WisBusiness: Manufacturers say many factors putting pressure on profits

By Dan Polley
For WisBusiness.com

Panelists at a manufacturing summit today said rising internal and supplier costs combined with a need to seek higher margin prices have squeezed manufacturing companies in Wisconsin.

The panel featured Richard Armbrust, president and CEO of The Oilgear Co., Milwaukee; Mike Graverson, president of National Tissue Co., Cudahy; Keith Trafton, CEO of Super Steel Corp., Milwaukee; and David Reiland, president and CEO of Magnetek Inc., Menomonee Falls.

“The only way we can grow is by focusing on companies who are net exporters,” said Tim Sheehy, president of the Metropolitan Milwaukee Association of Commerce. Sheehy presented the opening remarks at the summit.

Sheehy said manufacturing was a “driver industry” for Wisconsin and Milwaukee. He said manufacturing companies make up a large percentage of the Milwaukee business community.

“They’re here in greater volume than the region would support,” he said at the Manufacturing Summit Breakfast at the Wisconsin Business & Technology EXPO at State Fair Park.

Armbrust, whose company was recently acquired by a private firm, said accounting costs put a big pressure on his company to provide “bullet-proof accounting.” He said that was one way to try to keep internal costs down.

“Our costs continue to rise and we recognize that there’s some things that aren’t controllable,” Graverson said.

He said manufacturers need to focus on prices they can control to have stability.
Panelists also said that public companies could have a harder time keeping costs down.

“So many decisions are based on quarterly results,” Graverson said.

He said privately-held companies have the ability to focus on longer outlooks because there aren’t any stockholders to call for improvements or changes after a poor quarterly showing.

Trafton said innovation is a means manufacturing companies can use to continue to improve their organizations.

“Innovation is critical to success,” he said.

Panelists also discussed their growth strategies for the coming years. While Armbrust and Trafton said some of their growth would be through increasing business overseas, both
Graverson and Reiland said their company’s growth would be through organic measures.

Graverson said a team effort is needed and relationships need to be built in order to provide a competitive product.

“It needs to be a team effort all they way through the supply chain,” he said.

Trafton said businesses need to be honest and open with suppliers — and the relationship needs to be reversed, too. He said businesses need to come together with outside groups such as the Wisconsin Manufacturing Extension Partnership to sit down and solve some problems.

He said one of those problems is making sure that skilled workers stay in the state, otherwise businesses may move to other states. Graverson said that employees need to be cross-trained in jobs so that someone can fill in when an employee is unable to perform their job.

Panelists also focused on government and what it can do at local and state levels to help out the manufacturing industry in the future.

Armbrust said the educational system in Milwaukee is an asset and that there are plenty of engineering resources, including the Milwaukee School of Engineering, Milwaukee Area Technical College and the University of Wisconsin-Milwaukee.

He said that loyalty and stability are factors that make employees in the region an asset to their employers. Reiland said the skill set of the workforce and its work ethic are also positive attributes for the Milwaukee community.

“I haven’t found a stronger work ethic than I’ve found here,” Reiland said.

While Trafton agreed that the workforce has a strong work ethic and that the Milwaukee educational systems are a benefit, he also said local government does not have a “willingness to take calculated risks.”

“I think Milwaukee is very conservative in that nature,” he said.

Armbrust said the state also needs to step up to help out businesses. “They don’t do enough to attract businesses, maintain businesses,” he said.

Reiland said he would like to see the state offer incentives to assist in new development programs.

Graverson said that the city needs to solve social issues so that the quality of life in the area can improve.

Said Trafton, “Let’s stop living in the shadow of Chicago.”