Business Booms For Some Manufacturers, Dwindles For Others Amid Pandemic
Considered essential businesses, many manufacturers have been exempted from Gov. Tom Wolf’s shutdown order. Some now find themselves with almost too many orders, while others don't have nearly enough. But almost all are facing unexpected challenges from the coronavirus.
Among those finding success — at least for now — is IngMar Medical, based in Pittsburgh’s East Liberty neighborhood. Company president Stefan Frembgen said that when the shutdown order took effect more than six weeks ago, he initially worried about the impact the pandemic would have on his business, despite its being deemed essential by the state.
“But then, it turned totally around, and we were swamped with orders,” Frembgen said.
IngMar Medical makes breathing simulators. Engineers need the devices to test new designs for ventilators, which are critical to treating COVID-19. Hospitals also use the simulators to train staff who don’t normally operate ventilators.
With the explosion in sales, Frembgen expects annual revenues at his 45-employee company to double or triple. But tasks like ordering new supplies present their own challenges.
“Now all the sudden you tell your vendor, ‘OK, we want five times as many, and we want them maybe next week’ – that just doesn’t work,” Frembgen said.
He said after finding new suppliers and hiring additional temporary workers, he now expects IngMar Medical to catch up with demand in a few weeks.
Montgomery County machine shop EF Precision similarly experienced a surge in sales due to the pandemic. The firm’s vice president, Bud Tyler, said demand for a fogging system his company makes has soared to 10 times the normal amount.
Foggers release gases that kill pathogens. Tyler said while hospitals typically use the machines in surgical suites following an operation, now they also use them to sterilize rooms where COVID-19 patients have been treated.
Tyler said at first, it was challenging to stay on top of orders for the devices, which previously accounted for a “small amount” of EF Precision’s work.
“We’ve been doing this product for six, seven, eight years. And our supply chain got into a very comfortable spot because they were easy numbers to hit,” Tyler said. “Now we’re trying to increase the assembly [and] production. And it’s been difficult.”
Tyler said his company ultimately managed to find suppliers for all the necessary parts and is now keeping pace with demand.
He said while the business, which employs about 90 people, is on track for a “very, very good year," it has put a moratorium on hiring. Tyler said such caution is necessary even though EF Precision’s other customers, in the aerospace and defense industries, are still buying equipment.
“I think that they’re building inventory,” Tyler said. “I think that they understand that … there will be [an economic] rebound … And I think they all want to be in place to be able to turn the switches on and go full bore.”
But Tyler added, “If this pandemic were to last another two or three months … [that demand] will wear thin.”
‘A lot of pride in what we do’
Like EF Precision and IngMar Medical, the vast majority of American manufacturers are considered to be essential businesses by the government, data suggest. Machine utilization data, however, indicates industrial activity in the U.S. fell by about 17 percent in March and has since leveled off.
Although it’s not clear how many manufacturers in Pennsylvania are still open, the state has permitted entire sectors, ranging from steel to semiconductors and most chemicals, to continue to operate.
And exemptions often extend to businesses that support life-sustaining industries. Onex, Inc., in Erie, received a waiver from the state to stay open because the firm builds and services furnaces used to make steel. Onex applied for the exception because the governor’s office orginally classified its industry, refractory manufacturing, to be non-life-sustaining. (Refractory is a ceramic material needed to insulate furnace walls against heat loss.)
The U.S. Department of Defense, however, had already declared Onex to be essential. So the company continued to operate the five days it waited for the state’s approval.
“We did have a client that is a primary contract for the Department of Defense,” Onex president Ashleigh Walters said. Once the coronavirus threat became apparent, Walters said, that client “immediately notified us with a defense letter that said, ‘You have to remain open. You’re in the defense supply chain.’”
In addition to helping to sustain the nation’s defense infrastructure, Onex also supports energy producers and aerospace manufacturers, Walters noted.
“If these furnaces have a maintenance issue, it can’t wait to be fixed. It’s hot … It’s going to potentially burn through the metal shell if we don’t get the refractory lining replaced,” she said.
