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Kober, 55, heads Milwaukee Composites Inc., which manufactures composite resin flooring used in mass transit. The product is about half the weight of traditional bus and train flooring and is waterproof and fire resistant. Its clients include subway systems and trains not only in New York, New Jersey, Denver and Philadelphia, but in Beijing. In a world supposedly ruled by the migration of manufacturing to low-cost labor centers, Milwaukee Composites doesn't just successfully compete with China, it exports there. Business for the 10-year-old company is booming. Last year, Milwaukee Composites topped $5 million in revenue, more than double what it did in 2003. Its backlog stands at $10 million. Kober expects that will increase substantially within two months. "We don't see the recession hurting us at all," says the Wisconsin native. "We see nothing but growth." This is not your father's rust belt. Picture America's old urban economic heartland, and Milwaukee is one of those cities that spring to mind. Mention Milwaukee and, quick, what images appear? Maybe "Laverne and Shirley" and "Happy Days," frozen custard, sausage and beer. Residents themselves dredge these up, only they sigh at how hard it has been to shake off the clichés. After all, even "Laverne and Shirley" moved to Southern California. Thankfully, frozen custard remains, but most of the breweries and food processors have long since disappeared. Although long earmarked for development, the Pabst Brewery is a lifeless hulk on top of a hill. SABMiller plc, which operates the last of the big breweries, is threatening to take its headquarters south on I-94 to Chicago after its merger with Molson Coors Brewing Co. closes later this year. Even Harley-Davidson Inc., another symbol of old Milwaukee, is laying off workers. Milwaukee itself continues to battle social inequities and urban woes. The city's population of less than 600,000 is slowly declining. Some old-line companies are struggling. But Milwaukee is far from a badly aging artifact. This is no Detroit, or even Pittsburgh. Many neighborhoods are picturesque and inviting. Its downtown, if not exactly teeming, is blossoming. It's an easy place to maneuver, say residents, comfortable and a good place to raise kids, despite Wisconsin winters. Once known as the "machine shop to the world," Milwaukee has become a far more diversified economy and, in many ways, a resilient one. Surprising to outsiders, the city has emerged as one of the country's premier centers for money management, for high-technology medical devices and for back-office financial services technology. "Milwaukee has an extremely bright future," declares Kent Velde, managing partner of Milwaukee-based private equity shop Lakeview Equity Partners LLC. Milwaukee encapsulates the challenges and pitfalls, and many of the successes, of the rust belt Midwest. It's a city built on a paradox: In this southeastern Wisconsin metropolitan area of 1.7 million, the economic well-being, present and future, remains firmly tied to manufacturing. "It's the elephant in the room," says Tim Sheehy, who heads the Metropolitan Milwaukee Association of Commerce. According to the association, of the 300,000 jobs attributable to exports, 173,000 are in manufacturing. Those, in turn, generate almost 200,000 more jobs. Another way of putting it: Of the region's roughly 1 million jobs, more than a third are tied to manufacturing. In effect, Milwaukee's post-rust belt economy is now centered to a large degree on post-rust belt manufacturing. As Sheehy says: "We've peeled the rust off the belt." Miller Beer's corporate headquarters may be leaving, but plenty of other large companies call Milwaukee home: GE Healthcare, Johnson Controls Inc., Kohl's Corp., Manpower Inc., M&I Bank, Northwest Mutual Life Insurance Co. and Rockwell Automation Inc. Milwaukee hosts two of the country's biggest financial service technology concerns, Fiserv Inc. and Metavante Corp. And Quad/Graphics Inc. is America's largest privately held printing company. Mining equipment manufacturers Joy Global Inc. and Bucyrus International Inc. dominate the field, which is experiencing significant growth. "They're making money hand over fist," says John Beagle, a managing director and co-founder of investment bank boutique Grace Matthews Inc. Says Peter Coffey, a Milwaukee-based partner and M&A lawyer with Michael Best & Friedrich LLP: "We have pockets of wild success." These companies spawn startups. GE Healthcare is famous for producing executives and managers who want to stay in Milwaukee when their shift ends in GE's revolving-door assignment system. They get some funding and they're on their way. Smaller companies fuel the regional economy. "There's a disproportionate amount of middle market here, even compared