The revival in the Rustbelt isn't a comeback -- it's a transformation
We've heard a lot recently about the revival of the Rustbelt, and it's a dramatic story. Detroit back on its feet. Cleveland beginning to boom. Heavy-equipment makers such as Caterpillar thriving. Even U.S. Steel (oops, I mean USX) making money again. All of which has led me to a heretical thought: maybe the Old Economy isn't dead after all. Maybe the giant manufacturers whose obituaries we've been writing were only dozing. To find out, I went to Akron.
Akron: what better symbol of America's industrial transformation? The Rubber Capital's massive factories once churned out tires by the millions, anchoring a muscular blue-collar economy typical of yesterday's heartland. And when U.S. manufacturing entered its early-1980s tailspin, Akron was at the vortex. Between 1979 and 1983, say University of Akron economists James Shanahan and Richard Goe, the city lost 10,000 jobs in the tire and tube industry alone. All told, manufacturing employment dropped by 22,000, or nearly 25%.
Like the rest of the Rustbelt, Akron has been recovering -- to a point, says Shanahan, where it's on the verge of taking off. But anyone looking for the return of big-company America will be sorely disappointed. The economy that's powering the city's rebirth is utterly unlike what preceded it -- and quite a lot like what we'll see elsewhere in the country over the next few decades.
Point one: Akron's giants have relocated and restructured themselves past the point of no return. Goodyear Tire & Rubber opened an ultramodern tire plant -- in Lawton, Okla. B. F. Goodrich and GenCorp -- formerly General Tire & Rubber -- sold off their tire divisions completely. Firestone Tire & Rubber moved its headquarters to Chicago only to be bought out by the Japanese firm Bridgestone. Today just a few experimental and specialty tires are manufactured in Akron. Large companies such as Goodyear maintain a strong presence in the city, but they are no longer the driving force.
In their place are newer, smaller businesses. Jack Jeter walked me through Jeter Systems Corp.'s stylishly renovated offices; they are upstairs from what was once a Firestone shower-room building. Out back, where Firestone warehoused tens of thousands of tires, Jeter's 115 employees manufacture sophisticated filing equipment for a nationwide market. A few miles down the road, Dennis Oleksuk took me around the biggest, most decrepit complex of factory buildings I ever hope to see, all the while explaining how these old Goodrich facilities are becoming home to dozens of new businesses (see page 2, "Out of the Ashes"). "It's the small and midsize companies that are expanding," says Dale Gibbons of the Akron Regional Development Board. "The big ones are consolidating."
Point two: the small companies driving Akron's boomlet don't look or behave like the small companies of the past. Once, for instance, you had to attain a certain size before you thought about going global. No more. Beta Medical Products Inc., manufacturers of hydraulic trauma beds for hospital emergency rooms, is so young it's still housed in the Akron-Summit Industrial Incubator on Lincoln Street. But it is already selling in Europe through giant Siemens Medical Systems Inc., for which it has also contracted to develop a new and still-secret product. Beta is not, however, a captive supplier. It still sells most of its trauma beds on its own and has developed a new mobile medical-imaging table with the Cleveland Clinic Foundation, independent of Siemens.
Captive suppliers, in fact, are hard to find. "Ten years ago machine shops like mine lived or died with the [large] company they hooked up with," says S. Lee Combs of S. C. Manufacturing Inc. "Today I have 50 customers, and they come from all over." The typical customer, moreover, now wants ready-to-assemble parts, complete with quality-control documentation. To meet this demand, Akron's machine shops operate as a kind of high-capacity flexible network. Combs maintains various types of computerized machine tools. He subcontracts operations that require other specialized equipment, and his competitors return the favor.
Even fast-growing, diversifying companies are no longer emulating the old model of the large, integrated corporation. Not far from Combs, Akron Storage & Warehouse Co.'s ever-more-numerous employees run warehousing facilities, develop industrial real estate, unload and repackage plastic resins from hopper cars, and just recently began contract manufacturing of injection-molded housewares. The company is positioning itself, says marketing director Robert Flaherty, to serve the area's evolving polymer businesses. The goal: not just to thrive as a company, but to help build a thriving industry. The tire makers -- which muscled out competitors, dominated suppliers, and carved up the market like so many feudal lords -- could have used a little such farsightedness.
