Leaders see uneven future for industry

Number of jobs likely to fall or stay flat for 1999 in Maryland economy

January 24, 1999|By William Patalon III | William Patalon III,Sun Staff

Maryland's manufacturing sector is likely to be stagnant in terms of job growth and see moderate increases in revenues and earnings this year, economists and other sector experts say.

It needs to refocus and will likely require the help of the state and local universities to do so, industry analysts say.

"It has a spotty outlook" in terms of job opportunities, said Mike Funk, a research economist with Towson University's Regional Economic Studies Institute. "Overall, we are looking for manufacturing to be flat or slightly down."

Manufacturers in Maryland employed 215,000 workers in 1982, a figure that was projected to fall to 179,000 for 1998. That total represents about 8 percent of the Maryland work force of 2.3 million people.

Two of the state's biggest manufacturers -- McCormick & Co. and Black & Decker Corp. -- should have a fairly good 1999, reaping the benefits of several years of investment in new products and streamlined operations, analysts say. But Bethlehem Steel Corp., including its Baltimore-based Sparrows Point Division, is likely to find the going tough as cheap imported steel continues to flood the country -- illegally "dumped," the company alleges.

"I think 1999 will be a very good one for American industry -- except for the very severe unfair-trade problems we're facing with steel," said Curtis H. "Hank" Barnette, chairman and chief executive officer of Bethlehem Steel.

Many small- and mid-sized manufacturers, now Maryland's bread-and-butter in the production sector, have mostly domestic customers and therefore will largely duck the so-called "Asian contagion" and the more recent financial problems in Latin American that are hurting bigger companies like Coca-Cola and Gillette.

Maryland's status as a manufacturer has "been in decline for 25 to 30 years," said Paul Engle, a manufacturing consultant with the Baltimore office of Grant Thornton LP, an accounting and management consulting business. The sector could be staging a slow but steady comeback, Engle said. State agencies are trying to come up with programs for tax incentives, technology investments and marketing that will help Maryland rebuild its manufacturing base, he said.

That's not a universal feeling. E.H. "Ted" Verdery, chairman and chief executive officer of Baltimore-based Environmental Elements Corp., said there's a perception among manufacturers that the state is not friendly to production companies. Verdery said he believes the perception is accurate.

"I think Maryland has a difficult situation from a variety of standpoints," said Verdery, whose company designs and assembles pollution control systems for factories and power plants. "Taxes and regulatory rules are key issues people look at when they're looking to locate. In states with better tax and regulatory structures, companies find it easier to establish new factories. It makes a big difference."

Verdery points to Virginia as a state that's a lot better at attracting big companies.

Maryland has "an educated work force, and I believe we have a lot to offer," Verdery said. "We need to get government and the business community working more closely together. The current appearance [is viewed] as negative."

What Maryland does have in its favor are good quality of life, a skilled-labor base of both blue- and white-collar workers and proximity to key markets such as New York and Washington -- something suppliers to big customers are seeking to improve efficiency and cut costs. That's one reason the Riverside area of Harford County has seen construction of so many warehouse and distribution centers.

Longer term, a number of experts -- Grant Thornton's Engle among them -- wonder if the state might have to redefine what manufacturing is. The state has built up a substantial base in information technology and biotechnology.

The Interstate 270 corridor has quietly developed a national reputation in the high-tech arena, and the state might want to capitalize on that by marketing and creating better working relationships between some of Maryland's universities and technology companies. Stanford University helped spawn Silicon Valley and such companies as Hewlett-Packard and Sun Microsystems. A smaller version of that scenario could play out here, some experts believe. "These are very well-paid jobs that have tremendous benefit for the entire economy," Engle said.

The public and private sectors have to help the companies already here, and technology might again be the key. Most big companies can pay for high-tech inventory control systems that link them with suppliers and customers, and for "enterprise resource planning" (ERP) systems that tie once-disparate departments like manufacturing, marketing, accounting and finance and give top executives the information they need to make important decisions. Those companies can also pay for the consultants who sometimes -- though not always -- can help them modify techniques or tactics. Those are tougher investments for small- to mid-sized companies.

Grant Thornton's Engle said it's important for these businesses to keep current, particularly because they often serve bigger companies. Engle said smaller companies can make the necessary investments if they share information through industry associations, get assistance from the big companies they do business with, or work with consultants and technology suppliers who specialize in meeting the needs of mid-sized firms.

"We have to take real, traditional manufacturing -- the way we all think of manufacturing -- and make it much more competitive -- take the waste out," Engle said.

"I think 1999 will be a very good year for American industry -- except for the problems we're facing with steel."

Pub Date: 01/24/99

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