Innovation and entrepreneurship in the land of the RV.
by Bob Kronemyer
While many areas of the country remain mired in economic distress, Elkhart County has become a beacon of light for a manufacturing turnaround. A historic entrepreneurial spirit, a stellar workforce, industry consolidation and an increasingly diverse manufacturing base have all contributed to the rebound.
“Many manufacturers here are either solely owned or family-owned businesses that were started by entrepreneurs who came up with an idea to build a gadget or some special-need tool,” says Phil Penn, president and CEO of the Greater Elkhart Chamber of Commerce Inc. “These businesses have grown and become successful.”
Penn believes entrepreneurs by nature are risk-takers and, therefore, more likely to gamble on an idea. “They don't sit back and wait for something to happen,” he says. “They are innovative, looking for new product opportunities and acquiring the most modern equipment.”
Overall, Elkhart County has literally hundreds of entrepreneurs, says Penn. “It is just amazing. Companies I visit tend to be innovative in their processes.” Some of the recreational vehicle (RV) manufacturers, in particular, “are becoming very innovative in the way they have set up their production lines and their use of lighter weight materials. We just don't sit around and wait for things to get better in Elkhart County.”
A third-generation manufacturer of high-precision, military aircraft parts that are shipped worldwide “is doing very well, in part because it has invested millions of dollars in high-tech, computerized machinery,” Penn points out. Two other success stories are a first-generation maker of highly specialized small parts for a variety of industries and Flexco Products Inc., a steel and aluminum fabricator.
Penn expects the manufacturing sector in Elkhart County to continue to improve over the coming years. “Everyone says everything is being imported from China. But that's not true to a large degree. Some of those businesses are actually coming back here because they found they could not achieve the quality they need.”
Ivy Tech Community College in Elkhart is also “on board for training people,” he says. A more diversified manufacturing base over the past few years is precipitating growth as well.
Dorinda Heiden-Guss, president of the Economic Development Corporation of Elkhart County, concurs with Penn that many of the investment and job announcements are essentially from consolidation from overseas back to the U.S. market. She cites shipping costs as the major reason for the reversal. “It just makes more sense to be in the Midwest and a central location.” Consolidation also provides for reduced overhead and labor costs.
Between January and October 2011, the economic-development agency documented roughly 1,700 new jobs and $113 million in investment from 21 companies in Elkhart County, ranging from Hi-Tech Housing Inc. in Bristol to Lippert Components Manufacturing Inc. in both the City of Elkhart and unincorporated Elkhart County to Benteler Automotive in Goshen.
“We continue to see improvements in production and efficiency,” says Heiden-Guss. Going forward, those manufacturers that have standardized as many processes as possible and are able to customize to the client's specific needs will continue to excel. “They will derive a higher return on investment,” she says. “We also have a fantastic workforce for manufacturing. This information has been shared with me while meeting with site selectors that have done research for companies on their expansion throughout the country. These site selectors have told me that Elkhart County has the absolute best workforce for labor.”
Much of that labor is devoted to the RV industry. In October, wholesale shipments of RVs nationwide increased 12.4 percent over September, representing 19,100 units, according to the Recreation Vehicle Industry Association, and marks the highest monthly shipment total for October since 2007.
Sharing in the buoyancy is Jayco Inc. in Middlebury, the largest privately held RV manufacturer in North America, and in unit volume the third-largest producer overall (public or private). The company makes a full line of RVs, ranging from fold-down camping trailers to large, rear-diesel Class A motor homes. “Over the last two years, our sales are up in excess of 60 percent,” says Sid Johnson, director of marketing.
A huge portion of Jayco's customers are baby boomers. “As these people become more mature and economically comfortable, they feel both an ability and an urge to see the country through traveling,” Johnson explains. In addition, a typical RV owner in this age bracket “has not been as hard hit” by the most recent recession because of more stable income.
Johnson conveys that over the past several recessionary cycles – dating back to the 1970s – the RV industry “has been a leading indicator of the economy, in that the industry has led the economy into a recession and has led the economy out of a recession.” This holds true about the most recent downturn as well. “As the industry has recovered, RV production has been the leading factor in manufacturing growth in Elkhart County in the last two years,” he says.
