US Manufacturing

[jackellis]

There have been other threads about the decline of manufacturing in the US. Here's an article from Forbes that is well worth a read: http://us.rd.yahoo.com/finance/exter...rtner=yahootix

I confess it's a political statement, but aimed at corporate executives who refuse to use their brains. If the mods think this thread's inappropriate, please lock it down.

[dbhost]

I have read the article, and while it involves 2 paragraphs that even mention government or politicians, I do not see anything controversial, or offensive.

I'm good with it... Others may disagree but I just don't see any problem here.

[Cubsfan]

Do we have the workers to do any mass manufacturing here? We've told kids for 40 years that they have to go to college, that white collar jobs are the only "good" jobs. Do we have enough American workers what would be willing to take manufacturing jobs on a mass scale here? I'm guessing that a large portion of the unemployed would see manufacturing jobs as beneath them.

Also, I'd claim that blaming this on corporate executives is not entirely fair. How long does the average CEO have a job? A few years? What's their incentive to maximize long term profitability?

[BobSch]

I don't think it's a political statement, just common sense. As the article says corporate executives have traded away long-term success for short-term profits. It seems as if their vision only extends to the nest quarter, not years down the road as they should.

[dbhost]

Do we have the workers to do any mass manufacturing here? We've told kids for 40 years that they have to go to college, that white collar jobs are the only "good" jobs. Do we have enough American workers what would be willing to take manufacturing jobs on a mass scale here? I'm guessing that a large portion of the unemployed would see manufacturing jobs as beneath them.

Also, I'd claim that blaming this on corporate executives is not entirely fair. How long does the average CEO have a job? A few years? What's their incentive to maximize long term profitability?

Have you seen the unemployment rate? Mind you, the official rate does not count the millions that have fallen off the books due to expiring unemployment benefits. I know several of them, and they would happily trade the no longer existent desk job for a production job.

Nothing like being laid off from a 60K a year tech job, not being able to replace it at even half the pay, being told you are underqualified for mid career level jobs, and told you are overqualified for entry level... There are tons of people in this country that want to work, are highly skilled, and willing to do what it takes to earn a living, that can't even get an interview at Wal Mart... So yes, we have the workers.

I wonder if the CEO having a short term job, and the shortsightedness of the typical American executive are a chicken and egg situation. I know that pressure from investors for big returns in the next quarter are a big part of what drives stupid decisions. But what can be done to squeeze the long term point of view? Maybe a minimum time to own stocks the same way the bond market works? You buy a stock and it "matures" in 5, 10, or 15 years... I don't know, just speculating...

[Black wallnut]

It seems to me without even reading the article that too many business decision makers are too focused on the short term rather than long term.

[Cubsfan]

Have you seen the unemployment rate? Mind you, the official rate does not count the millions that have fallen off the books due to expiring unemployment benefits. I know several of them, and they would happily trade the no longer existent desk job for a production job.

Nothing like being laid off from a 60K a year tech job, not being able to replace it at even half the pay, being told you are underqualified for mid career level jobs, and told you are overqualified for entry level... There are tons of people in this country that want to work, are highly skilled, and willing to do what it takes to earn a living, that can't even get an interview at Wal Mart... So yes, we have the workers.

I wonder if the CEO having a short term job, and the shortsightedness of the typical American executive are a chicken and egg situation. I know that pressure from investors for big returns in the next quarter are a big part of what drives stupid decisions. But what can be done to squeeze the long term point of view? Maybe a minimum time to own stocks the same way the bond market works? You buy a stock and it "matures" in 5, 10, or 15 years... I don't know, just speculating...

The question is, even if they would work a manufacturing job, would you want them to work for you? I would guess that your typical "overqualified" person would leave for a better job as soon as possible. If you own a factory, do you want to invest the time training these people only to see them leave at their first opportunity?

[Skaning]

I remember some some40 + years ago when I was in college listening to a radio commentator fume about a government action that would cripple the US economy. It was essentially the free trade agreement which to a large extent eliminated tariffs. His argument was that it would change the US economy from a manufacturing based economy to a service based economy. There would be jobs but on the whole would pay less on average than manufacturing. Liberals thought it was a good idea because it wouyld get the world so intertwined that a WW 2 could never occur. Conservatives thought well of it because they saw it as a union breaker. Well, here we are 40+ years later. Seems like we gave our economy away

[gnal41]

The following is a rant I sent to the “Detroit News” several years ago. I was still working for Delphi (1999, I think) when the following was written.

