Economy on the Edge: Minnesota's economy after 9/11

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(00:00:00) With news from Minnesota Public Radio. I'm Greta Cunningham Travelers at the Minneapolis. St. Paul Airport seemed to welcome the presence of Minnesota National Guard troops who took up positions at the airport this morning Minnesota public radio's Mark zdechlik reports (00:00:13) National Guard officials say at any given time there will be more than 30 troops at the Twin Cities airport. They're not going through luggage your frisking passengers instead. They're watching security checkpoints armed and dressed in combat fatigues Buck Luger who's flying from Minneapolis. St. Paul to Sacramento has seen guard troops at other US airports in recent days and he says it's a welcome sight. So like Europe the presence will scare off some people. I think just the fact that they're there will make everybody feel better guard members are also watching over security checkpoints at the Duluth and Rochester airports. This is Mark. Zdechlik, Minnesota Public Radio (00:00:50) Wells Fargo was buying Banks and other companies in seven states from the family of Minnesota. Businessman Carl polad. The deal for Marquette bankshares will give Wells Fargo. Control of banking companies with more than five and a half billion dollars in assets and branches in seven states. Analysts said Wells Fargo's main interest in buying parts of the polad families banking interest is the group's major presence in Texas where Wells Fargo is also expanding an overnight house fire and fire and Hutchinson has killed three fifth grade boys. The fire was reported around 1:45 this morning in the central Minnesota Town firefighters entered the home and found the boys who were taken to Hutchinson Area Health care where they were pronounced dead. The three victims attended Park Elementary School in Hutchinson, fire Crews and investigators from the State Fire. Marshal's Office are still at the scene authorities say no foul play is suspected. It'll be mostly cloudy with a chance of rain or snow showers in the north partly cloudy in the South cool temperatures today with high temperatures mainly in the 40s. That's a news update. I'm Greta Cunningham programming on Minnesota Public Radio is supported by the Iron Range resources and Rehabilitation agency in Eveleth facilitating business development in northeastern, Minnesota (00:01:59) it is six minutes now past 11 and good morning. Welcome to midday and Minnesota Public Radio. I'm Gary eichten glad you could join us all bets are off trite phrase perhaps but it does seem to fit the September 11th attack on America has had a profound impact on virtually every aspect of life in America. But this hour we're going to focus on the economic Fallout from that attack more specifically the impact on Minnesota's economy. It's true the state's economy like the national economy was slowing down before the September 11th attack, but the aftershocks from the terrorist attack in America seems to have turned the state upside down at the Capitol Minnesota officials. Say the era of budget surpluses and tax rebates is over across the state business is suffering and layoffs are mounting and nobody seems to know for sure what the future may hold State Economist Tom Stinson. Nobody knows what's going on in the economy part of the reason why Economist have so much difficulty at this point is because this depends a lot on consumer psychology and we're not trained in Psychology. We're trained in economics despite the uncertainty of what lies ahead for Minnesota's economy. Some Trends are becoming clearer and during this hour of. Midday. We're going to focus on the state of Minnesota's economy after the attack. Now this week Minnesota Public Radio has been running a series of reports titled economy on the edge. And today we've packaged those reports together to give you an overview of what we found out about the state of Minnesota's economy to begin. Let's focus on where we were before the attack before September 11th, the national economy had slowed appreciably a million manufacturing jobs have been eliminated in just the past 13 months. It is Minnesota public radio's Bill Catlin reports. Minnesota was not immune from that slow down and how it's good for you to do. Cool, what months of looking for a job in a weakening economy have done little to dampen knee lobna Ryan's steadfast cheer, which brightens even more as his twin girls come home from school. (00:04:11) Then you don't need his (00:04:12) help. No Ryan was laid off in May from his job as Chief technologist at tenant company maker of industrial cleaning equipment based in Golden Valley despite a slew of layoffs. Minnesota still has relatively low unemployment and the state's economic basis celebrated for its diversity and resilience. But as of August, Minnesota has lost more than 12,000 relatively high-paying manufacturing jobs in a year Ting said quite slow. And that's that was a little surprise to me a native of India Narayan has lived in Minnesota for 19 years, even before September 11th. He expanded his job hunt beyond the state now in the wake of the attacks Narayan expects the search to take even longer in part because of the beating stocks have taken since then because the first thing that the Senior Management does is to try to figure out How are they going to get their stock prices up? And so all other decisions will be delayed by virtually all accounts the likely caution and retrenchment stemming from the terror strikes will worsen the job market and further weaken the economy before September 11th economists debated whether the economy was in a recession Dan. Laufenberg chief us Economist with American Express financial advisors in Minneapolis says, even then it was something of an academic debate at that point. We knew they were ten consecutive months of declining output in the manufacturing sector and since then we've discovered that we had 11 months of declining output. So the manufacturing sector was in recession. We had a (00:05:40) profits recession profits (00:05:42) just took a nosedive in in 2001 late 2002 early 2001 laufenberg stands out for as optimistic prediction. The economy will grow in the fourth quarter many