to Chicago," says Thomas Lacy, a managing director, investment banking, at Robert W. Baird & Co. The ability of area manufacturers, big and small, to prosper is at the heart of Milwaukee's well-being. That means making high value-added goods dependent on engineering skills, not on low labor costs. It's the sort of product Kober's company cranks out in the suburb of Oak Creek. "We're doing something in a patented arena. It's very niche, very focused, and we can beat out everyone else," says Kober. His labor component runs at a mere 9% of total cost. But Milwaukee Composites is only one of hundreds of niche manufacturers that form the region's economic backbone. Many fly under the radar. They make products that may lack sex appeal but can compete globally. Take Molded Dimensions Inc., which inhabits an almost pastoral site in Port Washington, north of the city. Majority owned by husband-and-wife Michael and Linda Katz, Molded Dimensions produces custom-engineered rubber molding and cast urethane components. It offers low-volume, specialized production, maybe 20,000 as opposed to the mass-produced millions made in China. As Michael Katz strolls along the factory floor, he points out some of the thousands of moldings the company has produced over the years, then grabs handfuls of products in various bins: fire extinguisher firing pins, gears for medical treadmills, MRI machines and paint mixers, fins for oil exploration mapping. "Good chemistry can work," he deadpans. Both Harvard Business School graduates, the Katzes were working for a small Wisconsin plastics company when U.K. giant Rexam plc acquired it. The couple wanted to stay in the Milwaukee area, where Linda was raised. They searched for a company to buy, persuaded Molded Dimensions' owner to sell and, in 2001, says Michael, "rubbed two nickels together," mortgaged their home, borrowed from the owner and set up an employee stock ownership plan. While declining specifics, he says sales are "north of $10 million" and have grown 15% a year since 2001, and the company is now debt-free. Molded Dimensions is building a second facility next door. "There are more hidden stories of success than we're aware of. It's very healthy out there," says Linda Mertz, who heads Mertz Associates Inc., a midmarket M&A boutique west of the city. Ron Miller, managing director of Milwaukee investment bank Cleary Gull Inc., agrees. "Every week I meet a great company I've never heard of," he says. That middle-market core extends to M&A. Interviews with more than a dozen investment bankers, corporate lawyers and fund managers paint a highly consistent picture of smaller deals and dealmakers. Acquisitions are both strategic and financial, bolt-on and standalone. They range in price from single millions to several hundred million. In many cases, purchase price isn't disclosed. One recent deal with a price tag was the $160 million acquisition in April by Montreal-based Saputo Inc. of Wisconsin cheesemaker Alto Dairy Cooperative. Many firms focus on the lower range. Local investment banks and friendly rivals Cleary Gull and Emory & Co. both say they tend to advise sellers on deals that range from $10 million to $200 million. Cleary Gull's Miller says half his deal flow comes from Wisconsin. Emory's CEO, John Emory Jr., says deals tend to go at 1 times sales or 4 to 6 times Ebitda. PS Capital Partners LLC looks to even a smaller bandwidth, companies with $20 million to $40 million in revenue. And it's even more local. The fundless private equity firm, which provided Milwaukee Composites expansion capital in 2004, has made eight investments since it opened shop in 2001 in a century-and-a-half-old office building downtown. The last four, says partner Paul Stewart, "are within a half-hour drive of here. ... I haven't been on a plane to look at a new deal in six years." That localization extends to the support network. "Within three blocks is just about everyone I need: law firms, senior lenders, accounting firms," says Stewart. "We're a self-sufficient deal community," adds Miller, who lists not only advisers and lenders, but entrepreneurs and manufacturers. "There's a huge support system for the middle market." There are gaps. Milwaukee lacks mezzanine lenders and depends on Chicago, Minneapolis and New York for more arcane forms of funding. Venture capital is minimal; Wisconsin trails much of America, despite having the University of Wisconsin-Madison, one of the great research universities in the world. While Milwaukee-based money managers invest billions in equities, homegrown private equity is small, although this doesn't impede deal flow. Outside buyout firms "love to buy Wisconsin companies," says Emory. The companies have hard assets, aren't highly leveraged and are known for a great work ethic. In late 2002, for example, Carlyle Group