Point three: the new economy in Akron depends on the public sector as never before. Not so long ago, businesspeople wanted public officials to cut taxes and stay out of the way, while officials wanted business to keep its finger out of the public's eye. Today there's both mutual respect and active cooperation. The city's six-year-old incubator houses 12 start-ups, has graduated 8, and is about to move into much larger facilities. The Akron Regional Development Board runs a small-business assistance center, guaranteed-loan programs, and a consortium of employee-training agencies. "The board has been tremendously helpful in offering us training assistance," says Robert Flaherty, discussing his company's new manufacturing operation. "With today's computer-controlled equipment, we had to send our people to school for seven weeks before we made a dime."
The public sector has replaced the large corporation as spawning ground for new products. Robert Winer, for example, had an idea for a plastic-and-rubber spray can as an alternative to aerosols, a product that had eluded inventors for decades. In the past he might have taken it to Goodrich in hopes of licensing it out. This time, he took the idea to the dean of the polymer-engineering and polymer-science department at the University of Akron. With the dean's help, Winer applied for -- and won -- a $220,000 Thomas Edison grant from the state of Ohio, which funded additional research and development at the university. Today Winer's Akron Polymer Container Corp. is about to begin production of the so-called Akro system.
Small companies operating in big markets, pursuing strategies they never pursued in the past, cooperating rather than fighting with public agencies: such is the new economy in Akron. If we looked behind the headlines, that's probably what we'd find elsewhere in the Rustbelt as well. The Caterpillars and USXes of the world get the attention, and it's a fine thing that our big manufacturers are no longer on the ropes. But we shouldn't mistake their recovery for a return to the old regime.
OUT OF THE ASHES
Old buildings, new businesses
"We like to think that Uncle Benny's up there smiling at us," says Michael Owen, referring to Benjamin Franklin Goodrich.
A few years ago Owen's colleague Dennis Oleksuk was working in B. F. Goodrich Co.'s facilities-management office. His job: getting Goodrich's many divisions out of the company's huge, aging complex of factories on Akron's South Main Street and planning for the buildings' demolition. Owen, over in the company's real-estate department, was wondering if there wasn't some way to save them.
He convinced Oleksuk, and the two put together a plan. With the city's approval, Goodrich agreed to sell the buildings to Covington Capital Corp., a Larchmont, N.Y.-based developer that had rehabilitated smaller industrial facilities elsewhere. Covington would turn it into a mammoth mixed-use complex: housing, shops, offices, and sizable amounts of industrial space. Today Oleksuk and Owen are on Covington's payroll, charged with overseeing what has been renamed Canal Place.
From one angle the 27 buildings that make up the complex look ready for the industrial archaeologists. Huge bay doors stand gaping, rusty railroad tracks disappear into cavernous covered loading docks. With 1 million of the buildings' 1.8-million square feet of usable space still vacant, the two men are faced with filling the equivalent of a small industrial park.
But here and there, like sprouts among the ashes, are busy outposts of enterprise. Among the offices are the tony studios of an architecture-engineering firm, a freshly painted day-care center, and a desktop-publishing company. Industrial tenants include Robert Winer's Akron Polymer Container Corp., a children's clothing manufacturing start-up, and a heavy-equipment remanufacturing business expanding from nearby Medina. Rents are low, which for some of the 30-odd tenants is the critical factor. "We're paying less than $2 [a square foot] for good manufacturing space," says Alan Robbins, founder of a fledgling company that makes decking and other products out of scrap plastic. "Where else can you get rents like that?"
That's just one benefit of starting up in a business incubator. (For others, see "Mother of Invention," October, [Article link].) Next spring the Akron-Summit Industrial Incubator plans to take 300,000 square feet, allowing the incubator to add dozens more new businesses to its roster. That will further Oleksuk and Owen's goal, which is not just to fill space but to fill it with a healthy diversity of growing businesses, some utilizing the services of others. "Benjamin Franklin Goodrich brought a struggling company here and watched it grow and diversify," says Owen. "We can do the same thing with many businesses. So much of what I perceive as Akron's future is coming through these doors."