(FORTUNE Magazine) – It wasn't one of the usual explanations for a plant closing. In early May, Dana Corp. announced it was shutting down an injection-molding facility in Marine City, just northeast of Detroit, where some 120 employees were making parts for the Big Three auto companies. The problem was not a dearth of orders but of workers. The unemployment rate in that part of Michigan is under 3%, and Dana said it couldn't keep enough people on the payroll to operate profitably.

Almost anywhere else in the U.S., the story is the same. There's nobody left to hire, at least nobody with rudimentary skills who understands that it's necessary to show up on time every day. Dana is lucky; it was able to shift the Marine City business to a plant in Tennessee, and to take along workers willing to move. But at other companies, growth is being hobbled. Matt Coffey, president of the National Tooling and Machining Association, says a best guess is that 25,000 jobs are going unfilled in U.S. machine shops alone. He adds, "I have been in over 1,000 companies, and they all tell me they regularly pass up work because they cannot take it on." John Ross, executive vice president of Kurt J. Lesker Co. in Clairton, Pa., which builds sophisticated vacuum chambers, says flatly, "We've lost business because we didn't have the people to deal with it."

The good news is that across the country, training programs that are as well designed as they are well-intentioned are drawing people from the last big reservoir of potential hires: the unemployed and the underemployed, many of them inner-city minorities. With uneven but sometimes notable success, these programs are lifting people out of welfare or dead-end work and providing manufacturers with skilled or at least trainable help. Companies hiring people from these programs are generally more than satisfied. While there are no reliable statistics, as many as nine out of ten of the new hires survive a probationary period, a far better outcome than when companies hire workers from the street or try out temps.

Nobody is more pleased than Bucky Pope, human resources director at Sandmeyer Steel in the northeastern corner of Philadelphia. Sandmeyer is a family-owned and -managed 48-year-old job shop specializing in machining and forming heavy stainless-steel plate. Like most of his peers, Pope has low expectations of anyone looking for a job in today's tight labor market. "If you're not working and you come in here looking for a job, I'm suspicious," he says.

But Pope got a pleasant surprise late last year. He tested applicants who had been through a 61-week machinist training program run by PhAME, a nonprofit group whose full name is Philadelphia Area Accelerated Manufacturing Education Inc. The test covers such topics as English, math, and machine-shop practices. Says Pope: "These guys killed it. They just murdered the test." He hired three of them. One is Ronald Montaque, a 44-year-old African American, who says he used to do "light industrial work." In January he started at $10.75 an hour in a job he says holds "lots of promise."

But there is also some bad news. While a few of the training programs have been around for years, most, including PhAME, have yet to show they can scale up to hundreds of students or even thousands. None has been able to pull many black and Hispanic males in their late teens and early 20s off street corners. People in their late 20s and older are the best prospects.

Funding is another worry. Both new and old programs rely heavily on the largesse of government agencies and private foundations, which can run dry. While no program is totally without some sort of corporate support, very few are getting the amount of assistance from private industry that they deserve.

PhAME, for one, has demonstrated that it can turn men and women with no more than eighth-grade reading and math skills into competent starting-level machinists. The training cost per person, PhAME says, is about $15,000, a bargain if one considers nothing more than the federal and state income tax the worker will pay over the years. But the program has fully trained only 50 since it started classes in 1997 and is tottering.

Up to now, PhAME has had lots of support from William Avery, CEO of Crown Cork & Seal, who was a founder and is chairman. Classes were held in a Crown Cork facility until PhAME acquired an old factory in northeast Philadelphia and remodeled it with state funds. Last year Avery had to go into his own pocket to help cover a $300,000 deficit. He now forecasts glumly that the program won't survive in its present form without major new government help.

Beyond money problems, many programs can't attract enough qualified applicants even though they practically guarantee decent jobs for anybody with gumption. A Pittsburgh program, Manufacturing 2000, has turned out some 180 machinists, including a dozen who were immediately hired by Lesker, the vacuum-chamber company. But it has learned, in the words of one founder, Barry Maciak, that "training is critical, but it's not the obstacle. The question is, How do you drag people into manufacturing?"

