Things are looking up: Manufacturers remain optimistic as the economy begins to recover
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John Matig, president of Frontier Steel, talks about how his company survived the recession.
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Three decades in the chronically cyclical steel business should be enough time to experience every kind of business cycle imaginable. Or so Frontier Steel president John Matig thought until the recession slammed the Neville Island steel plate processor in the fall of 2008.
Steel prices plunged from 75 cents a pound to 25 cents. Orders evaporated.
"It was an avalanche," Mr. Matig recalled. "In 30 years, you think you know everything. You really know nothing."
Mr. Matig said it took the company six weeks to develop a recession plan and six more to implement it. The work force was reduced 25 percent. Salaries were cut. Quarterly bonuses, which had been paid for 20 consecutive quarters, were eliminated. Expenses were slashed. Property that Frontier owned but wasn't using was rented out.
"We cut everything but our wrists," Mr. Matig said.
Two years later, things are looking up. About half the people laid off have been recalled, bringing Frontier's work force up to 65.
Frontier shipped 5 percent more steel this year than it did in 2009, and a 20 percent increase is forecast for 2011. Phones that normally are quiet in December are ringing with customers who say business is picking up.
"I haven't been this optimistic in 2 1/2 years," Mr. Matig said.
The steel industry veteran is not alone.
Half of the senior manufacturing executives surveyed by Grant Thornton said the U.S. economy would improve over the next six months, and 81 percent were very or somewhat optimistic about their prospects.
"The manufacturing recovery is widespread and progressing at a moderate rate," said Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI.
Some of the optimism stems from the rebuke President Barack Obama and Democrats received at the polls in November. That led to the Bush tax cuts being extended for two more years.
With the tax outlook clearer, manufacturers are counting on their belt-tightening measures to expand their profit margins as the recovery gains momentum.
Zippo Manufacturing, the manufacturer of the iconic Zippo lighter, was already reassessing its costs and operations when the recession hit the Bradford company.
"We just took a more aggressive stance and posture in those areas," said president and CEO Greg Booth.
First Published December 28, 2010 12:00 am
