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Washington's manufacturers are gaining strength, despite a slack national economy, partly by supplying durable goods to healthy local prime contractors including Boeing Commercial Airplanes and Paccar Inc.
But a combination of the trade advantages of the weak dollar and local companies' increasing skills in improving productivity is also helping local companies create new business niches and even reclaim work previously lost to Chinese companies.
Still, the industry has its challenges. Some local companies are affected by the sluggish domestic economy, especially those that supply the home-building market, but most say the primary problem going forward is a lack of sufficiently skilled workers.
"Here in Washington state, most of the industries and companies we're working with in manufacturing are all sitting with full order books," said John Vicklund, president of Washington Manufacturing Services, which helps manufacturers implement lean manufacturing to improve productivity.
In 2006, Washington companies manufactured $23.5 billion in durable goods, placing the state 12th in the nation, according to data from the U.S. Bureau of Economic Analysis, part of the U.S. Department of Commerce. Durable goods manufacturing accounts for 8 percent of the state's gross domestic product, compared to 7 percent nationwide.
Bowman Manufacturing Co. President Randy Bellon is among those who haven't seen a shortage of work.
His Arlington-based company makes sheet metal enclosures for several technology companies in the Puget Sound region, among other products. He expects Bowman's revenues will increase between 10 percent and 15 percent during 2008.
Like many manufacturers in the area, Bellon increasingly has turned to more efficient, or lean, manufacturing to lower his costs, make his company more competitive overseas and to reduce his need for scarce skilled labor.
Bowman brought in Washington Manufacturing Services to help his company improve its lean process, building on an initial effort a decade ago. The efficiency-increasing tool has helped the company cut inventory and wasted motion, while new-technology equipment is bringing in more automation.
"We're running more efficient, we're more productive with our man hours," Bellon said.
They have to be.
"It's very difficult to find good welders, or anybody with background in our industry," he said.
Skilled workers may be in short supply here, but the region's natural amenities, and the lure of its research universities and high-technology community, are a definite draw keeping many executives here.
Several Seattle-based technology manufacturers recently made headlines by deciding to leave Seattle, driven out by fast-climbing property values, but they weren't going far. For instance, Korry Electronics, a fast-growing company that makes technology-packed switching systems for many aircraft manufacturers including Boeing, announced it will leave its Seattle facility, moving to a new factory just 20 miles north in Everett. University Swaging, another Seattle aerospace company, is moving to south Snohomish County.
While aerospace is lead dog for the state's manufacturers, demand in several other sectors -- boats. technology-intensive machinery, even people lifts -- also is generating strong sales and backlogs. And the weak dollar is spurring that demand.
For instance, Flow International Corp., a Kent company making high-pressure Watergate cutting equipment mostly used in industry, on March 6 reported net income had tripled on strong international sales.
And Genie Industries, a Redmond company that's a world leader in manufacturing equipment that lifts people to work sites, also is growing by expanding into international markets after reaching maturity in the U.S. market.
"Capital goods, that's what we're really good at. That's what's really exportable in the world economy," said Dave Gering, executive director of the Manufacturing Industrial Council of Seattle.
Another of Washington's strengths is that people leaving established companies, including Boeing and Microsoft, tend to stick around and create new companies. And other intellectual-rich sectors, like biomedical equipment, feed off the innovation coming from medical research centers including the University of Washington and the Fred Hutchinson Cancer Research Center.
And among companies that make technology-intensive medical devices, including Philips Ultrasound, Cardiac Science and Sonosite, the trend is toward more development and manufacturing here and more companies being created, said Jack Faris, president of the Washington Biotechnology and Biomedical Association.
"I think our region will continue to be a real hotbed of innovation, in discovery and invention. I think we will see acceleration in creation of companies, and we will get a fair share of the manufacturing side," he said.
Washington Manufacturing Services' Vicklund contends that the high level of intellectual capital among many of Washington's manufacturers, which tend to make complex and expensive equipment, will be more likely to keep those companies here, in contrast with makers of consumer goods that have moved overseas.
"You can't pick these industries up and move them to the Southeast Asia, because you lose the support system, and the intellectual capital," he said. "There has to be a network of people doing similar kinds of things, who can get together and share ideas."
The region's manufacturing sector also is tied to its history and location in some unexpected ways, such as the fact that Washington state has become one of the world's leading producers of superyachts for the super rich.
This industry, with manufacturers in Tacoma, Westport, Seattle and elsewhere around the region, is built upon the skills developed by years of building and maintaining the commercial fishing fleet in the area.
While the softening economy has hurt sales of other recreational vehicles, wealthy people who can buy miltimillion-dollar yachts, many of whom are overseas, are still placing orders. And with the dollar weak, Washington-made yachts are a good buy.
While a strength of Washington's manufacturing economy is that it's so diversified, there's no way around the fact that aerospace continues as manufacturing's keystone.
And with Boeing's new 787 scheduled to enter production this year, despite repeated delays as kinks are worked out of the new production system, observers are bullish about aircraft production in Washington through the end of the decade.
"I don't think production will plateau until 2011, unless we have a major depression that makes airlines cancel orders," said Bob Toomey, chief equity strategist for EK Riley Investments in Seattle.
Toomey predicts that Boeing's production will climb from 2007's 441 aircraft to about 500 for 2010. The strongest models will be the 737, at 37 aircraft a month by 2010, and the 787, at about seven monthly.
At press time, Boeing Commercial airplanes had 3,544 unfilled orders; 61 percent of them 737s, while orders for the new 787 was the second highest, at 857.
This manufacturing strength is great news for Rick Bender, president of the Washington State Labor Council. Calling from a labor meeting in Denver, he said Washington's looking good.
"It looks like we're going to be going real strong in manufacturing in aerospace industry, for the next several years, or longer," he said. "We've been adding jobs to the state economy, while other states around the country have been losing jobs."
Bender's focus is the welfare of workers and unions, and he said Washington's robust economy is a major reason why the state has risen to fourth in the nation for "union density" of workers. The state was ninth in union density in 2000, according to the New York-based Labor Research Association.
And with Boeing's machinists rebounded up to 23,000 members, after a low of 14,000 several years ago, Bender supports the idea of a major push to organize non-union aerospace suppliers in the next few years. He estimates unions could add up to 70,000 aerospace members by unionizing relatively low-paid aerospace suppliers in the region, a goal he contends is doable given the bulging order books for most aerospace suppliers here.
Aerospace workers are the single largest group manufacturing "durable goods" in the state this year, up to about 84,000 workers, according to data released by the state Department of Employment Security.
But increasing productivity means that the number of aerospace workers will slowly decline to 80,000 by 2009, and 75,000 by 2014, said Evelina Tainer, chief economist for the department.
But Tainer contends that this employment slide, in the face of strong demand for state companies' products, means that companies here will become more competitive.
"As long as we do continue to make productivity enhancements here, it bodes well for firms that are producing well," she said. She added that the weak dollar is another plus, making the state's exports cheaper, and competing imports more expensive.
Employment Security predicts that the state's overall employment in durable goods, now about 215,000, will slowly decline to 210,500 by 2014, at least partly due to the increases in efficiency.
"We know there are tough times coming," said Washington Manufacturing Services' Vicklund. "But we're busy and have lots of business, and one of our main problems is we can't get enough people to take care of the work we could get if we wanted it."
Vicklund said that many of his organization's clients are companies that are finding it hard to hire skilled workers, but are discovering that productivity improvements can make this manageable.
"What they're finding is that as a result of doing it the workers they have are more productive, and without working harder, are able to do more output," Vicklund said. "That's giving them some breathing room, in not being able to find the skilled people they want."
