In the 21st century, Wisconsin’s economy is again being built on agriculture, mining and manufacturing.
Wisconsin’s traditional economic triumvirate, which were ballyhooed as weaknesses a decade ago, are once again emerging as the backbones of the state’s economy.
After years of struggles, the farm economy has been booming in the past year with increased exports, higher commodity prices, more efficient farming techniques and a weakened U.S. dollar that makes American crops more affordable for foreign countries. That success drives economic benefits statewide — one in 10 Wisconsin jobs is now in the food industry.
The Badger State was named for its mining roots, with active copper and iron mines starting in the 19th century, and one copper mine operated in Ladysmith until 1997. While the state currently has no metallic mines, several companies are digging for frac sand used in oil and natural gas drilling, and a proposed iron mine in northern Wisconsin would create an estimated 700 direct and 2,000 related jobs.
Manufacturing has been essential to Wisconsin’s economy since the mid-1800s and at one time accounted for more than half of the male employment in Milwaukee, according John Gurda, a Milwaukee historian.
Today, several leading local manufacturers are undertaking massive expansions and creating hundreds of new jobs. Milwaukee’s PMI (Purchasing Managers Index), used to measure manufacturing growth, has been on an upward trend for several months. The seasonally-adjusted January PMI was 58. Any number above 50 indicates growth.
Growing manufacturers have absorbed more real estate in the region. The region’s industrial space vacancy rate fell from 8.5 percent at the end of 2010 to 7.6 percent at the end of 2011, and the market absorbed 3 million square feet of space during the year.
‘Insourcing’
Oak Creek-based locks and security device manufacturer Master Lock Company LLC has been in the national spotlight since January when its president and chief executive officer, John Heppner, participated in a national “insourcing” forum at the White House with President Barack Obama. The president then highlighted the company in his State of the Union Address.
Master Lock moved about 900 of its 1,200 production jobs to China and Mexico in the late 1990s, but has brought back, or “insourced,” more than 100 of those jobs from China since mid-2010.
“A few weeks ago, the CEO of Master Lock told me that it now makes business sense for him to bring jobs back home,” Obama said in his State of the Union Address. “Today, for the first time in 15 years, Master Lock’s unionized plant in Milwaukee is running at full capacity. So we have a huge opportunity, at this moment, to bring manufacturing back. But we have to seize it.”
Over the past 12 years, Master Lock has added about 150 new jobs as it expanded its product line into the industrial, automotive, storage and electronic access control safety markets. The company now has 1,650 employees worldwide, with 412 of those in Milwaukee and Oak Creek.
“We have a very wide range, and a lot of those are markets that we entered in the last 12 years,” Heppner said. “We’ve had very strong revenue growth over the last 12 years.”
In that time, Master Lock also has retooled its plant and invested in automation to remain competitive globally, Heppner said.
Heppner sees more growth on the horizon.
“I think manufacturing’s growing — there’s no question about it,” he said. “We’ve done a lot to reinvest in our facilities to make them much more competitive than they were in the past. There’s a lot more opportunities for us to invest in Milwaukee.”
As the company invests in automation and updates its Milwaukee manufacturing plant, the company expects continued insourcing and domestic job growth, Heppner said.
‘Made in America’
North of Milwaukee, Allen Edmonds Shoe Corp., an upscale men’s shoe manufacturer in Port Washington, is using a different model to pursue global growth. The company recently licensed its first foreign retail stores in China. The company’s first retail store will open in Shanghai in late spring, and it has plans to expand throughout China, Hong Kong and Macau.
American-made shoes will be exported and sold to a growing middle class in developing companies.
Allen Edmonds also plans to add four more U.S. stores in 2012, bringing the total to 41, and CEO Paul Grangaard said revenue topped $100 million for the first time last year.
Powerful growth
Generac Power Systems Inc., a Waukesha-based backup power generator manufacturer, recently announced it will invest $8 million to $10 million to expand its headquarters and add a new technical center. The company expects to complete the organic growth-funded project by the end of 2013.
The firm is adding 400 new jobs, nearly doubling its workforce, said Aaron Jagdfeld, president and CEO. Generac currently has 550 employees and recently added a third shift at its Whitewater plant.
Generac also recently acquired Magnum Products, a light tower and mobile generator manufacturer in Berlin, Wis., and Gen-Tran Corp., a transfer switch and portable generator accessory maker in Alpharetta, Ga. Both are being operated independently, but Jagdfeld said the Georgia production may eventually move to Wisconsin.
