Made In Michigan

After years of globalization, Michigan’s once-dominant manufacturing After years of globalization, Michigan’s once-dominant manufacturing industry couldn’t compete with countries offering lower wages, minimal labor interference, And cheap energy. But the tide is Turning as higher shipping and fuel costs, a dearth of technological skills, and rising nationalism make foreign products more expensive

By Fara Warner

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The all-new 2009 Dodge Ram goes through the assembly line at the Warren Truck Assembly Plant.

Photograph by Bill Pugliano/Getty Images

When entrepreneurs Aaron and Michelle Crumm were deliberating where to start their fuel-cell company, Adaptive Materials Inc., Michigan was at the top of their list as the place to build their 21st-century products. “Even when we were a little research and development company, we knew that we wanted to transition into manufacturing,” says Michelle Crumm, the firm’s chief business officer. “And if there’s one place that knows manufacturing, it’s Michigan. There’s a ton of manufacturing experience here, the mechanical engineers we need are here, the infrastructure [is here, and] the spaces that we need to make things.”

So the University of Michigan graduates — she has an MBA and he has a doctorate in material science — bought a former Johnson Controls factory south of downtown Ann Arbor earlier this year after landing several projects from the U.S. military. The company had about $5 million in revenue in 2007, including government contracts.

They began manufacturing prototype batches of portable fuel cells — 10 to 25 units in each run — that can power equipment such as computers and cell phones used by the military, so soldiers don’t have to pack dozens of heavy batteries. The company also makes fuel cells that run on propane for recreational use by campers, fishers, and hunters.

Next year, Michelle says the company will be well on its way to making hundreds, if not thousands, of fuel cells in a factory that used to manufacture air bags for the auto industry. Michelle says the ability to go from a few units to thousands is at the heart of why she wanted to manufacture close to home. “Michigan is the place that knows how to make millions of parts per second.” And, she adds, it has the people who know how to do it well.

“I was able to hire a manufacturing person from the auto-supplier industry who had already built out an entire facility, put the lines in, ordered the equipment, and hired the people,” she says. “People are amazed when they walk into our facility. They ask how we did it. I say we hired somebody who had been there, done that.”

“Been There, Done That”

You could easily translate that same quality to Michigan. When it comes to manufacturing, the state has “been there, done that.” For more than a century, Michigan has made the office chairs we sit on, the tables we eat off of, and the cars we drive — among thousands of other products.

But despite that depth and wealth of manufacturing knowledge and infrastructure, Michigan’s once-strong manufacturing base has been in a steep decline for more than a decade. The story of why has been told all too often. Labor and materials costs rose even as market shares dropped for U.S. firms. Many companies — notably the carmakers that the Michigan economy heavily depended on — made the decision to move manufacturing out of Michigan to other states (predominantly right-to-work states) as well as to Canada, Mexico, China, and elsewhere around the globe.

What’s more, six years of the Granholm administration has led to a cozy relationship with labor unions. Soon after
Granholm was elected, she directed that a new division, the Department of Labor and Economic Growth, run the Michigan Economic Development Corp. The move hasn’t escaped manufacturers, who routinely set up their operations in other states to avoid union influence. In turn, taxes have risen steadily since the governor took office, making it harder for companies to compete on a global scale.

The results have been all too obvious. The Bureau of Labor Statistics, as reported by the nonprofit consulting firm Michigan Manufacturing Technology Center (MMTC), estimates that a decade ago there were 888,000 employees working in 16,045 small- to medium-sized plants throughout Michigan. By mid-2007, those numbers had dropped to fewer than 631,000 employees in about 14,000 plants. The biggest decline came from U.S. automakers and their big suppliers. In 1978, those firms employed 736,000 people in the state. By 2007, the numbers had plummeted to 256,000 — about 65 percent of which occurred in the last 10 years.

Now, the tide may be turning back toward Michigan. But it has nothing to do with what’s happening in the state Capitol. Due to market factors, experts say a new manufacturing model for the 21st century is under way — one that focuses on innovation to serve many different industries, instead of depending too heavily on the auto industry.

For example, there are new companies, like Adaptive Materials Inc., that take over old factories for new production needs. Or existing firms like Detroit Chassis, which produces a variety of vehicles for automotive, recreational, and commercial truck uses, have moved operations from Mexico to Michigan. Meanwhile, Alticor (parent company of Amway) opened its Ada, Mich., plant to manufacture products for global brands and learned to compete head-to-head with outside suppliers.

In 2008, companies such as generic drug maker Perrigo, wind-turbine firm Mariah Power, and ironworks company Thunder Bay Development announced plans to expand or restart operations in Michigan. Even the auto companies are rethinking their Michigan investments. Chrysler LLC is spending tens of millions of dollars revamping its Jefferson North Assembly Plant to build a new generation of more fuel-efficient vehicles. In turn, GM recently announced plans to build an engine plant in Flint.

Their reasons for rethinking Michigan are myriad. Labor costs are rising in countries such as China, as government leaders insist that outside companies unionize their workers. Other countries have been more direct. For example, Venezuelan leader Hugo Chavez has been nationalizing industries at a record pace while encouraging the formation of hundreds of unions. But such campaigns have their limits, as Chavez recently went on national television to demand that unions rein in their newfound powers (Chavez noted that the camera operator working for the state-owned VTV was making eight times his hourly wage that day because it was a Sunday).