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Manufacturing poised for a comeback

It appears Minnesota manufacturers are more optimistic about the economy right now than they were a year ago.

Or, at least the leaders of manufacturing businesses are "more optimistic about their own ability to weather the storm," according to Bob Kill, president and CEO of Enterprise Minnesota.

Kill spoke to a group of manufacturers and business leaders last Thursday at Douglas Machine, Inc. in Alexandria.

"Manufacturers faced a tough year in 2009, but we're seeing optimistic attitudes again this year," said Kill. "Many manufacturers might say that this recession has made them better."

The reason, according to Kill, is because the recession helped them to focus on their business and changed how they operate, driving many manufacturing leaders to innovation.

"They've seen the worst, worked their way through it and are on better footing today to drive business growth, and ultimately job growth, throughout the state," he said.

Kill presented the results of the State of Manufacturing, a major survey research project sponsored by Enterprise Minnesota and its partners, to a group of about 30 people who attended Thursday's meeting at Douglas Machine, Inc.

He explained that Public Opinion Strategies (POS), a survey research company, conducted phone interviews with 500 manufacturing executives, representing a geographically proportional cross section of Minnesota, over a two-week period in January. The research was complemented by 13 focus groups, including one in the Alexandria area - Tri-State Manufacturers Association.

Kill noted in his presentation that the average length of time for the phone interviews was 22 minutes, which he felt was impressive.

Pollster Rob Autry from POS provided the analysis of the survey. During his presentation, Kill referred to an article written by Autry, which was labeled "Sunshine on a Cloudy Day."

The results

The survey indicated that more than 26 percent of manufacturing executives polled are anticipating economic growth in 2010 and only 19 percent foresee a continued recession.

For companies with $5 million or more in annual revenues, concern about a bad economy dropped from 62 percent in December 2008 to 15 percent in January of 2010.

Kill noted that revenues and profitability are both projected to increase across the board, although the projected increases may not be that significant.

And although the outlook is rosey, Kill said there are clouds looming overhead when it comes to availability of credit.

The percentage of firms who say they experienced a constriction of credit has increased nearly three times since last year's survey - from 13 percent to 37 percent.

Nearly 30 percent of manufacturing executives indicated that credit constriction has had a significant impact on their business, compared to only 9 percent reporting the same during the last survey.

Kill explained that seven out of 10 executives indicated that they had to reach out to personal or internal cash flow to deal with the credit crunch.

"Many find it frustrating to have to find resources for credit help," he noted.

Another factor that plays into the cloudy outlook includes healthcare costs. Kill noted that healthcare costs are an overwhelming factor for many manufacturing firms.

More than two-thirds of those surveyed - 68 percent - listed healthcare costs as the highest concern, which is slightly higher than last year's 64 percent.

Not only are the rising costs a factor, said Kill, but the number of executives who said their company offers some variety of healthcare plans dropped 11 percent - from 63 percent in December of 2008 to 52 percent in January.

"Firms are not taking a more active role in key consumerism or other health initiatives," said Kill.

He also talked about the rise of "being green," noting that 54 percent of companies are doing their part to protect the environment. Kill said that it appeared smaller companies are doing more when it comes to green initiatives.

According to the survey results, exactly half of the respondents said that environmentally-friendly practices are important to their business but that they are skeptical that it adds value for their employees (24 percent) or customers (26 percent).

The survey also indicated that 54 percent of the executives interviewed said that the most important reason to "go green" is for their business to do its part in protecting the environment, while government incentives ranked very low - only 3 percent.

The bottom line, according to Kill, is that manufacturers continue to deal with healthcare woes, including costs and expenses; how the credit crunch is hitting home and has had an impact; and that sometimes, it's not so easy going green.

Full information about the survey can be found on the Enterprise Minnesota website,