a bad thing.

How productive? Even with a smaller staff, Thogus says its revenues have more than doubled.

In Cleveland, I’m Dan Bobkoff for Marketplace.

Ryssdal: Coming up tomorrow from Changing Gears: The night-shift gets a makeover.

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