Yellowstone County manufacturing companies eye expansion

At a time when many of the jobs available in Yellowstone County are in the service sector, there are still a few heavy manufacturers calling this area home.

By JOHN FITZGERALD
Of The Gazette Staff

Companies that deal in durable goods in Montana – logging, furniture makers, fabricated metals and transportation equipment manufacturers, for example – employed 15,041 workers, about five percent of the non-government workforce, according to 2001 census figures.

Most of those jobs are in Western Montana. Yellowstone County for 2001 had 901 workers making durable goods, which accounts for just 1.4 percent of the county’s 60,500-employee workforce.

State experts say manufacturing jobs in Montana are being lost to overseas workers, and some say the loss is due to the state’s tax structure. The national recession hasn’t helped, either.

Even so, the experts expect more jobs are on the way.

"I think there’s reason to be optimistic," said Steve Holland, the director of the Montana Manufacturing Extension Center at Montana State University-Bozeman. He said many Montana companies are trying to expand.

New blood

One of the businesses planning to grow is High Plains Industrial at 2450 S. 32nd St. W.

Four former ARCO executives bought Holland Loader from Mike Holland in 2001, and they plan to aggressively market the company’s earth-moving equipment.

The firm builds dirt-movers that are essentially a conveyor belt mounted on two bulldozers, which can scoop up earth either horizontally or vertically.

But this equipment isn’t meant for a standard road-building or foundation-digging job. The machines are built to move a lot of dirt very quickly – 3,000 to 6,000 cubic yards an hour.

"Our machines are high capacity with low capital and operating costs," said Andy Gaudielle, one of the four new owners. "It’s a competitive way to move earth, but you have to have a lot of earth to move."

High Plains Industrial builds the machines from the engine up, using 13 employees at their 85,000-square-foot shop. The owners also use the shop to repair heavy equipment, such as machinery from the Stillwater Mine, Gaudielle said.

He said that Holland hadn’t marketed the loaders for about 10 years and subsequently the profits had dropped. With the infusion of new blood, Gaudielle said they hope to have their loaders in markets across the globe.

"We can build airports, highways, dams, irrigation canals – there’s not a lot of these jobs around," he said, which is why they are looking at the Chinese, South American and Eastern European markets for expansion.

Which brings up one of the chief problems with being located in Billings: transportation costs.

"One of the things we have talked about is, what if we get a job in China?" Gaudielle said. "We’d do the initial construction here, but when does it make sense to move the fabrication to China?"

The factory was built in Billings because that’s where Mike Holland lived. "Sure, we could shave off transportation costs if the factory were in Kentucky, but the factory’s here, and Billings is a good place to live," Gaudielle said.
In the family

Steve Pinnow and his father, John, lived in Billings when they decided to open Midland West Manufacturing at 2224 Minnesota Ave.

It was a decision his father made 26 years ago, Pinnow said. "He sold the farm to buy the machine shop and all the welding stuff. Now it’s me buying him out to pay for his retirement."

Pete Gannon has come on board as the new partner.
By the numbers…

Companies that deal in durable goods in the state – logging, furniture makers, fabricated metals and transportation equipment manufacturers, for example – employed 15,041 workers, about five percent of the non-government workforce, according to 2001 census figures.
Most of those jobs are in Western Montana. Yellowstone County for 2001 had 901 workers making durable goods. That accounts for 1.4 percent of the county’s 60,500-employee workforce.

The company makes parts for coal-fired energy plants. "Most people wouldn’t understand what we make," Pinnow said. "Tube shield guards, chevrons – you need to see them to understand what they are."

The company also makes, among other things, concrete forms for the U.S. Forest Service and vent caps for the top of water towers. "With all the 9/11 stuff, water treatment plants need vent caps that go on top of the building. They let air go in and out of the tanks. They’re terrorist proof."

The company has seven employees year-round and adds an eighth when work gets busy.

Finding employees qualified to do the manufacturing work is difficult in Billings, Pinnow said. "It’s a little bit tough to find quality guys. We’ve got good people now," he said.

He said getting materials from Denver or Seattle isn’t much of a problem.

What is a problem is Montana’s tax structure, he said. "Our costs of doing business here are fairly expensive.

"About 10 years ago, guys from Powell, Wyo., tried to get us to move to Powell. We’d save $10,000 apiece just in taxes that’d be money in our pockets. But our family lives here and we like the Billings area, but our tax stuff is tough here."

Pinnow elaborated: "I have equipment worth $500,000 to $600,000. We get taxed on the equipment, taxed on our inventory, taxed on the job we get and if we do business out of state, we have to pay that state’s tax. That’s where it gets fairly expensive. And we have to take that cost out of our pocket or put it onto the customer, and if we take it out of our pocket, we won’t stay in business very long. … A sales tax wouldn’t help us. If the state would drop the inventory and equipment taxes, that would help us but other than that, the taxes are just part of doing business here."

Paul Polzin, director of the University of Montana’s Bureau of Business and Economic Research, said Pinnow’s comment about taxes may be very true for durable goods manufacturers, many of which are taxed on their expensive machinery.

"I have heard many business people make the exact same statement," he said.

However, when you look at the whole economy, "I have found very few studies that have established a strong relationship between a state’s taxes and a state’s economic growth."

Changing tax laws may benefit durable goods manufacturers like High Plains Industrial and Midland West Manufacturing, but the changes would hurt other economic sectors, he said.

"We rank in the middle of the pack as to total tax burden," Polzin said. "This suggests to me that when we’re looking at making changes in the tax structure, we’d help some and hurt some. This may be why we find no aggregate activity on taxes at the state level.

"That’s why it’s so difficult to make changes to the tax laws."

Copyright © The Billings Gazette, a division of Lee Enterprises.

http://www.billingsgazette.com/index.php?id=1&display=rednews/2003/08/31/build/business/30-mfg.inc