Manufacturing.

• Position: Industry Outlook - Interview - Company overview

Some manufacturing companies have endured during the slowdown, while other leaders are bracing themselves for an even slower year throughout 2010. Experts say finding skilled workers is essential to maintaining industry strength. Our group of manufacturing leaders also discussed helping Utah's homegrown manufacturing companies, promoting the industry in K-12 education, and international threats and opportunities.

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We'd like to give a special thank you to Lew Cramer, president and CEO of World Trade Center Utah, for moderating the discussion, and to Holland & Hart for hosting the event.

PARTICIPANTS:

Standing: Pratap Khanwilkar, WorldHeart Inc.; Donald Blohm, Mity-Lite; Jeff Alexander, Alexander's Print Advantage; Nate Brown, XanGo; Miguel Rovira, Governor's Office of Economic Development; Steven Johnson, Wencor; Jon Bensen, ZAGG; Marlon Snow, Board of Regents; Diane Williams, Companion Systems; Charley Johnson, SnugZ USA; Bryan Welton, Namifiers; Richard Thomsen, Bank of American Fork; Josh Randall, Holand & Hart; Todd Brightwell, Economic Development Corporation of Utah; Ragula Bhaskar, Fatpipe; Wayne Stewart, Promontory Management Group; Frank Ruiz, international Armoring Corp. Sitting:Lew Cramer, World Trade Center Utah; Tom Dickson, BlendTec; KC Ericksen, Orbit Irrigation; Dave Sorensen, Manufacturing Extension Partnership

How has today's economic environment impacted Utah's manufacturing industry?

THOMSEN: 2009 was an interesting year, and we're glad it's done with. I'm starting to see financial statements from manufacturers that are customers of our bank and over the past 12 months there's been a general slide in their abilities, generally speaking. I believe the good news and the positive news that we're now hearing from our customers is that a lot of them are having very strong orders, so I think there's a lot of good news for the manufacturers from what we're seeing from our customers.

As most know, banks have not done a very good job in managing themselves. For a bank to be strong, it needs diversification in its assets. So if one sector of the economy fails, a bank will not be in a funk because the other sectors are strong. So as a manufacturer, I think you should be seeing a lot of support from banks because they're needing more diversification.

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BRIGHTWELL We [EDCUtah] are busier than we've ever been regarding inquiries about business expansion and relocation to the state. We were expecting things to dip for us during fall of last year or at least to level off, but it hasn't--the pipeline is very full. The interesting thing about it is it's very full on the front end of the pipeline. We haven't been as successful as getting things across the finish line, but the interest is there. A lot of companies are doing their due diligence. They are spending the money to come here and we sense that they're getting in line for what is hopefully a little stronger economy in 2010 to start making decisions. We think we're poised very well here in Utah. I think that's our key lead punch and why companies are looking at Utah--because it's stable and it's solid, but also we have a low cost of doing business that is very helpful. But what is resonating more than anything is that we're a very well run state, and the ability for us to rebound out of this is looked at nationally as being very positive.

BHASKAR: From a tech perspective, many of the technology companies tend to invest forward in new projects. And what they did the last year and a half was cut back on some of the highly risky projects and also cut back on some of the marketing, making profitability go up in the tech sector. The top rank sales are not as high, but from a profitability perspective, it's done very well. And then from a financing perspective, most tech companies are equity financed, with not a whole lot of bank financing involved, therefore, they're being largely unaffected by the banking crisis. And if you look at some of the technology companies, they always have a lot of cash. So many of the technology companies have been able to acquire the weaker ones that have not been able to get equity funding from the venture capital.

KHANWILKAR: From our [Worldheart] perspective, we are selling as much as we can make. We've doubled our manufacturing staff and clinical trials. Now we are manufacturing and it's a good position to be in. Medical device companies definitely need much more funding than even tech companies do and they take longer to get to profitability. So the good thing is even during clinical trials we're generating revenue now because our devices are being bought even during trials.

BLOHM: We supply the hospitality industry and other industries that were hit pretty hard by the downturn. A while back we decided to create our own economic recovery with two initiatives. The first is to develop innovative products. The second is to focus on improving internal production and processes so that we can compete. In doing that, we've actually been successful in bringing a number of jobs back from offshore sourcing and found that the benefits we get from inventory management, from scheduling, from flexibility to customize our products to customers' needs, in addition to the fact we can compete on labor costs is quite encouraging. Oftentimes we think that the gap between foreign-sourced products and domestic-sourced products is big, but it really isn't that big. My idea is if we can match up offshore sourcing needs with Utah companies that can supply those needs and work to narrow' that gap, it doesn't seem to be a challenge.

SORENSEN: Along that line, one issue is why is Utah perhaps more competitive in manufacturing? I say fortunately we're not dominated by a single industry. It's not just aerospace or just automotive. I think that diversity is very fundamental. The thing we need to be concerned about is making sure that we maintain a critical mass in manufacturing. We don't let it get so small that it can't sustain itself.

CRAMER: That's not only a Utah problem, that's an American problem because when you lose your core, you lose everything else around it--the accountants, finance, everything else is at risk.

SORENSEN: Over the last decade, the percent of employment as part of the Utah economy that is in manufacturing has remained the same. But as a percent of the economy, we've gone from 12.4 percent down to 8.9 percent over a decade. That represents a loss. If we had just stayed at 12 percent of the economy, there would be over 50,000 more jobs in...