Government & Politics  June 18, 2019

Manufacturers worry about tariffs, labor force

FORT COLLINS — Some of Northern Colorado’s leading manufacturers are fretting over finding qualified workers and a global supply chain changing around the rise of tariffs.

From left, Flood and Peterson president Brett Kemp, Otterbox COO Kyle Pettine, Plante Moran partner Chris Otto, Noffsinger Manufacturing CEO Dean Herl, Forney Industries CEO Steve Anderson, In-Situ Inc. CEO John Pawlikowski, Eldon James CEO Marcia Coulson, Vestas VP and general manager Hans Jespersen, Front Range Community College Advanced Technology Center director George Newman, Plante Moran partner Tim Weed, Plante Moran partner Mike Grell, Walker Manufacturing CEO Bob Walker, Aleph Objects president and CEO Grant Flaharty, Elevations Credit Union business banking relationship manager Nadine Trujillo-Rogers, Advance Tank CEO Jim Clay, Carestream Health site manager Chris Schmachtenberger. BizWest/Dan Mika.

The 11 executives from Front Range companies gathered for a BizWest CEO Roundtable on manufacturing echoed worries from companies across the United States over President Donald Trump’s tariff policies.

Among the largest complaints of the tariffs is that materials producers abroad pass on the added costs of materials to manufacturers in the U.S., which then have to figure out how much of that cost they can pass onto customers and how much they have to absorb themselves.

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Steve Anderson, CEO of Forney Industries Inc. in Fort Collins, said many of his accounts, including national retailers, are pressuring their suppliers to take the tariff hits themselves.

“They’ve been very reluctant to take on the tariffs; we didn’t have a choice but to actually pay the tariff pricing … they push back on it, and they don’t accept it,” he said.

There’s also confusion about how uniformly the tariffs have been applied to various industries. Grant Flaharty, president and CEO of Aleph Objects, said his company’s 3D printers face tariffs at Chinese ports, but the U.S. hasn’t applied duties to Chinese-made printers coming into the U.S.

“All these [Chinese printers] are flooding the market, and they’re very very cheap… and a lot of people buy those for their houses and ruin the market,” he said. “If you’re going to put stuff on, that’s the kind of thing you want to try and do.”

The inequity of tariffs aren’t just between the U.S. and China. Walker Manufacturing CEO Bob Walker said his company’s lawnmowers are exempt from a Canadian tariff because it includes a power unit, while some of his competitor’s mowers incur the penalty.

“In a way, it’s not fair, but that’s one of the things to try and come up with avoiding tariffs by describing tariffs and avoiding exemptions,” he said.

The speed and unpredictability of how the Trump administration has made tariff announcements has also caused headaches for companies trying to make the most out of their supply chains. Kyle Pettine, chief operating officer of Otter Products LLC, which does business as Otterbox, said companies have adapted their global sourcing methods to the realities of tariffs, and a truce in the trade war won’t necessarily provide immediate relief.

“It’s like getting on a road with a divider on it; you get onto a certain direction, and it takes a while to get turned around,” he said. “So if I commit major resources to go somewhere else, the fact that suddenly everything’s fixed with China doesn’t leave me on the correct side of the street.”

During the meeting, Trump tweeted that he planned to have a long meeting with Chinese President Xi Jinping at the G20 Summit next week over trade, while the two countries will meet beforehand.

Some of the executives dismissed the news, saying Trump had made mentions of improving relations with China and other major trading partners in the past without much result.

“I thought a while ago that this was going to be behind us,” said Dean Herl, CEO of Noffsinger Manufacturing Co. in Greeley. “Who knows [on the talks], maybe, maybe not, but I’m not going to get my hopes up.”

But at least one executive found a silver lining from the tariffs. Jim Clay, CEO of Advance Tank in Wellington, said he tries to buy as much domestic steel as possible. Trump’s tariffs have increased the prices of Chinese steel closer to that of American steel.

