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PA Manufacturers Look Up As Economy Recovers

Three decades in the chronically cyclical steel business should be enough time to experience every kind of business cycle imaginable, but the recession changed that thought.

PITTSBURGH (AP) -- Three decades in the chronically cyclical steel business should be enough time to experience every kind of business cycle imaginable. Or so Frontier Steel president John Matig thought until the recession slammed the Neville Island steel plate processor in the fall of 2008.

Steel prices plunged from 75 cents a pound to 25 cents. Orders evaporated.

"It was an avalanche," Matig recalled. "In 30 years, you think you know everything. You really know nothing."

Matig said it took the company six weeks to develop a recession plan and six more to implement it. The work force was reduced 25 percent. Salaries were cut. Quarterly bonuses, which had been paid for 20 consecutive quarters, were eliminated. Expenses were slashed. Property that Frontier owned but wasn't using was rented out.

"We cut everything but our wrists," Matig said.

Two years later, things are looking up. About half the people laid off have been recalled, bringing Frontier's work force up to 65.

Frontier shipped 5 percent more steel this year than it did in 2009, and a 20 percent increase is forecast for 2011. Phones that normally are quiet in December are ringing with customers who say business is picking up.

"I haven't been this optimistic in 2½ years," Matig said.

The steel industry veteran is not alone.

Half of the senior manufacturing executives surveyed by Grant Thornton said the U.S. economy would improve over the next six months, and 81 percent were very or somewhat optimistic about their prospects.

"The manufacturing recovery is widespread and progressing at a moderate rate," said Daniel J. Meckstroth, chief economist for the Manufacturers Alliance/MAPI.

Some of the optimism stems from the rebuke President Barack Obama and Democrats received at the polls in November. That led to the Bush tax cuts being extended for two more years.

With the tax outlook clearer, manufacturers are counting on their belt-tightening measures to expand their profit margins as the recovery gains momentum.

Zippo Manufacturing, the manufacturer of the iconic Zippo lighter, was already reassessing its costs and operations when the recession hit the Bradford company.

"We just took a more aggressive stance and posture in those areas," said president and CEO Greg Booth.

The initiatives are paying off. Booth said efficiency had increased as much as 30 percent. Scrap and products that have to be reworked have been reduced by up to 40 percent. That makes Zippo lean enough to be profitable at sales levels that would have produced a loss in the past, he said.

"We're doing very well and, this year, from a profit perspective, are doing a little better than we expected," Booth said.

Zippo also benefited from extending the brand by developing products that do something other than light cigarettes, an initiative that preceded the recession by about six years, Booth said. The new products include hand warmers, lighters for starting candles and campfires, and sunglasses. A line of casual clothing will hit the market this spring.

"All of those things are starting to get some traction in the marketplace," Booth said.

The recession meant 30 percent less revenue for Perryman Co., a Washington County titanium producer with plants in Houston, in that county, and California, Pa. At this point, president and CEO Frank L. Perryman said the company's top line was about halfway back to pre-recession levels.

The company limited layoffs, choosing instead to hold onto skilled workers for when the economy turned, Perryman said. It also aggressively managed its inventories and continued investing in the business. After spending about $100 million on projects in recent years, Perryman invested another $10 million this fall when it broke ground on a project at its Houston mill.

"Perryman has always been a down market reinvestor and has proven the benefits (of doing that) over the years," Perryman said.

The company, which employs 208 people, is cautiously optimistic about 2011.

"All indications from our key customers point to an improved year," Perryman said.

Booth is also optimistic. After laying off more than 100 workers to battle the recession, Zippo now employs nearly 800 worldwide. This fall, it put about 50 workers who were working part time on full time through the end of this year. Booth believes that they'll be around for a little longer than that.

"It looks like we're probably going to keep them into 2011," he said. "Our forecast for January looks very strong.
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