other analysts are predicting recession in the second half of the year in Minnesota and elsewhere. The airline industry has taken The heaviest blow so far Egan based Northwest is slashing at schedule and cutting 10,000 jobs nearly half in Minnesota The industry's Plight prompted a 15 billion dollar Federal bailout still north West's planes were half empty following the attacks. The airline's Jeopardy worries Business Leaders like Bill Blazer of the Minnesota Chamber of Commerce, the state's largest business group much of our success as a center for corporate headquarters for high technology manufacturing and maybe most importantly as a center for this emerging and growing information economy goes back to being able to get our well educated and hardworking people around the world quickly and without a world-class airport in a world class airline. You can't do that state Economic Development officials expect the pain from Northwest struggles to spread with each Northwest job loss costing two more jobs. The latest numbers show consumer confidence was plummeting even before the attacks. And the huge airline industry layoffs that ensued now the question is how much the all-important consumer spending will suffer. Here at the Mall of America a citadel of consumerism traffic looks sparse nine days following the attack Mall officials say the numbers have been returning to the modest levels typical in September, but the owner of the Street Corner News shop would only give his name is Jim says his sales are down considerably. The Mall of America is as a destination vacation spot. We're not seeing a lot of that. Now some of that this time of year, you have the Fallout because school started but usually see the the young couples without kids the retired couples a lot of Tours, they'll type of things and we're not seeing that that business right now least not in the numbers. We used to see him over the past year consumer spending kept the economy out of recession as business investment shriveled and some of the Shoppers here view their purchases in no small way as economic self preservation, Nate Judson says, he's shopping for his girlfriend's birthday and not holding back. I mean not everybody going to do what I'm doing obviously, but if people keep surround their money, obviously then become is going to pick up Just like anybody else. I have stocks and things that I'm concerned about and we need to keep the economy going. I guess consumer spending directly affects two major Minnesota retailers. Target Corporation says the week after the attacks sales and stores open at least a year matched or beat forecasts best by the nation's biggest consumer electronics retailer has cut sales projections, but not expansion plans even so a broad consumer pulled back is expected the national retail Federation for example has nearly halved its forecast of fourth-quarter sales growth from 4% to slightly more than two percent University of Minnesota Economist and markeson says the Twin Cities high-tech economy will see varied effects depending on the industry. She doubts the area's big Medical Technology sector will suffer. You really don't expect to (00:08:57) see the demand for healthcare or drugs really decline noticeably in this period of time Marcus and (00:09:04) says a relatively small Twin Cities defense sector will benefit somewhat but the large computers Versus and financial services areas are more vulnerable. Ultimately. She says the diversity between high-tech manufacturing and services will help the Twin Cities do a little better than the nation as a whole (00:09:20) and a lot of other places in the midwest are going to be on the down side just because they're so concentrated in producer Goods Manufacturing and Automobiles and sectors that really are very vulnerable to changes in business and consumer spending (00:09:35) Greater. Minnesota is already down hammered by low steel and farm prices and Manufacturing job losses J Musa with the State Department of Economic Security says outstate, Minnesota has fewer than half of the state's manufacturing jobs, but over the year ending in July areas outside the Twin Cities accounted for 90 percent of manufacturing jobs. Lost Greater, Minnesota many towns have a one or two companies and when they lay off workers, it's very hard to get jobs in the same sector. What that does is really puts the Greater Minnesota in a disadvantage during economic slowdown Musa expects the state unemployment rate to rise from its current rate of 3.6% in the next few months. He says the Fallout from the Northwest layoffs could push it slightly above 4% But Moosa says the economic stimulus of lower interest rates and tax cuts plus the states and during tight labor market should keep unemployment below its average of 4.8% since 1978 for now State Economist. Tom Stinson cautions that Clarity is weeks away. Frankly. We don't know how the attacks are going to affect the Minnesota economy and it's just too soon to tell what we know is that it's not going to make things better Stinson compares the economy to a mural each new release of economic data fills in a few more brushstrokes the attacks. He says left a big black swath across the canvas and the new picture has yet to emerge. I'm Bill Catlin, Minnesota Public Radio. Well, Bill noted the airline industry was clearly hit hardest by the September 11th attack. 