Ohio’s Struggling Manufacturing Sector Finds Clean Energy Clientele

Tales of layoffs and cutbacks in Ohio’s manufacturing sector are being eclipsed by a surprising new narrative, one of job growth and profits, as firms use old skills to court a new and ‘greener’ clientele.

Based just outside of Cleveland, Cardinal Fastener & Specialty Co. is the epitome of the clean energy-driven manufacturing renaissance sweeping the Rust Belt state.

By adding a wind industry line to its production of hot forged bolts — which are used to build oil rigs, bridges, trains and construction machinery — the small firm has nearly doubled its annual revenues in less than four years.

Interestingly, the manufacturer’s decision to enter the clean energy technology market was more happenstance than strategic.

John Grabner, who founded the firm in 1983 and is also CEO, received a desperate phone call in 2007 from a wind turbine company in Iowa. A European supplier had fallen through on an order of heavy-duty fasteners for the towers, and the turbine maker needed high-quality bolts — and fast.

Grabner filled the order, and then became “intellectually curious,” he told SolveClimate News. He was soon reaching out to other turbine manufacturers and meeting with their suppliers overseas to familiarize his firm with the emerging wind energy market.

“We said, ‘We need to structure our company to meet their demands and expectations.'”

Two years later, President Obama stopped off at Grabner’s plant along his White House-bound inaugural train ride in 2009, during which he touted his plan for an American Recovery and Reinvestment Act and underscored the role of clean energy in creating jobs.

Grabner met Obama again last month as a participant in a small business forum at Cleveland State University. While there, he also spoke with U.S. Energy Secretary Steven Chu, who keeps a Cardinal Fastener bolt on his desk in Washington, the exact one the firm uses in its wind towers, Grabner said.

“The renewable energy industry is a cornerstone of [Obama’s] reinvestment plan, and we were doing that and growing significantly in that,” Grabner said of the 2009 visit.

‘Poster Child’ for Entering Clean Economy

“We’re a poster child for how to grow a manufacturing company from what it used to be to what it needs to be,” he continued.

Today, Cardinal Fastener’s wind parts division has grown 900 percent since its first order and accounts for 40 percent of the firm’s $10 million-plus yearly revenues. The venture added 25 new positions to its then 40-member workforce.

The company’s bolts will be used in the 55 turbines built by Vestas, the Danish wind manufacturing giant, for a 99-megawatt wind farm in northwestern Ohio by developer Paulding Wind Farm II LLC, a subsidiary of Houston-based Horizon Wind Energy.

The fastener maker also works with nearly 15 other turbine builders, including Gamesa SA, a prominent Spanish firm, in addition to more than 100 global suppliers involved in the fabrication, transportation, construction and maintenance of the some 8,000 parts needed to build wind turbines.

Much like Cardinal Fastener, Ohio’s 21,250 manufacturing companies are well positioned to add the clean energy supply chain to their traditional client base of automotive, aerospace and original equipment manufacturer, or OEM, industries.

Manufacturing Expertise Moves to Turbines

Manufacturing is the largest of Ohio’s 20 industries and accounts for nearly 18 percent of the state’s economy, the Ohio Manufacturers’ Association reported in 2008. Ohio produced $84.1 billion worth of goods that year, ranking it third nationally after California and Texas for industrial output.

“We make a lot of stuff that goes into stuff — gears, transmissions, breaks, sheet metal,” said Scott Miller, director of energy and environment programs at Ohio University’s Voinovich School of Leadership & Public Affairs. “A lot of that always went into the automotive sector, but these days those are the exact same components that go into a wind turbine.”

Miller contributed to a February report by the Chicago-based Environmental Law & Policy Center (ELPC) ranking Ohio as the No. 2 state for wind turbine manufacturing behind California.

ELPC spokesperson Peter Gray said: “We’re trying to show in realistic terms what green jobs and renewable energy means, specifically in the Midwest … and especially in the supply chain, which sometimes gets overlooked.”

The study highlights firms such as the century-old Cincinnati Gearing System, a precision gear and transmission maker that now directs nearly 25 percent of its business to demand for wind turbine engines. Crown Battery, an 80-year-old battery manufacturing facility outside of Toledo, added storage products for wind and solar energy systems to its production line in 2009.