As Maciak and others have discovered, the image of manufacturing in the U.S. remains dark, dirty, and dead-ended--despite the fact that the average precision machinist makes more money than the average four-year college graduate. Getting the word around will take a major effort, but manufacturers have no other choice. Today's highly skilled factory work force is an aging group. In just a few years the cream of the current cohort of U.S. manufacturing workers will be either dead, fishing, or in Florida.

Says Robert Milbourne, president of the Greater Milwaukee Committee, whose membership includes the CEOs of most of the region's larger companies: "We have companies in Milwaukee that will lose 50% of their work force in the next five years. In the manufacturing area, that's a killer. These are the best people." And there are no farm teams. Harry Moser, president of machine-tool company Charmilles Technologies, estimates that for every three openings for precision machinists created by death, retirement, or expansion, only one person is being trained. In New York City's huge public school system, there isn't one machine-shop teacher.

It's not that there's no raw material left to train. Even with national unemployment hovering at a low 4%, more than five million people remain jobless. In addition, millions of working poor are stuck in low-paying jobs with little job security and few prospects for advancement. True, many of the jobless and underemployed live in places like Appalachia and northern Maine, far from where skilled manufacturing workers are needed. The more glaring disconnect is in the large cities, particularly the repolished Rustbelt. The manufacturers that can't fill jobs are mostly in the suburbs, 20 miles or so from central-city people who can't get work or can't get by with the jobs they manage to find.

Even if inner-city folk have public transportation for reverse commuting or cars that start every morning, they may run up against discrimination. You are more likely to be unemployed or underemployed if you're some color other than white and speak a language other than English at home. But overt prejudice is far from the whole story. William T. Dickens, a senior fellow at the Brookings Institution, notes that the parts of the central city with lots of people out of work--who are most often Latino or black--lack the networks of working relatives and neighbors that elsewhere are role models and provide the inside word on who's hiring and how to dress and act when you apply.

The biggest problem, though, is the collapse of the educational system in many large cities. In Detroit, which is not unique, many 17- and 18-year-olds straight out of high school who apply at Focus:HOPE, one of the oldest and most highly regarded training programs, can't pass eighth-grade reading and sixth-grade math tests. U.S. Labor Secretary Alexis Herman gets to the core of the matter: "We don't have a labor shortage; we have a skills shortage."

"In truth, the American school system has failed us," says Phyllis Eisen, who heads the Center for Workforce Success at the National Association of Manufacturers (NAM). Eisen admits that until recently American manufacturers hadn't done much to help. "Ten years ago, all they had to do was hang out a sign, and people would line up. But then the labor market slowly started to tighten. Not only were there fewer people, but they didn't have skills. So manufacturers started to look around for training programs for the disadvantaged and the low-skilled and found there wasn't much out there."

Now, Eisen says, her organization and lots of others are trying hard to figure out how to train people, "not for jobs making beds, but jobs making things." NAM and the U.S. Chamber of Commerce are seeding training projects in eight cities. The Society of Manufacturing Engineers is pushing efforts to improve and tie together technical education from high school to community college to university. In New York City, the Garment Industry Development Corp., run by UNITE, the garment- and textile-workers union, is helping laid-off and underemployed workers upgrade their skills. And the Annie E. Casey Foundation, started by her son, UPS founder Jim Casey, is spending over $20 million to underwrite training efforts in six cities. (After decades of good works aimed at improving life for children, the foundation decided that one sure way to help kids is to help their parents get a good job.)

The U.S. Labor Department is funding scores of new demonstration training programs wholly or in part. To an extent likely to surprise many in private industry, the department is focusing on training people for what industry needs and getting people into careers and not just jobs.

Ray Bramucci, the department's pragmatic, down-to-earth Assistant Secretary in charge of the Employment and Training Administration, explains: "What we've tried to do in the last two years is to get employers together with the agencies that have access to public funds and can work with schools to make something happen based on a specific need of an area or a specific employer. That's a hard sell. Employers don't trust the government. But in order for training to be relevant to the world of work, we've got to have them involved."

