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Pennsylvania
Boosts Assistance

Interestingly, some Philadelphia companies beg to differ with Walker on the difficulty of doing business in the city. "Pennsylvania as a state and Philadelphia as a city do whatever they can to attract business," contends Eric Wilhelm, vice president of KV in nearby Huntingdon Valley.

Some Global Hotspots

If the U.S. worker shortage is acute, it's certainly no easier to find highly skilled workers in Mexico. That, however, is where many machining companies are opening new facilities, says Dan Malachuk, partner and worldwide director for business location services at Arthur Andersen (www.arthurandersen.com) in New York. "We're seeing a lot of activity at the border and in Monterrey among companies looking to do sophisticated manufacturing," he says. Malachuk acknowledges the skills shortage in Mexico. But he points out that for companies that take a long view of site selection economics, sufficient worker training and development should pay off handsomely in the long run. "You start small and add capacity as employees' capabilities increase," Malachuk says. Monterrey Tech and various schools in Texas are specialized in machine work training. There are active cross-border educational partnerships and, as Malachuk puts it, "a lot of people coming across the bridges to go to school." U.S. and Western European companies are eagerly eyeing Eastern Europe's long tradition of precision machining and its plentiful supply of skilled workers. Such companies are also looking at opportunities to bring Western-style management to Chinese operations. "There are a lot of people skilled in engineering for 'produce-ability,' and plenty of people with some skills," says Malachuk. "The right manufacturing ingredients are there, but the recipe [for managing operations] has been lousy."

Philadelphia is reaching out, according to Tom Travia, sales manager for Everite Machine Products Co. Sixty-employee Everite's main plant has been located in a Philadelphia enterprise zone since 1986. Two years ago, the company opened a second plant with "quite a bit of assistance," as Travia put it. The Philadelphia Industrial Development Corp. (www.pidc-pa.org) kicked in with low-interest loans, tax incentives and a screening program to identify prospective unskilled employees from a welfare-to-work program.

Everite's use of unskilled and low-skilled labor meant that staying in Philadelphia was a particular plus. "We didn't want to relocate outside of Philadelphia because of the available low-cost labor," notes Travia.

The downside of the decision to stay put is the city income tax, which makes it hard to attract the skilled craftspeople and engineers who tend to live in the suburbs. Most of Everite's skilled work force are long-time employees, some as long as 40 years with the company. "There's a shortage of skilled people everywhere," says Travia.

Steven Tamasi, president of Boston Centerless, a high-precision machining and grinding company in Woburn, Mass., has a similar story. The firm is fortunate in excelling in a small niche, and thus attracting national and even international customers with no pressure to move to meet customer needs. However, when Boston Centerless outgrew its 28,000-sq.-ft. (2,520-sq.-m.) plant in Malden, Mass., the firm had to move close by enough to keep a high proportion of its skilled work force. "If we left the area, we wouldn't have a business," says Tamasi. "We'd just have a big, new building and no employees."

The firm's original plan was to close down not only the Malden facility, north of Boston, but a slightly smaller one in Avon, south of Boston as well, consolidating operations in a central location. But a series of small group meetings with the 100-plus employees convinced Tamasi otherwise. People worked within 15 to 20 minutes of the workplaces in Malden or Avon. With Boston in the middle, the only central location would be west of the city, forcing everyone to lengthen his or her commutes.

"If we went west of Boston, we'd lose most of our people," says Tamasi. "Boston is a difficult market for manufacturers because there are so many other opportunities." Not the least of which is Boston's current Big Dig, a huge public works project that would lure machinists to construction jobs. Even worse, says Tamasi, "We can't just hire another set of CNC (computer numerical control) machinists. Our niche is just too specialized."

The solution was to sell the Malden plant, a disjointed facility of three buildings joined by tunnels, and to build a new 45,000-sq.-ft. (4,050-sq.-m.) facility in nearby Woburn. Every single employee stayed with Boston Centerless.