Iowa Manufacturing Climate

In 2023, manufacturing played a significant role in Iowa’s economy. According to three observers representing ABI member firms, the state’s manufacturing strength is rooted in its robust ag economy, central Midwest location, and highly skilled workforce.

“Iowa is a spectacular state in which to be a manufacturer,” says Ed McGreen, CEO of Ankeny-based woodworking equipment maker Kreg Tool. “We have a dedicated, reliable, hardworking, and highly skilled workforce to draw from. We are centrally located in the U.S. so it’s very favorable to get products to retailers and consumers, and supplies from vendors.”

The state is attractive to workers as well, he says. “It is a great place to live and raise a family. Iowa is one of the top states in education and the cost of living is relatively low. Our local governments, companies and philanthropies provide support back into the communities where our employees live and work.”

Tim Bianco, second-generation owner of Adel-based Iowa Spring, agrees that Iowa’s well-educated workforce is an asset, though he finds it increasingly harder to attract workers to his rural location. Mr. Bianco’s firm manufactures coil springs used in overhead doors and a variety of industrial and ag equipment manufactured by John Deere, Kinze, J.I. Case and others.

“We are a niche manufacturer” that benefits from “having a handful of Fortune 500 or 100 companies in the state that recognize that they have to partner with well-run vendors. They pay a price when they don’t,” says Mr. Bianco. “Knowing the marketplace is rich with opportunities is what drives them to the state.”

“A lot of things make manufacturing strong here,” says Jose Garcia, assurance principal with MHCS, a Des Moines-based accounting firm that’s been working with manufacturing clients for more than 70 years. “What comes to my mind is our strong ag base, the roots in agriculture from bigger companies like John Deere and Vermeer and our central location.

“Another is our workforce. We have well-skilled individuals that work at manufacturing facilities. We have invested in development programs, partnering with colleges and other organizations to provide the training needed. In the last 10 years, Iowa has also been on the forefront with tech and innovation.”

Jenny Smith, assurance principal and manufacturing industry leader at MHCS added, “Family-owned and employee-owned businesses are continuing to enrich the landscape of Iowa manufacturers and the communities they operate in. There is strength in those who own the company living in the communities which they are operating, whether that be a company that has been passed down through generations or an ESOP where the employees are directly benefiting from the profitability of the company.”

Building on Natural Advantages

“What Iowa manufacturers do really well is a dedicated focus on the customer, on what they need and want,” says Mr. McGreen. He also sees manufacturers supporting their communities where their employees live, with the state government playing an active role.

“Iowa is one of the more favorable states to conduct business. There’s a strong partnership with the government in creating jobs for Iowans and helping support our local educational systems. The state does a wonderful job in supporting communities, with Iowa being a place where employees want to come live.”

Mr. Bianco, who employs a combined 220 people at plants in Adel, Granite Quarry, North Carolina, and Reading, Pennsylvania, is a big fan of Iowa State University ‘s Center for Industrial Research and Service (CIRAS). “They have advocated for manufacturing in the state for as long as I can remember.”

Mr. Garcia praises Iowa’s favorable business climate and partnerships to help manufacturers with tech integration. “There’s always something new they are doing, like utilizing advanced robotics, to improve the manufacturing process and upskill employees.”

Technology is moving at a rapid pace, he notes. “You can tell that when a manufacturing company isn’t thinking about it, they start to fall behind.”

Current Conditions: ‘Covid Hangover,’ Workforce Challenges

Mr. McGreen remains upbeat overall but counts “the COVID hangover,” including supply chain issues lingering from the end of 2021, among the headwinds facing Iowa manufacturers. “We saw significant inflation in the overall economy. It became a difficult issue for employees and employers. We have been seeing a pullback from consumers with uncertainty around the election, inflation, and continued high interest rates.”

Kreg’s 185 employees manufacture and assemble products in Huxley and Ankeny, where it occupies corporate headquarters built two-and-a-half years ago. A satellite location near Munich, Germany, provides sales support for European distribution.

Mr. Garcia says his manufacturing clients “are doing well, performing at the level they are budgeted for” but dealing with challenges including recruiting and supply chain issues. “The workforce shortage is not necessarily that there aren’t people,” he says. “People are choosing a different path that limits the number of skilled workers available. Some people don’t stay around Iowa. What can we do to make sure they stay here?”

Another hurdle for manufacturers is meeting higher environmental standards, Mr. Garcia says. “There is a big push for sustainable manufacturing practices which can be challenging to implement. It adds another layer of standards to meet.”

Mr. Bianco at Iowa Spring says recruiting is an ongoing challenge as the state urbanizes. He employs a mix of highly skilled and low skilled metal workers at his Adel plant but finds it increasingly difficult to pull in employees from nearby towns like Panora, Guthrie Center and Winterset. He’s raised wages steadily but “a lot of folks are commuting to Des Moines for higher paying jobs.”

Hiring is a bit easier now than before. “The market for labor is softening. It’s not as hard to find a qualified person as it was a couple of years ago,” he says. His headcount at all three plants is off 25% from market high of 2022.

Year-End Outlook Less Than Rosy

What’s the outlook for manufacturing as the presidential election looms and the year’s final quarter approaches?

“We’re starting to get some of those forecasts now. We’re seeing a slight uptick in demand for products across the board through fourth quarter and a lot of inventory adjustments and shutdowns for the first part of 2025,” says Mr. Bianco. The outlook is “commodity price-driven” with uncertainty about the next national administration. “What happens with trade tariffs if Trump gets elected? There’s a lot of waiting for the dust to settle.”

Mr. Bianco predicts 2024 will finish with sales off 12-13% from 2023, and 2025 to be flat, both in sales and hiring.

“In light of recent layoffs and the economy as a whole slowing down, I think we’re going to see a strategic investment into what companies want to focus on. Companies will become more innovative and look for the ways they can maximize margins,” says Ms. Smith. “I don’t think it’s going to be a huge dip, but we won’t see as much growth as we have in the past.” Mr. McGreen says, “the remainder of the summer will be slow from a sales perspective for manufacturers throughout the state and nation.” He looks forward to 2025 with “cautious optimism.”

The new year, he says “will be defined by the policies that are generated by the administration that ends up taking office after the election. If we continue down the path of significant government spending, we will likely see increased inflation risk again ... If we cut government spending and are able to reduce interest rates in a stable sustainable manner, we will see a favorable manufacturing outlook in Iowa through 2025 and beyond.” ABI