I think it is clear to most of us that that the end of the Delphi’s “cradle to grave policy” is very quickly going by the wayside. The policy came about in the 40s/50’s when the USA’s companies were the only game in town. Most of Europe and Asia’s industries were in shambles and they designed and produced very low-tech products. Most USA industries and UAW prospered in this environment. Essentially, USA industries had prices and profits almost solely to their selves and could accommodate a great deal of the managemant and UAW’s wage, health care, and work policy wishes. I grew up in a GM town, worked there along with my family, many friends and relatives and remember many of the GM/UAW confrontations.

During most of my working life, a person working in most American industries could expect to receive a decent working wage, health care, and retirement. Most of my family and friends have had a good life with just a high school education. A financially decent life is hard to obtain these days without a post high school education. As more countries develop excellent high tech industries, have excellent k-12 education programs and have sub USA wages, they put the average non-degreed worker in this country at a distinct disadvantage. We, the non-degreed USA worker, will continue to be under the cloud of being offered ever decreasing wages and benefits. If a foreign worker with the same skills and education will work for less wages than our present wage and benefit structure, then the end of middle class lifestyle will vanish and is vanishing very quickly. Ask yourself, how many clothes, shoes, textiles, furniture, tools, home electronics, office equipment, automobiles, etc. that was produced in this country have you purchased in the last ten years – very few!

Just as entire countless sectors of the past American industrial base no longer prosper or even exist in this country, the high wage/benefit auto parts industry is headed off shore and soon will be just a memory.

After the above rant, I hope Delphi survives and become a good company

[dbhost]

The question is, even if they would work a manufacturing job, would you want them to work for you? I would guess that your typical "overqualified" person would leave for a better job as soon as possible. If you own a factory, do you want to invest the time training these people only to see them leave at their first opportunity?

Which is EXACTLY the problem a large number of the 99ers face. Too many employers won't hire them because of just that. They fear a lack of loyalty from overqualified / underqualified workers...

The entire economic dynamic has changed, globally. Americans all over are well aware of it. And any job is far better than no job. But yes, if there is a person with say a bachelors degree and $70K in student loan debt, and the only job they can find pays $15.00 an hour. Of course they are going to bust their behind to find a higher paying job... And so the cycle continues...

Sure, if I traded my IT job for a forklift operator job for example, you bet I would be looking to better my situation at my earliest opportunity. But if the career track was there in the company I worked for versus going elsewhere, I would rather stay where I was (barring working for a serious jackwad) earning seniority, being vested in 401K etc...

I am seeing an interesting trend among those that can't find permanent jobs. Has anyone else noticed the growth of self funded small business since this down turn? Most of the 99ers I know, and there are more than a few of them, have hung their own shingles out. I know guys that were process engineers for large oil companies that are now doing offshore rig repair and testing services (BP could have used these guys). My own brother in law had been doing corporate IT prior to getting sick, and he is now throwing his hat in the ring for small business / home IT / tech support. (I used to do that as a side line, good money, but a LOT of travel to get it...)

I have a neighbor that was an engineer on the Space Shuttle program, he now designs, builds and sells components for kit airplanes and boats. His business isn't super profitable yet, but they haven't foreclosed on him either...

I somewhat wonder if that is the way our economy is going to go in the wake of all this. Decentralize. There are some things that must be done in large scale, like circuit boards, semiconductors, etc... But most other things given enough jigs and such, can be manufactured in reasonable quantity by cottage industries... This might just be the kick in the pants the US needs to bring a resurgence of home grown manufacturing... I am guessing that safety and regulatory hurdles will be problematic at best for many, but those are issues that should not be dealt with here...

Another very serious point to have to ask about the loss of American manufacturing capacity. It was durable goods manufacturing capacity that won the Civil war for the union, it was durable goods manufacturing capacity that won WW1 and WW2, or at the very least, were key parts of our strategy. Now, we have sent our manufacturing of critical items to nations that are far less than friendly to U.S. interests such as China, India, Pakistan etc... What will happen to the U.S. if there is a major military confrontation with one, or several of our suppliers... We have sacrificed our middle class, and national security at the altar of short term profits. We need to bring them back, and now...

[dbhost]

It appears I am not the only one concerned with the national security aspects of offshore production of critical infrastructure...

