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Manufacturing-job losses hobble Western Maryland economy

HAGERSTOWN — Consumers buy less. Manufacturers make less. Shippers ship less. Hammered by the Great Recession, Western Maryland is still reeling.

Sam Griffith, owner of National Jet Co. Inc.

Nearly four years after the economy headed south, unemployment in Allegany, Garrett and Washington counties remains far higher than the state average. Beleaguered business owners and economic development officials wonder when the region will ever catch a break.

“We live in a totally different time now than we have ever had before,” said Jim Ward, president and CEO of D.M. Bowman Inc., a logistics company based in Washington County. “You have to plan for the unknown, all the time.”

The computer screen in his office shows 330 red, green and blue triangles crowding the Eastern United States. They represent the last stops made by Bowman’s trucks, carrying raw materials and consumer goods from ports to warehouses and from factories to stores.

Before the recession, that screen would have shown nearly 400 triangles —about 70 more tractor-trailers on the road.

“We’re really waiting for the national economy to recover,” said Tim Troxell, executive director of the Hagerstown-Washington County Economic Development Commission. “We’re waiting for people to buy things again.”

Sam Griffith needs them to buy cars and houses.

Griffith owns National Jet Co. Inc., a Western Maryland company founded 74 years ago.

At a factory outside Cumberland, the company makes small, precise holes in steel parts that are used in racecars and satellites and in machines that make artificial turf and carpet fibers. Calls and orders have slowed since the debt-ceiling compromise in Congress and the subsequent downgrade of the nation’s credit worthiness, Griffith said.

Higher interest rates hurt the manufacturers that buy from National Jet, and worries about consumer confidence make them wait longer to order parts.

“You wake up in the middle of the night and you toss and turn. From 3:30 to 5:30 this morning, I couldn’t get to sleep,” Griffith said last week. “All the little things are adding up. I’ve got a person I was thinking about hiring, but now I’m not sure I want to hire him or not.”

Before the recession, carpet fibers made up about 40 percent of the company’s business, with most of that carpet going into new cars and homes. Griffith said he considered layoffs and came close to furloughing his 25 employees twice as the recession dragged on and the factory sat idle.

“We repaired machines. We had guys painting the floor, painting the building, actually outside spreading mulch and filling potholes,” Griffith said. “We did everything maintenance-wise we could do to keep them busy and avoid layoffs.”

Other companies in Western Maryland have not been so fortunate.

Huge losses in manufacturing

There are no major academic or military complexes, no biotech corridors humming with promise in this part of the state.

Here, where the land is cheap and available and Interstates 68, 70 and 81 send ribbons of asphalt into the Midwest and up and down the East Coast, the economy is heavily dependent on manufacturing and logistics.

Here, the Great Recession hit hard, buffeting Western Maryland with factory closings, downsizings and furloughs, bleeding the region of precious jobs.

Rayloc, which made auto parts, closed its Hancock plant and laid off 260 in 2008. Fujifilm USA Inc. eliminated 125 jobs in Williamsport that year. Teleflex Marine laid off 93 the following year and in 2010, Northrop Grumman Corp. cut 233 jobs in Hagerstown.

Those blows came as part of a decades-long slide for manufacturing in the region, headlined by major losses like the Kelly-Springfield Tire plant, which at its peak employed 2,000 people, before closing in 1987.

The state lost a total of 5,000 manufacturing jobs in 2006 and 2007, the years leading up to the recession. It has lost 18,000 since. Of those 23,000 lost manufacturing jobs, 3,500 came from Washington County alone.

With less than 3 percent of the state’s population, the most populous Western Maryland county has accounted for 15 percent of Maryland’s manufacturing-job losses since 2006.

Surviving with technology

Ward, the trucking executive, said his company saw the first signs of the slowdown in 2006 when shipments started trending downward.

Bowman, founded in 1959 and still family-owned, cut the size of its fleet as the downturn deepened. The company, which had 400 trucks and Midwest growth plans, became one with 330 trucks, expanding more cautiously and closer to home.

Slack demand for shipping services drove rates down by more than 10 percent, Ward said. With less revenue coming in, Bowman couldn’t offer as much to new drivers; this became one of several factors that made it difficult to find qualified drivers.

Bowman laid off a handful of back-office employees while its competitors were failing.

“It was one of those times when you step back into your organization and look at how you’re doing things, where you’ve overlaid technology, what type of internal personnel you really need to be able to affect your ongoing business,” Ward said.

Bowman invested in technology during the downturn. One new computer system allows the company to make fuel purchases more wisely — and more cheaply. Another tracks trucks by satellite to alert managers if drivers drift off-route.

Griffith, too, has spent on technology at National Jet — some $660,000 since the recession began, including automated hole-drilling machines that don’t need constant attention from workers. Instead of one employee for each machine, each National Jet worker can now monitor up to four machines drilling complex patterns of holes.

And with high-speed, wireless Internet that Griffith plans to bring to the factory, workers will be able to monitor their machines from home as they continue drilling holes overnight.

A new reality

Bowman and National Jet reflect a new reality in the business world.

“Companies will first invest in improvements to their technology and plants,” said Troxell, the Hagerstown-Washington County Economic Development Commission chief. “Then when they see that investment makes sense, they’ll hire somebody. I think that’s the reverse of how it was 10 years ago.”

That drag on the labor market is compounded by companies hoarding cash to protect against government budget cuts, policy changes and economic upheaval, said Memo Diriker, a Salisbury University economist.

“There’s an ongoing reduction of labor as a percentage of overall expenses and an increase in cash positions,” he said. “We’ve never seen so much cash doing nothing, essentially.”

With so much cash tied up in corporate balance sheets, would-be entrepreneurs have access to less.

The Tri-County Council for Western Maryland runs a gap-financing program for new and expanding businesses that works in conjunction with bank loans and federal loan guarantees. The council has closed two deals this year, down from a peak of 10 in 2006.

“There are a lot of inquiries,” said Guy Winterberg, the council’s assistant director. “There just aren’t a lot of people who have the cash to go to the bank to get the loan so that we can get involved.”

Many lack start-up capital because their homes, often the collateral for loans, have been devalued in the real estate bust.

Just in case

Washington County became one of the fastest-growing counties in the state before the recession as suburban dwellers moved there and commuted to work in Montgomery County and Washington, D.C., Troxell said.

But that trend has slowed, and the slower pace of building in and around Washington has hurt Western Maryland contractors.

Troxell hopes that growth in Montgomery and Frederick counties picks up again and spills west, and that sectors like health care and financial services remain relatively strong.

Washington County Health System is the largest employer in the county with 2,860 employees. Citigroup Inc. and electronic payment processor First Data each employ more than 1,900.

The Hagerstown/Washington County Industrial Foundation is planning a high-tech and biotechnology park to lure the types of companies that fueled Montgomery County’s strong growth.

But industrial parks take time. And while business executives like Ward and Griffith say they don’t expect to see another recession, they are moving very cautiously, just in case.

Just in case consumers don’t come back and factory orders falter. Just in case there aren’t enough car parts, concrete and steel to fill the trucks on the road.