Reader Feedback – 2007-04-15

Does anyone care about the loss of manufacturing jobs, plants?

There was an interesting article in the March 2006 issue of PLANT ENGINEERING . It was the cover story (The Future of Manufacturing), and I thought I would save it. Looking back one year, I wanted to see if any of it made sense.

Here are my thoughts:

I am about to retire from Goss International. There was a time when we were Goss Graphics Systems, centered in Cedar Rapids, IA. We commanded around 75% of the American newspaper plant’s equipment.

Today we are owned by the old Hiedelberg web press division of Hiedelberg of Germany. The original group of Goss employees is now less than 250 people in Bolingbrook, IL. The plant in Cedar Rapids no longer exists. The facility now produces windmills, at about half the workforce.

But in your article, which seemed to center on Paul Loftus of Accenture, the future of manufacturing in America seemed to be somewhat bright. All that was needed was to wait and plan for the global market forces to happen.

Well, I do not believe those global market forces are going to happen for many, if any, of America’s manufacturing plants.

The biggest problem for America, in the article, seemed to be the shortage of skilled workers — especially engineers. Well, I am an engineer, and I would not recommend that field for anyone right now!

What should have been asked is why more students out of high school are not even trying for engineering degrees. One very good question is, why should one study a subject corporate America is outsourcing to places like India as fast as they can?

In my own company, Goss, we have manufacturing in China, France, the Netherlands and Japan. All we supply is the manpower to handle the headaches that arise from having something made overseas sent here.

NAM has asked our own government for help for years. One of the main issues has been currency problems. American firms simply cannot compete on price. In fact, a number of our vendors have said that if they even closed the shop, and worked out of their homes, they could not compete.

Besides the currency issue, those foreign concerns do not pay for any health care, pensions, EPA requirements, etc. Yet American concerns must compete against that.

Take a good look at the Specialty Equipment Manufacturers Association, they are crumbling. These are special shops that make a lot of automotive aftermarket equipment. Custom wheels, special engine parts — a lot of ‘innovative’ products.

Almost every custom wheel manufacturer has had to close their U.S. plants. Cheaply made wheels, of questionable quality, has forced this to happen. I call it the Wal-Mart effect.

Accenture talks about innovation being the key to the future of American manufacturing. I disagree. The ‘absolute’ leveling of the manufacturing playing field is America’s only hope!

We are being told that the American standard of living is the problem. That concerns about safe water and air are the problems. That while global warming may be an issue, America cannot afford to be part of that fix.

Tell me, what can America afford? Does sending jobs off shore really make ‘future’ economic sense?

I believe some the biggest problems we face are political hurdles. The lobbyists in Washington, which make around $495 an hour, are driving this. Nations such as India, China and the rest know that all they have to do is wait us out. Once we have lost all that manufacturing capacity, they can then demand whatever they wish.

We may be the toughest military force on the face of this earth, but we are pushovers for off-shoring!

I hope you do a follow-up story on this. As we see less and less investment in both R&D and capital machinery for American manufacturing, and more off shoring, it is becoming plan for anyone to see where this is heading. And it is not good.

On February 22nd, the U.S.-India High Technology Cooperation Group Summit, hosted by The U.S.-India Business Council, met. What was discussed has not yet been published. But it is my understanding that American defense contractors discussed selling equipment to India. And to make those sales, ‘content,’ around 30% worth, would be made in India. More jobs — and high end ones — lost to India.

You can talk all you want to about the global economy. But your magazine deals with American plants. How do American workers actually feel about losing those plants?

Or does anyone honestly care?

Randy Juras

Plant Engineering invited responses from the National Association of Manufacturers and Accenture to this letter. Here are their responses:

NAM: Level the playing field

The concerns of Mr. Juras are widely shared. The new century started off with a three-year manufacturing recession that brought the loss of 3 million jobs in the U.S., and the recovery thus far has been one of the weakest on record in terms of employment.

But this is the world we live in. There was a time when U.S. manufacturers competed with companies in the next town or next state but that time is gone. We are caught up in the most competitive global market the world has ever seen, and the competition gets tougher every day.

While some manufacturing industries are shrinking because of foreign competition, others are thriving. We all want to see manufacturing employment grow more rapidly, but it is important to understand that employment is not the only measure of the health of U.S. manufacturing.

The fact is that U.S. factory shipments, as reported by the U.S. Census Bureau, were $4.8 trillion last year, a new record and a figure 20% higher than in 2003, when the manufacturing recession ended. Last year 14 million American factory workers produced 20% more than 17 million factory workers did in 2000. Standing alone, U.S. manufacturing today would be the eighth largest economy in the world. And despite the loss of 3 million manufacturing jobs, the great majority of U.S. manufacturers today are complaining about scarcity of skilled and qualified workers.