paid $900 million for Rexnord Corp., a Milwaukee manufacturer of motion technology products, primarily used in power transmission. Less than four years later, Carlyle sold the company to Apollo Management LP for $1.825 billion. Baird is the city's only resident investment bank with a truly national reach. (It's also one of the country's largest midmarket firms.) It boasts the largest PE fund in town, the $300 million Baird Capital Partners IV raised last year, and the largest venture capital operation, with $150 million. Being local helps, say those in the community, because Wisconsin companies like dealing with Wisconsin firms. That usually translates into a more personal approach. It also can mean greater scrutiny. "Everyone knows you, your reputation, your style," says Stewart. Miller puts the reputation factor more bluntly: "Milwaukee is a one-strike-you're-out town." In the current environment, a more grounded approach has served the community well. LBO-driven megadeals in New York and other financial centers may be on life support; it's a different story in middle-market M&A in middle America. "It's strong. It's not going away," says Emory. The number of deals signed and closed in the first five months of 2008 alone makes this a record year for the firm, he says. Emory's record aside, the pace of dealflow appears to be slowing. "Last year, there was a huge rush to get deals done. The feeling is that it doesn't get any better than this," says Coffey. "Now there's been a return to normalcy, particularly on the acquirer's side, a degree of caution that if it doesn't close this month, it will next month. Deals are taking longer to do, but they're getting done." Coffey believes dealflow will center on generational wealth transfer. He describes family-owned businesses, some in their second or third generation, primarily engaged in manufacturing. Their heads are nearing retirement, and the offspring don't want to take over the business. "Banks are still willing to lend. Private equity firms are still willing to buy. Strategic buyers are interested and more comfortable with the multiples." Like much of the Midwest, Wisconsin may have missed out on the fast-growth spurts of recent boom economies but hasn't felt the lows, either. Even financial services here reports employment holding steady. The lack of a trough is largely attributable to a painful transition. In 1990, Bill Moyers produced a TV documentary that called Milwaukee a microcosm of economic malaise in America. A Darwinian storm had swept through, and ever since, it's been survival of the fittest. "Manufacturers have had two choices. If they don't move up the chain into higher skill, higher technology, they go out of business," Sheehy says. Adds Steven Booth, director of investment banking at Baird: "If you're still around today and in manufacturing, you've done things really, really well." In terms of markets and outlook, he says, "you've evolved way past regional." Actuant Corp. illustrates these currents. Based just northwest of downtown Milwaukee, the company makes highly sophisticated hydraulics, electrical tools and so-called actuation systems, such as the mechanisms used in convertibles. Sales are almost equally divided between the Americas and the rest of the world. Revenue tripled in seven years. Part of this reflects organic growth, part aggressive acquisitions -- almost 20 in the past six years. For the six months ended Feb. 29, revenue totaled $815 million, a 19% increase. Actuant is a successor to Applied Power Inc., founded almost 100 years ago as American Grinder and Manufacturing Co. In 1996, Applied Power began an ill-planned rollup of electronics component businesses. Four years later, the company spun these into a separate publicly traded company. Crushed by debt and declining sales, that company, APW Ltd., lasted two years before filing for Chapter 11 in 2002 and eventually liquidating. Meanwhile, Actuant flourished. To be sure, Actuant, its subsidiaries and its suppliers manufacture offshore. The company is set to open a Shanghai design center that will dwarf its current center near Madison, Wis. But Actuant employs domestically not only engineers, designers and the like, but several hundred factory workers in Wisconsin and elsewhere in the U.S. "We anticipate de minimis job loss" of these domestic jobs, says Ted Wozniak, vice president of business development. In the past two years, Actuant acquired two manufacturing businesses in suburban Chicago. One makes hydraulics, the other transformers. "No one is saying, 'Hey, let's go to suburban Chicago for a low-cost manufacturer,' " he points out. "Thought leader companies are not going anywhere," says Emory. Emory's offices occupy the old Northwest Mutual headquarters, a 120-year-old Romanesque building in the middle of downtown. A bank vault next