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The Honolulu Advertiser
Posted on: Saturday, October 8, 2005

Mining-equipment makers prospering

By Ryan Nakashima
Associated Press

Floor mill operator Michael Hundt takes a measurement of a gear at Bucyrus International in South Milwaukee, Wis. The builder of some of the world's biggest earth-moving machines is hiring shop-floor welders after years of troubles, including bankruptcy in 1994.

MORRY GASH | Associated Press

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MILWAUKEE — Since summer, there's been a sign on the highway from Chicago to Milwaukee that people around here haven't seen for ages — "Jobs now" at mining equipment maker Bucyrus International Inc.

The builder of some of the world's biggest earth-moving machines is hiring shop-floor welders after years of troubles, including bankruptcy in 1994 and near-bankruptcy in 2001. A two-decade-long slump in commodity prices has turned around, and now 125-year-old Bucyrus's South Milwaukee plant is starting again to hum and clang with activity.

Its competitor across town, Joy Global Inc., which accounts for the rest of the global supply of surface mining machines, is also ramping up, four years after emerging from bankruptcy itself. "We decided we're staying here, we're going to do a major expansion of our facilities and we need a lot of people," said Bucyrus CEO Tim Sullivan.

The turnaround of both companies is a bright spot in the Rust Belt, the Midwest region that has seen manufacturing jobs leave for Asia and Latin America only to trickle back last year as the U.S. economy continued to recover. Demand for their products — earth movers sometimes larger than jumbo jets — is booming, fueled by pricey oil and China's material hunger.

"They're certainly Rust Belt survivors," said analyst Barry Bannister with Legg Mason Wood Walker Inc. "Capacity lags pricing so the strongest years are still ahead for these companies. But they didn't see this coming, and have been struggling to ratchet up capacity to build more machines."

What's unclear is whether the companies can find the workers they need right away. The Institute for Supply Management reported this week spikes in both manufacturing activity and employment that raised fears of inflation in both materials and salaries.

The added manpower is needed to crank out enough of the behemoth dirt-movers for customers worldwide to dig up the coal, copper and iron ore needed to feed the insatiable Chinese economy.

Soaring oil prices have also increased demand for digging equipment to get at Alberta's vast tar sands, which were once seen as too costly to unearth, but are now teeming with frantic activity.

"There's literally hundreds of years of oil in those tar sands and they're moving as fast as they can to expand those properties up there. So that means obviously good business for us," said Bucyrus spokesman Kent Henschen.

Both companies have gotten further behind on orders; Bucyrus' backlog more than doubled to $573.3 million in the last quarter from a year ago, while Joy Global's surged 53 percent past $1 billion.

Bucyrus announced expansion plans last month to more than double its shovel-building capacity to 17 a year and it plans to hire some 335 workers in the next two to three years.

Joy Global said in August that it is also boosting its shovel-making capacity 40 percent, from 17 to 24 per year, in the next 18 months.

Now the problem is convincing workers to sign on.

Technical college graduates in today's high-tech age no longer have the specialized skills to weld giant machines — many the size of several jumbo jets and can move 120 tons of dirt the length of two football fields in a single swivel.

The largest of the machines, called a dragline because it scoops up material with huge buckets pulled by thick cables, can command up to $70 million each and take about two years to manufacture parts and then assemble in the field. Smaller shovels and drills still cost several million dollars and take months to build.

Workers have to adapt to getting inside and over single parts that can weigh 160,000 pounds and tower 70 feet in the air. Welding lines several inches thick requires skills traditional welders do not have.

Although Bucyrus received $3.5 million in state grants to help train new workers, Sullivan said he still had to approach area schools to get them to super-size the skills of their students for the coming expansion.

"The whole focus of training and schooling and everything else moved away from manufacturing and moved into what you call white-collar type jobs," he said. "But now that we're hiring more welders, we have to get the programs more adapted to what we need."

Wisconsin has seen the percentage of salaried manufacturing workers among all workers drop for decades to 17.9 percent last year, still number two behind Indiana. Starting last year, the state reversed a nearly four-year slide and began to see manufacturing jobs increase. Manufacturers then strained to find people to fill the spots.

"You can't just put a sign out there," said state economist Eric Grosso. "You have to go out and find people with the special skills you need, just like any other industry."

Milwaukee Area Technical College spokesman Jim Gribble said students have turned away from manufacturing jobs out of fear for their futures and need encouragement to go back to the industry.

"There's a perception that if you do get a job, it'll be roboticized in the next few years," Gribble said. "In some respects, it's a difficult sell."

Analysts say for now, the expansion will be stable. They say the Bucyrus and Joy Global duopoly is set to ride the upsurge in the price of commodities until at least 2015.