“The tariffs did bring that up to a sustainable level for the steel mills, so that whole industry seems to be more healthy, and that helps us because then we get way more consistent pricing,” he said.

Marcia Coulson, CEO at Eldon James Corp. in Fort Collins, said the tariffs are a benefit for her company. Eldon James is the only U.S. manufacturer of anesthesia circuits, so the tariffs are raising prices for imports closer to the company’s.

“What we’re hearing from hospitals is that they’re tired of the poor quality coming in from Mexico and China, and they’ll pay more to allow us pay employees more here in the U.S. to make reliable quality [circuits] and not deal with the uncertainty of the tariffs,” she said.

Finding talent, keeping talent

Hiring was the other common issue the executives have, particularly in finding younger employees who stay at the company for longer periods of time.

“I’m in the position where most of my mechanics are in their early to mid sixties,”  said Chris Schmachtenberger, site manager for Carestream Health Inc. in Windsor. “Even with the folks I’m bringing in, I have 65-year-olds training 55-year-olds.”

Others said young women could be an untapped labor pool for manufacturers.

For employers that can’t keep up with industries that can afford to pay significantly higher wages, John Pawlikowski, CEO of In-Situ Inc. in Fort Collins, said emphasizing other benefits can entice workers to stay. He said a production manager takes out the staff to stretch in the lobby twice per day and often supplies lunch.

“It’s a big part of what the management team looks at, at how to make life better working at In-Situ and how to hold onto those people,” he said. “… It’s just those extra things that people value.”

Others placed an emphasis on trying to get students involved in manufacturing early on and tapping into underrepresented demographics within the industry’s labor market.

Hans Jespersen, vice president and general manager of Vestas Wind Systems in Windsor, said women can find better base pay and benefits at a manufacturing job than in retail or other sectors, but it’s hard to dispel common conceptions.

“We just have to change the perception of manufacturing to everybody who thinks it’s a dirty place with dirty men and dirty language,” he said. “Still, I believe it’s a difficult one to overcome.”

Coulson works with the Women In Manufacturing program and other outreach programs to give school-age girls a preview of what working in the industry might look like compared to fields where the female labor participation rate is typically higher.

“It’s just shifting the way that they think,” she said.

There are some local efforts to prepare students for manufacturing careers. Front Range Community College is starting classes at its new Center for Integrated Manufacturing in Longmont in the fall, with emphasis on automation, machining, electronics and optics.

George Newman, director of the Advanced Technology Center at FRCC, expects between 150 to 200 students to enroll in CIM classes each semester. That won’t be nearly enough to meet demand, but if a recession were to occur, Newman said that may spur enrollments in technical schools and increase the number of workers in those fields, similar to what happened at the height of the last recession in 2010.

“I’m not wishing it on you guys, but if there is a slowdown, we’re going to see many, many more students and there might be an opportunity there,” he said.

BizWest CEO Roundtables in Northern Colorado are sponsored by Elevations Credit Union, Flood and Peterson Insurance, and Plante Moran.

 

FORT COLLINS — Some of Northern Colorado’s leading manufacturers are fretting over finding qualified workers and a global supply chain changing around the rise of tariffs.

From left, Flood and Peterson president Brett Kemp, Otterbox COO Kyle Pettine, Plante Moran partner Chris Otto, Noffsinger Manufacturing CEO Dean Herl, Forney Industries CEO Steve Anderson, In-Situ Inc. CEO John Pawlikowski, Eldon James CEO Marcia Coulson, Vestas VP and general manager Hans Jespersen, Front Range Community College Advanced Technology Center director George Newman, Plante Moran partner Tim Weed, Plante Moran partner…

Ken Amundson
Ken Amundson is managing editor of BizWest. He has lived in Loveland and reported on issues in the region since 1987. Prior to Colorado, he reported and edited for news organizations in Minnesota and Iowa. He's a parent of two and grandparent of four, all of whom make their homes on the Front Range. A news junkie at heart, he also enjoys competitive sports, especially the Rapids.
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