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Area manufacturers feel pinch from economic slump

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Perham, 56573
Perham Minnesota 222 2nd Avenue SE 56573

John Deere, Bobcat, Polaris, Artic Cat, Lund Boats, General Motors, Ford and Chrysler...brand names we all recognize.

The economic downturn is affecting each one of those brand name manufacturers to one degree or another--which is, in turn, is having a trickle down affect on the economy right here in East Otter Tail County.

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Industrial Finishing Services (IFS), with plants in New York Mills, Perham and Deer Creek, is a manufacturer that services not only those household names--but others like Kenworth trucks, Freightliner, Mercury marine motors, Lund boats, Honda and even IBM computers.

With a 20 percent decline in volume for the first quarter--from a record $13.5 million last year--IFS has laid off 30 employees, in recent days. The total workforce at the three plants is down to 120. Most of the layoffs were at the Perham plant.

IFS expansion on the drawing board

Not only has IFS trimmed its payroll, but the state of the economy has likely delayed the company's plans for a 120,000 square foot expansion of its manufacturing and warehouse facilities, according to Keith Aune, president of IFS. Aune spoke at a Tri-State Manufacturers' Association meeting, hosted by IFS March 3 in Perham.

The meeting, which was followed by a tour of the Perham IFS facility, offered a glimpse into a less-visible but no less important, facet of our globally-connected economy.

There are numerous smaller manufacturers in the region that provide products or services to larger manufacturers. IFS is one of those companies.

Parts that are painted, coated or finished at the IFS plants in New York Mills, Perham and Deer Creek are shipped around the world. China, Ireland, Canada and Puerto Rico are the destination points for IFS's foreign distribution, said Aune at the meeting, which was attended by about 30 manufacturing officials from centeral Minnesota.

Snowmobile, boat industry has impact on small manufacturers

Thirty percent of the volume at IFS is in the recreational market, such as Polaris, Lund and Artic Cat. Sales are down for snowmobiles and boats, which in turn cuts into IFS, said Aune in an interview.

Another 30 percent is predominately agricultural, said Aune.

"Bobcat makes loaders and skid steers--which coincides with the housing market," said Aune. IFS, which specializes in industrial coatings and surfaces for manufacturers, has a contract with Bobcat. If home construction is down, Bobcat is down--and ultimately, IFS is down. It's an economic circle, which impacts a complex network of manufacturers, vendors, suppliers and, in the end, workers.

Lund Boat's production cutback has ripple affect in area

Lund's layoff of about 150 workers over the past several months has a direct impact on IFS. Detroit Lakes-based Team Industries also contracts with IFS, and Team has laid off employees at its plants--including Park Rapids and Bagley.

A brief history and overview of IFS was presented by Aune, dating back to the company's 1996 start with 13 employees at its New York Mills shop. At one time, the shop was so packed, they stored materials in the parking lot, he noted. Today, the Mills plant has 9,000 square feet of manufacturing and 6,500 square feet of warehouse space.

Facilities in Perham and Deer Creek combined have more than 50,000 square feet in production, warehouse and office space. IFS also operates high tech labs for testing; and offers certain graphic arts and assembly services.

IFS optimistic but watching economic trends closely

Aune is optimistic that IFS will proceed with its 120,000 square foot expansion plans.

"We find that if we add space, we gain efficiencies in the workplace," said Aune, adding that an expansion will improve workplace productivity. The expansion would also spur upgrades and modernization of the plant, he added.

Some, or potentially all, of the 30 laid off employees may be called back in June--but like everything, it all depends on the marketplace.

"I'm hoping the economy perks up by the third or fourth quarter. I wish somebody knew when that will happen, so they could tell me," laughed Aune. "That would make it a lot easier to make decisions."

Following the breakfast meeting, Industrial Finishing Services in Perham hosted a plant tour of IFS, to view the plant's operations in powder, liquid, e-coat and commercially applied rhino coatings.

Following the tour, the group heard a presentation with Dan Eischens, Minnesota State Community and Technical College, who presented information about "Test Method Analysis."

Tri-State Manufacturers' Association (TSMA) is a membership-based organization serving manufacturers and related industries in west central Minnesota and eastern North and South Dakota. TSMA's 210 members benefit from peer networking, low cost training, plant tours, benefit programs, promotional opportunities, and more.

For more information about Tri-State Manufacturers' Association, contact Melissa Christianson at 1-800-654-5773 or melissa@runestone.net.

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