Minnesota manufacturers are confident about growing economy

Ultra Machining, on the northwest edge of the Twin Cities metro area, is booming again with orders ranging from surgical knee parts for aging baby boomers to parts for jet engine makers.

Sales are expected to increase 10 to 15 percent in 2017 — and for the next five years. "We are very optimistic," said Eric Gibson, president of the precision manufacturing company in Monticello.

So are most of his peers in Minnesota. Business confidence was over 90 percent among 400 companies surveyed for the consulting organization Enterprise Minnesota's latest State of Manufacturing report.

"Our customers are telling us their businesses are growing and they need more [machining] capacity from us," Gibson told an industry gathering earlier this month at the Minneapolis Convention Center. His company's sales are now $30 million to $50 million. As companies like his continue to shake off the cobwebs from the recession, they are finding that things they did to survive, like tightening up business practices and diversifying their customer bases, are now paying off. More companies also are looking to contract for parts with suppliers closer to where they are located as orders and specifications become more customized and precise.

Last year, the 215-employee Ultra hired its first full-time recruiter, 30 other workers and six apprentices. Fifteen more machinist jobs are open.

"Minnesota's manufacturers have reached a record level of optimism about their prospects in 2017," said Enterprise Minnesota CEO Bob Kill. "They are bullish on the economy, optimistic about their companies' growth potential, and less concerned about the challenges that confront them — all in record proportion during the history of the survey."

Companies' confidence has been rising as the economy has steadily improved. The Dow Jones industrial average rose 140 percent from its depth to cap 20,000 under former President Barack Obama. Since President Donald Trump was elected, the Dow has risen 14 percent, more than 6 percent in the first 100 days of his tenure.

There's solid movement in surveys across industries that business as a whole is picking up. A U.S. Bank survey this spring of small business owners in Minnesota and 24 other states found 80 percent thought their firm was strong and 20 percent planned on expanding.

Some of the optimism is certainly rooted in Trump's pro-business stances and early deregulation moves, Kill and others have said.

The energy industry is starting to pull out of the doldrums, and agriculture suppliers have been helped by diversification, Kill said. The "reshoring" phenomenon of contracting with other U.S. companies instead of overseas manufacturers was cited by 34 percent of those surveyed as a reason for more business.

Regardless of the reason, the attitude change among producers since 2016 "is dramatic. And it's across the board statewide, no matter the size or location of the companies," said survey pollster Rob Autry.

The manufacturing survey also showed the growing pains of a widening economy: concern with health care costs and the tightening of the labor force, especially outside the Twin Cities metro area. Also, estimated capital expenditure projections do not keep up with the projected growth in revenue for companies.

Still, the negatives, plus delays on President Trump's tax reform measures, have not extinguished people's upbeat attitudes, said Tom Schabel, CEO of Alexandria Industries aluminum extruding about two hours northwest of Minneapolis.

Schabel predicts 3 percent growth this year — "modest," he admits. Alexandria Industries is coming off two years of skyrocketing orders from gun and ammunition makers that have calmed after the election in what's assumed will be a gun-friendly administration.

Solar energy and electric carmakers, who are turning to aluminum to make lighter-weight frames and bumpers, are filling the gap. Schabel also is hopeful the company could see a 7 to 12 percent sales bump if Trump and Congress increase infrastructure spending from sales of road signs, highway barriers and other road equipment.

"There are just a lot of really good things brewing out there," he said. "We are hitting our budget. It just feels like there is an optimistic pull to the whole thing."

For Alexandria Industries, getting past the recession posed other challenges. The metal extruding firm struggled for years to find enough machinists and keep up with employee retirements. In 2009 it started adding assembly robots which cut production backlogs. It will spend millions this year on more automation and employee training.

Chandler Industries in Montevideo also invested. It had to diversify after the recession, having relied too heavily on oil refinery and gas customers. To fight back and grow again, Chandler bought factories with other expertise — including shops in Minneapolis, Bethel and Long Prairie — and sought new defense, medical and aerospace customers.

"Now we are expecting significant growth in 2017," said Jacque Peters, Chandler's human resources and benefits manager. "Our optimism is high, most definitely."

Defense contracts for high-precision parts for U.S. smart bombs, F-35 fighter jets and more are a big reason.

For Ultra, two new $400,000 metal milling robots, plus four more automated machines work twice as fast as the old process and will allow the company to take on even more new jobs without necessarily hiring too many new workers, which they and other manufacturers are finding hard to find.

That's a good thing, because Gibson doesn't expect the contracts to slow down or the labor shortage to loosen up any time soon.

"We are not seeing any economic indications of a recession for the next five years," Gibson said, "and so we are trying to make hay while we can."

Dee DePass • 612-673-7725