Some people demand that our government protect U.S. business from foreign competition, but that would be a cure worse than the disease. Despite our awesome trade deficit, the U.S. is the world’s largest exporting nation — $120 billion each month — two-thirds of which are manufactured goods. Any interruption of world commerce would have a catastrophic effect on the U.S. economy.

Free Trade Agreements are a solution, not a problem. We do almost half of our trade with FTA countries, but altogether they account for less than 6% of our trade deficit, and that is declining.

While there is outsourcing and plant closures, there is also plant expansion and increasing production. Our manufactured goods exports grew 14% last year — an increase of $108 billion of U.S. manufactured goods last year alone. With the right policies and with a ‘can-do’ attitude aimed at getting our legislators to do more for U.S. competitiveness, to spur more innovation and productivity, U.S. manufacturing can meet its challenges and become even stronger.

Our challenges are to reduce the costs of production here at home (taxes, regulations, energy, health care and litigation), educate and train a new generation of manufacturing workers and level the playing field with our trading partners — putting an end to currency manipulation, subsidies and theft of intellectual property. Tall orders all, but there is no viable alternative.

Hank Cox
Vice President, Media Relations
National Association of Manufacturers

Accenture: Glass is half-full

Unfortunately, there are no easy answers for Mr. Juras. However, I do want to address his concerns about the conclusions of Accenture’s research on achieving high performance in the industrial sector.

We stand by our research findings that show opportunity for the growth of the manufacturing segment, with innovation as the key to this growth.

In fact, recent data show that output and exports are at an all time high, and the productivity pendulum is swinging toward segments such as medical equipment, electronics and engineered equipment, where innovation is helping to drive growth.

The challenge of maintaining sustainable growth in an industry segment known for its cyclicality is keeping many manufacturing professionals — executives and engineers alike — awake at night. Whether a company makes a product that is no longer in demand, uses a manufacturing process that becomes dated or faces a new competitor that changes the game, there will likely be numerous forces that challenge its ability to succeed.

These waves of change will be more frequent and come with less warning. As PLANT ENGINEERING reported from our research last year, in order to achieve and sustain high performance, industrial products companies need a repeatable approach that aligns with the growth of an organization and its professionals.

Additionally, some innovative companies — including a number of U.S.-based manufacturers — are using simulations to gauge and evaluate the impact of future events in order to create the best business strategy for a particular situation.

Our research shows that there is a clear difference between companies that sustain consistent growth and those that appear to be treading water. Leading companies are rethinking their strategy and execution model for the next three to five years. Four guideposts define the secret to high performance for industrial equipment organizations. In the most simplistic terms, these are: connecting the dots on macro and micro economic trends; knowing your market and the ones ‘next door;’ understanding the customers’ value chain; and focusing on execution.

I still see the glass as half full. The world is moving in new directions, and high-performing manufacturers understand that their role is changing and evolving, and they are identifying ways to use innovation to help make market cycles work in their favor.

Paul Loftus
North American Managing Partner
Accenture Industrial Equipment Practice

PE: Innovate in growing jobs and new ideas

The blame for the state of American manufacturing typically goes at the feet of the off-shoring of jobs, or corporate greed. There is plenty of evidence to support both conclusions. But even if that is the problem, the solution is not in the surrender of either the manufacturing jobs that remain or the innovation that drives new jobs.

The political and economic issues usually are outside of the control of workers. Looking to Washington for a solution is almost always futile. What individual manufacturers and workers do control is their reaction to these changes.

PLANT ENGINEERING supports a concerted grass-roots effort to make engineering a viable career opportunity for young people by showing them where manufacturing can go in the future. This is something every manufacturer can do today, with the schools and trade groups and parents and teachers in their own home towns.

From that effort will come new ideas, as more good minds are applied to the task of developing innovative products and innovative ways to manufacture them. As this happens, the global economy opens our existing products to billions of new consumers and thousands of new markets. A level global economic playing field helps, but as the IPod has proven, the right product levels the economic playing field just as quickly.

So where is the next great innovation coming from? Why not here?

Bob Vavra, Editor
PLANT ENGINEERING

We invite your views as well as we continue this dialogue in the coming weeks online at www.plantengineering.com.

Do you have experience and expertise with the topics mentioned in this content? You should consider contributing to our CFE Media editorial team and getting the recognition you and your company deserve. Click here to start this process.