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Most manufacturing assembly lines are still built around employees working at least eight-hour shifts, five days a week, and that’s been a hurdle for industrial companies competing for talent in a labor force that increasingly prioritizes flexibility. Factory employees aren’t going to be able to work from home anytime soon, but there are changes companies can — and should — make to rethink the industrial workweek.
As of May, US manufacturers had more than 600,000 job openings, according to the Bureau of Labor Statistics. While that’s an improvement from the peak of more than 1 million last April, the number of unfilled positions is still elevated relative to pre-pandemic levels. And the industry’s need for workers is also rising. Melius Research has tabulated some $600 billion of “mega projects” — defined as an investment greater than $1 billion — announced cumulatively since January 2021 amid a rewiring of global supply chains and a revival of industrial policy. But the ultimate economic impact of those new factories, hospital wings and airport terminals depends on the availability of labor to build and operate the projects. Taiwan Semiconductor Manufacturing Co. said this week that it needed to delay the start of production at a plant it’s building in Arizona because there aren’t enough workers available, particularly those with the expertise needed to install equipment in a semiconductor-grade facility. TSMC is sending experienced technicians from Taiwan to help train the US workforce, Chairman Mark Liu said on the company’s earnings call.
Companies surveyed by the National Association of Manufacturers ranked attracting and retaining a high-quality workforce as their biggest business challenge in the second quarter, ahead of a weakening economic outlook, supply chain challenges, and access to credit. The group has previously warned the industry could be short 2.1 million workers by 2030. In addition to skilled workers such as those needed to build semiconductor plants, “many manufacturers can’t fill entry-level production associate positions,” according to a 2021 report co-produced by Deloitte and the Manufacturing Institute, the workforce development and education partner of the NAM. “These are the jobs that do not require technical know-how or industry knowledge. ... Rather, they require a person who has a basic level of ‘human capabilities,’ such as following directions, willingness to learn, and follow-through.” The manufacturing sector typically offers better benefits and wages on average compared with the retail and services sectors, according to a Deloitte analysis of 2021 data from the BLS. But work-life balance was the No. 2 priority after attractive pay in Deloitte and NAM’s survey of manufacturing workers for that year. This was also the area where respondents said manufacturers fell short the most and the primary reason they listed for considering leaving the industry.
Where Are the Workers?
A tough labor market for manufacturing work outweighs other concerns for industrial companies
Source: National Association of Manufacturers
NOTE: Respondents were asked to check all challenges that apply
Some of the issues holding back the growth of the industrial labor force are complicated. The US has spent decades emphasizing four-year college degrees as the gold standard, to the detriment of technical schools and manufacturing careers. Narratives around robots stealing jobs and dull, dirty and dangerous work are deeply ingrained, however inaccurately they may describe the current state of US factories. Manufacturers haven’t helped perceptions of the industry by firing workers en masse when business slumps. But the desire for more flexible schedules is a solvable problem.
Historically, the manufacturing sector has shunned part-time work because employees in those positions were perceived to be more challenging to train and less reliable. But with baby boomers retiring and millennials showing less interest in factory work, GE Appliances realized it needed to rethink how it managed its workforce and give part-time employees another try. “The way we have looked in the past at hourly associates was 40 hours a week of work, plus some overtime, and here’s our pay and benefits, take it or leave it,” Bill Good, vice president of supply chain at GE Appliances, said in an interview. “We have had to flip that script. We can continue to have that approach and then struggle to fill manufacturing jobs, or we can change and break paradigms and start looking at, ‘If we can’t make the person fit the work, then we need to make the work fit the person.’” GE Appliances is owned by China’s Haier Group, which acquired the business from General Electric Co. in 2016 for $5.6 billion.
In 2018, the company started experimenting with hiring people to work at its Louisville, Kentucky campus just on Mondays and Fridays, days when there are typically higher volumes of vacation requests from its full-time staff. The company expanded the two-day-a-week program in 2020. The initial idea was to attract college students who might be looking to make money in between classes, with benefits including up to $6,000 a year in tuition reimbursement. What GE Appliances got instead was a flood of interest from stay-at-home parents and secondary wage earners. “That was an ‘Aha’ moment,” Good said. In 2022, the company added a three-day-a-week option for Tuesdays, Wednesdays, and Thursdays. About 500 people work under one of those flexible scheduling arrangements out of a total manufacturing staff at the Louisville campus of 6,000, Good said. Retention rates are high and absenteeism is low for that group of workers. “This is probably my third or fourth time to attempt to use a part-time associate in a manufacturing environment,” Good said. “Each time we’ve abandoned it in my past worlds. But this has been super successful. It’s shown us that this generation of workers is different.”