to the conference room is a reminder of the building's origins. (Northwest Mutual's present headquarters is a few blocks away. It is now the country's largest underwriter of life insurance and probably the biggest reason why so many money managers began in Milwaukee.) Emory walks a visitor across the street to the Grain Exchange building. They peek into the building's old trading pit, an opulent, parquet wood floor framed by muraled walls. Once the center of wheat trading, it closed more than 40 years ago and is now a banquet and reception hall. There was a time, he reminds the visitor, when Milwaukee rivaled Chicago. Milwaukee lost out, a victim of geography, if nothing else. On the southern edge of Lake Michigan, Chicago became the logical Midwestern hub of the transcontinental railroad, rather than Milwaukee, about 100 miles northwest. Commerce followed the railroads. So it's tempting to think of Milwaukee as the Second City's second city. And Chicago residents sometimes refer to Milwaukee as a far northern suburb. This makes Milwaukee denizens defensive. "We've never felt a dependency on Chicago," says Mertz. Rather, Mertz and others maintain, Chicago's proximity gives Milwaukee an advantage: "It's an hour to O'Hare [airport]," says Timothy Kennedy, president and COO of PKWare Inc. That's "a huge luxury." In 2000, Kennedy acquired with a partner the software company that invented zip-files technology. It now occupies the second floor of the former Marshall Fields department store smack in the middle of the city. Some of PKWare's employees live in Chicago's northern suburbs. "Their commute up here is easier than to downtown Chicago," Kennedy says. Emory understands Milwaukee's complex economic arc better than most. His great-grandfather was the president of Allis-Chalmers Manufacturing Co. in the 1930s. For years, this maker of farm equipment was the city's biggest employer -- at one facility, 45,000 workers traipsed to the sprawling complex daily -- and the epicenter of its manufacturing might. Then came its slow decline as it fell behind both American and Japanese rivals. Milwaukee marked its economic nadir when Allis-Chalmers went bankrupt and shuttered its factory in 1985. "In the '80s, Milwaukee was similar to Pittsburgh. We had big rust-belt companies that weren't making it," says Emory. "But over time, those have been replaced by a knowledge-based economy." That's evident even in the old factory complex itself. While some of Allis-Chalmers' cream- and pink-colored brick buildings were demolished, others were restored. Rechristened Summit Place, it's now an office park, just west of Milwaukee's professional baseball stadium. Tenants include EMSystem LLC, a software provider for medical emergency services whose founder is a refugee from GE Medical. "When [developer] Dick Carlson pushed his vision, everyone said, 'You're crazy,' " recalls Jennifer Green, a vice president at CB Richard Ellis in Milwaukee. "It's turned to be a great example of adaptive reuse." From her office near the top of the US Bank building in downtown Milwaukee, Green scans the cityscape. She points south. Far in the distance, you can see Chicago's Sears Tower and the John Hancock Center. Much closer is what Green terms "our little SoHo." The Third Ward was once the home of knitting plants, tool and die shops and vegetable wholesalers. An ill-planned freeway spur choked off the area from downtown and hastened its decline. It began to transform again in the late '90s. Now retailers, restaurants and residential lofts line the streets. In the 57-unit Cityside Plaza development, real estate agent Tom Riley, of First Weber Group Realtors, shows visitors the model unit. With one bedroom and 13-foot-high windows, it has more than 1,000 square feet and is listed at $215,000. "It's about what you'd pay for a parking space in Manhattan," the realtor says. Other neighborhoods are undergoing renewal as well. Such gentrification is encouraging, but it's not the whole story. After decades of white flight, Milwaukee has become one of, if not the most, segregated cities in America, according to Judith Kenny, who chairs the geography department at University of Wisconsin-Milwaukee. The north side is almost entirely African-American, the south side is heavily Hispanic. "There's very little African-American presence in the suburbs," Kenny adds. The unemployment rate among the city's adult black males has come down this decade, but still exceeds 43% as of 2005, according to a UW-Milwaukee Center for Economic Development study released last year. Only Pittsburgh is worse. That illustrates another of the city's paradoxes. While manufacturing remains the backbone, Milwaukee -- like other U.S. cities -- can succeed only if it makes products that are heavy on technology and engineering and light on labor. With its