Toledo Becoming Hub for Thin-Film PV Products

Solar suppliers are also on the rise.

In Toledo, a hub for glass and plastic film manufacturers, many firms are now using their products for photovoltaic (PV) solar panels, and research programs at the University of Toledo have helped the northwestern region become a center for the production of flexible sheets of thin film PV cells.

Overall, Ohio has 106 wind power and 63 solar power supply chain businesses that together account for 7,500 and 1,500 manufacturing jobs, respectively, the ELPC study says.

The count includes only the firms the center could get in touch with during a month of research, the authors said, so the actual numbers are likely to be even higher.

“We’re seeing a fundamental shift in the way that we manufacture in Ohio and what we manufacture,” Miller said. “Old, inefficient manufacturers with high energy costs and overhead costs are being squeezed out during this economic recession.”

“What you’re starting to see is a shift toward more efficient, leaner manufacturing and a shift toward higher technology and cleaner technology products, because that’s what the market is demanding,” he said.

Economic Development Programs Spur Transtion

Ohio has helped spur the green manufacturing transition with several economic development programs, like the $5 million Advanced Energy Fund program that gave grants to more than 600 advanced energy and energy efficiency projects in the last five years.

The ongoing Ohio Energy Gateway Fund combined $40 million of federal stimulus funds with $40 million of venture capital investments to help jump-start clean and advanced energy projects. The ten-year Ohio Third Frontier program is providing $1.6 billion in investments for new companies, product innovation and research and development through 2012.

The programs were created to help offset the heavy blows dealt to Ohio manufacturers as more factories moved overseas, the automotive industry recoiled and the economic recession unfurled.

The state lost around 268,000 manufacturing jobs from January 1999 to December 2007, according to figures from the Brookings Institution, a Washington-based think tank. An additional 150,000 jobs were lost between December 2007 and November 2009, accounting for nearly half of the total job loss in the state.

Ed Burghard, executive director of the nonprofit Ohio Business Development Coalition, said that the same traits that made Ohio a manufacturing leader in the past would help guide the state out of the grim recent history.

Shipping, Well-Trained Workforce Give Ohio Edge

Ohio is within 600 miles of more than 60 percent of all U.S. and Canadian manufacturing locations, and the state’s border with the Great Lakes gives it immediate access to transatlantic shipping, he said. Major interstate highways crisscross the state, and railway and air cargo infrastructure is built up across the state.

“If something is made in the state, it can be moved to markets in a cost-effective way. That’s one major enabler of the success we’re starting to see” in clean energy industries, Burghard told SolveClimate News.

The state also touts a well-trained industrial workforce and hosts an array of major research institutions such as Battelle, the Central Ohio Hub for Advanced Energy Manufacturing and Energy Storage, plus seven statewide Edison Technology Centers.

Another big strength for Ohio manufacturers is its position as the seventh-largest exporting state in the country, a particularly key quality as domestic renewable energy markets lag behind those in Europe and Asia.

Burghard said the state had eliminated taxes on capital improvements, inventory and out-of-state or overseas sales to keep Ohio competitive with global manufacturers.

Renewable Portfolio Standard Also Plays a Role

ELPC said that Ohio’s aggressive renewable portfolio standard (RPS) also played a role in boosting green manufacturing. The RPS signals to firms that more wind farms, solar plants and other alternative projects will require more components like the ones their factories produce.

In 2008, Ohio mandated that 12.5 percent of electricity sold in state must come from renewable energy sources like wind and solar by 2025, while an additional 12.5 percent must come from alternative energy sources, such as nuclear power, natural gas and so-called “clean coal.”

Although Ohio has just 10 megawatts of installed wind capacity and slightly more solar capacity, projects underway this year will add 1,300 megawatts and 50 megawatts of installed wind and solar, respectively.

In Cardinal Fastener’s case, more than 95 percent of the firm’s wind turbine generator fasteners are exported to states with strong RPS policies in place, according to the ELPC study.

However, John Grabner said that a federal clean energy standard is the biggest way to boost green manufacturing in Ohio.

Domestic suppliers are “losing our edge” because the demand for renewable energy is so much greater abroad, he said.

Scott Miller added: “A federal standard would set a national market and send a signal to overseas markets to locate in Ohio.”