Help Wanted
There are still too many unfilled industrial jobs
Source: Bureau of Labor Statistics
In LaFayette, Georgia, GE Appliances’ Roper Corp. plant has partnered with MyWorkChoice, a staffing agency focused on bridging the gap between workers’ desire for flexible schedules and manufacturing, supply chain, and warehouse companies’ need for a dependable labor force. Here’s how it works: MyWorkChoice handles job advertisement, recruitment, and background checks and coordinates with companies to get candidates the appropriate training, building a pool of workers who are essentially ready to plug and play into a factory on any given day. The manufacturers communicate their labor needs, and the workers get to choose, through an app, what shifts they want based on their availability. Some members of the pool commit to working at least 32 hours a week and are considered full-time, while others serve as backups, picking up shifts when the first tier needs to make adjustments because of personal matters, Adam Raimond, senior vice president of North American operations at MyWorkChoice, said in an interview.
This isn’t Uber for workers; it would be too disruptive to have people swapping out on the assembly line at random times, and every employee needs to be trained properly. But MyWorkChoice’s model does allow people to take half-shifts — four to six hours a day, depending on the manufacturer’s operating schedule, with the handoff happening over the lunch break, Raimond said. The idea is that there’s an untapped talent who might be better suited to working only a few days a week or who can’t commit to a full eight hours every day because of other responsibilities: think college students with classes, parents with young children, people trying to supplement wages at another part-time job and retirees who want to dial back their time on their factory floor but aren’t fully ready to walk away from the workforce. MyWorkChoice handles the back-end logistics to make sure the entire shift is covered in some capacity — something that would be challenging for the Roper facility to manage on its own day-to-day, Luther Ingram, president and executive director for Roper, said in an interview.
Roper worked with MyWorkChoice to build and train a pool of 1,500 people that the company can tap into to fill staffing shortfalls, Ingram said. On a given day, about 200 people from the MyWorkChoice pool work at the company’s Georgia facility, which has a total workforce of 2,500. One big selling point of MyWorkChoice for Roper was that the 1,500-person pool of workers was built specifically to its plant, so it’s not competing with other local manufacturers for the same talent, Ingram said. MyWorkChoice will add other partners in a community if it has more applicants than the initial company needs, although it’s careful to self-regulate and not leave anyone with a shortfall, Raimond says.
Separately, Roper this month implemented a new work schedule for assembly roles and supporting departments that allow employees to work 10-hour shifts and then enjoy three-day weekends. That’s more flexibility than most salaried workers in other industries get.
Flexible scheduling is just one prong of GE Appliances’ many efforts to adapt its workforce practices for the available labor pool. GE Appliances used to require a high school diploma or a General Educational Development (GED) test, but the company relaxed that hiring condition during the pandemic and hasn’t reinstated it, Good said. The company also used to require English language skills for workers on the factory floor so that employees could read signs with operational and safety information. Investing in translators and posting information in multiple languages allowed it to drop that barrier as well, which provided a particular boost to the number of Latin American and Hispanic workers in its factories, Good said. In Louisville, GE Appliances has also partnered with Catholic Charities and Kentucky Refugee Ministries to hire a group of displaced Afghani and Congolese workers. The company last year joined the Tent Partnership for Refugees, a nonprofit founded by Chobani Chief Executive Officer Hamdi Ulukaya that encourages refugee hiring and advises members on how to build effective programs.
GE Appliances’ more welcoming hiring policies and less rigid approach to schedules is working: The company has hired more than 4,000 new employees in the US since the Haier acquisition in 2016. “Manufacturing has a brand problem as we compete for associates in the workforce,” Good said. “We have to solve this. No one can solve this but us.”
Quote of the Week
“We’re now doing more than ever to mitigate the impact of weather, congestion, and other infrastructure constraints at Newark and, frankly, to build a schedule at Newark that's more manageable given the frequency of weather events and the very real operating constraints that exist there, even on blue-sky days.” — United Airlines Holdings Inc. CEO Scott Kirby
Kirby made the comments this week on United’s earnings call as a boom in demand for international travel helped the company report better-than-expected results for the second quarter and raise its full-year profit guidance. The airline cut its capacity plans for the second half of the year, however, and raised its estimate for the nonfuel costs to fly each seat a mile. That reflects a need to further curtail the number of flights it operates out of Newark Liberty International Airport to adapt to infrastructure constraints, including a shortage of air-traffic controllers and only one set of parallel runways, Kirby said. United got hit particularly hard at its Newark hub by a series of storms along the Northeastern US in late June, forcing the airline to delay around 50% of its total flights and cancel almost 20%, according to data from FlightAware. United will trim flights at Newark to 390 a day in August, down from the 410 it had been flying this summer and the 435 flights that made up its typical schedule this time of year. It’s unlikely that United will get back to its pre-pandemic capacity at Newark by next summer, given the operational challenges at that airport, Chief Commercial Officer Andrew Nocella said. The company is also accelerating technology enhancements, increasing resources for crew scheduling, and tweaking its scheduling to avoid having to divert planes when thunderstorms hit, which can cause a cascading effect on the overall network.
