MANUFACTURING
      

Tom Digges Jr., CEO of Virginia Semiconductor in Fredericksburg, says there are untapped applications for his company's silicon-based sensors.

photo by Mark Rhodes

Sixty miles up the road in Fredericksburg, Tom Digges Jr. is taking a different kind of company in a different direction. Digges created Virginia Semiconductor in the late 1970s and claimed a share of the fast-growing market for silicon-based sensors, the devices used to deploy such items as automobile air bags and airplane oxygen masks. Digges' business is not without challenges: Virginia Semiconductor lost two top customers last year and broke a long period of double-digit growth, but it was back at full strength in less than three months, he says. "The sensor market is really growing at a faster rate than the computer market, because there are just so many uses that haven't even been defined yet."

The end of the Cold War took a bite out of the state's shipbuilding and chemical industries, according to William Mezger, chief economist for the commission. Electronics, another defense-related industry, also declined during the same period but is growing again because of the expanding tech sector.

The passage of the North American Free Trade Agreement in 1994 only accelerated the free fall of the apparel and textile industries. Since 1989, the number of textile jobs has dropped by 20 percent, and apparel is down 45 percent. Mezger doesn't expect overall manufacturing employment to start posting major increases, but some sectors -- such as electronics, machinery and automotive components -- are looking strong.

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At Gateway in Hampton, general manager Pete Tollini can barely keep up with the new employees. The South Dakota company started Virginia operations in 1996 with 160 employees making desktop computers. A year later, it expanded manufacturing operations, opened a technical support call center and grew to 900 employees. The expansion continued to 1,400 employees last August and then to the current level of 2,100.

Companies like Gateway are helping to fuel the state's rebounding electronics manufacturing sector. It jumped to 32,700 workers last year, driven in part by the arrival of chip makers -- Dominion Semiconductor in Manassas, White Oak Semiconductor in Henrico County and the smaller companies that cluster around them. The big unknown in the industry is the Motorola plant planned for Goochland County. The on-again, off-again project was announced in 1995 but has since been put on hold.

While growth in high-tech industries fuels the semiconductor market, strong auto sales are boosting the state's automotive components industry, Mezger says. One example is the Lear Corp.'s Winchester plant, one of four the company owns in Virginia. The plant makes interior auto parts for Ford, GM, Toyota and Saturn. In 1997, the plant had 450 employees and annual sales of $52 million, says plant manager Thom Bee. It now has more than 900 employees, and 1998 sales hit $87 million. "We have so much business that a year ago, we went to a continuous shift operation. We run 24 hours a day, seven days a week."

In Newport News, the Siemens Automotive Group has a 1,100-employee plant that makes fuel injectors for a broad range of manufacturers, including Volkswagen, Mercedes and BMW. The plant is busy: It also runs around the clock and churns out 95,000 injectors a day, according to company spokeswoman Melissa Steinbauer.

Virginia draws auto-parts makers because labor and transportation are less expensive here than in Michigan, the industry's traditional base, and because Virginia is within a day's drive of half of the U.S. population. "It's sort of a hidden industry, because it's not finished goods, so most people don't notice it," says Roy Reynolds, vice president of the Virginia Manufacturers Association.

The same is true of the state's industrial machinery sector, which has seen a 10 percent increase in employment in the past two years. In Chesterfield County, ABB Power Generation produces gas-fired turbines for electric power plants. Company vice president Ron Cox calls them the most expensive product in the state, costing more than $35 million each.

The Connecticut-based company has made about 25 turbines so far at the 200-employee Chesterfield plant, which opened in 1968. Cox says the Virginia plant expects to build 18 this year and up to 25 in 2000. Most of the turbines are going overseas to feed demand sparked by utility deregulation. The new turbines are more efficient and produce less pollution than those in many existing power plants, he says.

In Martinsville, Smart Machine Technologies found a niche producing custom-made machines for manufacturers. The company has 70 employees, its highest ever, says vice president Daryell Hodges, and he expects continued growth. Business from tobacco producers and textile companies has dropped off, but it has been replaced by work from beverage companies like Anheuser-Busch. The company recently designed and installed new pasteurizing machinery at that company's Williamsburg plant, Hodges says. "It seems like when one of the industries dips down, another will pick up."

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The Cold War meant good times for Newport News Shipbuilding. In the mid-1980s, the company had 30,000 workers, and the Defense Department was on a spending spree. The hard times hit, though, with the 1991 recession and the end of the military buildup. Since then, employment has dropped to 18,000 workers.

