Smaller firms try to fill manufacturing gap

Vermont Business Magazine, Jul 01, 2003 by Kelley, Kevin

Chittenden County's manufacturing sector, a key indicator of the region's overall economic health, is showing signs of reviving from a severe slump that has lasted more than two years.

The recovery is spotty, however, with only a few companies moving into an expansion mode. And long-term trends remain ominous, warns Frank Cioffi, head of the Greater Burlington Industrial Corporation.

"I'm very concerned about how globalization is going to affect the Vermont economy. We're seeing more and more outsourcing by the larger companies, especially in manufacturing, with the actual production jobs getting moved offshore," Cioffi. says.

It's the research, design and technical aspects of manufacturing that are being retained in the United States, he points out. "That's the kind of economic development that we have to nurture in Chittenden County," Cioffi says.

Globalization is actually accelerating shifts that were set in motion long ago, notes economist Art Woolf.

"The industrial job losses we've seen recently are a continuation of a pattern that's been going on for decades. With globalization, it's being compressed over time."

In 1950, Woolf says, manufacturing accounted for 40 percent of non-farm jobs in Vermont. Today, the figure is 15 percent.

Chittenden County has witnessed the loss of more than 10 percent of its manufacturing jobs in just the past year. And layoffs at a single corporation - IBM - accounted for about twofifths of that total, with the workforce at Big Blue's Essex facility shrinking from 8,000 to 7,000.

And IBM has no plans to fill any of those vacated positions, says Jeff Couture, the company's Vermont spokesman.

Local manufacturers doing well at present are those with an edge in innovation, says Cioffi. He cites the case of Ascension Technology, a Milton firm that develops motion-tracking systems for 3D computer graphics applications. Ascension last month hired the full four-person staff of Internav, a recently dissolved Essex firm that made short-range measurement devices for medicine.

Manufacturers that do extensive business-with the Pentagon have also been prospering, Cioffi observes. General Dynamics, for example, has seen its stock price rise 30 percent since midApril, compared to a 9 percent increase in the, Dow Jones Industrial Average during the same period.

General Dynamics' armament and technical products division in Burlington recently landed a $24 million contract with Sikorsky Aircraft for development of the Comanche Turreted Gun System. In April, the company's Burlington unit was awarded a $9.5 million contract option for added production of gun and guidedmissile directors and controllers.

Husky Injection Molding Systems may soon add workers at its Milton plant, Cioffi reports. The Canadian firm is awaiting a decision from the Vermont Economic Progress Council on an application for tax credits.

Husky's profits for the quarter ending in April jumped 400 percent in comparison with the same period in 2002. Husky reported $28.5 million in pre-tax earnings for the most recent quarter on the strength of a 41 percent increase in sales as well as cost savings from job cuts made last year.

While a round of hiring at Husky would provide an important psychological boost, it would only begin to rehabilitate the Burlington area's badly damaged industrial base.

Still, some forecasters are dropping hints of optimism.

Allen & Brooks, the real-estate analysis firm based in South Burlington, predicts a nearly 3 percent growth this year in the amount of industrial space in Chittenden County. That rebound from last year's near-zero level "reflects the anticipated expansion of existing Chittenden County businesses and is an indication of increased confidence and economic activity," the researchers say in their latest report."

Allen & Brooks also finds "a dramatic improvement" in vacancy rates for the local industrial market. The current figure of 7.1 percent is close to the historical average and is down sharply from the record levels reached last year. But much of the improvement results not from an expansion in manufacturing activity but from the conversion of a single large industrial space. The property in Essex that formerly housed Champion Jogbra and Tensolite is to become the site for the Chittenden County Regional Technical Academy.