The continued US aviation infrastructure constraints aren’t very helpful for the airlines, which lose money when planes can’t fly because of disruptions, nor to consumers, who have had more than their fair share of nightmare travel experiences lately. But the capacity cutbacks suggest a floor for fares, even as domestic demand shows signs of slowing.
Deals, Activists, and Corporate Governance
Cirrus Aircraft Ltd. filed to go public in Hong Kong last month and in doing so reminded the world that it’s currently owned by a subsidiary of a Chinese entity that was flagged for sanctions starting in 2020 because of its connections to that country’s military-industrial complex. Aviation Industry Corp. of China acquired Cirrus in 2011 for $210 million through its subsidiary China Aviation Industry General Aircraft Co., with a green light from the Committee on Foreign Investment in the US. But heightened geopolitical tensions and paranoia about Chinese access to US technology and infrastructure are sparking questions about whether the deal ever should have been allowed in the first place.
Small Planes, Big Skies
North America still dominates the market for general aviation aircraft
Source: Cirrus IPO filing; data from General Aviation Manufacturers Association, Frost & Sullivan analysis
The concerns about Cirrus seem to have little to do with the specifics of the company itself. AVIC acquired the company from an investment arm of Bahrain-based Arcapita Bank BSC, which had owned a majority stake since 2001. Cirrus was founded in 1984. So it has been under foreign ownership longer than it’s been under American control. General aviation aircraft aren’t an obvious weapon of war or source of industrial might. Perhaps most important, China didn’t need to buy a maker of small private planes to access US aerospace know-how. The broader industry is littered with joint ventures with AVIC-related entities. The spotlight is more a reflection of growing political scrutiny over industrial businesses of all shapes, sizes, and histories with connections to or operations in China. The shifting line creates a minefield for CEOs and raises bigger questions about the extent to which US businesses will be allowed to interact with China at all. Read the whole thing.
Chase Corp., a manufacturer of protective coatings and tape, agreed to sell itself to KKR & Co. for $127.50 a share, or $1.3 billion including the assumption of debt. The purchase price values Chase at about 13 times its earnings before interest, taxes, depreciation, and amortization over the past year. It’s the latest indication that private equity buyers may not be as sidelined from the pursuit of industrial assets as some company CEOs had hoped. Purchases the size of Chase are easily digestible for big buyout firms and help them put their vast piles of cash to work. Once the transaction closes, KKR plans to establish an equity ownership program for rank-and-file employees, a strategy that it’s deployed successfully at more than 30 companies since 2011. Read more about KKR’s push to treat workers like owners here and here.
Safran SA agreed to buy an actuation and flight control product business from Raytheon Technologies Corp.’s Collins Aerospace division. The all-cash deal has an enterprise value of $1.8 billion. The purchase helps the company further diversify its core engine operations. “We already are in the flight control and actuation business, but with a much smaller size,” Safran CEO Olivier Andries said on a call to discuss the acquisition. Combining Safran’s existing electric capabilities with Collins’s hydraulic and electromechanical expertise “will position us very nicely for the next-gen aircraft where we really work smoothly towards more electric actuation and flight controls,” he said.
Johnson Controls International Plc acquired FM: Systems, a provider of workplace management software for facilities operators and real estate professionals, for $455 million plus additional payments if the business hits certain earnings milestones. Johnson Controls plans to integrate FM: Systems’ offerings with its OpenBlue digital buildings software and automation portfolio. FM: Systems has had double-digit revenue growth, and its margins are accretive to Johnson Controls, the company said. There had been a bit of a lull recently in software acquisitions by US industrial companies as the buyers refocused on nuts-and-bolts assets that fit more obviously in their traditional wheelhouse.
FedEx Corp. hired John Dietrich, the former CEO of cargo carrier Atlas Air Worldwide Holdings Inc., to be its chief financial officer. Atlas was acquired in March by a group of private equity firms including funds owned by Apollo Global Management Inc. and J.F. Lehman & Co. Dietrich retired from his role in May. It’s unusual for FedEx to hire outsiders. The company’s top ranks have typically been populated by executives who have spent decades at the company, a contrast to rival United Parcel Service Inc., whose CEO was a longtime Home Depot Inc. executive and whose CFO hails from PepsiCo Inc.