Lately, the outlook is brighter. Newport News Shipbuilding has a backlog of work totaling $5 billion, revenues last year were up 8 percent to $1.86 billion, and in March the company announced plans to build the Virginia Advanced Shipbuilding and Carrier Integration Center in downtown Newport News. The center will open in mid-2001, funded by a $98 million state grant. It will combine public and private research, testing and development for new aircraft carriers. "I think you could easily say we are a national security asset," says company spokeswoman Jerri Dickseski. "We're the only shipyard capable of building a nuclear-powered aircraft carrier, and one of two that can build nuclear-powered submarines."

The company is currently building the Ronald Reagan, a nuclear-powered aircraft carrier that will be delivered to the Navy in 2002, and is starting work on the first of four new attack submarines, Dickseski says.

Newport News Shipbuilding is also making a major push to win a share of the Navy's fleet servicing needs. An aircraft carrier that arrived in Norfolk last May is being serviced under a $1.2 billion contract. In March, the company joined with San Diego-based Science Applications International Corp. to form a partnership based in Virginia Beach that will offer service from 20 locations, including every major U.S. Navy port.

And Mezger says there's some security for this industry. "The federal government is going to give Newport News Shipbuilding enough work to keep them from going out of business," he says. "For the large naval vessels, Newport News is the only source in this country. They're obviously not going to have it built in Korea."

The company is involved in a consolidation trend that is changing the shipbuilding industry. In 1997, it acquired San Diego-based Continental Maritime Industries, and in January announced plans to merge with Avondale Industries of New Orleans, giving it strategic locations on the East, West and Gulf coasts.

Then in February, the company received an unsolicited $1.95 billion offer from Falls Church-based General Dynamics. That proposal, however, was rejected by the Defense Department. The Pentagon ruled that "the savings projected by General Dynamics did not now outweigh potential competitive disadvantages from the proposed merger." Virginia congressmen Rep. Herb Bateman, who represents the Newport News area, called the bid an attempt to stop the Newport News-Avondale merger and said it would have given General Dynamics a stranglehold on the growing fleet-maintenance market.

Chemical manufacturers, too, felt the impact of defense cutbacks during the past decade. Industry employment has dropped nearly a third from 1989 and reached all-time lows in the 1990s, but employment is up slightly to 21,600 jobs.

Several of the industry's biggest facilities here are clustered near Hopewell, and employment levels there seem to have stabilized, Mezger says. One of the state's largest chemical companies, AlliedSignal Polymers, produces a material called Spectra. This is the brand name for a new polymer the company says is the strongest, lightest fiber in the world. It's used mainly to produce bullet-resistant body armor to compete with the Kevlar vests made by DuPont.

The company has about 3,400 employees at six locations in the Richmond area, where it's one of the largest private employers. The manufacturing facility near Colonial Heights, which makes the Spectra fiber, increased production by 25 percent last year, says company spokeswoman Emily Metzger. The company has two plants in Hopewell: one producing polyester fiber and another that makes caprolactum, the base material for nylon.

The company's employment has been stable for the past few years and is expected to remain so. The company's future isn't tied to the public sector, Metzger says. "We're not a huge government contractor. We're more into performance fibers."

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For a few years before Levi Strauss made plans to close its Warsaw plant, there were signs that it was in trouble, says Brenda Burrell. "The first 17 or 18 years that I worked there we had two bosses." After they retired, she said, there was a different manager every year. "Everybody had different ways of doing things. It just seemed to me that things were going downhill."

Slumping sales have hurt Levi Strauss in recent years as competitors have won a bigger share of the teen market. Last year, the company closed 13 U.S. plants and laid off more than 7,000 people. This year's round of closings involved 11 plants in North America and 5,900 workers.

There have been a string of closings lately at other apparel plants. Last June, DuPont closed a nylon plant in Henry County that at its peak employed 4,800 people. Bassett-Walker Inc., a division of VF Corp., closed five sewing plants last year in Virginia and North Carolina. And in December, Cross Creek Apparel closed its Floyd County plant, leaving 160 workers jobless.

Levi Strauss is giving workers like Burrell a generous severance package, including eight months of pay and 18 months of health insurance, along with job training. Counselors have started working with the plant's former employees, and Burrell says she won't miss this chance to jump to where the job market is better. She's going for computer training. "Everything is going to computers. I just figure I need to learn that."

© May 1999, Media General Business Communications, Inc.
publisher of Virginia Business Magazine