Companies seeking information about training programs in their areas can contact local "One-Stop" career centers. Under the Workforce Investment Act of 1998, these are replacing government employment offices and gathering all employment and training programs under one roof. The act also required states to establish state and local Workforce Investment Boards by July 1 of this year. These boards oversee training and employment activities, and by law, local businessmen must make up a majority of their members. The purpose is to ensure that people are trained for jobs that actually exist in the community.

Generally speaking, manufacturing training programs fall into two categories: those offering four or five weeks of basic instruction and those that stretch into many months and develop workers with advanced skills.

A promising short-term program is offered by the Piedmont Triad Center for Advanced Manufacturing, or PT CAM, in Greensboro, N.C. Founded in 1993 by a state university, North Carolina Agricultural and Technical State, whose student body is predominantly black, PT CAM first planned to offer advanced training in a 24,000-square-foot, well-equipped "teaching factory" in a former Cone Mills building. Steve Oneyear, the program's executive director, says that originally "the focus was to be very high tech, very advanced. But the industry folks told us, 'We'll worry about leading edge. You worry about basic training.'"

PT CAM responded with a five-week metalworking program covering "soft" skills (how to listen as well as talk), hard stuff (shop math, blueprint reading, measurement tools), time on machines, and visits to potential employers. Since the program began in a pilot version in late 1997, 64 people have attended classes, and 52 have made it through. Two have gone on to more training at a community college, and all but four of the rest have gotten jobs starting at $8.50 or more an hour.

As training programs go, PT CAM's is among the more business-minded. Its shop floor is stuffed with an impressive range of advanced machine tools that it leases at below-market rates in return for letting manufacturers bring in potential customers for demonstrations. It's also one of the few programs that charge employers for each candidate they hire, albeit only $660. That's a deal for employers, and PT CAM roughly breaks even on the course's costs, not counting a charge for the facility or other overhead. PT CAM runs other programs, some at a loss but others at a decent profit.

Not surprisingly given its origins, PT CAM is firmly tied into North Carolina's manufacturing-oriented educational network. It runs machining labs for the engineering students at its founding university. It also provides instructors for machining classes at Guilford Tech, a community college, and prepares continuing-education teaching modules on such subjects as Introduction to Manufacturing for use in two-year colleges throughout North Carolina.

In many parts of the country, training programs are tying in with community colleges. In Wisconsin, the two-year Milwaukee Area Technical College provides space, equipment, and instructors for a successful four-week, entry-level program in manufacturing skills devised by the Wisconsin Regional Training Partnership, or WRTP. Supported by both businesses and unions since it started in 1992, WRTP got into the basic-training business in 1997 with financial help from the Casey Foundation.

WRTP has adhered strictly to an important rule: Nobody enters the program without having a job already lined up. The partnership hosts work fairs staffed by companies looking for help and attended by people looking for jobs. Often an applicant will get an offer on the spot. Others get a promise contingent on completion of the course. Some students are recruited by unusual methods of persuasion. In a recent WRTP class, many of the enrollees were "noncustodial" fathers behind on child-support payments. A judge had made them a hard-to-refuse offer: job training or jail.

In class, instructors work to improve reading and math, teach the basics of blueprints and machine operations, and try to instill a work ethic by exhortation or by dumping those who are tardy or absent. With a chance to refresh forgotten skills, some enrollees jump two grade levels in reading and math over the four weeks. Typically, about nine out of ten make it through the program; about nine-tenths of those take and keep a job. Very roughly, since there are hidden subsidies and since nonprofits don't do business-type accounting, the training cost per student is around $1,000.

Scaling up should be fairly easy. By outsourcing to the technical college, the Wisconsin group hasn't had to sink funds into shops, classrooms, or staff. All it has is a handful of people and a suite of offices. In the past three years, WRTP has trained 181 people. This year it intends to turn out 150 more simply by striking a deal with the college for more space and more instructors. While that's happening, the program will spread up the shoreline of Lake Michigan, Wisconsin's industrial belt, by contracting for classes in other community colleges or technical schools.

