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How Could the Trans Pacific Partnership Affect you or your Business

Tuesday, April 19th, 2016

On February 4, 2016, President Obama signed the Trans Pacific Partnership Agreement on behalf of the United States. The TPP agreement has been in negotiation behind closed doors since 2010 between the United States and 11 other countries around the Pacific Rim: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. The TPP is a “docking agreement” so other countries could be added without the approval of Congress. India, China, and Korea have expressed interest in joining the TPP.

Our elected representatives in Congress had no involvement in writing the TPP – it was written by the staff of the U. S. Trade Representative office, with over 600 corporate advisors (think corporate lawyers) helping them write it. It contains more than 5,500 pages, and no member of Congress could view it as it was being negotiated until late 2014. Even then, they could not take any staff with them and were not allowed to take pen, pencil, paper, or a camera when they went to view it at the U. S. T. R.’s office.

The full text of the TPP was finally released to the public to review in November 2015, and it now awaits Congressional approval. According to the rules established by the Trade Promotion Authority (TPA) that passed Congress narrowly in June 2015, Congress will only be allowed 45 days for committee analysis after the bill is introduced, only 15 days after that is completed to bring it up for a floor vote, and only 20 hours of debate in the House and Senate. The TPA does not allow any amendments, filibuster, or cloture. Notice that the TPP is called an “Agreement,” as was NAFTA, CAFTA, KORUS, and every other trade deal in the past 22 years. The purpose for this is to get around the requirement of the two-thirds vote of the Senate to approve a Treaty that is required under Article 1, Section 8 of the Treaty clause in the U. S. Constitution. The TPP requires only a simple majority vote (50% + one.)

Supporters of the TPP say that it represents 40% of the world’s economic activity (GDP), but they fail to mention that the U. S. and its current trading partners represent 80% of that 40%. The other five countries represent the other 20%, with Japan alone being 17.7% of that total.

The current goal of trade agreements as given by Congress to the U.S.T.R is to “remove trade barriers,” such as tariffs, quotas, etc. and increase U. S. exports. The U. S. cut tariffs and opened our markets by means of these trade agreements. However, our trading partners didn’t really open their markets to us. They played another game ? mercantilism, featuring rampant global currency devaluation, consumption taxes called Value Added Taxes (VATs) that are tariffs by another name, massive subsidies to their industries, and industrial policies that favor their domestic supply chains.

In brief, the effect to the United States of this unbalanced trade has been:

Loss of >600,000 mfg. jobs from NAFTA
Loss of 3.2 million mfg. jobs between 2000 – 2010 from China’s entry into WTO
Loss of >60,000 mfg. jobs since Korea-US Agreement went into effect in 2012
Loss of an estimated 3.4 million U. S. service & call center jobs since 2000
Loss of an estimated 700,000 public sector jobs (2008-2013)
Racked up cumulative trade deficit of $12 trillion in goods (average $500 billion each year) since 1994

As a result, we now have the worst trade deficit in U. S. history, and we are off to even a higher deficit this year based on the trade figures released for January ($45.9 billion) and February ($47.1 billion). As a recent example of the effect of trade agreements on our total trade deficit, our trade deficit with Korea has nearly doubled in less than four years, increasing from $14.7 billion in 2012 to $28.4 billion in 2015. Proponents of KORUS promised that it would create 70,000 jobs and $10 billion in exports.

As mentioned in a previous article, proponents of the TPP aren’t even giving such rosy predictions. The Peterson Institute’s analysis of the TPP states: “…GDP is projected to fall slightly (-0.54 percent), employment to decline by 448,000 jobs…”

What are some of the ways the TPP could affect you or your business?

Buy American Act would essentially be made Null and Void: The worst effect would be to those businesses who sell to the government, whether it be local, state, or federal because under the TPP procurement chapter, the U.S. would have to agree to waive Buy America procurement policies for all companies operating in TPP countries. This means that all companies operating in any country signing the agreement would be provided access equal to domestic firms to bid on government procurement contracts at the local, state, and federal level. There are many companies that survived the recession and continue in business today because of the Buy American provisions for government procurement, especially defense and military. The TPP could be a deathblow for companies that rely on defense and military contracts. However, it would also affect procurement for infrastructure projects, such as bridges and freeways, as well as construction of local, state, or federal facilities.

Of course, this means that U. S. companies could bid on government procurement projects in TPP countries, but the trading benefit is miniscule. The U. S. government procurement market is 7X the size of current TPP partner countries (+550 billion vs. $55 -70 billion.) It is also highly unlikely that U. S. companies would be the low bidder against domestic companies in these TPP countries because of the vast difference in wages in countries such as Vietnam, where the average wage is 55 cents/hour. Past trade agreements has resulted in an average annual wage loss of 5.5% for full-time workers without college degrees, and U. S. wages have been stagnant for decades, growing by only about 2% per year since 2008. The result has been increased wage inequality from low to high wage earners.

Product Labeling could be Made Illegal: If you like to know if your food is safe, then you won’t like the fact that “Country of Origin,” “Non-GMO,” or “Organic” labeling could be viewed as a “barrier to trade” and thus be deemed illegal. According to Food & Water Watch, around 90% of the shrimp and catfish that Americans eat are imported. They warn, “The TPP will increase imports of potentially unsafe and minimally inspected fish and seafood products, exposing consumers to more and more dangerous seafood.” Many TPP countries are farm-raising seafood in polluted water using chemicals and antibiotics prohibited in the U. S. Farmed seafood from Malaysia, Vietnam, and China is being raised in water quality equivalent to U. S. sewers. Today, the FDA only inspects 2% of seafood, fruits and vegetables, and the USDA only inspects 4-5% of meat & poultry. Increased imports of food from TPP trading partners could swamp FDA and USDA inspections, so that even less is inspected.

TPP would Increase Immigration: If you are concerned about jobs for yourself or family members, then you won’t like the fact that the TPP increases “the number of L1 visas and the number of tourist visas, which can be used for business purposes.” