Plastics executives face daunting labor crunch

Before the pandemic, a help-wanted sign outside Premier OEM's rotational molding facility in Cuyahoga Falls, Ohio, could bring 15-20 job applicants in a week from the 22,000 vehicles passing by every day.

Business was good for the manufacturer of parts and accessories for off-road vehicles.

Sales of roofs, luggage boxes, in-dash stereo systems and premium coolers were growing 10-15 percent a year and had reached about $15.5 million.

After the pandemic was declared, trail riding surged in popularity. COVID-19 nixed indoor gatherings, and social distancing became the norm to reduce the risk of infection.

Business at Premier OEM should be better than ever. And it would be if founder Jim Nagy could fill about 35 vacant positions. He said the labor crunch is costing the business about $7 million this year and company officials are now creating some part-time positions to appeal to more people looking for jobs.

It's a familiar refrain as manufacturers struggle to fill openings and broaden their talent pipelines. The manufacturing industry lost 578,000 jobs during the pandemic-challenged 2020 — a figure that represents nearly six years of job gains, according to the U.S. Bureau of Labor Statistics.

However, at almost any given moment, about 500,000 jobs have remained open in manufacturing, the bureau also says.

By 2030, U.S. manufacturing is expected to have 2.1 million unfilled jobs, according to a May 2021 report from consulting firm Deloitte Touche Tohmatsu Ltd. called "Creating pathways for tomorrow's workforce today."

A lot of the lost and vacant jobs are in the plastics industry, according to Perc Pineda, chief economist for the Washington-based Plastics Industry Association.

"We're no longer an industry with over 1 million workers. That's kind of disappointing," Pineda said during an Aug. 13 online economic update to the mold making division of the plastics association's equipment committee. "Don't feel bad; you're not alone. It was an economywide event that happened last year."

The U.S. plastics industry accounted for more than 1 million jobs and $432 billion in shipments in 2019, the trade association reported last year. At the time, California had the most plastics industry jobs with 79,700.

However, that has changed, too.

"Texas is now the state with the most plastics workers. It's no longer California," Pineda said.

Businesses should expect to pay more to attract, train and retain employees, the economist also said.

"As we look for some sort of guideline, businesses should really factor in about 3.1 percent employment cost higher this year than last year," Pineda said, adding he will go into more detail on the topics on Sept. 21, when the association unveils an updated report on the size and impact of the U.S. plastics industry.

Nagy said Premier tried to attract more applicants with wage adjustments. However, raising the pay rate to $14.25 didn't help and neither did offering $40-a-week bonuses for perfect attendance. Hiring bonuses failed, too. Most new employees collected the $1,000 after 60 days and another $1,000 after 90 days and then quit.

"The bonus carrot didn't work," Nagy said. "We paid $15,000 in May and $20,000 in June, but there are so many incentives out there, people are just churning through."

Now shifts are shorted and thermoforming equipment gets idled.

"We have orders for about $23 million that we can't get to because we can't get the machines running because that requires labor," Nagy said. "We will be fortunate to get $16.5 million out."

Supply chain woes are adding to problems at Premier and elsewhere. The companies that sell components to Nagy also are struggling to fill vacant positions.

"Lead times are getting further and further out," Nagy said. "We have some components that are [usually] 26 weeks and we're waiting 52. Things we ordered in May we won't see until March. So even when get people in here, there's not workable work."

As a result, Premier officials decided to try something different there: hiring part-time workers. Nagy said the first seven applicants are four men and three women. Some are getting off night shifts and want to go to a second part-time job. Others prefer part-time work because they want to see children off to school or they share a car with a spouse.

Nagy said maybe there will even come a day when part-time employees set their hours, show up and do the work, and get paid instantly or shortly after like drivers for food delivery services.

"I don't know what it will take for manufacturers to get through this and how employment will be in the future," Nagy said. "I think we're going to be paying on a daily basis. I think we will have sign-up boards like they do for Grubhub."

For now, Nagy said he is excited about the prospect of part-time workers helping Premier meet demand.

"There was a mental barrier about part-time work that we had to overcome as to how we would manage it," he added. "We had to stop thinking about it and start doing it and figure it out."

Automation also will be part of the solution, Nagy said.

"Realistically with the market we're in, the labor out there will never be sufficient to do what we want," he said. "We have the capital to invest in equipment and automation so over time we can work our way out of this."

The employment problem is plaguing the whole plastics supply chain. Batesville, Ind.-based machine builder Hillenbrand Inc. is turning to partners to help with incremental volume increases to keep lead times down for its Advanced Process Solutions segment.

APS equipment, including the Milacron brand of molding machines, makes up 47 percent of Hillenbrand sales and is sold mostly to custom molders and processors in the automotive, consumer goods, chemicals, packaging and construction markets.

Early in the pandemic, Hillenbrand furloughed "quite a number" of employees, Hillenbrand President and CEO Joe Raver said in an Aug. 5 quarterly conference call with investment bankers.

"So we're building back that labor force, but it's a challenge for us, especially domestically. ... We continue to see wage pressure around the world when it comes to labor," Raver said.

In July, Xaloy Holdings LLC announced it is moving its twin-barrel manufacturing operation from Austintown, Ohio, to Pulaski, Va., where it rehired former employees and is investing $1.75 million to ramp up as soon as possible. The move is creating 35 jobs and nearly all of the first 20 hires had worked at the Pulaski plant before, bringing decades of experience.

Andrew Brickman, a partner at Chicago-based private equity firm Altair Investments Inc., which owns Xaloy, said there was a "sense of getting back the band together" as the company searched for its former employees.

"They had all been at other jobs but we were fortunate enough to tap into a solid core base of that talent pool again," Brickman said. "By redeploying the twin barrels to a workforce that knows how to do them, we hope to bring in lead times and alleviate some of the stresses in Austintown."

Labor constraints also are hampering the extent to which Trex Co. Inc. can utilize $200 million of additional capacity that became fully operational in May.

The Winchester, Va.-based company increased capacity by about 70 percent compared with 2019 volume levels to give Trex a competitive advantage in the composite decking marketplace, which is gaining sales from the wood decking market.

However, Trex is struggling to add 350 employees to handle the extra capacity, according to Trex CEO Bryan Fairbanks.

"Because of the tight labor market, we weren't able to run all of our lines as much as we would have liked. And as a result, we have absorption impact from that," Fairbanks said during an Aug. 2 earnings call.

With $881 million in annual sales, Trex ranks sixth among North American pipe, profile and tubing manufacturers, according to Plastics News' latest ranking.

Trex is fulfilling orders about 30 days later than expected because of labor woes. In response, the company increased wages for some positions and sweetened the pot for overtime.

"We have put some additional incentive programs in place to encourage more people to work the overtime that we need with the additional lines," Fairbanks said.

Trex also has broadened the focus of its recruiting efforts with the launch of what it calls its Level-Up Program.

"For most of Trex's history, we hired people at the entry level and then we've trained them through all of our manufacturing processes as they move up through manufacturing," Fairbanks said.

Now Trex officials also are seeking out prospective employees with some manufacturing experience.

"We recognize there are highly skilled, capable people available in our local economies, and we've gone ahead and started recruiting directly for those individuals, of course, paying at a higher wage rate than just coming into Trex as a newer and unfamiliar employee along the way," Fairbanks said.

Trex continues to look for new ideas to beef up its workforce, he also said.