From the Shop Floor — The Week in Manufacturing

December 15, 2010

It’s just a week or so before Christmas and two weeks to the New Year, but things are still cooking in the increasingly active world of U.S. manufacturing.  Here’s my take on some of what’s going on.

During difficult economic times, as any manufacturing company begins tightening its belt, some of the first things to come under heavy scrutiny are the fees being paid to various trade associations.  I’ve always believed a trade associations is a lot like any business; some are good — even great — others, not so much. 

And I’ve always felt too that just about every trade association in every industry is a reflection of the person at the very top of the org chart.  And the more progressive and innovative that person is, the more his or her brand of entrepreneurial thinking will permeate the entire association and impact the industry it supports.

Given that, you have to believe that Elaine Thorndike, CEO of the Colorado Association for Manufacturing and Technology really has it together.  Check out this story in Bloomberg, that paints in broad strokes a multidimensional deal the CAMT just inked with NASA to build a technology park, develop and manufacture new hi-tech products like wafer-thin solar cells, and in the process, hopefully add as many as 10K jobs to the state-wide economy.

That’s heady stuff, Ms. Thorndike.  You can take the rest of the day off, if you’d like.

 

I will probably never agree with former Labor Secretary Robert Reich on many economic issues, not the least of which is his war on the current bill before Congress that would extend the tax cuts for the wealthiest Americans (including, by extension, certain entities like my company). 

But that said, I was listening this week to Reich’s conversation with Tavis Smiley and Cornell West on their weekly public radio show last Sunday, and found myself intrigued by at least one thing the former Clinton cabinet member said.

Reich claimed that one of the biggest hurdles the U.S. faces as an economy is the death of its middle class and the growing economic disparity between its haves and have nots.  And, as you might have already realized, that disparity will only grow as we continue to off-shore fair-wage manufacturing jobs and increase our reliance on robotics and automated functionality.

Reich then said something to the effect — and forgive me, since I’m doing this from memory — that the people at the top in this country have to make a decision:  do they want a large piece of a weak and fragile economy, or do they want a slightly smaller piece of a much healthier one?

Forgetting more a moment Mr. Reich’s flawed premise that higher taxes on our job creators is a good thing, I do find his point something worth pondering.  Shouldn’t American companies and their rank and file workers start to revisit their relationships and begin trying to work more together, rather than at cross purposes?

After all, for the past half century if the UAW and Detroit’s Big Three had acted more like partners than adversaries, and focused more on the overall health and future of the auto industry than they did on their respective (and often short-sighted) self interests, they might not be in the horrible position they’re in today.

Nor, frankly, might this economy that so relied on their strength and ongoing viability.

 

 

Along those same lines, the New York Post offered this story about the creation of a permanent American underclass, while listing a number of iconic American consumer brand products now made exclusively off-shore.

While I don’t challenge the accuracy of such a story, I take great exception to its timing.  What’s happening to manufacturing in this country is not news.  The fact that Chuck Taylor high-tops and Levi’s jeans no longer made in America, but on some foreign soil is not news. 

What is news is that the belching smokestack industries of this economy’s not-too-distant past are slowly but surely being replaced by a network of hundreds, if not thousands of smaller, smarter, greener and far more nimble companies which are making more and more products using entirely different economic models than those that fueled those bygone dinosaurs.

What’s more, these companies driven not so much by a desire to dominate the market, like their smokestack ancestors, as they are by the desire to out-innovate, out-think and out-maneuver their lumbering and often less market-responsive competitors. 

That’s news, Mr. Murdoch; not the fact that U.S. manufacturing is being challenged.  Please get a memo off to your editors at the Post and tell them the decade they’re locked in is pretty much over.

 

 

And even some of those dinosaurs are starting to evolve.  Do yourself a favor and read this terrific story in last week’s edition of the National Journal, which talks about the surprisingly competitive steel industry in Butler County, Pennsylvania and what’s going to be necessary for it to take the next step up the ladder of global competitiveness.