4,500 Minnesota workers at Northwest Airlines alone have been laid off and that doesn't begin to reflect the Ripple effects of the airline industry's cutbacks the travel industry hotels convention business. They've all been hit hard since September 11, but those problems have been fairly well documented these past few weeks. And for the rest of this hour we're going to take a closer look at some other sectors of Minnesota's economy that have not received as much attention Minnesota's taconite industry in northeastern Minnesota. For example, the taconite industry was in trouble long before September 11th, one mine had already closed and others cut back on production and jobs, but the Fallout from the attack has made a bad situation even worse Minnesota public radio's Bob Kelleher reports. On a still day. You can hear the Drone of heavy trucks and loaders miles away. It's a welcome racket to residents of Hibbing a city born to dig iron from hard gray rock more than 600 workers are back on the job at Hibbing taconite. (00:12:12) It's been a rough year (00:12:13) for them to lengthy shutdowns of idle the mine and taconite plant for 13 weeks a full quarter of the year, but you might say they're the lucky ones 1,200 workers in Northeast. Minnesota mines lost their jobs in the last year mostly due to the January closing of LTV steals iron, mine and taconite plant near Hoyt Lakes. The ghost of the 1980s are haunting the iron range steel crisis and that decade took more than half of Minnesota's iron mining jobs permanently some say the 80s are back. It's a lot worse right now. Steve's idler is communications director at Hibbing taconite the situation that we went through in the 80s. We thought was very severe. Those were moderately Good Times compared to where we are. Now, Minnesota's iron gets turned into taconite pellets, which feed the blast furnaces that produce raw steel but the whole Industries mired in a long Funk led by low-cost foreign steel x a year-long economic slowdown and now threatened by Terror fueled recession The Bad Times show up as red ink at the nation steel companies the number of bankruptcies and the number of closures permanent closures and the number of temporary shutdowns. And what have you is greater now than it has been nationwide at least 18 steel companies had closed or filed for bankruptcy protection in the last four years all before the events of September 11th, iron companies are banking on trade investigation is now underway pairings and Minnesota this year focused on the Steel Industries roll. In a strong National Defense until recent events at may have been a weak argument a couple of weeks ago. I don't think too many of us were thinking about National Security. But today everyone is concerned yet few think iron will benefit directly by a campaign Against Terror. It's not likely to generate a huge increase in the manufacture of Steel products like tanks or ships The Slowdown has exacted a heavy human toll in northern Minnesota LTV steel closed its Minnesota mine in January National steel Pellet Company and Keewatin and F attack near Eveleth of trimmed their labor forces North Shore mining will suspend production at its Silver Bay taconite plant until December yet. There's been little evidence of a stampede away from the Iron Range day vessel has worked on and off at LTV since 1976. He thought his job operating ltvs heavy shovels and bulldozers was Secure it was kind of a shock. Actually, it was a pretty big shock. We thought it was going to be sold to another company originally vessels determined to stay even though the jobs have left. He's launched his own business building Custom Homes in additions. Mostly for out of town residents summer lake homes so far. It hasn't produced The Paychecks Bill TV hat this year. I took a big cut Bay this year in a lot longer hours, but I think it's worth it. So but he's having a tough time starting a new business just as the economy slides Dave's wife Diane. (00:15:18) We're now on the downswing and were scrambling for to find the work out there. We're competing with the other contractors that have been in business for 10 20 years. And it's a lot more difficult for us being new to the picture (00:15:32) and now they worry about economic uncertainty and recession which could hurt their Core Construction business. The town of the wha big is just down the road from the closed LTV Gates about 15% of the town's Workforce lost their jobs at LTV, but it could have been worse city planners Scott Dane says, the range is more economically diverse than 10 years ago new employers like Northwest Airlines reservation center in Chisholm and Delta Dental in Gilbert have brought hundreds of jobs with no connection to the iron industry, but the terror Attacks of September 11th have hit Airline jobs while few of the new jobs provide the paychecks iron mining had you may have made $20 an hour at one time working in the mine. You may have to go to work for ten to Fifteen dollars an hour now and you're in the spouse may have to also go to work to remain living at the same standard that you enjoyed working the mines Dane remains optimistic despite the Turning world. Once he says he has to keep focused on his mission to strengthen babak's job base despite the shadow of a looming National economic crisis babak mayor, Steve berdych says the range needs to turn to the future rather than rebuild its past. The reality is mining is not what it was 20 years ago, even the industry is a lot leaner. There's over 4,000 miners left on the range today compared to 16,000 in the late 70s and (00:16:56) some observers think unless something dramatic happens the industries in terminal decline (00:17:02) 15 years ago. There were 83 blast furnace is operating in the United States today. There's 40 blast furnaces in the United States. The numbers are projecting ate less blast furnaces will be here over the course of the next 10 years. Obviously that hurts us taconite feeds those blast furnaces industry insiders say there's going to be some role for blast furnaces for decades to come but they're losing market share to a new kind of steel plant called a mini Mill. Minnesota mining companies are considering new facilities capable of creating a higher grade iron product called direct reduced iron or dri that can be sold directly to many mills but no projects are likely to materialize any time soon. Tony. Barrett says the immediate prospects aren't good for Northeast, Minnesota the College of st. Scholastica Economist says, it's not just the steel slump. He worries that the Region's leading Industries are vulnerable to economic slowdown taconite Lumber paper. All those are going to go down if the economy goes down retail by definition slows and that's another big thing here. The tourism Hospitality will probably slow but he says there is still hope that recession can be avoided thanks in part to Congressional response to the terrorist attack. There may be a silver lining to this and that the Congress has left ahead with increased spending which is going to stimulate the economy and to the extent that the kind of me stimulated that stimulates