Detroit's Focus:HOPE, Philadelphia's PhAME, and Pittsburgh's Manufacturing 2000 fall into the group of programs that teach advanced skills. These longer programs get their share of the longtime unemployed, but they also attract the "displaced" worker whose employer has decamped or the underemployed individual who decides that delivering pizzas is not a worthy lifetime goal. Seven out of 20 in the first Manufacturing 2000 machinist class a few years ago had been pizza-parlor workers. Again, the accounting can be slippery. But the true, fully loaded cost to take somebody from remedial math through advanced machining is likely well above PhAME's estimated $15,000.

Students in the longer programs usually go through a preparatory phase with an emphasis on the three R's, and then move by stages into more difficult subjects and shop work. As weeks pass, the number that drop out increases. However, those who make it past the preliminary phases have basic training equivalent to what they would have learned in a short course. Most leave because they can't afford to stay and can now find a better job.

Focus:HOPE started out to feed, not teach. Set on a 40-acre multibuilding site about 20 minutes from Detroit's downtown Renaissance Center, it was founded in 1968 to distribute food to the poor, which it still does. It wasn't until the early '80s that the program branched out into training entry-level machinists. Since then it has produced some 2,200 and continues to graduate as many as 100 every four months from MTI, its Machinist Training Institute.

Last year Focus:HOPE opened an Information Technologies Center that offers courses leading to such jobs as computer-systems administrator. But machining still gets the most attention. An MTI student, for whom the preferred term is "candidate," first goes through a five-week "vestibule" of classes and shop training that gives the candidate a chance to decide whether he or she is cut out for cutting metal. The next 26 weeks consist of eight-hour days, each divided into four hours in class and four hours training on an expansive shop floor. By the end, MTI graduates have a solid foundation in shop math, are competent on manual lathes, mills, and drills, and have some experience on computer numerically controlled (CNC) equipment.

Some MTI grads go into employer-paid apprentice programs and make a career of machining. Others work a short time on machine tools and move on. Ed Daffin, now 41 and married with three children, including a daughter in college, quit working as a Detroit sewage-plant attendant to go through MTI. He finished in 1998 and now makes $41,000 a year as supervisor of the quality-control lab at Vitec, a supplier of blow-molded fuel tanks for Chrysler's Dodge Dakota and such GM cars as the Chevy Monte Carlo. He's working on an associate degree at Wayne County Community College and says he won't stop studying until he has a four-year engineering degree.

To be accepted for machinist training at Focus:HOPE, applicants have to be able to read at the ninth-grade level and do tenth-grade math. As early as 1989, fewer and fewer could. The solution was a seven-week Fast Track program to bring up scores. By 1997 test results had gotten worse. The answer was First Step, a four-week program. Applicants whose skills aren't past sixth grade in math or eighth grade in reading take it before moving on to Fast Track.

With steely determination and lots of support from family and friends, about a tenth of those who start at First Step go all the way to MTI graduation. Anita Richardson, a 46-year-old single mother, went into First Step in 1998 and graduated from MTI last year with a choice of jobs. She picked Vitec because it's in town rather than the suburbs, and seemed to offer a good chance for advancement. After time on the production line, she's now in quality control reporting to Ed Daffin.

Far from deflecting people from college, MTI is the core of an educational system a person can enter with no more than sixth-grade math skills and depart with a BS in manufacturing engineering. About one out of four MTI grads goes down the street to Focus:HOPE's Center for Advanced Technologies, which opened in 1993 to provide advanced training and college-level courses in cooperation with four Michigan universities and Pennsylvania's Lehigh. CAT (said as initials, not as the feline) is a single-site work-study program. After 13 weeks of "pre-engineering" to get ready for calculus and other college-level courses, candidates spend 15 hours a week on academic studies, much of it self-directed computer learning, in the front portion of the CAT building. For another 40 hours a week they're working out back in a 120,000-square-foot manufacturing plant.

