The last months of 2008 are proving to be trying times for many companies and workers in Montana's $1.2 billion manufacturing sector.

Businesses ranging from lumber mills and mines to upscale fly-rod makers are feeling the pain of the national economic slowdown. Some of the challenges faced by manufacturers could be ripped from the headlines or the nightly TV news: the housing slump, great uncertainty in the automobile industry, plunging prices for precious metals and cautious consumers.

"The big picture in Montana is not as severe (as nationally), especially with the housing downturn," said Todd Morgan, an economist who tracks forest products and manufacturing for the Bureau of Business and Economic Research at the University of Montana. "But the longer this recession lasts, the more we will start to feel it here."

While manufacturing jobs are relatively scarce in Montana in comparison to the rust-belt states in the upper Midwest and elsewhere, roughly 24,000 state residents work in some form of manufacturing. Those jobs range from the highly visible - timber mills, oil refineries and mines - to small businesses making beer or pet products. And those jobs pay well, at least by Montana standards. The average manufacturing worker in Montana made $37,000, which is 23 percent higher than the average worker's pay in the state, according to a recent study conducted by UM economists.

The outlook for Montana manufacturing workers in 2009 isn't too rosy, at least according to a recent survey conducted by the Federal Reserve Bank of Minneapolis, which oversees a large region that includes Montana. In general, manufacturers in 2008 told the Fed that they experienced flat production and reduced sales, employed fewer workers and had invested less in their businesses than in 2007. Looking ahead, many surveyed expected conditions to worsen in the months ahead. The Fed reported that Montana manufacturers "responded more negatively than the rest of the district."

Almost 25 percent of Montana's manufacturing economy rests in the wood products industry, which may explain some of the pessimism.

"They've been having difficulty for the last couple of years with the housing market down so steeply," Morgan said. The result has been shutdowns, layoffs and uncertainty. The Stimson Lumber plywood mill in Bonner shut down early in 2008 and the mill equipment was auctioned in October. In the Flathead Valley, Plum Creek Timber scaled back its operations throughout much of the year and announced several rounds of layoffs in the fall. Other smaller mills have made similar moves in recent months, blaming a lack of demand for products sparked by plummeting new-home construction, less home remodeling and repair and uncertain financing in the housing market.

In what Morgan describes as a sign of worsening conditions, Smurfit-Stone Container Corp. laid off 52 workers at its Frenchtown mill, citing reduced demand. Before the November layoff announcement, the mill had fared much better than others in the wood products industry.

"As the global downturn has accelerated, the linerboard they make for cardboard boxes has been hit," Morgan said.

A steep drop in the prices of many metals has been felt in Montana. Officials from Revett Minerals recently said that sharply lower prices for copper and silver might force the company to shut down operations at its mine near Troy early next year. Copper prices have dropped by more than 60 percent in the last few months, while silver is selling in the $10-per-ounce range, down 50 percent from summertime highs. The mine employs 180 and has a $10 million annual payroll.

"The economic crisis has obviously had a big impact on the mining industry," Carson Rife, a Revett official, told reporters. "This kind of across-the-board fall in metals prices, it's pretty much unprecedented."

Decreased demand for aluminum, coupled with the potential for higher electricity prices are behind a planned shutdown at the Columbia Falls Aluminum Co., officials said last week. The company reduced production and laid off 125 workers in July. The latest news will idle another 200.

"We are going to stop producing aluminum and whether or not we restart sometime depends on the situation," said CFAC spokesman Haley Beaudry.

Along with a drop in demand for metals around the world, Montana mining operations are feeling the pain of the automobile industry. Production cutbacks in Detroit have led to less demand for copper, Rife noted, while the troubles of big automakers have hit hard elsewhere in Montana.

Stillwater Mining, the only platinum and palladium producer in the United States and one of the few in the world, recently axed about 220 jobs at its operations in south-central Montana. The falling price of the metals has hurt Stillwater, but slackening demand played a big role in the decision to cut production and the size of the work force. While there may be a developing market in jewelry, one of the principal uses of palladium is in automotive catalytic converters. General Motors and Ford are key customers for Stillwater and account for a big chunk of the company's business, officials have said.

The challenges extend into the technology ranks as well. Kalispell-based Semitool Inc., which manufactures machines used to make semiconductors, permanently laid off 100 of its 800 Montana workers in November. Weakened demand for computer chips, driven by business and consumers, has led to less demand for the machines that make the chips, company officials said. Semitool also planned to shut down its operations in Kalispell and Libby over the holidays.

Plum Creek, Stillwater and Semitool are among Montana's largest manufacturers. But even smaller enterprises have been hooked by the slowdown. The R.L. Winston Rod Co., which makes graphite and bamboo fly rods, announced layoff plans in early December, the move the result of reduced demand for its products, some of which sell for as much as $3,000 each.

"Hopefully, it's a short-term deal and we can rehire these people as soon as possible," Winston chief executive Woody Woodward told the Montana Standard recently.

While there is plenty of early-winter gloom to go around, not all Montana manufacturers are struggling.

"We have an extremely wide range of manufacturing companies here in the state," notes Steve Holland, executive director of the Montana Manufacturing Extension Center in Bozeman. "Any scenario you can come up with, you are going to find."

West Paw Designs, a Bozeman-based maker of eco-friendly pet beds, toys and other items, is also seeing revenue growth despite slowing consumer demand. The 12-year-old company has about 40 employees, including several hired in the last few weeks.

"We have seen our revenue drop recently but our growth is still positive," said Spencer Williams, West Paw's president. "We are still adding jobs and raising wages. We are grateful for that."

West Paw's continued growth, Williams says, stems from a decision not to scale back its marketing efforts, despite the slowing economy, and a focus on high-quality "green" products often made from recycled materials. Customers seem willing to splurge on their pets and the fact that all of the company's manufacturing is done in Bozeman provides a nimbleness that others might not enjoy.

"We can adjust to the market quickly and keep our inventories low," Williams said. "I see that as a real plus in this market."

Butch Larcombe is the editor of Montana Magazine. He can be reached at 444-5120.