Surviving In A Tough Sector | Machine shops that survive recession may find themselves with two-year-old problems
These days, Steve Leighton gets two or three calls every week from employees he’s had to lay off asking when they can come back to work at H.T. Machine in Webster.
Leighton, the company’s general manager, has brought the company’s employee count from about 31 down to 19 during the recession and he considers H.T. lucky to be one of the machine shops that comes out of the downturn alive.
If the economy comes back strong, Leighton will hire back to pre-recession levels. But, he predicted, “a lot of places won’t be hiring back. They have closed.”
The Massachusetts manufacturing sector has been in a tough spot for years, but made a decent showing in 2007, and even in the early part of 2008 when manufacturers warned that one of their greatest challenges was getting skilled employees in the door.
This was especially true for high-tech machine shops tasked with making tools and other products for the state’s burgeoning medical device, computer and other high-tech manufacturers.
“Right up until December of last year, everybody was hurting for skilled people,” said Jack Healy, director of operations at the Massachusetts Manufacturing Extension Partnership in Worcester.
“In December, it was like somebody closed the door and turned out the lights. It’s been coming back, but there hasn’t been a dramatic increase in people looking for help.”
Leighton said H.T. may be helped by the willingness of laid off employees to come back to work at H.T. and by the pool of laid off machinists left by companies that couldn’t make it through the recession.
H.T. specializes in making one or two specialty parts for customers, “and that has helped us a great deal,” Leighton said.
However, many of H.T.’s customers use H.T. for help with repairing or developing capital equipment, “and no one is doing anything with capital equipment now. There’s a lot of stuff on the table, but whoever’s got the final say is holding back. I wish I knew what the catalyst was going to be. At some point, people will have to make stuff, inventories are low.”
At Capacity
Esco Tool’s business model has also helped it survive the recession in better shape than many machine shops.
Unlike many machine shops, which make the components of other products, Esco manufactures and markets its own end product.
That product, though, relies on a great deal of machining. Matt Brennan, the company’s president, said it’s too early to tell if demand for skilled machinists would again outstrip supply.
“But in the meantime, if someone’s looking to hire, now is an excellent time.”
Brennan warned that companies that laid off workers in order to make it through should have done so while continuing to invest in technology. Those that did not may survive the recession, but will not survive for long afterward.
“You can’t ignore technology. You have to stay with it, even if it’s just the computer system in the office,” Brennan said.
“A machine shop, you need the capacity. When you get busy, you either send the work out to other machine shops or you increase capacity,” Brennan said.
Healy said, “we’re starting to see an increase in business” for machine shops, “which is not hard, because you didn’t have any business, but people are looking for new tools, people have deferred buying anything.”
But there aren’t enough laid off machinists looking for work to guarantee that any shop looking to hire will be able to, Healy said.
That problem is compounded by the fact that the existing workforce at small companies is about to retire. At one shop Healy deals with, the average age is about 57, he said.
“There’s still a demand for people in the existing workforce to trade their skills up, but that’s an investment, and (small companies) are reluctant to make that investment because when you’re training, you’re not producing.”
“We’ve done everything we can to retain our employees because we know the cost of replacing them,” said Catherine Phillips of Phillips Precision in Boylston.
She said the company “took advantage of down time to train our employees and become more lean through training.”
As a result, Phillips can “produce more work with the same number of employees. We remember how difficult it’s been to find talented employees in the past.”
But as Healy said, it isn’t easy to remain committed to technology investment or employee training. Phillips said “we would never have been able to afford to keep pace with technology and training without tax incentives, low interest rates and training grants.”
She said Massachusetts’ high health care and energy costs make taking advantage of such programs “critical to our success.”
She said Phillips and other machine shops will need to rehire laid off workers to meet demand, but noted that that simply won’t be enough for the long haul.
“We’re hopeful that with the increase in enrollment at technical high schools and local manufacturing programs, in addition to unemployed workers, we’ll have a talent pool to hire from.”
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