Generac’s growth is driven by weather events such as the recent hurricane and snowstorm on the East Coast, Jagdfeld said.
“When power outages happen on a large scale, that’s certainly good for business, and it raises awareness for a lot of our products,” he said.
Jagdfeld also sees future growth potential in the residential back-up generator market.
The company aims to provide opportunities to its employees during its growth spurt, Jagdfeld said.
“These are family-supporting wages. These aren’t part-time jobs,” he said. “Growth companies like Generac give a lot of people the chance to grow along with the company.”
A spirit of innovation
Cree Inc., formerly Ruud Lighting Inc., is another Wisconsin manufacturer that is growing.
Cree is in the process of adding 208,000 square feet to its Sturtevant facility. The project should be finished in August, said Al Ruud, who founded Ruud and now sits on the Cree board of directors.
Durham, N.C.-based Cree purchased Ruud in August for $525 million. The merger allowed Ruud to combine its outdoor LED specialties with Cree’s indoor LED lighting products to lead the way in implementing the growing technology, Ruud said.
“It’s really accelerated our growth by combining the two,” he said. “The reason we’re investing in new facilities is knowing the significance of the new products that are coming out in coming months. We’re being proactive so that we can serve the market.”
The company plans to hire 469 employees in the next four years, bringing the area total to about 1,200, as it ramps up production of LED lights at the new Sturtevant building.
Reducing costs while continuing to invest in research and development efforts has put Milwaukee manufacturers such as Cree in a good position coming out of the recession, Ruud said.
“There’s a strong engineering and innovation spirit in the Milwaukee area, and I think that’s really what it is,” Ruud said. “People aren’t just sitting on their money, waiting for the economy to return. I think it’s a culture of just not accepting status quo but trying to innovate your way through tough times.”
Reinventing industry
The manufacturers that survived the Great Recession are competing in a global economy far different than their predecessors in the previous century, according to Gurda.
International competition has forced the region’s manufacturers to increase efficiency, often through automation.
MillerCoors LLC, for example, has shifted to an almost fully automated cleaning, filling, capping and boxing process for its beer that has cut down on production staff, said Dick Marcus, associate professor of finance and managerial economics at the University of Wisconsin-Milwaukee. Advances in automation have had a similar effect on other manufacturing companies.
“A risk is that the industries that Wisconsin has been good at – paper, yeast, brewing, cheese, small engine manufacturing and watercraft – will change. Wisconsin firms will need to stay flexible,” Marcus said.
Technological advances are a necessity to meet the demands of a global customer base, he said.
“You have to always be reinventing your industries,” Marcus said. “Even our farmers are producing products that are not necessarily being used in Wisconsin.”
The state has become a leader in ginseng and soy sauce production, most of which it exports to Asia, he said. Cranberries have become Wisconsin’s most profitable fruit crop, bringing nearly $300 million to the state annually.
In 2011, Wisconsin exports increased by 11.4 percent to $22 billion and agricultural exports hit a record of $2.85 billion. “One out of every five manufacturing jobs depends on exports. Surprising, nearly as much of the agricultural sector depends on exports too.”
“Forward”
Advanced manufacturing continues to be a staple in the state’s economy, said Paul Jadin, CEO of the Wisconsin Economic Development Corp.
“Manufacturing has always been critical to Wisconsin. We’re a state that has always made things and made them very well,” Jadin said.
Jadin also expects mining to be around for a long time in Wisconsin, with several companies gathering the state’s “frac sand” for use in oil and natural gas exploration and the proposed iron mine in Ashland and Iron counties.
Bob Chernow, vice president of RBC Wealth Management in Milwaukee and chairman of the World Future Society, expects more manufacturing jobs will be brought back to Wisconsin from abroad as companies commit to remaining in the state and increasing activity.
At the moment, skilled jobs are available in droves for welders, electricians and carpenters, Chernow said. The state’s doesn’t have enough qualified workers to fill all the available positions in manufacturing, he said.
In addition, the Milwaukee Water Council is helping to build an industry cluster focusing on fresh water research and technology. As fresh water becomes more scarce, manufacturers that work in the water industry are likely to succeed, he said.
State Rep. Mark Honadel (R-South Milwaukee) has been championing legislation to support the proposed iron mine. Honadel predicts the state’s economic future will once again be driven by its “trifecta” of manufacturing, agriculture and mining.
“We must once again make it, milk it and mine it to be be successful in Wisconsin,” Honadel said.
