Tuesday, March 26, 2013

Increased Demand for Guns and Ammunition Spark Jobs Bonanza in Firearms Industry

Looks like I was wrong- President Obama and the Democrats actually CAN take credit for creating some private sector jobs.

With the White House and Democrat-controlled Senate promising to take action on gun control- including a proposed "assault weapons" ban- civilians have been stocking up on guns, ammunition and parts for the last several months. Coupled with the recent Department of Homeland Security purchase of 1.6 billion rounds of ammunition, the increased demand has created a shortages and backlogs. In fact, the massive bulk purchase by the DHS has left local police departments across the country scrambling to find ammunition and paying more and waiting longer for the ones that do manage to find any.

The brisk sales has also had the unintended consequence of creating a significant jobs boom for gun manufacturers throughout the USA.
Mike Weddle, head of maintenance at Dynamic Research Technologies, an ammunition manufacturer in Albany, Mo., says he is adding 10 new hires to his staff of 35. DRT's machine operators make between $10 and $17 an hour -- a healthy paycheck in a region where it's tough to find a job and the cost of living is relatively low.

DRT currently cranks out 80,000 bullets per shift and operates two shifts per day. But that's not enough to meet demand. So Weddle is adding a third manufacturing shift and building an additional facility.

"Demand picked up a year ago -- it quadrupled," he said. "It just went crazy." He says .223 caliber ammo, which is for semiautomatic rifles, is particularly difficult to keep in stock.

DRT is a tiny part of an industry that employs about 240,000 nationwide, according to an estimate from Brian Rafn, who follows the gun industry for Morgan Dempsey Capital Management. And like DRT, many of the giants in the business of making guns and ammo are also expanding.

"Sturm, Ruger and Smith & Wesson have both added manufacturing capacity, which includes labor and shifts, in the past year," said Wedbush Securities analyst Rommel Dionisio.

Caleb Ogilvie, a concealed-carry instructor who works at Cabot Gun & Ammo in Cabot, Ark., said that employees at a nearby Remington plant in Lonoke are telling him that "they're running full swing up there, running 24-7."
Ironically, companies like Smith & Wesson, Colt, Mossberg and Ruger are headquartered in New England states where residents can't legally own some of the firearms those companies make. This has not gone unnoticed by officials in Mississipi and Texas who say they would gladly welcome the northern-based companies should they decide to move south. Colorado-based ammunition manufacturer Magpul has said their move out of Colorado is underway after Gov Hickenlooper signed a raft of gun control bills into law earlier this month.

Meanwhile, the northern Idaho town of Potlatch is attempting to do follow suit with some help from the Idaho department of commerce, Potlatch corp [NYSE- PCH] which owns property that housed one of their paper mills until 1981 and regional utility Avista [NYSE- AVA].

The move by PNW Arms was like a signal flare to business and political leaders in the town of 800 people, who were in the process of trying to determine what industry would be best to pursue.

"We were in the middle of doing our marketing plan at the time and decided that firearms is the niche we would recommend," said Gary White of Kennewick, Wash., a business marketing consultant who is helping develop the town's pitch to gun makers.

Potlatch, they decided, would go from timber town to gun town. It would try to lure firearms and ammunition makers, and plans also called for hunting-themed housing and retail development.

"It will help draw some out-of-towners and out-of-staters," Mayor David Brown said.

Potlatch went public in April with its come-hither pitch to gun makers.

"We've had two nibbles already and we haven't even tried," Swanson said.

Swanson acknowledged that gun manufacturers would not be welcomed everywhere. Even in Latah County, they might face opposition 15 miles away in liberal Moscow, where the University of Idaho is based.

"In Potlatch, they would be welcomed with open arms," Swanson said. "I have not heard a single person in Potlatch saying, 'We don't want them here.'"

White agreed: "If we proposed this in Seattle or Portland, I'm sure it would be entirely different. For Potlatch, Idaho, this makes absolute sense."

Busy State Highway 6 serves as the main street through the town, and the small business community actually has trouble finding workers, said Dale Spring, owner of Dale's Wagon Wheel Bar & Grill.

Spring wonders where the workers would come from for any new firearms factory. "There's no labor force," he said.

Many Potlatch residents work at the universities, or at one of the thriving private sector employers in the Moscow-Pullman area, he said.

Local economic development leaders believe good-paying jobs will draw workers.

The lure for manufacturers is the former lumber mill site, of which 26 acres is set aside for firearms and related companies, White said. The mill site is currently without buildings, but has nearby utilities, is flat and the town has plenty of water and sewer capacity, Swanson said.

Nationally, there has been a big jump in the popularity of target shooting, largely the result of a slew of television programs on that subject, White said. They expect Potlatch's plan to appeal to some of those people, he said.

The marketing effort is funded by Potlatch Corp, which still owns the mill site, by local utility Avista, and by local city and county governments.
There are relatively few publicly traded gun companies, but shares of Smith & Wesson [NASDAQ- SWHC] have gone up 7.85% since the beginning of 2013 and shares of Ruger [NYSE- RGR] are up more than 13% in the same timeframe.

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