For automakers and other customers, CAT builds such products as the water pumps for the Northstar engines that GM puts in Cadillacs. Students start at $8.50 an hour and make more as they move up. Timothy Duperron, who took early retirement last year from Ford Motor to become Focus:HOPE's chief operating officer, says that CAT, "like a teaching hospital," loses money. In the first nine months of this year, sales were $43.8 million and costs were $45.4 million. But for students the deal's hard to beat. While working and earning money in the plant, they can get an associate degree in about two years and a bachelor's degree in engineering in about five, at no cost, and on graduation easily find a job in industry starting at around $47,000 a year.

Duperron has been pushing the organization into acting more like a business and less like a social agency. Tuition is theoretically charged for all Focus:HOPE training programs other than CAT. At MTI, tuition for the full 31 weeks is $9,250. About 60% of it is covered by some form of government assistance. In the past, while some students paid something, most of the remainder became part of a budget deficit covered largely by contributions. Now candidates must sign a note for any uncovered tuition, which they are expected to repay later in their careers.

Focus:HOPE's relationship with its corporate customers is also changing. In the past it assumed that there's always a buyer for a good product: its students. Now it's switching from push to pull, persuading companies to place open "purchase orders" for MTI graduates. Right now the program is oversold. Orders from just the Big Three are equal to its current capacity.

Training administrators elsewhere in the country are almost duty-bound to make a pilgrimage to Detroit and learn from Focus:HOPE. Whether the program is replicable is a good question. Taking a crawl-before-you-walk tone, a spokesperson says, "People forget that we've been around for 32 years." Besides those decades of experience, Focus:HOPE has been a magnet for money to an extent that new organizations may be unable ever to match. It has received a flood of federal and foundation seed capital and has been heavily supported by the auto companies. Contributions, individual and corporate, will probably total more than $10 million this year.

Philadelphia's PhAME, which can only dream about that kind of help, offers a training curriculum that duplicates MTI's with both ends truncated. It doesn't try to train anybody with less than eighth-grade skills. And its advanced program is not as complete as CAT; it's only just starting some small contract-manufacturing jobs. PhAME's list of industry supporters is notable mainly for who's missing. Besides Crown Cork & Seal, the only major manufacturer deeply involved with the project is Vertol, Boeing's helicopter business adjacent to the Philadelphia airport. Among the absent: Visteon, the newly independent Ford Motor parts supplier with substantial operations in Lanark, Pa., about 40 minutes away; U.S. Steel's Fairless Works, even closer; and Rohm & Haas, the Philadelphia chemicals producer.

PhAME has the capacity to start 60 students in machinist training every nine weeks. But only 141 have entered since spring 1998, and 91 of those have dropped out, mostly to take jobs. Today PhAME has only about 50 students at all levels. Part of the problem, its managers say, has been finding qualified applicants. One community organization got 70 people to apply, but none passed the entrance test. Says Susan Hight, PhAME's recruiting manager: "When the powers that be designed PhAME, they thought people would be banging on the doors to get in. They never did."

One reason is that at PhAME, as well as everywhere else, students have trouble getting by without any income while learning. Federal and state funds can be found for training costs but usually are not available for living expenses. That was temporarily solved with a $2 million state grant for monthly stipends. When the grant ran out, students left and applicants became harder to find. This compounds the financing woes, since fewer in training results in less money from per capita government grants.

The story is more upbeat at the other end of Pennsylvania. In Pittsburgh, the founders of Manufacturing 2000 realized early on that even if you give away training, you still have to market it with the same drive and techniques used to sell anything else. Their program grew out of meetings in the mid-1990s of Pittsburgh-area manufacturers that were organized by Barry Maciak, a local consultant who serves as executive director of the Institute for Economic Transformation, part of Duquesne University's business school. Maciak recalls that "guys would always bitch about how they couldn't find a good work force."