marquee engineering schools, Wisconsin produces a disproportionately strong engineer cadre and is well poised at the high end. The lower end is another matter. As Kenny explains, African-Americans migrated to Milwaukee late, often in the 1960s. They had a "relatively short time before industrial restructuring took place," Kenny says, and continue to feel shut out of the employment loop. Another 2005 study, this one by the commerce association, estimated the jobs shortfall through this year among 99 employers would hit 26,000. But those jobs are highly skilled and require a good education and specialized training, both in short supply among the socially disadvantaged. "One sad thing about my school district: It's really poor," says Alice McGuinness, chatty and self-confident at, as she says, "six-and-three-quarters." She attends an inner city elementary school. "You can go there because it's free. There are lots of poor people." "It is a heartbreaking city in many ways," adds her mother, Jasmine Alinder, a historian at UW-Milwaukee. But it's also a place of hope and a low-key, gritty determination. "I've seen a real change post-2000," says Steve Peterson, Milwaukee-based co-founder of Brass Ring Capital Inc., a small Midwestern private equity fund. He notes both a renewed sense of self-confidence and vibrancy. The symbol of downtown renewal is the Milwaukee Art Museum's Quadracci Pavilion, a $120 million privately funded project that opened in 2001. Designed by Santiago Calatrava, this stunning building combines the architect's vision of a postmodern cathedral with the prow of a ship and unique "wings," which open and close twice a day. It's a structure as instantly recognizable as, say, the Sydney Opera House. Given its size, the city has a rich arts community: a symphony, a ballet company, opera, theater. The Green Bay Packers, its best-known sports franchise, resides an hour north. "We're big enough to have one of everything," says Coffey. "Sports, phenomenal theater, great universities. The schools are excellent." Steve George, a Milwaukee Composites engineer, calls Milwaukee "a big town with a city in the middle of it." On Milwaukee Composites' factory floor, John Czerniejewski and Lyle Gritzmacher apply and spread liquid phenolic resin on a structural composite skin made of fiberglass fabric and resin. That skin is attached to both sides of a foam or balsa core, creating what Kober terms a "peanut butter and jelly sandwich." These particular panels are destined for new cars that will travel the New York City subway's N Line. The importance of Milwaukee Composites transcends its size. A mile down the road, the Oak Creek Delphi plant looks abandoned. A handful of cars inhabit a vast parking lot. The factory once employed more than 1,000 workers when it was AC Spark Plugs, then Delco Electronics. It's now shutting down. "My father worked there 37 years," says Gary Berres, shaking his head as he drives by. His father helped make guidance systems for Boeing 747s and worked on aerospace projects so secret trashcans had locks on them. Now? One of the Delphi buildings has been converted into a Woodman's Market. Berres, a Milwaukee Composites vice president, is delivering payroll to the company's second factory, about 2-1/2 miles from the first. Further expansion is likely before year's end. "We know we've got problems, but we love the city," says Kober, back at the company's main building. "We also know that if we innovate in a controlled manner, we will continue to grow. I can't see how manufacturing can't make it here. It can make it," he says. Unaware of the Moyers analogy, he plows on, motioning to his operation: "This is a microcosm of Milwaukee." -- Matt Miller
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From: Surfers Gold Coast,
And just think.. In Australia they are purchasing small units on the Gold Coast for millions.. specially this area Broadbeach
Posted on:
November 2, 2009 3:06 AM
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Inside a low-slung industrial building south of Milwaukee's airport, Jeffrey Kober points to a stack of yellowish-brown panels, each about the size of and thickness of a sheet of three-quarter-inch plywood. "This is our reason for existence," he declares. "It sounds like a simple thing. You'd think making this kind of flooring is no big deal, but it is."
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I sort of think that what Milwaukee has done was first to weather the storm. Meaning as manufacturing jobs left and went to Mexico and China yes Milwaukee took some big hits but was still standing. Then as the storm past Milwaukee has begun to grow again. And over the last 6 years had really been hitting its stride with a boom in new residential construction and finally after years of decline an increase in population.