[frumper64]

In Lee Iaccoca's memoirs, he says "What do you call a country that exports raw materials and imports finished goods? You call it a colony". He makes a very strong case for a national manufacturing policy which, alas, never came about.

[jackellis]

I'm glad to see my OP generating thoughtful discussion. On other forums this would have degenerated immediately into a different kind of conversation.

I think there are a couple of things that will change the dynamic and bring at least some manufacturing back:

High oil prices will reduce the cost advantage of offshore manufacturing.

Large firms are beginning to understand that some countries play by different rules. China in particular is going to find it more difficult to entice American firms like GE to give away technology in return for "market access".

American workers will be more flexible with respect to work rules that were originally designed to protect jobs at the expense of productivity. I still remember being admonished about picking up a screwdriver to adjust an instrument in a lab when I worked in a power plant.

Labor costs in developing markets are rising fast, which is also going to affect their competitiveness.

It's also true, however, that Americans are not the only ones with the means, desire and education to improve themselves in this world. The level of competition from abroad has increased dramatically. Using protectionist policies to protect jobs is no smarter than the short-term thinking of corporate executives who focus solely on cost. To cite one example, it's my opinion that a large part of the auto industry's woes were the result of complacency. Foreign badges were working their tails off to improve cost and quality while American badges were living off their legacy. Now after two decades of playing catch-up, American badges are finally producing vehicles American consumers want to buy.

[vaking]

to be honest - I disagree with a lot of things the original article says. I also find the article political. To illustrate - the main political devide today is the size of the government. The ending of this article says "it is time for serious politicians to step up and examine which parts of the private sector are fostering, and which parts are destroying, the economy of the country." This is a "call to arms" for a bigger government. I also see plenty of logic failures in the article. However, I know that we want to stay away from politics here and I am all for a civilized intelligent discussion within the set rules. For this reason I shall stay away from political aspect of the article and will only touch logical faults that are politically neutral.

Investors: Investors need to realize that the companies of the future are those that practice continuous innovation as Apple [AAPL], Amazon [AMZN] and Salesforce [CRM], as compared to companies practicing traditional management, such Wal-Mart [WMT], Cisco [CSCO] OR GE [GE]. Investors need to realize that short-term financial gains are ephemeral: the companies that will generate real value are those that do what is necessary to continuously innovate.

Salesforce is purely a service company, they manufacture nothing. Amazon is a retailer. Kindle is probably the only product they make and Amazon would be happy to give it out at cost - Kindle is just a bait. Once you get Kindle you will start buying books from Amazon. Apple does make and sell products but biggest Apple accomplishment is not in their engineering. It is an Apple business model where every product they make generates numerous service revenues and profits from services far outweigh profits from the sale of product itself. For example - Apple collects revenue from I-Tunes and revenue from licensing "I-Pod compatible" docking stations etc that are far bigger than revenue from sales of I-Pod which created those services. It means Apple is also a service company more than it is a manufacturer. On the opposite side - Cisco and GE are manufacturers. Walmart is a retailer like Amazon. So based on this advice - manufacturers are outdated, service companies are innovators. And this is supposed to bring manufacturing back to US?

[jackellis]

GE manufacturers a lot of stuff here, and apparently they're expanding their manufacturing operations in the US for high value products like jet engines and power turbines.

My nephew has just gone to work for a plastic products manufacturing company just outside Detroit that is seeking to expand abroad. In their case, the first step is probably to establish sales offices, but they will inevitably locate some manufacturing close to their foreign markets.

Remember also that tons of low value manufacturing are done in China while a lot of the more complex operations are done here. The value of manufactured goods produced in this country is at about the same level as 2007 after dropping some during the downturn, but fewer people are required to do the same amount of work. What work remains doesn't necessarily require a college degree, but it does require more than grade school math. Machinists need to understand trig, geometry and statistics. Kids who want good jobs can't expect to have those jobs handed to them. It drives me insane that of all the college age kids I know, exactly one is going to major in engineering and the rest are going for liberal arts. The only child I know who will have any hope of being able to build something with his hands is a nephew, and then only because his dad, who has a master's degree in astronomy, builds and sells telescope mounts around the world, and he does all of the machining and assembly himself. Castings and some electronics are the only things he "outsources", and then only to local suppliers.

We didn't get where we are overnight and we won't dig our way out overnight.