Businessweek Archives

Small Business Has A Friend In Pennsylvania


Cover Story

SMALL BUSINESS HAS A FRIEND IN PENNSYLVANIA

Believe it or not, tiny Scheirer Machine Co. is the kind of company Pennsylvania officials had in mind when they hatched a new technical-assistance program for manufacturers in 1988. Scheirer--a Pittsburgh shop with 65 employees that makes replacement parts for steel and mining equipment--needed help to become more competitive, so it turned to the state-funded Industrial Resource Center in Duquesne, a Pittsburgh suburb.

For a fee of $3,000, a three-person team of experts helped Scheirer reorganize its shop floor and raise productivity by about 15% in just six months. The center lent Scheirer $150,000 at 5% interest to buy a computerized lathe. And the company will get ongoing assistance to upgrade its technology further.

THINK SMALL. Pennsylvania, like other industrial states, is rethinking the economic importance of its small, nuts-and-bolts manufacturers. Through much of the 1980s, Rust Belt states pursued high-tech and service jobs to replace losses from plant closings in such basic industries as steel and autos. States often went overboard offering expensive tax and subsidy incentives to woo a limited number of huge manufacturing plants, often built by foreign companies.

But small industry turned out to be more resilient than expected. In Pennsylvania, for instance, factory jobs declined 22% during the 1980s--largely from steel plant closings. But the number of manufacturing companies in the state actually increased during the decade by 5%, to more than 17,000. "The lion's share of economic activity and job creation is going to depend on smaller entrepreneurs," says Andrew T. Greenberg, Pennsylvania's commerce secretary.

Other states agree. Budding local industrial policies are geared toward preserving the stable, high-paying factory jobs. Ohio has a long-established technology transfer effort called the Thomas Edison Program. Georgia and Maryland both have top-notch programs to assist manufacturers.

But Pennsylvania's package of initiatives stands out as the most comprehensive policy effort yet. The state spends about $9 million a year to staff a network of eight regional resource centers, such as the one providing help to Scheirer. Under the decade-old Ben Franklin Partnership, state money is aimed at nurturing startups. And just last month, the state started lending more low-interest money for modernization to companies that pay above-average wages. "There is a model brewing here," says Bennett Harrison, economist at Carnegie Mellon University. "They're focusing on the real competitiveness problem."

Indeed, as Japan and Germany have proved, big companies can be globally competitive only if they can count on suppliers for high-quality products at reasonable prices. And many small U.S. manufacturers know they have a lot of catching up to do when it comes to quality and productivity.

More and more of them are benefiting from state programs. Piad Precision Casting Co. in Greensburg, Pa., needed access to the latest technology and production methods to remain competitive. So it linked up with the Southwestern Pennsylvania Industrial Resource Center, one of the largest and best-funded centers. Piad, which has 95 employees and $10 million in annual sales, supplies electrical components to major equipment producers, including General Electric Co. and Asea Brown Boveri. With standards ever rising, says Karl Schweisthal, president of Piad, "our objective is to be a world-class manufacturer by the end of 1995."

The Pennsylvania program has some critics. With limited funding, the centers tend to work with the stable and creditworthy. Struggling manufacturers who need the most help don't get much assistance, beyond seminars. "We are not a turnaround operation," says Barry G. Maciak, managing director of Southwestern Pennsylvania Industrial Resource Center. Still, by providing access to new technologies, such states as Pennsylvania are giving many small manufacturers a new way to compete.Michael Schroeder in Pittsburgh


Hollywood Goes YouTube
LIMITED-TIME OFFER SUBSCRIBE NOW

(enter your email)
(enter up to 5 email addresses, separated by commas)

Max 250 characters

 
blog comments powered by Disqus