Manufacturers more optimistic, likely to invest

2013-10-24T19:00:00Z 2014-05-02T17:16:13Z Manufacturers more optimistic, likely to investJoseph S. Pete joseph.pete@nwi.com, (219) 933-3316 nwitimes.com

Manufacturing has been rebounding in Indiana, and factory owners who had been skittish are again willing to spend toward the growth of their businesses, a new Indiana University report concludes.

A survey of the state's manufacturers by IU's Kelley School of Business found that four out of five manufacturing companies consider their businesses healthy or stable. An estimated 70 percent are actively investing in capital and labor again, while fewer than 5 percent are still cutting costs across the board, the survey found.

Indiana University, Conexus Indiana, the Indiana Manufacturers Association and the accounting firm Katz, Sapper & Miller conduct an annual survey aimed at keeping a finger on the pulse of the state's largest industry.

About half of survey participants described their manufacturing companies as "challenged" in 2009 and 2010 but now use more positive terms. A majority say they are now investing in employees, equipment and facilities to remain competitive.

The study's authors call it a manufacturing renaissance.

"Indiana remains the nation's most manufacturing-intensive state by employment and share of economic output," said Scott Brown, partner-in-charge of Katz, Sapper & Miller's manufacturing and distribution services group. "The state's economic future is inseparable from its production industries -- and we see a cautious return to investment and growth that bodes well for all Hoosiers."

Locally, air conditioning component manufacturer Tec Air Inc. is investing $7 million in new equipment at an expanded Munster location. Food-cutting equipment maker Urschel Laboratories Inc. broke ground on an $80 million expansion in Chesterton. And Merrillville-based MonoSol, which makes specialty water soluble poylmer-based films, announced a $40 million expansion at its LaPorte facility earlier this year.

"MonoSol is continuing to grow," said Matt Scearce, manager of media communications. "In the past few years, we added 100 employees and are continuing to expand."

Fronius, one of the world's largest manufacturers of grid-connected solar inverters, recently invested in a new North American headquarters in Portage. The Austria-based company plans to employ as many as 500 workers at the office and manufacturing facility by 2016.

"Fronius USA is committed to Northwest Indiana," said Wolfgang Niedrist, managing director of U.S. Sales. "We're proud of our local workforce and its commitment to quality and innovation, and we are looking forward to helping the entire area grow."

The Kelley School of Business survey found that Indiana manufacturers don't consider uncertainty regarding the Affordable Care Act to be a deterrent to investment, are starting to look beyond controlling costs and need more skilled production workers.

The overall outlook among Indiana manufacturers is now one of growth instead of retrenchment, the survey found. About 19 percent of companies surveyed said they would pursue aggressive growth during the next two years, while 29 percent said they would expand between 2015 and 2017.

"Our findings from this year's survey show cause for optimism as Hoosier manufacturers continue to invest and grow," said Mark Frohlich, associate professor of operations management at Indiana University.

About 12 percent of existing manufacturers are still actively looking for places to cut expenses, the survey found. But only 8 percent of manufacturers plan to downsize within the next four years, and only 5 percent are still slashing costs across the board.

"Manufacturers are having a good year," Frohlich said. "They probably did a little better the year before. Revenues are higher now, but profits are lower."

Energy costs and other operating expenses are climbing and eating into margins. But companies are still opting to invest in the United States instead of abroad because of automation, low energy costs, reduced shipping expenses, and rising wages overseas.

But the industry is still enjoying a renaissance after a dark age during the recession, Frohlich said.

"Manufacturing really improved in 2011 and since has been having hallmark years," he said. "But now they're really investing for growth. The future looks pretty positive."

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