demand for steel which Emulates demand for taconite in the short term the Iron Range could also find relief and trade sanctions under consideration on foreign made steel products in the long term there still hope for a billion-dollar steel plant on the western Iron Range a number of firms are also looking into the possibility of new mines for Minnesota's other minerals like Platinum Palladium and gold but big Capital Investments come slowly in the best of times and these aren't the best of times from Minnesota's Iron Range. I'm Bob kelliher Minnesota Public Radio, by the way, a commissioner with the Iron Range resources and Rehabilitation board said today the sale of the LTV steel plant in height Lakes could be announced later today Ian or Company Cleveland Cliffs and Duluth base, Minnesota Power submitted a joint bid for the property back in May commissioner. John Swift says that under the bid Cleveland Cliffs would acquire all of the taconite plants processing facilities Minnesota Power for its part would acquire the company's electrical Generation Plant attack a night, huh? Transmission lines and some non mining property LTV steal clothes the LTV steel mining plant in January the shutdown affected 1400 workers if you just tuned in today on. Midday, we're taking a look at how the attack on America on September 11th is affected Minnesota's economy. And our next stop. This hour is Southern Minnesota where Minnesota Public Radio Zarin galba Lee found some serious problems facing Minnesota manufacturers (00:19:58) over the 80 years. The Dennis Thompson's Family is on the Mankato iron Foundry that bears their name. They've experienced The Changing Winds of the economy subsisting through hard times and profiting and good ones. Now, is it company's third CEO Dotson's dealing with a 30% drop in revenues from last year and he first these tough times ahead as America attempts to deal with the attacks as the industrial sounds of work continued on the production floor below Dotson says, he's shelved any plans for expansion until the economy shows. Signs of recovery (00:20:30) right now we're looking at we're on four day weeks and and we're looking at the possibility of taking an entire week out of production. We can't make inventory in our business. We only make what the orders are from our (00:20:46) customers the decision to shave hours off of the workweek predates the events of September 11th, unlike many manufacturing firms, which of laid off large numbers of workers Dodson says he's determined to keep his employees on the job and the aftermath of the attacks Datsun says customer orders have slowed but he's been able to keep his 100-plus workers busy filling orders for a variety of iron crafted truck parts with so many unknown surrounding potential military action an additional security threats Datsun says, he's hopeful American companies can regain a greater piece of the domestic Market (00:21:22) if product is coming from Taiwan India Korea China. It's on a boat and we Can lock down the Harbor's for three weeks four weeks, whatever. Well, there's a risk out there. So I think what is happening with the patriotism is we're not going to get a hundred percent of the product back. But can we do some blending? Can we have duplicate tooling? Can we be providing product as a backup? I think that's an opportunity asked me a year whether it (00:21:53) works economists. Don't see much room for optimism. They say there's no evidence the long-term Trend towards moving manufacturing operations to lower cost locations overseas will change the director of research for the Department of Economic Security. Jeh. Musa says, it's unlikely any surgeon by America patriotism would revive Manufacturing in Minnesota. (00:22:16) They may gain from abnormal or unusual circumstances for a month or two or three they may gain or expand their market share but eventually things will return to normal the the rules of competitions will come into play again and efficiency and meeting the customer needs will again differentiate between a successful operation and unsuccessful (00:22:51) one over the past decade manufacturing companies. Like Danson's have proven the rare bright spot in a rural landscape, otherwise dominated by a troubled Farm sector, but hard times that hit last year led to more than 12,000 layoffs Statewide 90% of them in Greater, Minnesota. Musa expects steady gains in unemployment as more workers receive pink slips (00:23:13) manufacturing. Minnesota is bleeding. We haven't seen such high numbers in job losses and layoffs. The initial unemployment insurance claims in manufacturing is the highest of all Industries and the increase from a year ago is over. Hundred (00:23:33) percent mosa predicts the jobless rate now at 3.6 percent in the state may rise as high as four point two percent in coming months, but he points out that remains below the state's long time average layoffs numbers have local officials across Greater Minnesota scrambling to draw in new employers to sponge up what's expected to be an expanding population of displaced workers. Jay. Musa suggest people should contemplate switching Industries pointing out. There are still jobs available in medical and Technology Fields. Carl Williams may be just the person Musa has mind when Williams was laid off last fall from General Electric subsidiary Midwest electric products in Mankato. He went back to school with plans to become a high school biology teacher and athletic coach at a popular Saint Peter Lunch Spot. William says with three small kids a mortgage and car payments getting laid off with scary in the long run a (00:24:27) blessing. What to tell you the truth I was I was not satisfied with with the blue collar aspect. I I mean, it's good money and it's normally it's fairly secure but I wasn't satisfied and I need to do you know, I needed to do something that I was satisfied with I had I had wanted to coach and I thought that teaching would be a good Avenue to get towards that means so that's so it just kind of progressed to where I wanted to do something anyways, something different and this gave me the opportunity to do something different (00:25:03) William says in the aftermath of the recent terrorist attack. He's even more grateful