February 28, 2010
In manufacturing, the niche is where it's at
The Richmond area's manufacturing economy is down, but not out.
Even as the recession has delivered punches to industry sectors ranging from paper and packaging to high-tech electronics, the region has seen some investments in manufacturing, particularly in smaller, niche markets that have weathered the economic storm fairly well.
Other entrepreneurs are trying to find ways to salvage new opportunities from what has been lost in manufacturing.
One example of that is in Ashland, where Howard Hager and a group of former employees of the Reynolds Metals Co. and Alcoa Inc. manufacturing operations in the Richmond area have started their own business, Hanover Foils.
"We are essentially starting from scratch," Hager said. The startup company has set up operations in a former Philip Morris USA product development facility on Hill Carter Parkway.
Production machinery was moved into the site in January, and the company began production earlier this month making packaging for customers such as the confectionary and pharmaceutical industries.
Hager and other Hanover Foils employees were part of a wave of people who lost jobs at the Reynolds Packaging operations in early 2009 when the company closed its downtown Richmond aluminum foil plants. The decision to close them came after the local businesses, which had been owned by aluminum maker Alcoa since 2000, were acquired by a New Zealand-based investment firm.
Hager said he has received numerous calls from former Reynolds employees interested in working for the new company.
"We have got so many qualified people who have been in the business for many years and now they don't have jobs," he said. "People that I never expected have called me about jobs."
The hundreds of job cuts at Reynolds were among several major losses that have hit the region's manufacturing base during the recession.
The Virginia Employment Commission reported in January that manufacturing employment in the Richmond metropolitan area was down by 3,300 jobs, or 8 percent, from the end of 2008. That sector directly employs about 7 percent of the local work force, though its economic impact extends much further through the supply chain into the service sector.
Yet since early 2008, the Richmond metropolitan area has had new investments in manufacturing worth about $414 million, expected to create about 1,565 jobs, according to Virginia Economic Development Partnership records of major job announcements. Many investments have come from small to medium-sized firms. The average announcement was about 46 jobs.
Food processing, for example, is one industry sector that has gained some traction in the area.
Will Davis, Chesterfield County's economic-development director, cited several manufacturing-related expansions that were announced in 2009. Those include packaged-foods maker Maruchan Virginia Inc.'s announcement that it would invest $18 million to open a new product line at its Chesterfield plant, creating 50 jobs. Refrigerated food display case maker Hill Phoenix also announced a $9 million investment to expand its operations in Chesterfield.
"Our manufacturing base in the Richmond region is very diverse, when you think about what is made here," Davis said.
Sabra Dipping Co., a maker of kosher packaged foods, has completed work on a new factory in Chesterfield that is expected to employ 250 people.
"We have progressed very well," said Meiky Tollman, Sabra's executive vice president and the plant's director. Plans now call for a late spring start of production, and Tollman said the company's market is holding up well. The company serves a niche, but growing, market for kosher, vegetarian foods.
At Hanover Foils, Hager and other employees are courting customers in the food, confectionery and pharmaceuticals industry who once bought packaging from Reynolds.
"As soon as I got out [from working at Reynolds], I started looking for investors" to start up a new company, said Hager, who started as a machinery operator but eventually became a supervisor at Reynolds.
"For six months, I went up and down the East Coast looking for and meeting with potential investors. I had three different investors at different times that wanted to fund it."
For various reasons, however, those investors fell away. Finally, in the summer, Hager found a local investor who was able and willing to help finance a startup manufacturing company.
Local economic developers say future growth in manufacturing likely will come from smaller factories, many of them serving niche markets and employing smaller numbers of people than the large-scale manufacturing of 20 to 30 years ago.
"I think that is where we will see the growth, mostly in the niche manufacturers," said Marc Weiss, Hanover County's economic-development director. "It's people who are making high-value products that cannot be made overseas for a variety of reasons."
The Greater Richmond Partnership, a regional economic-development group, has about 438 manufacturing prospects in its database, out of 1,500 total prospects. Of those, about 68 of the manufacturing firms are considered active prospects, meaning they are considering locating in the region and either have visited the area or soon will.
The trend has been down because of the economy, said Greg Wingfield, the partnership's president. But some of the more promising sectors include aerospace-industry firms that are looking at the area because of Rolls-Royce's planned investment of more than $100 million for an aircraft engine components plant in Prince George County.
Alternative energy, medical devices and food processing also are strong sectors within manufacturing, Wingfield said.
When a recovery comes in manufacturing, the types of jobs that are created are likely to be different from those of past recoveries, he said.
"I think it is going to be different in that there will be fewer people hired back," Wingfield said. "We are talking about a more productive kind of manufacturing, and more capital intensive, so you will have more equipment and machinery with less people doing the work."
"I think there will be more diversity in the job requirements, with one person doing a couple of different aspects of the job," he said.
That type of scenario seems to be developing at Hanover Foils, which has no plans to employ the kind of work force that Reynolds once had in the Richmond area. Instead, Hager said the company is drawing from among the most talented and experienced of the labor force. About 10 have been hired so far.
Carol Graves, a chemist who worked as a packaging scientist for Reynolds and Alcoa for more than 30 years, joined Hanover Foils to operate its packaging testing laboratory.
"This is probably the one place where I can put to use about everything I learned in 30 years at Reynolds and Alcoa," Graves said. "We know what can go wrong, so here we have an opportunity to do it right."