The Chicago area has long been a good home to a diverse array of manufacturers, but as a shrinking skilled workforce, increased global competition and sometimes unfriendly government policies are taking their toll, many industry experts are concerned about its future.

“Small and medium-sized manufacturers are the backbone of the U.S. economy and Chicago,” said Mike Johnson, senior business advisor for the Chicago Manufacturing Center, at The Business Ledger’s most recent Newsmakers’ Forum in Hoffman Estates.

“We are positive that these companies can compete in the global marketplace, but they need to do a few things differently if they are going to be successful.”

Globalization has been a boon to some, but a burden for others. While many companies have found less expensive ways to bring their product to market and consumers typically enjoy lower prices, U.S.-based manufacturers have been forced to cut jobs and sometimes compete on price. In the latest wave of global outsourcing, 3 million jobs have been lost to overseas competition.

However, competing on price will be a losing battle and manufacturers must look to other methods to win business, said Johnson.

“You need to have value other than price, because that’s what your competition will market,” said Johnson. “Manufacturers need to develop a stream of new ideas and products. There need to be high value-added segments to your product.”

Yet while employment is down in U.S.-manufacturing, production has remained steady. The double-edged sword of job losses is that while many workers have found themselves in the unemployment line, those same job losses have allowed some U.S. manufacturers to survive.

“Employment is just one indicator of manufacturing,” said Bruce Baker, president of the Tooling and Manufacturing Association. “I hate to see three million people lose their jobs, but there can be a positive to this. Globalization is both a threat and an opportunity. Manufacturers have found a way to automate a good portion of their work, which has kept them in business. Now the industry has fewer, but better paying jobs.”

Ironically, as the manufacturing industry has cut back on a large portion of its lesser-skilled workforce, employers are now is facing another crisis in that they can’t find a steady stream of highly-skilled workers to fill positions.

“The trouble that we have is finding skilled laborers,” said Sandra Westlund-Deenihan, president of Quality Float Works, Inc., in Schaumburg and a third-generation manufacturer. “Low income jobs have been sent to China and are now automated here. We are missing out on the mid-level skilled workforce. They are the future workforce for manufacturing.”

The majority of applicants who walk through the doors at Quality Float Works would not be able to pass an 8th grade math test and need a digital clock to tell time, said Westlund-Deenihan.

“The quality of manufacturing jobs now is outstanding,” said the CMC’s Johnson. “But in today’s society we paint manufacturing jobs as having a short future. Young people don’t want to start their career there.”

Westlund-Deenihan said the dark and dirty reputation attributed to manufacturing work environments is unfair and often misrepresented in the media. However, it is often enough to keep high school guidance counselors from recommending manufacturing careers to graduates.

Many laborers have opted to enter the retail market instead, but these jobs on average pay 30 percent less than manufacturing jobs, said CMC’s Johnson.

“Entry level workers can make $12-$15 an hour,” said Westlund-Deenihan. “Some of my workers make $80,000 a year.”

The panelists agreed that it will take a partnership of the manufacturing industry and area high schools and community colleges to help change the negative image that potential manufacturing careers now receive.

Government officials should also be another public relations target for manufacturers as the recent business environment has hindered many, said Westlund-Deenihan.

“In Illinois we face a hostile anti-business manufacturing climate,” said Westlund-Deenihan. “Cook County is proposing a massive sales tax hike. We need to educate our leaders on the importance of manufacturing. Don’t handcuff us. We create jobs.”

Another pitfall that manufacturers should avoid is a dependence on big-box retailers, said Hugh Elliott, senior manager for Dugan & Lopatka, CPAs, PC in Wheaton.

“One of the things we have noticed is that some of our clients have become too dependent on big-box retailers,” said Elliot. “Eventually, big-box retailers will start to negotiate the terms and clients are forced to accept this. They end up paying the price for this.”

CMC’s Johnson said that big-box retailer can be a great customer, because they are very predictable, but that manufacturers should be wary and take a unique approach because it is a relationship driven by data and figures, not personal ties.

The current market has also created an opportune time for manufacturers to seek out overseas partners and sales opportunities.

After 9/11, sales were lagging at Quality Float Works, so the company looked to the overseas market and found that it could pick up a significant portion of its business in developing nations like China and India, said Westlund-Deenihan.

“Right now the dollar is weak and it is the perfect time to experiment internationally,” she said. “Specialized work can’t be done overseas, but it is worth exploring.”

And while the manufacturing industry has many unanswered questions, the overall economy in the U.S. seems to be stable, making it an ideal market for companies to take risk and invest in the research and development of new products that will make them competitive in the long run.

“Right now the U.S. economy is chugging along and there is no reason to panic,” said Dugan & Lopatka’s Elliott. “Our clients who invest in new technology and continue to take risks are the ones that succeed and increase production.”