to be out of manufacturing his family's livelihood now free from the fear of being tied to a sinking industry still some companies remain guardedly optimistic back in Mankato, while Jacobson the head of the emergency generator company Kato light has roughly a month to go before moving into a newly constructed larger facility since the late 1980s Kate. I'd sales of jump from approximately 7 million dollars a year to nearly 55 million dollars. As of last year Jacobson says he expects the business to continue to grow sitting next to a display of dark colored fabric swatches destined for the new headquarters. Jacobson says, he'll be watching business closely over the next few weeks. (00:25:49) Well, I'm the type of guy that doesn't overreact any one particular thing. I kind of let the dust settle and see how things are going to go away. We were seeing a bit of softening in some of the markets that we deal in before this happened. And like I said, they just hit a wall for the last couple of weeks, but we're starting to see some activity again (00:26:08) until things pick up again. However, Kato light has frozen all hiring just one business will come back is open a question, but industry experts seem to agree that recession and Rising layoffs will remain a fact of life until the middle of next year Aaron globally, Minnesota Public Radio Rochester (00:26:26) this our midday were focusing on the Minnesota's economy just a reminder that all of our reports economy on the edge are available on our website, Minnesota Public Radio dot-org still to come this hour right after the news more on the aftershocks from September 11th. When you're looking for an update on the news, log on to Minnesota Public Radio dot org headlines are updated several times an hour. There's audio from your favorite MPR shows and you can respond to the issues on the MPR soapbox. It's all in the new section of Minnesota Public Radio dot-org also a reminder of the program's you here on Minnesota Public Radio are made possible by listeners like you we thank you news headlines. Now, here's Greta Cunningham Greta. (00:27:04) Thanks Gary. Good morning, British Prime Minister. Tony Blair says Pakistan made the right choice in backing the u.s. LED campaign Against Terror Blair is in Pakistan to shore up support for the effort. He called last month's Terror attacks on the US a crime against humanity. Today's talks are viewed as part of western efforts to Rally Islamic backing for strikes against Osama. Bin Laden's organization in Afghanistan Blair will travel to India tonight the US Army has Asked about a thousand infantry soldiers to use Becca Stan a neighbor to Afghanistan Uzbekistan. Slater says, he's getting US forces. He's letting us forces use an air base in his country for search and rescue missions. He stressed that US forces there can't be used to launch air or ground attacks workers at the World Trade Center pause for a moment today as they continue their cleanup work. They stopped Reserve as half a dozen firefighters took another body from the wreckage many saluted as the flag-draped stretcher was carried from the ruins of the North Tower memorials are scheduled today for 15 firefighters and a police officer killed in last month's Terror attacks. The White House says, there's no reason so far to think yesterday's crash of a Russian plane was anything more than an accident spokesman Ari Fleischer says, there's nothing to indicate terrorists were involved the plane plunged into the Black Sea with more than 70 people aboard in Regional news. Travelers will notice a military presence today at Twin Cities International Airport members of the Minnesota National Guard have been deployed to the Twin Cities airport as well as airports. Rochester and Duluth to beef up Security in the wake of the September terrorist attacks South Dakota. Governor Bill janklow met with about 50 South Dakota crop sprayers this morning to explain new Federal Security requirements. He says they need to do all they can to make sure their airplanes are not used as Weapons by terrorists the attorney hired by the family of the late Viking Korey Stringer says his death was preventable Stanley Chesley was hired by stringers family to look into the death of the Pro Bowl right tackle Stringer died August 1st after suffering heat stroke while at Vikings training camp in Mankato the forecast for Minnesota today has a freeze advisory for Western Minnesota tonight. It'll be cloudy with a chance of rain or snow showers in the north today partly cloudy in the South cool temperatures Statewide with highs mainly in the 40s right now in Marshall, that's fair and 41 Worthington reports Fair skies and 45. It's fair in Mankato and 43 partly cloudy in Duluth and 36 and in the Twin Cities clear skies a temperature of 45 Gary. That's a look at the latest (00:29:27) news. All right. Thanks Greta. It's about 26 minutes now before twelve and this is midday on Minnesota Public Radio. I'm Gary eichten and this hour were focusing on Minnesota's economy after the attack part of our Series this week that we've been running called economy on the edge as we noted at the beginning of this hour the state economy was slowing before the September 11th attack. And nowhere was that slow down more noticeable than the high-tech sector of the economy Boom had gone bust long before the terrorists struck but economists say the Region's Tech sector will suffer even more if consumer and business confidence isn't restored soon. Minnesota public radio's John Gordon reports, even before the terrorist attacks many Twin Cities internet and computer services companies were hurting customers were harder to come by Capital dried up losses mounted and prophets were a distant. Hope now things look even worse Dan ryebeck of the Twin Cities e-commerce consulting firm. ASI Associates says the events of September 11th exact at a toll it's added a new level of instability. Certainly. I think all of us are being much more sober and terms of our assessments of the next few quarters or even into the next year following consumer confidence could have a devastating effect on Twin Cities technology companies that were already in the dumps, like e-commerce firm net perceptions that perceptions has lost 114 million