Johnson predicts 2012 will be characterized by limited or slow growth for manufacturing in Elkhart County, but then for 2013 “the economic experts we've talked to are pretty enthusiastic about more robust growth.” Johnson also believes the county's workforce for manufacturing is “an excellent fit,” foremost because of the many Amish who are employed. “They have a very positive work ethic and constitute a very stable workforce for us,” he says. The manufacturing jobs in Elkhart County, primarily led by the RV industry, are also “good paying. This lends itself to a more stable and skilled workforce.”
Besides being known as the RV capital of the world, Elkhart County produces 75 percent to 80 percent of all transit buses (including airport shuttles and tour buses) in the country, according to Heiden-Guss, who adds that 46 percent of the products made in the county are exported. “This is huge. We're making more and sending more out,” she says. Elkhart County also has a strong presence in third-party warehousing and daily household goods (items such as soap and shampoo). “There is one company here that makes 600 products marketed under other names,” Heiden-Guss says.
Not surprisingly, Elkhart County “is a very inventive community,” observes Pam Smith, president of Swan Lake Golf Resort in Plymouth, whose parents, Richard and Pauline Klingler, cofounded RV-producer Holiday Rambler Corp. in Elkhart in the early 1950s. If a particular business decreases, people “seem to find other things to fill the void,” Smith says.
For example, back in the 1970s, during the country's first energy crisis, the Klinglers became much more diversified. “My father had all these chassis sitting around that he was unable to build on to sell,” Smith recalls. As a result, he and his wife started Utilimaster Corp., using the same chassis to build cargo vans, step vans and delivery trucks. “At one point, we also had a kitchen manufacturing facility, an office and drafting furniture company, and produced a line of recreational boats,” Smith says. “Still today, I feel diversity is where people's strengths are. They don't just focus on one product. They are much more diversified in a variety of products.”
Smith also notes that Elkhart County possesses a variety of skill levels. “There are a lot of very educated people and many great minds,” she says.
The extremely business-friendly and manufacturing-friendly environment of Elkhart and of Indiana as a whole was one of the chief reasons that THINK North America Inc. (with business offices in Dearborn, Mich.) opened a plant in Elkhart in late 2010 to produce the all-electric THINK City electric vehicle. “What we found is that the workers here share a strong belief in manufacturing and understand the need to manufacture quality products,” says company spokesman Brendan Prebo. “The workers have a great attitude and spirit.” THINK North America also offers Elkhart County workers an opportunity to earn their livelihood in a new clean tech industry.
To date, some 400 full-speed, highway-capable electric vehicles have been made at the plant. “Most of the vehicles have been sold to customers in Indiana – both retail and fleet – including two to the city of Elkhart,” notes Prebo. “This is new technology that we believe will increasingly be seen on U.S. roads.”
Adds Barkley Garrett, economic-development director for the city of Elkhart, “THINK is certainly the type of forward-thinking company that we would like to see in the Elkhart County area. It addresses many of the issues related to transportation. Producing an all-electric vehicle helps to alleviate the nation's need for foreign oil and eliminates the issues associated with greenhouse gases.”
In the two-plus years that Garrett has been in his position, the unemployment rate in Elkhart County has fallen nearly in half (from around 20 percent to 10 percent). “The primary reason for that has been the resurgence of the RV industry,” he says.
One positive influence has been the gradual availability of financing through lending institutions. “This has allowed people to start looking at RVing as a viable choice for some of their disposable income,” Garrett explains. A somewhat stable gas price has also fueled the recovery. “We haven't seen a lot of spikes, as we saw a few years ago,” he says.
Many industries related to the RV sector also rely on the same talent base, which is helping to bolster manufacturing. Apart from transit buses, watercraft “has stabilized” and is experiencing slight growth, Garrett says. Furthermore, “some of the stronger players in the area have become stronger, perhaps through acquisition, so we don't have quite as many companies as we did two or three years ago.” And although manufacturers tell Garrett that their balance sheet is strong, they have cash in the bank and have projects ready to move forward, “they are waiting for things in Washington to settle down a bit. But there is definitely a light at the end of the tunnel.”
