Entrepreneur aims to help Iron Range add value at home

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In the 1976 Johnny Cash classic, “One Piece at a Time,” the song’s narrator steals a car part each day while employed at a General Motors factory in Detroit. After 25 years he has enough parts to make his own Cadillac, though it ends up looking a bit strange due to the variation in model years.

Stealing from your employer is always wrong, but this nicely illustrates of the concept of value-added production. A more finished product holds higher value than a less finished product. The company would never let Johnny steal a car, but “GM wouldn’t miss just one little piece, especially if I strung it out over several years.”

Unfortunately, at $104 a ton last week, iron ore is too heavy and unrefined to be worth stealing. You can scoop up a handful along the railroad tracks and no one will say boo. That’s why my miner grandpa took extension cords instead.

There’s money to be made harvesting crops, trees and ore, but much more in the finished products those commodities become. With Minnesota’s natural resource industries, that’s generally something that happens far away, sending money out of the communities that provide the raw materials.

The manufacturing heft in Minnesota comes from Minneapolis and St. Paul, and a few other regional centers. Today, only about 9,100 manufacturing jobs — about 2.8% of such jobs in the state — are in the northeast, according to the Minnesota Department of Employment and Economic Development.

In 2023, the last year that data was available, the number of manufacturing jobs in the region climbed above pre-COVID levels. This reached totals not seen since the recession of 2008 and 2009, creating high labor demand unusual to the region.

The change in presidential administrations and a burgeoning trade war with nations both near and far will likely affect this recent growth, but entrepreneurs outside the Twin Cities still see opportunity in manufacturing.

Unfortunately, they also experience frustration.

“I thought there would be [manufacturing] infrastructure here, but I was horribly mistaken,” said Jason Wobbema, CEO of Advanced Machine Guarding Solutions, which opened for business four years ago in the Iron Range town of Hibbing.

I followed Wobbema on a tour of his small factory floor, each area humming with robotic equipment that he and his staff built themselves.

The infrastructure he’s talking about isn’t just bricks and steel, though Wobbema said he struggled to find suitable production space at first. Rather, this Iron Range native, who traveled the world building robots for big companies, found he couldn’t easily raise local capital despite a proven business model. AMGS is one of only two companies in America that make the durable guards and fencing for factory and mill automation.

“You need to be a millionaire to start a manufacturing company,” said Wobbema.

Or you need investment capital, which he found slowly. Without local investors, he was looking elsewhere.

“Every investor asks, why the Range?” said Wobbema. “They’re not here to make wealth for the community. They’re not here for Hibbing.”

Despite the headwinds, Wobbema’s company is expanding this summer to a new, city-owned building as it scales up production. Construction of the $9 million Hibbing facility was aided in part by Iron Range Resources, a local state economic development agency funded by taconite production taxes.

In the past, Iron Range Resources, often known by the acronym for its governing board, the IRRRB, stepped into controversy by tinkering with long-shot private developments. That’s something present leadership is now careful to avoid.

“We’re not a bank, but we do work with banks,” said Ida Rukavina, commissioner of Iron Range Resources. “There’s a balance of wanting to be there in the most flexible way possible but also recognizing how we’re handing taxpayer funds and making sure we’re responsibly using those funds.”

The agency’s caution and due diligence are merited, but they also show the perils of relying on government agencies alone for business development. Venture capital must come from some of the local people who own the fancy lake houses, too. A homegrown manufacturing renaissance will take home-raised funding.

Wobbema tries to spread his success around. AMGS only uses steel made by Cleveland-Cliffs and U.S. Steel, the two companies that employ union labor on the Iron Range. Relying on steel from those two companies is more expensive, Wobbema said, but AMGS makes up for the costs by building its own automated equipment from scratch rather than buying it.

“We can compete on technology and talent,” said Wobbema.

The company employs 19 people, up 10 since the beginning of this year. Wobbema said this kind of small-scale success is more typical of the companies that will succeed in places like Hibbing.

“We’re not a job shop,” he said. “We’re competing on a global level. We’re going to generate wealth here. Not as many jobs, but wealth in good-paying jobs.”

Northeastern Minnesota might look to northwest or southwest Minnesota for historic examples. Manufacturing is a slightly bigger chunk of the economy in those regions, mostly because of the food and machinery sectors. Processing farm goods and building the machines that harvest them represent a logical extension of the local farming economy.

State labor statistics show that greater Minnesota has available jobs; it just needs people to fill them. Paradoxically, that’s why Wobbema’s company, Advanced Machine Guarding Solutions, is doing so well. It builds protective supports for automated machinery. Think of the caging that would prevent a human worker from being mangled by a factory robot. Wobbema’s customers are people who have abandoned large human workforces in favor of fewer, more technically skilled workers who run automation.

From 1980 to the present, Iron Range mines lost two-thirds of their workers, mostly due to automation and other production efficiencies. Those mines still produce the same amount of ore; they just do it with fewer people. (Cleveland-Cliffs announced last week that it was temporarily idling plants in Hibbing and Virginia, Minn.)

To stabilize the economy in places like this, more of the value-added production — including manufacturing – has to come home to where the metal began. Same for wood products. Same for agriculture.

To foster manufacturing growth in places like northeastern Minnesota, and rural Minnesota at large, you need two things.

First, you’ve got to support good ideas from people with vested interest in the communities, including existing business owners, entrepreneurs from the area and passionate new residents. We shouldn’t pick winners, but we can make it easier for people who have marketable ideas.

Second, you’ve got to plan strategically for change. No local official should be surprised by trends like automation, AI, trade policy or scrambled supply lines. Rural Minnesota’s future depends more on adjusting to change than it does remembering the past.

In fact, the best economic plans for manufacturing (or anything else) anticipate what towns will be doing in the future. Rural Minnesota must build value on top of old economic footings. Leadership might come from government, but it might just as easily, perhaps even preferably, come from local investors willing to remanufacture the prosperity that launched past success.

At the heart of it all, people with good ideas and a commitment to the community stand as the most valuable assets of rural Minnesota.