dollars so far this year and laid off almost half of its employees telecommunications equipment maker ADC recently cut some 2,000 employees and has seen its stock dropped precipitously if consumers and those who make purchasing decisions for businesses feel squeamish companies, like a DC and net perceptions could be hit even harder but even as some companies face Dark Times some firms are finding Silver Linings data management company Wham net has been on the road. Losing more than half a billion dollars since 1994, but CEO and co-founder. Eddie. Driscoll says his firm which helps companies store and transport critical data good see its fortunes improve as businesses discover the importance of protecting information. This unfortunate event has Focus people on the need for redundancy for disaster recovery for backup infrastructures. And anybody that's that's providing those those types of services I think are going to be are going to be very busy Wham Nets fortunes were improving before September 11th. It scored a new round of financing that allowed it to maintain a 950 million dollar contract to build computer networks for the military including at the Pentagon when American Airlines flight 77 crashed into the Pentagon many of the computers Wham net had already connected were destroyed Driscoll says the Network's themselves survived the attack and there was no data loss greater awareness about Protecting data could help plymouth's computer network technology or CNT which helps companies back up there computerized information. So they can survive disasters. Brian Larson is senior director of product management for storage network products at CNT, which employs about 700 people. He expects the terrorist attacks could bring in more customers. We're kind of in a wait-and-see mode right now, but it could definitely have a positive impact to our overall revenue streams. The revenue may also flow at companies that make high-tech security products Joseph. Attic is CEO of busy Onyx a Minnetonka based company, which makes systems that identify people by facial characteristics or fingerprints. We have received a deluge of enquiries as well as orders as well as immediate requests to provide assistance information as well as design, so and it's been apparently from airports in the United States as well as agencies in charge. Of security in general the United States but also from airports as far out as Thailand Indonesia, and other places in the world is Yannick share price more than doubled in the days after the stock market reopened following the terrorist attacks and the Department of Transportation ask addict for a briefing on how his firm's technology might help beef up airport security. It's hard to say how many jobs might be created by companies that benefit from a war footing but such companies are providing a glimmer of hope for technology workers who have been suffering through the slow down. Tom Latimer has been looking for a job since May when you completed a master's degree and management of Technology at the University of Minnesota. He's actually feeling better about his prospects. Now, there are areas around the Twin Cities that I think are going to expand and I think in the end they'll hire people but it's probably a good bet there will be more companies trimming their payrolls rather than adding to them. Month ago it looked like Twin Cities techies and the companies they work for would whether the downturn better than places like San Francisco and Austin Texas, which placed bigger bets on the so-called new economy. The diversity of the Twin Cities economy was supposed to act like a flak jacket now after the terrorist attacks, the picture is hazy the largest tech sector in the Twin Cities computer programming data processing and Computer Services is expected to take a hit as businesses pull back on spending in part because of nervousness caused by the attacks University of Minnesota economists and markeson. (00:35:05) We're beginning to see consumers really pulling back that will have a negative reflection back on business investment. And that's really the toughest thing because really to get going again as economy. We need business investment to turn around and so to the extent that computer services serve more business than individuals, which I think it's fair to say they could take a hit in this (00:35:28) The Outlook is brighter, if like markeson you define the Twin Cities high-tech sector in a broader sense to include things like Munitions manufacturing. The Twin Cities has a small weapons making sector which could see more business as the result of a military buildup investors seem to buy into that argument Alliant techsystems, which makes precision-guided ammunition for the US military saw its share price leap upward following the attacks Marcus and says the Twin Cities economy also benefits from its strong Cadre of health related businesses. (00:36:02) A lot of our high-tech manufacturing is in the medical instruments and pharmaceutical Industries to industries that are going to be pretty insulated from this (00:36:11) recession economists say it will be weeks or months until we start to understand the impact of the terrorist attacks on the technology sector Dan Ryback of ASI associate says things look Bleak now, but he's competent the computer and internet sectors will He says more firms will want to do business on the internet because they saw how well the net withstood the crush of traffic after the attacks the internet and online technologies have become so much a part of this culture that that their use and importance is only going to increase and I think we have reason to be optimistic about that one thing's clear Minnesota Tech firms have got a bumpy ride ahead as they wait for the economy to rebound John Gordon, Minnesota Public Radio. Remember the California blackouts earlier this year. They may seem like a lifetime ago, but it really was just a few months ago when experts all around the nation were warning that problems with the nation's electricity Supply could cause serious problems for American Business some Minnesota Business Leaders have been warning that power production in Minnesota may not keep up with long-term demand hurting Minnesota's competitiveness. But