Free markets will find a way. Let the bad companies fail, some will change, and others will prospur
CHICAGO — Pete Ostrander and the manufacturer he works for took a hard look at the auto industry four years ago, and neither liked what they saw.
Automakers were pushing vendors like Merrill Technologies Group, where Ostrander works, to cut costs and, with the economic environment in Detroit worsening by the day, the company retooled itself as a supplier to what it believed was an industry with better prospects.
Ostrander, standing in a display booth at one of the wind industry's biggest gatherings, was not alone.
Merrill is among dozens of companies at the American Wind Energy Association conference in Chicago that have their traded auto-related business for a niche in wind-power.
"We have seen these indicators for years," Ostrander, an engineer, said of the auto industry. "They needed to clean up their own closets."
With the economy's tailspin, General Motors, Chrysler and Ford have laid off tens of thousands of workers, and Chrysler last week filed for bankruptcy protection. The problems have rippled through a support network that includes thousands of auto parts makers and other suppliers.
According to the Motor Equipment Manufacturers Association, a trade group for auto industry suppliers, more than a third of such companies say in industry polling that they are in deep financial trouble. More than 40 of them entered bankruptcy last year.
"If you walk that floor, what you will see is that many, many companies — a lot of the small companies — have come from the automotive supply chain," Don Furman, president of the wind industry organization's board, said at the conference.
AWEA's meeting drew 21,000 people and roughly 1,200 exhibitors.
Sales reps for several of those companies spent the week at a convention booth sponsored by the state of Michigan, ground zero in the auto industry meltdown.
About 700 Michigan manufacturers now do wind-industry work. Most of them either have been — or in some cases still are — auto industry suppliers, said Frank Ferro, the international business development manager for the Michigan Economic Development Corporation.
In neighboring Ohio, the state Department of Economic Development can count more than 500 companies it says are active in the wind industry supply chain or entering the business. Most of them are either hedging their bets on their auto industry work or leaving it behind, said Kimberly Gibson, energy adviser to Ohio Gov. Ted Strickland.
"Ohio's been bleeding jobs for the last eight years," she said. "The wind industry gives (manufacturers) a chance to diversify."
The shift to the wind industry was a natural for many, Ferro said. While parts for wind turbines can be much larger, the process of making them is much the same.
That's not to say it's been an easy choice for suppliers.
"How do you ever leave GM? How do you ever leave these customers that were this powerful?" asked Jeff Metts, president of Dowding Machining in Eaton Rapids, Mich. "I think a lot of suppliers struggle with that."
Parent company Dowding Industries began cutting back on the metal stamping and other work it did for the auto industry in 2000 before moving into wind-related work two years ago, Metts said.
Now, about 30 of Dowding Machining's 140 employees do wind-related work. Metts thinks that number will grow substantially.
"I personally feel — and some people might think I'm nuts — I think we can employ about 5,000 people in Michigan in this wind industry business," he said, laying out long-term plans for multiple facilities dedicated to wind-turbine production.
Wind-related work still accounts for less than 10 percent of Merrill Technologies' business, Ostrander said.
"But I would expect that's going to ramp up very quickly to potentially something in the neighborhood of 20 percent," he said.
Merrill, based in Saginaw, Mich., has about 400 employees and, even though it's no longer directly connected to the struggling auto industry, that's down from about 450, Ostrander said.
The wind industry is not immune to recession and many manufacturers have announced layoffs in recent months.
But Ostrander said that Merrill is doing relatively well compared to suppliers that still rely heavily on Detroit.
"Some of them are not prepared for this whatsoever," Ostrander said. "It's scary."