Walters said her 48 employees recognize the importance of their work.
“I think there’s a lot of pride in what we do. I told them very early on that, ‘We are essential. We are keeping U.S. manufacturing alive,’” she said.
While Walters said she is confident in Onex’s prospects for now, she predicted the company would start to struggle if the economic downturn were to continue into the fall.
Electric Materials Company in nearby North East, Pa., has also fared well in the near term, according to its president, Becky Ramsdell. The manufacturer makes components for electrical, data, and defense infrastructure, and has been considered life-sustaining since the beginning of Pennsylvania's shutdown.
“And when this all started [with COVID-19],” Ramsdell said, “we found much business coming to us from overseas that we hadn’t seen before, because they were having difficulty with breaks in their supply chains. And we were able to step up and provide them with the product they needed.”
Ramsdell said her company has taken numerous safety precautions such as spreading out employees, relying more on electronic communications instead of in-person contact, and providing extra soap and hand sanitizer.
“It’s been a challenge just continually monitoring it, to ensure everybody has the mindset,” she said. But she added, “It’s rather surprising how quickly we adapted.”
For some, ‘essential’ does not mean ‘open for business’
The Pennsylvania Department of Community and Economic Development would not disclose how many manufacturers in the state are still operating. Individual businesses can seek a waiver exempting them from shutdowns if the state declares their industry non-essential. And the total number of active businesses "is not available as the exemption review process is still ongoing,” a spokesperson said in an email.
That process has faced complaints that it is slow and unfair. Last week, Pennsylvania Auditor General Eugene DePasquale announced that his office will investigate how the state has run the program.
In the meantime, some manufacturers are hurting. Petra Mitchell, President and CEO of the economic development nonprofit Catalyst Connection, could not say how many manufacturers in the region have been shuttered due to COVID-19. Her agency mainly interacts with those that are operating. But one national survey shows that only half of manufacturers are open amid the pandemic.
Mitchell said her agency has had contact with “well over 200 essential businesses.” She said there were about 3,000 manufacturers operating in the region before the pandemic. Of those that remain open, she estimated, at least 40 to 50 produce medical devices or parts or personal protective equipment.
Mitchell predicted that as some companies work through disruptions in global supply chains caused by the virus, domestic manufacturers will benefit.
“As those industries really think about what are their supply chains going to look like in a post-COVID-19 world, I think the manufacturers in southwestern Pennsylvania are really going to have some significant advantage,” Mitchell said. “I think there’s going to be a trend to reshore supply chains from international sources.”
In interviews with 90.5 WESA, Pennsylvania manufacturers said keeping the doors open is just one challenge they face. And while some have struggled to keep up with skyrocketing demand, others have had trouble keeping hold of their employees.
‘Almost a freezing mode’
For some businesses, the government offers aid with one hand and shutters them with the other.
Rolf Glass in Westmoreland County was caught in that bind for about six weeks. Owner Rolf Poeting said sales at his glass engraving company had already fallen by half due to a weak economy, and that he was planning layoffs, when Gov. Wolf’s shutdown order took effect.
Under the order, the state declared the glass product manufacturing sector to be non-life-sustaining, and Rolf Glass was forced to suspend operations entirely.
“That means we had to immediately cut our costs dramatically, talk to our major lenders, and just put everything on almost like a freezing mode in order to survive,” Poeting said.
He said he and all 40 of his employees went on unemployment. And the company got help through state and federal loan programs, including the Payment Protection Program. It won’t have to pay back the PPP funds if it uses them within eight weeks.
But Poeting said after weeks of having no work to pay anyone for, he won’t be able to spend all the money.
“It is odd in a way that it’s intended to provide the funding to keep people on the payroll,” he said in April. “And then in our case at the same time, we are not allowed to operate.”
Rolf Glass plans to reopen this week, now that the Wolf Administration has lifted restrictions on glass product manufacturing. But Poeting said the company still won’t have enough time to use all of its PPP money, so it will return a portion of the aid early.