since the September 11th attack, there's a new worry trying to protect the power grid. Potential terrorist attacks Minnesota public radio's Marissa Helms (00:37:32) reports since the September 11th terrorist attacks power plants Across the Nation have been on a heightened state of alert scenarios involving threats to the country's power grid are being taken very seriously and Minnesota with its two nuclear power plants has extra cause for concern Maureen Browne is a spokesperson for nuclear management company, which operates six nuclear power plants in the midwest including the Monticello and Prairie Island facilities. She says the firm is prepared for all contingencies. We have armed and expertly trained Security Forces who are on maximum alert and at maximum security to thwart any type of terrorism at our plants and I would add that. (00:38:17) We are prepared every day to detect and prevent any kind of (00:38:21) incursion Brown says the US Military and FBI are on call to respond to any threat but He says all measures are precautionary and there have been no specific warnings even before September 11th. Midwest utilities were already grappling with potential Supply interruptions unrelated to Public Safety. Kevin Lawless is managing director of retail services for Xcel Energy Minnesota's largest utility. (00:38:50) Our biggest issue most recently is making sure that we can assure Supply this year. We're very concerned as we look out over the future about the ability to actually have enough plants and enough transmission capacity to supply our customers long-term needs (00:39:08) exhales worries are shared by other Utilities in the Upper Midwest power companies in Minnesota, six other states and the Canadian provinces of Manitoba and Saskatchewan jointly operate the regional grid known as the Midcontinent area power pool or map recent map projections indicate that in this decade the Region's energy You supplies may be overtaken by demand planners typically say it's necessary to maintain at least 15 percent more capacity than estimated Peak demand and map says the margin will fall below that level in just five years despite the sharp slowdown in the economy and the increased possibility of a recession in the next few months map says it's not revising its projections downward if the group's correct, Minnesota businesses could be left in the dark with increasing frequency and that could mean big Financial losses for customers like polar Fab which operates a semiconductor plant in (00:40:05) Bloomington. These are ASM 5500 wafer steppers. And so a wafer would come in here (00:40:13) polar Fabs facilities and engineering manager and your Cormac says with tens of millions of dollars worth of equipment running 24 hours a day, even a brief outage is expensive Cormac calls major blackouts at polar fabric. But on September 11th, he says the factory abruptly went (00:40:32) dark day of the terrorist attacks. We had a power outage a 12-minute outage at our plant in the evening and it caused a lot of consternation with with our employees of people people were scared (00:40:45) as it turned out the blackout resulted from an equipment breakdown at nearby power substations. Cormac says the episode cost the company at least $100,000 in ruined materials and lost productivity polar Fabs loss is but a hint of the hit California businesses are taking in the wake of that states power crisis last spring and some experts in Minnesota are warning the state needs to take action now to prevent California's present from becoming our future Xcel Energy says building more power plants is only part of the answer the utilities Kevin Lawless ads. There's also a need for more Power (00:41:28) lines, we really do need transmission capacity to be built if insufficient transmission capacity exists. We're going to have some issues with being able to get energy to where our customers needed and that will probably Drive prices somewhat upward (00:41:45) and that's a big worry for the state's businesses says Minnesota Chamber of Commerce Vice President Bill (00:41:51) Blazer nobody whether you're making taconite or processing Healthcare Claims can afford to have a blackout nor can you afford (00:42:03) to have your electricity (00:42:04) price any higher than your competitors? It's a major input and it's got to be reliable and it's got to be competitively (00:42:12) priced laser says opening the electricity Market to competition is the only way to learn investors to spend the hundreds of millions of dollars. It takes to build up the state's electricity infrastructure. The chamber proposed a deregulation Bill during the last legislative. Of session but lawmakers instead past competing legislation that raises conservation goals and streamlines procedures for building power plants and transmission lines many environmentalists believe a more sensible route to the energy future involves, encouraging businesses to build small on site generators fueled by clean and renewable sources, like wind or solar power and down the road fuel cells that run on hydrogen dubbed distributed generation. It's an approach that's gaining converts around the world Michael Noble is executive director of minnesotans for an energy-efficient economy. He says any energy policy based on building hugely expensive power plants with long transmission lines to customers is outdated and potentially a public safety (00:43:21) hazard. It's just logical if you have all your energy eggs in one basket and that basket is a hundred miles away and Cost a billion dollars and ten years to build it that's more vulnerable and more exposed than having a thousand little power plants or a thousand little Power Systems on every rooftop or in every basement or in every (00:43:41) community business lobbies are taking a look at distributed generation. The chamber's bill Blazer says his group has scheduled a series of seminars for its members to introduce the new approach, which he says could be more cost-effective and secure (00:43:57) because terrorism has come to the United States that may make some businesses. Wonder if they shouldn't have their own means of generating electricity. Can we rely on central power plants as we have for the last, you know, 50 60 (00:44:15) years, Minnesota companies will have to ponder that question over the next few years and it's entirely possible. They may find that the pursuit of energy security leads them to become producers. Of not just semiconductors or steal but also their own power supply. This is maresa homes, Minnesota Public Radio, (00:44:36) by the way, if you're looking for that proverbial Silver Lining at least in the short run there is some good news on the energy front the federal government reports that gasoline heating fuel and electricity cost should be much lower this winter than last winter natural gas prices are expected to average about a third of what they were last winter on the wholesale Market gas is used to heat more than 56 million homes across the country and in addition heating oil and propane cost should also be lower. Well before we wrap up this hour we're going to take a look at the prospects for new Minnesota companies in this post-attack economy at the peak of America's Prosperity just a couple of years ago eager Venture capitalists competed for the right to fund promising start up companies, but as the economy has soured entrepreneurs are finding it far. Are difficult to find investors still all is not gloom and doom entrepreneurs and Venture capitalists who gathered this week at the Minneapolis Convention Center say, they remain optimistic about their long-term prospects and a sort of public radio's Andrew Hague reports many economists credit Minnesota's vibrant Cadre of small emerging companies for driving the state's economy. That's why the economic downturn and the Attacks of September 11th have caused special concern over whether the state's a fledgling Enterprises will be cut off from new funding but evidence is accumulating that small companies are still finding their way. We're looking for Peripheral arterial disease, which is sort of fatty plaque buildup it develops in the arteries of a person's body and reduces oxygen rich blood from getting to your legs and arms John Romans is president of biomedics St.Paul based company with a new approach to diagnosing vascular disease and storing and sharing the information it gathers the company recently raised 1.3 million dollars and is now looking for an additional 5. In Romans thinks his company has a good chance to get the funding it needs in part because it's not in the information technology sector. We've been fortunate in medical devices specifically Health Care has been a fairly robust industry despite the fact that the overall economy has experienced downturn we have been also Lucky in that many of the source of private Equity that were originally originally seeking investment opportunities in the it communities are now turning back to more traditional businesses and specifically Health Care there are deals getting done but it's a very high bar that's been set. Andrew Humphreys head of the emerging companies practice at Minneapolis Law Firm fakery and Benson. He says investors have become to put it mildly more judicious with their money in part because of the sharp drop in share prices over the last two years. There are still very committed and there's actually still quite a bit of capital that's available from a lot of these funds that have been raised. But there's been such a dramatic impact on valuations over the past year coupled with the events of September 11th that everyone is taking a break to figure out ultimately what the valuations are going to be. What was once a flood of venture capital flowing into local firms has slowed considerably Minnesota firms raised 107 million dollars in the second quarter of this year down from almost 250 million dollars the year before that's according to the most recent figures available from a pricewaterhousecoopers survey one entrepreneur who's seen the highs and lows is Tim Divine two years ago. He sold the company. He helped start for some four hundred million dollars. He used some of the proceeds to found another firm called dantas, but he couldn't raise enough capital in May Divine shut the business down and laid off all of its 85 employees after a Hiatus had his Northern Minnesota Retreat Divine started another technology company and says, he's learned from his experiences. It was good for me to go through and Stan you know mentally adjust to everything I learned with a successful company and a company that failed. So now with the new Enterprise I'm involved in I can take what I've learned and mentally have that in my database and it's helped me hugely in terms of making the right decisions today Divine is indicative of what many say is an abiding optimism among entrepreneurs and venture capitalist that Spirit was among the qualities Governor Ventura touted in his address to the Venture Finance conference. The governor had just returned from New York City where he visited the destruction at the site of the World Trade Center towers Ventura said the terrorists who attacked on September 11th intended to shake the economy to its core but he says they've failed if a company was a good investment on September the 10th. It's still a good investment today. If an idea sounded promising on September the 10th, it is still promising today. Think of that. You visit with the entrepreneurs that are here today. These are the people that have the energy and the ideas that will launch our strong economy into the future. That's a sentiment conference participants were eager to endorse. I'm Andrew Hague Minnesota Public Radio one other note before we wrap up this special report this week. The state of Minnesota asked the federal government for 24 million dollars in emergency dislocated worker Aid to help retrain workers in the state people who've been affected by the rash of layoffs of also ask the feds to help Shore up the state's Unemployment Insurance Fund and some legislators say that if for whatever reason the Congress does not go along with those requests. They may ask Governor Ventura to call a special session to work on those problems. All of our reports on this issue economy on the edge are available on our website, Minnesota Public Radio dot-org. We invite you to check it out. And also add your comments on our Soap Box.


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