When Maciak and his associates brought together executives of 17 metalworking companies to see what could be done, they heard high praise for the adult evening courses at Steel Center Vocational Technical, a high school in suburban Clairton. About three years ago, Paul Anselmo, the head of that program, agreed to work with the metal companies and devise a 525-hour beginning machinist course that could be taught after school hours at shops in high schools and community colleges. They include the machine shop at Steel Center Vo-Tech, which has been spruced up and equipped with new and overhauled tools, thanks largely to a local foundation. By running the program after school hours, Manufacturing 2000 not only uses shops that would otherwise be vacant but also gives its students time to hold down a job and cover living expenses.

Nearly 80 companies have signed an agreement with Manufacturing 2000 to open their plants to student tours, participate in job fairs, and pay $1,250 apiece for successful hires. Last year the program's administrators asked manufacturers what other skills they needed. Welders were at the top of the list, followed by electronic assemblers (western Pennsylvania isn't all melters, bangers, and benders). Manufacturing 2000 now has a 15-week welding course and a seven-week one in electronics assembly. With a full-time staff of only seven, the program has trained hundreds of people who have been grabbed by eager employers.

What most distinguishes Manufacturing 2000 is professional marketing carried out by Elliott Marketing Group, a small shop that also works with the University of Pittsburgh's Medical Center and the city's opera. By analyzing the results of promotion, the group now knows the phrases that pull in applicants: "free training," "short time," and "jump-start a great career." It also knows whom to target. Half the students are under 30, 20% have attended college, two-thirds earned under $10 an hour in their last job, and--a big contrast with other cities--most are single white males.

The program never lets a hot lead go cold. Says Maciak: "We aggressively go after people and make sure that they get in and don't get lost." Those who request information but don't reserve a place at a seminar explaining the program get a call. If they sign up for the seminar but don't show, they get a call about rescheduling. If they attend but don't apply for the program, they'll be asked why. From fall 1998 to this spring, the program generated 4,300 requests for information. Three out of four inquirers signed up for a seminar, but a third never came. Then 920 put in an application, but only two out of three took the required test, and 20% of those failed. Of the 360 who actually started a class, 10% dropped out. At the end of the line, despite early warnings, some couldn't pass drug tests. Final result: 277 got and held jobs.

Manufacturing 2000 is now part of a new nonprofit enterprise, New Century Careers. NC2, as it likes to call itself, is run by Anselmo, who has left the school system. It has just taken over management of the National Tooling and Machining Association's apprenticeship program in the region, which has been filling up with Manufacturing 2000 grads. It has received a $1 million grant from the Labor Department to explore other approaches to training. And it is expanding the Manufacturing 2000 program through four southwestern Pennsylvania counties, with the hope of training 1,000 students a year. Silva Baretta, Barry Maciak's consulting partner, nevertheless worries that "maybe we have already picked the low-hanging fruit."

Going higher on the tree won't be easy for any training program. A wider application of what's being learned on how to recruit and how to leverage existing educational resources will help. Part-time programs that allow men and women to hold some kind of job while training for something better--just started at Focus:HOPE--ought to be tried. At least two programs have recognized that you've got to get 'em young. Focus:HOPE is launching an experiment to bring high school students into its program so that they can complete MTI by the time they graduate and be ready to go on to pre-engineering and then CAT. North Carolina's PT CAM is running an award-winning program that starts in the junior year of high school.

Training programs themselves could use some improved business sense. Right now most of them virtually give away expensive products, the training and the trained. Dot-com mania aside, no rational businessperson would make a high-quality product for a market where demand exceeds supply and not charge for it.

Besides paying fairly for the product, U.S. manufacturing companies clearly must do more. Though they grouse about the lack of skilled workers, many companies do little to correct misconceptions about manufacturing in their communities and local educational systems. Even their employees, like almost all American parents, remain convinced that their kids won't get anywhere without a college degree. They don't understand that an affordable route to a good career as well as a degree might go through a machine shop. Such perceptions have got to change. If they don't, more and more U.S. manufacturing will move abroad--in pursuit not of lower wages but of people who can handle the work.

FEEDBACK: psiekman@fortunemail.com. Stories from FORTUNE's Industrial Management & Technology section can be found at fortune.com/imt.