While Rolf Glass will have to pay interest on the rest of the loan, Poeting said the funds helped to save his business.
“We were able to survive and come out financially stronger at this point right now in order to start up again and look at the challenge of the upcoming months,” he said.
Struggling to get by
The coronavirus is creating challenges even for companies that never had to close. Lake Erie Rubber & Manufacturing also received PPP money so it could make parts for the transportation and energy sectors. But company president Jon Meighan said only half his 14 employees have been coming to work.
“We have a couple of employees that are honestly just anxious and afraid to be at work and interacting,” he said. “A couple of them have small children. And then, I think we have one or two that maybe they got the government [unemployment] funding, and they have enough that they don't feel that it’s necessary to come to work.”
Meighan said he’s trying to hire more people and is taking steps to keep them safe. Like other businesses, he said, Lake Erie Rubber places workers at safe distances from each other and gives them each masks, hand sanitizer, and soap.
Mieghan admits he’s worried about the future.
“It’s been a struggle to sleep recently because I’m constantly concerned about obviously my employees, myself – I have small children,” he said. “For me, it’s a huge financial risk, because I’ve leveraged all of my own personal assets to take over this business”
Meighan bought the rubber company in 2017. He said the once-declining business had been improving.
“We were making a nice turnaround the past two years and had a really nice 2019, thinking we were on a good pace for 2020 to improve more,” Meighan said. “And then when this [pandemic] hit, it kind of took the wind out of our sails.”
Meighan said now his skeleton crew is battling to keep up with demand in an effort to avoid losing customers.
But while Lake Erie Rubber is overwhelmed with orders, sales have fallen at the Pittsburgh-based graphic design and print shop, AlphaGraphics.
The printing industry received a waiver to continue operating soon after Pennsylvania was shut down, said AlphaGraphics CEO Sarah Meehan Parker. She said local health care providers lobbied for the change because they needed shops like hers to support communications at medical and elder-care facilities in anticipation of a potential surge in COVID-19 cases.
“Print, signage, all of the communication going out on COVID – we were doing graphics for the pop-up … testing facilities, I mean real front-line assistance,” Parker said. “And as everyone knows, things were changing by the minute. So [we had] to redo things, reprint and expand pop-up facilities, just communications overall, different kinds of visitor signs.”
Despite the flurry in health care-related orders, Parker said overall, business at AlphaGraphics is slow. The company had to cut a few workers from its roughly 20-member staff.
In ordinary times, Parker said, local companies, arts organizations and higher education account for much of her firm's customer base.
“But overnight, our nonprofits and our arts and our universities got hit pretty hard, and so did we with the cancellations,” Parker said.
Other businesses, meanwhile, have shifted into entire new product lines that have allowed them to obtain waivers. Boathouse, a Philadelphia sports-apparel maker, now sews medical-grade masks and gowns as well as non-medical masks. That pivot has allowed the firm to stay open, but founder and CEO John Strotbeck said his company is just barely getting by, despite being approved for a PPP loan.
“All the work we’re doing right now might amount to about a third of what we normally ship in terms of revenue on a daily basis,” he said. “If something doesn’t happen pretty soon, we’re going to run out of cash in about two to three weeks.”
Strotbeck said that although sales for non-medical, cloth masks have taken off, he said demand among local hospitals for medical masks has dried up amid increased competition from other manufacturers. And he expects to lose money producing gowns destined for the Federal Emergency Management Agency.
Even if his business can survive for now, Strotbeck said it will continue to struggle unless schools open, sporting events restart – and life gets back to something resembling normal.
*This story was updated at 9:23 p.m. on Tuesday, May 5, 2020, to reflect that IngMar Medical President Stefan Frembgen requested five times more product components than normal due to increased demand for his company’s devices, not 85 times as stated in a previous version.
*This story was updated at 11:18 a.m. on Friday, June 26, 2020, to reflect that Onex, Inc., has 48 employees, not 20 as previously stated. At the time of publication, 20 employees were actually working at the Onex plant rather than at home.