Md. manufacturers still struggling

Sector had some pluses, but lost jobs in 2002

January 12, 2003|By Gus G. Sentementes | Gus G. Sentementes,SUN STAFF

Maryland's manufacturing sector, a small but potent piece of the state's economy, will continue to struggle and not see much improvement until later this year or in early 2004, economists and analysts said.

And the 3,300 workers at bankrupt Bethlehem Steel Corp.'s Sparrows Point plant are bracing for job reductions and the possibility of a new owner.

"It still remains a very difficult time for manufacturing companies," said Pradeep Ganguly, chief economist in Maryland's Department of Business and Economic Development.

Ganguly doesn't expect any growth in state manufacturing jobs until later this year or early next year.

After steady job gains in the latter half of the 1990s, Maryland's manufacturing industry has cooled, losing 4.7 percent of its jobs over the past two years as of October, Ganguly said.

It's part of a nationwide trend that has seen the manufacturing base in many states shrink as companies continue to cut back and trim costs by moving operations overseas.

Nationwide, about 2 million manufacturing jobs have been eliminated over the past 18 months, according to the federal Bureau of Labor Statistics.

"Manufacturing will probably pick up by midyear, based on demand for products - mainly consumer durables such as autos, housing and home-related items, and defense spending, too, because of the buildup for war in Iraq," said Robert T. Sweet, chief economist at Allied Investment Advisors in Baltimore. "The problem is that America is not much of a manufacturing country anymore."

But this country is still full of hearty consumers who have almost single-handedly kept the economy afloat. Consumer spending will continue to buoy many Maryland manufacturers.

Toolmaker Black & Decker Corp., which announced in November that it is closing its Easton plant and transferring most of the work to Mexico, saw sales rise nearly 4 percent in the first nine months of the year, with net profit up 27 percent.

Sparks-based McCormick & Co. Inc., the world's largest spice maker, had a 3 percent sales gain in the first nine months of its fiscal year. Net income rose 18 percent.

At DAP Inc., a privately held Baltimore company that makes caulk and sealants for the consumer market, sales are expected to be better than last year, according to DAP President and Chief Executive Officer John McLaughlin. The company employs 350 in the state, and also has operations in Ohio, Texas and Toronto.

"People are spending a lot of time fixing up their houses; mortgage rates are at historic lows, so people continue to buy and sell existing homes at a pretty rapid pace," said McLaughlin, who declined to release sales figures. "All of that plays well for our home repair and improvement type of products."

But the future of one of the area's major manufacturers, Bethlehem Steel, remains in question. The company, operating under bankruptcy protection since October 2001, is reviewing a $1.5 billion offer for its steelmaking facilities from International Steel Group Inc. of Cleveland

Many analysts expect that Bethlehem won't see a better offer and that the deal may be the company's best chance to avoid a shutdown, widespread layoffs and a liquidation in U.S. Bankruptcy Court.

Bethlehem says it has enough liquidity to operate through this year. But Bethlehem, ISG and the United Steelworkers of America expect the Pennsylvania-based company to reduce its work force significantly to compete against leaner domestic and foreign rivals.

A slowdown in capital spending over the past two years has hurt companies that depend on other businesses, rather than consumers, for their income. Machinery and high-technology equipment builders have been among the hardest hit, analysts said.

"Anyone building equipment or machinery, particularly in the technology sector, really has been hammered," said manufacturing consultant Paul Engle of Grant Thornton LLP. "I think some companies are beginning to think the worst is over, and that although it isn't going to be a great year, it's going to be less bad than the last year has been."

Defense contractors such as Lockheed Martin Corp. and Northrop Grumman Corp. expect to do well this year, as do the smaller companies that support them.

"Whether it's materials or machining, companies that are supporting that high-tech business will continue to do well," said Robert T. Barnes, a Northrop Grumman manager and chairman of an advisory commission that submitted a report on Maryland's manufacturing competitiveness to the state economic development agency last month.

David Huether, senior economist at the National Association of Manufacturers, said he expects modest growth in the first six months of the year and a somewhat stronger rebound in the last half of 2003, in large part because that is when exports are expected to pick up again.

Overall, manufacturers are feeling more optimistic, a National Association of Manufacturers survey found, with 75 percent of large companies and 61 percent of small businesses saying the climate is improving.

"I think, in general, our members are more positive now than they were a year ago," Huether said. "But they are not as positive as they were in the 1990s."

Sun staff writer Kristine Henry contributed to this article.

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