Mining & Manufacturing Industry Forum

Highlights from Forum on Mining & Manufacturing Industry
January 17, 2003 – Sawmill Inn, Grand Rapids, MN

Panelists: John Rajala, Rajala Companies; Tom Peluso, National Steel Pellet Company; Joan Hoeschen, The Bergquist Company

Panel members John Rajala, Tom Peluso and Joan Hoeschen answer questions from the audience during the JOBS 2020 mining and manufacturing forum.

Keynote Speaker: Bill Reif, Wausau Coated Products

“There are things we can’t change or control, but there are things we can do to take charge of our future. JOBS 2020 is part of that effort.” Jim Hoolihan

The fifth in a seven-part JOBS 2020 forum on creating a common vision for the future of the Itasca region was held Friday, January 17th. Panelists were asked to discuss pressing issues and current trends in the mining and manufacturing industry and the impact those trends have on their business. Panelists were also asked what their business needed from the community in order to succeed.

John Rajala of Rajala Companies and Joan Hoeschen of The Bergquist Company were panel presenters at the JOBS 2020 forum held January 17th highlighting the mining and manufacturing industry.

Industry Issues and Trends:

Forest products (Primary manufacturing):

• Consolidation into larger, lower cost mills
• Union of global producers and “big boxes”
• Migration to locations with fast growing, publicly subsidized, or less sustainable forest practices
• Fierce, innovative new product design
• Low to medium end products made in countries with cheap labor
• Negative price pressure
• Investments are needed in forest quality
• Lack of willingness to make long-term forest investments
• High relative cost of timber in Lake States
• “Urban disconnect” from reality
• (Secondary manufacturing – gluing, molding, sanding)
• Low to medium end products made in cheap labor countries
• Negative price pressure
• Exceptional service is an industry standard
• Species substitution
• Divergence in consumer demand; strong high end, tasteless low end
• Struggle to pay living wages
• Rising cost of health care benefits
• Exodus of youth
• Dollar investments needed in manufacturing

Electronic component/thermal products

• Market slowdown
• Fierce competition for sales
• Loss of revenues to Far East suppliers
• Hard times drive lower prices = margin loss
• Market share loss to foreign competitors

Taconite pellet manufacturing

• Reduction in workforce (98,000 workers in 1959; 4,600 workers in 2003)
• Global competition (unfinished steel slabs is the toughest)
• Economic turndown, including less steel consumption
• Scarce capital
• Domestic steel industry is in a tough spot: bankruptcies; new companies formed from bankruptcies, mergers and acquisitions
• Government involvement
• Less demand for pellets
• Mine shutdown for inventory investments
• Mine closings
• Integrated steel not interested in mining assets (focus is on steel making)

Options:

Forest products:

• Squeeze more out of every tree
• Keep high-end customers competitive
• Help set wise forest and trade policy
• Maintain continuous quality improvement – leverage natural advantages, i.e., local species
• Leaner manufacturing crusade
• Beat back global competition with excellent service and quality
• Hard-nosed price negotiations
• Sell the exceptional virtues of Minnesota species: white pine, red oak, white birch
• Invest in employees
• Harvest unsustainably – develop lakeshore – sell the land – or, find innovative ways to generate cash flow and keep forest under management
• Maintain fragile value-added expansion – attract additional investment – retrench as primary manufacturer only – consolidate sawmills – quit manufacturing and become a resource company

Electronic component/thermal products:

• Partner in the Far East (don’t want to give up technology)
• Provide superior customer service
• Lower manufacturing costs through research and investment
• Capture greater market sales in foreign companies
• Consolidation of domestic market

Taconite pellet manufacturing:

• Cost per ton needs to keep dropping
• Cost savings in production needs to keep growing
• Capital investment is needed
• Real-time information from mine to mill is critical
• High energy costs must be kept under control
• Integrated steel has to consolidate to survive
• Level playing field is needed
• Lower taxes, lower state royalty rates
• Less cumbersome permitting process

How can the community help?

Forest products:

• Promote manufacturing and consumption of products from our forests
• Educate yourself on the facts; demand wise policy, don’t succumb
• Support active timber harvest programs on the Chippewa National Forest
• Attend tours of operations
• Make quality purchasing decisions
• Identify entrepreneurs who can leverage production by adding further value locally
• Value and promote local species
• Demand lean government

Electronic components/thermal products

• Affordable housing for workforce
• Help change attitudes – help people understand that growth and change is good
• Build an environment that fosters personal change and growth
• Provide a skilled work force

Taconite pellet manufacturing

• School consolidation is needed to lower local taxes
• Medical community needs to work with industry to lower medical costs for labor force
• Improved labor relations with unions (work rules must change to get higher productivity)
• Lower transportation costs
• Look at new products for the future, beyond nuggets, that are competitive in global market
• Community awareness of local capacity is key
• Community should expect/demand lean government operations
• Realize that global competition is here to stay

Keynote speaker, Bill Reif, President and CEO of Wausau Coated Products, shared entrepreneurial experiences of three companies he has been involved in with JOBS 2020 participants.

Three stories of entrepreneurial experiences in Wausau, Wisconsin as told by Grand Rapids native, Bill Reif

Bill Reif, President and CEO, of Wausau Coated Products, shared entrepreneurial experiences of three companies he has been involved in: Wausau Coated Products (a manufacturer of pressure sensitive label materials.) Eastbay, Inc. (shoe sales) and Award Hardwood Floors (engineered laminated, prefinished wood floor products).

Criteria the local Wausau group of investors use as a filter for identifying investment opportunities:

• 3 C’s of a new business
  • Credit – a solid business plan
  • Collateral – need dollars in pockets
  • Character – in depth background checks

Entrepreneurship Involves:

• “Rolling the dice” – taking risks
• Understanding that you “can’t get the dice off the table” (business is not liquid) – must have an end game in mind

What is needed to build local business:

• Investors who are willing to invest in local companies (cultivating local angel investors is important)
• Industrial parks are a given; it’s what is behind the parks (entrepreneurial community) that make the difference
• Local people, bank cooperation, and investment capital are critical elements in business development