Jack Kaufman, president of Aviel Electronics in Las Vegas, said concerns about the manufacturing sector are starting to dissipate. Photo by Clint Karlsen. Machinist Hector Guererro performs secondary drilling operations on coaxial connections at Aviel Electronics earlier this month. Photo by Clint Karlsen.

In 2003, manufacturers were struggling.

Businesses and governments weren't investing in new capital equipment, and orders for durable goods such as airplanes were virtually nonexistent.

Jack Kaufman, president of Aviel Electronics in Las Vegas, remembers those days.

Sales at Aviel, which makes microwave connectors for telecommunications, aircraft and radar, were down 5 percent in 2003. Other manufacturers fared much worse, Kaufman said, experiencing sales drops of 50 percent or more.

"I was concerned about the whole sector," he said.

Today, however, Kaufman sees a healthier outlook. At Aviel, increased government spending on new technologies and a resurgent telecommunications industry should translate into brisk business in 2006.

"Our standard business is very solid and (clients) have some projects that have been on hold that we feel are going to be released in the next couple of months," Kaufman said. "Those will be good dollar-value projects for us."

That kind of fresh optimism prevails among manufacturers across Southern Nevada, a new report shows.

A survey from TR Cutler, a Florida company that conducts marketing research and public relations for manufacturers nationwide, found that 70.6 percent of private manufacturers in Las Vegas said they believe 2006 will be better for business than 2005.

In November 2003, the last time TR Cutler conducted the survey, 48.9 percent of local factory operators expected a better year ahead.

Manufacturers in Louisville, Ky., were the most optimistic, with 77.1 percent expecting improved conditions in 2006. At the low end, manufacturers in Minneapolis were the least hopeful, with 44.3 percent expecting more sales in 2006.

Ray Bacon, executive director of the Nevada Manufacturers Association in Carson City, said TR Cutler's numbers match the comments he's fielding from the trade group's 400 member businesses.

"The biggest frustration I'm hearing has totally changed," Bacon said. "A year ago, we had a situation where people were still looking for new orders. Now, companies are looking for employees. That's always a positive sign."

Manufacturers' big expectations come despite high energy costs and rising prices for commodities such as oil, lumber, steel and concrete.

In addition, until the Jan. 3 release of minutes from a recent Federal Reserve meeting suggested that the agency might halt 18 months of interest-rate increases, many business leaders expected continuing rate increases.

So why did good feelings dominate in the November questionnaire?

Bacon said energy and commodities costs are rising worldwide, so manufacturers in other nations are experiencing as many expense pressures as their U.S. counterparts. That has equalized the competitive drag that pricey raw materials might have imposed on American manufacturers.

Second, Nevada's factories focus on churning out industrial goods and building materials rather than consumer products.

Bacon said demand for industrial goods is increasing. As an example, he cited rising airplane orders, which have helped Titanium Metals in Henderson increase production of its aircraft composites. Also, he said, the need for roofing components, insulation and sheetrock remains high, especially in the Southwest.

A marketing shift from individual consumers to big industry should generate more sales at Earthly Mineral Solutions this year, company Vice President Herb Sugerman said.

The 7-year-old business, which operates out of a 50,000-square-foot plant at Valley View Boulevard and Ponderosa Way, makes additives for mineral-depleted soils. Sugerman said the supplements support healthier plant growth and increase nutrients in produce. Last year, Earthly Mineral Solutions began selling to homeowners with gardens; this year, the manufacturer's representatives are meeting with agribusiness companies in China, Mexico and the United States. Sugerman said Earthly Mineral Solutions has also launched a golf-course division to market to greens operators looking to scale back on costly, petroleum-based chemical fertilizers.

"We probably have more orders than we can fill," Sugerman said. "We're enthusiastic. We're very excited about what we're doing."

Also planning a marketing blitz in 2006 is Scott Drake, president of Scott Drake Enterprises in Henderson. The company, which makes and distributes parts for muscle cars, will roll out new catalogs this year. Drake said he's expanded inventory and added 10 employees for a total of about 65 workers to handle what he expects will be a 15 percent rise in sales this year.

Increasing prices for metal and other raw materials don't deter Drake because, like other manufacturers, he can pass some of those costs onto his buyers.

Drake said his biggest expense is labor, so he's trying to ease material-cost pressures with productivity initiatives.

His key concern is that high gasoline prices will siphon dollars from discretionary spending, leaving his customers with fewer dollars to invest in hobbies. Yet, Drake said he believes 2006 will be a growth year.

"Our move from California to Nevada (in January 2005) has given us a larger facility, and we have a lot of new product that will come available," Drake said. "We have record inventories, so we have a lot of good stock ready. You've got to have inventory or you're not going to have sales."

At Aviel Electronics, large customers help insulate the business from rising expenses. Kaufman said the company's clients are "the Lockheeds of the world" -- major corporations that can absorb higher product costs.

"This is not a case where we're competing on the pennies level," Kaufman said. "Some of our suppliers are adding (energy and commodities) surcharges, but if it adds 4 or 5 percent to the price of our product, our customers aren't going to not buy it. They just need the product. Whether we charge $20 or $20.50, they're going to buy."

But Tom Cutler, chief executive officer of TR Cutler, said manufacturer optimism in Southern Nevada isn't coming solely from an uptick in orders. He also credited demographic trends.

Cutler's survey found that the mean age of a factory president or owner has dropped in Las Vegas, from 63 in 2003 to 51 today. Backgrounds among older manufacturing executives lean heavily toward engineering, manufacturing and operations, and those execs are often reluctant to move into areas they're unfamiliar with, such as sales and marketing, Cutler said. Younger managers, on the other hand, tend to have more experience and training in marketing, sales and business, he said.

"Their outlook isn't based strictly on manufacturing. I think they have a willingness to look at the overall business perspective," Cutler said.

Kaufman, 69, recently hired a 25-year-old engineer he'll train to soon take over local operations at Aviel. He said there might be something to Cutler's theory.

"It's just the nature of the younger person in general to be more optimistic," Kaufman said.

"They're looking at a technological world that is advancing at rapid rates. If you can come up with a new product and be the first kid on the block with the next widget, then you have your marketplace."

Manufacturers might have a marketplace, but will they have a work force?

Sugerman said the biggest obstacle to Earthly Mineral Solutions' business in 2006 will be finding qualified workers.

Drake agreed, adding that hiring white-collar workers at his operation is difficult because he's competing with casinos for administrative help.

Plus, he said, Southern Nevada's relatively small manufacturing base means the area doesn't have a sizable concentration of factory-specific labor such as mechanical engineers. Drake said expanding the industrial sector in Las Vegas could alleviate the labor shortage long-term; for now, he and other manufacturers are recruiting from out of state.

Bacon said a few local manufacturers are offering signing bonuses for workers with specialized skills.

More common, he said, are "lean initiatives" -- measures to boost productivity and output among existing employees.

Cutler's report supports Bacon's observation: Nearly 80 percent of Las Vegas manufacturers plan to implement lean initiatives this year, up from 45 percent in the 2003 survey.

But like the commodities crunch, the employee shortage isn't enough to derail manufacturers' hopes for a bright 2006.

"What they see," Cutler said, "is growth potential."

PUTTING THE BAD TIMES BEHIND
Every two years, TR Cutler conducts a national survey on the optimism of manufacturers. Current results show that the 109 private manufacturing companies in Las Vegas that responded are enjoying better times than they experienced in 2003.