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A Chicago seat maker's quest for skilled workers

Friday, 7 Feb 2014 | 11:20 AM ET
Want a job? You may need to update your skills
Friday, 7 Feb 2014 | 7:31 AM ET
Despite a stubbornly high unemployment rate, many companies are having trouble filling available jobs, reports CNBC's Mary Thompson, with a look at how to bridge the labor gap.

Chicago's Freedman Seating is over 120 years old but growing like an adolescent. As with a teenager, its growth spurt is creating some unwelcome problems, among them, finding the workers it needs to keep its growth, and profitability, on track.

"It has been very difficult to find employees and retain them," said Craig Freedman, president of the maker of bus and truck seats.

Freedman said there is a bidding war for these workers. He said his company, whose clients include Greyhound, UPS and the Chicago Transit System, not only competes for employees with other small manufacturers but with multinational corporations in Chicago that have far greater resources than his company.

The workers Freedman is referring to are skilled: welders and workers who can operate the computer-guided machines and other high tech equipment found at most manufacturers these days. Freedman is hardly the only company affected by the skilled labor shortage, according to the Manufacturing Institute: 74 percent of all U.S. manufacturers say the shortage is hurting their ability to expand.

As the company's sprawling 400,000-square-foot factory on Chicago's west side attests, a lack of skilled workers has not hurt Freedman Seating's expansion so much as it is impacting its bottom line.

(Read more: Solving manufacturers' jobs dilemma)

"Over the past 10 years, we've averaged about 10 percent compounded growth per year," said Freedman. "We have to use a lot of overtime to get the work done. We have to outsource a fair amount of work that we don't have the capacity to do because we don't have the skilled labor to do it. And of course it's more expensive when we send the work outside the company."

Freedman Seating's recent growth is tied to a decision to make seats for buses, along with those it makes for delivery trucks.

To meet demand, it hired 100 workers last year, pushing its payrolls to 600. With 2014 expected to be a record year, it is adding a dozen more jobs now and 15 to 20 workers by year end. That is, if it can find them.

(Read more: Wicked winter puts big chill on job creation)

Entry level workers at most skilled jobs will earn $12 to $15 an hour, said Freedman. Workers who prove to be skilled machinists can make $20 to $25 an hour. The company also offers paid vacations, a 401(k) plan with a generous match and health care.

The great grandson of company founder Hyman Freedman, Freedman is finding some new employees thanks to two sources: a retraining program Freedman has tapped for years to keep its workforce up to date, and more recently, a nearby high school that is working with area manufacturers to train students in the skills these companies need.

Freedman Seating's relationship with the Jane Addams Resource Corp, goes back 20 years. It has used the program to retrain incumbent employees, and more recently has been hiring from its Careers in Manufacturing Program

"Part of our model is that we want to target industries that pay families living wages and benefits and that offer authentic career paths," said Guy Loudon, Addams' executive director.

Freedman Seating Company, Chicago.
Source: CNBC
Freedman Seating Company, Chicago.

The Chicago-based nonprofit designs its classes around the skills manufacturers in the area need. Loudon said these days, they need welders and "computer numerical control" machinists.

These machinists program the machines to make different parts used in a finished product. It is a job that requires good math skills, including competency in algebra, and a knowledge of what Loudon calls a relatively simple computer language.

The Careers Management Program has a diverse group of students, including displaced manufacturing workers looking to update their skills, and former convicts seeking to re-enter the workforce. The classroom is really more like a workplace, with instructors acting like floor managers and students required to punch a time clock when they come in. The skills they learn here go beyond operating a machine. They are taught workplace ethics and the basics of personal finance and all skills necessary to ensure the job lasts more than a few months.

One of the graduates, Valerie Galvan, 37, works at Freedman Seating. She is also a rarity, a female welder. After years of working in a variety of industries including construction and hospitality, she can sense after eight months on the job she is firmly on a career path.

"I know more about what I'm doing," she said, her dark hair a little damp under her flipped up welder's helmet. "I can go places with it. It's not like I'm stuck anymore."

Woman working at Freedman Seating in Chicago.
Source: CNBC
Woman working at Freedman Seating in Chicago.

Freedman said his company has hired dozens of people from the program over the years. More recently, he has hired two graduates from Austin Polytechnical Academy, a high school a couple of miles from the factory that is being run by a public-private partnership between the Chicago school system and the Chicago Manufacturing Renaissance Council. The school system provides the teachers and principal, the council pays for the instructors to train the students in advanced manufacturing skills.

Opened in 2007, Austin's first class graduated three years ago. The school is small, with only 150 students. Graduates come out with high school diplomas and some valuable work experience.

"Students have field trips to companies as freshmen and sophomores," said Dan Swinney, executive director of the council, a group of 50 to 60 manufacturers. "Juniors have internships and shadow workers during the school year. Some get summer jobs."

The school is still a work in progress, said Swinney, with a lot of turnover in the principal's position. What's more, when the first class graduated, only 10 percent of graduates took manufacturing jobs. By the second year, the rate was up to 22 percent and Swinney expects it to be in the mid-20s when the current crop of seniors graduates.

(Read more: Chart: What's the real unemployment rate?)

Not all students are sold on manufacturing careers. Swinney, though, said you can convince them there is a career path once the manufacturers open their doors and allow them see the work being done.

Torres Hughes at work at Freedman Seating.
Source: CNBC
Torres Hughes at work at Freedman Seating.

Torres Hughes, 19, graduated from Austin Polytechnical last year. He started at Freedman Seating in January and is working as a brake press operator, cutting metal pieces for the company's bus seats. Polite and well-spoken, Hughes eventually wants to get into sales, but for now he is eager to learn more about the company and the products it makes.

"I feel like I was introduced to something that can change my life and my future as well." he said. "It really means something to me and my family. I love what I do."

—By CNBC's Mary Thompson. Follow her on Twitter @MThompsonCNBC.

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