These are the kind of stories that are much more reflective of what’s happening in cities and towns all across this country — and, more important, is likely to happen with even greater frequency in the months and years ahead as U.S. manufacturers continue to adjust to the shifting dynamics of the marketplace.  Kudos to reporter Bruce Stokes and his editors at the National Journal.

 

 

South Dakota Representative-elect Kristi Noem was impressive in last week’s weekly GOP address to the nation, speaking about the importance of tax breaks for small businesses.

 

The telecommunications industry talks about the Three C’s — choice, convenience and control — that continue to drive their development and launch of new products and services.  That’s how massively bundled channels of news, sports and entertainment have slowly evolved into something called Video-on-Demand (VOD). 

Now comes a new development from a sister industry.  The content creators in the home entertainment industry have been researching and developing something they’re calling Manufacturing-on-Demand (MOD).  Ever wonder why some great but long-lost old movie or album never made it to digital or got released on CD?  Or why independent start-up bands often can’t get record deals?  Because such limited demand would never justify the minimum run required in the pressing of a new CD or DVD.  Now with MOD, the economics have been turned inside out and what had never been thought possible is now getting closer and closer to reality.

I bring it up because that’s the kind of breakthrough thinking that, when applied to durable goods and component manufacturing, will someday make the rules under which we now compete, completely obsolete, and allow the best-run companies to grow both bigger and smaller at the same time — expanding their market reach while limiting their overhead.

I have what I can only call a love/hate relationship with this story.   The Wall Street Journal reports that Chinese battery and car manufacturer BYD is planning to build a major production facility in downtown Los Angeles.  What’s more, the city of L.A. did some good old fashioned quid pro quo horse trading to help BYD decide to open such a facility within its city limits. 

That’s the good news.

The bad news is that BYD is about to launch a series of all-battery operated cars , which are roomier and far more reliable and powerful than previous incarnations.  What’s more, BYD will also be manufacturing and testing a line of full-size, fully electric buses, which if successful, will be purchased in bulk by Los Angeles as part of the deal (according to Deputy Mayor Austin Beutner, perhaps as many as “several thousand” when all is said and done). 

Look, I get the jobs thing.  And good for L.A.  But part of this story is sticking in my craw.

And I ask this as a way of explaining why that’s so: why are we Americans so innovative, so willing to reinvent ourselves and so willing to embrace advances in technology in one sense, while remaining so utterly wedded to the internal combustion and/or diesel engine in another?   Even if such 20th Century inventions never go away entirely, wouldn’t it also be wise for the U.S. to continue to invest in research and development so that we can develop newer and far more efficient ways to power vehicles, such as the battery the Chinese are trying to develop which will be capable of powering a fully loaded, three-ton bus?

Yes, the jobs in L.A. are nice.  But wouldn’t an American-owned electric car and bus manufacturing company be better?  In fact, way better? 

 

 

Nuts and Bolts:  There are foreign investments; then there are foreign investmentsThyssenKrupp Steel of Germany just completed a three-year, $5 billion construction project— one of the largest foreign investments in the history of the U.S. — to build an all new carbon flat and stainless steel processing facility in Calvert, Alabama, an hour or so west of Montgomery…In the most recent edition of The Atlantic, Daniel Indiviglio says that while the third quarter profitability of the U.S. manufacturing sector is one more good sign, our sector of the economy is still not out of the woods yet — which  is, of course, a little bit like saying it’s a good idea for a man to brush his teeth every day….On the international front, Industry Week reports that experts believe that manufacturing in South America, due in large part to how Brazil and Argentina are continuing to blow away projections, will increase by as much as 4.2% in 2011…Chicago-based Klein Tools has announced a $76 million investment in an all-new production facility in Mansfield, Texas …And finally, from the “It Must Be the Season Dept.” a Wisconsin mailman finds himself in custody after braving the cold to deliver the mail of a certain female customer on his route wearing nothing but his mail pouch and a smile.

Enjoy your reading, and Happy Holidays from all of us at Belden Universal.

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