Economy takes a toll on some local businessWhile southwest North Dakota sports one of the healthiest economies nationwide, a few big businesses have felt the impact of a widespread economic downturn and one local, long-standing manufacturer is feeling the squeeze.
While southwest North Dakota sports one of the healthiest economies nationwide, a few big businesses have felt the impact of a widespread economic downturn and one local, long-standing manufacturer is feeling the squeeze.
In operation since February 1969, TMI Systems Design Corp., a company specializing in laminate casework, is “feeling the financial impact” of a dimmed national economy, said Dennis Johnson, chairman and chief operating officer of TMI, who has been with the company for 36 years. “The western North Dakota economy, if it’s not the best in the nation, it’s one of the best,” Johnson said. “And the economy that TMI participates in is really the national construction market and that economy is perhaps the worst in the nation. We’ve had the most profound effect really in probably the last 12 months or so.” The “profound effect” is partially attributed to TMI often working off backlog and heading into the economic downturn — backlog was “pretty healthy.” Now, backlog is down more than 30 percent, Johnson said. The nationwide construction peak was in 2006 and Johnson estimates it to have fallen about 40 percent since. “There isn’t as many schools and hospitals being built … from their peak, they’re off 35 to 40 percent,” Johnson said. “As a result, the bidding for those projects is fierce, is much more competitive.” With less school and hospital construction, a big part of TMI’s niche, there is less work and consequently, prices are much lower. “That’s kind of the worst thing that could happen to a manufacturing company is at the same time you have a decline in volume you also have a decline in your gross profit margin,” Johnson said. Bid profit margins began to deteriorate about two years ago, Johnson said. While it doesn’t appear positions will need to be cut in the near future, present factory employees are working 36-hour work weeks, Johnson said. The sector encompassing TMI is “getting close to a bottom,” Johnson said, and projections for next year are dim. “We think that our sales will fall further and it won’t be a good year for us,” Johnson said. “In terms of this downturn, I think 2011 is going to be the toughest year for us.”
Johnson said TMI has a strong balance sheet and is well prepared for a downturn. SolarBee, Inc., a solar-powered circulation technology company based north of Dickinson, remains stable, but hasn’t had much growth in the last two years, said Willard Tormaschy, one of the company’s co-founders. While the company was able to retain present customers through the downturn, new business is seeing an impact. “Our growth went to virtually zero and we were used to being on a path of growth,” Tormaschy said. “We were prepared for growth too and then it stopped.” While SolarBee isn’t experiencing financial hardships, the downturn caused the company to be more financially conservative, Tormaschy said. But, the nation’s economic state has left little predictability, Tormaschy said. “We’re starting to see it stabilizing again and I think that now we’re feeling a little bit more comfortable in predicting what might happen,” he said. “The last few months have been fairly good months again for us.” Looking into 2011, Tormaschy said it appears growth will return. Joe Rothschiller, president of Steffes Corp., a local manufacturer, said the national economy has affected about 40 percent of the company’s business, according to a voice mail. While the company’s heater division has been affected as it follows the housing market, Steffes is seeing a rebound in retro fit applications. Steffes’ manufacturing solutions division has also experienced a “flattening” of the economy, but is now beginning to see “an upward tick,” Rothschiller said. The company’s oil industry division is thriving, Rothschiller said. “We’ve felt the national economy however we feel that we bottomed out about six months ago and now are on an upward tick — have lots of opportunity in front of us,” Rothschiller said. One local company has the complete opposite issue. Guy Moos, president of Baker Boy, said the company is doing extremely well and is “blessed to be making food products.” Many of Baker Boy’s food products are everyday items. “The national economy has only affected us perhaps in very, very high end restaurants, they’re off a little bit,” Moos said. Opposite many nationwide companies, Baker Boy remains busy and is in the midst of an expansion. “The orders have been so strong this fall we’re selling more than what we can make and that’s good and bad,” Moos said, adding staff have been running overtime. “It’s heartwarming to see that our market share is growing.”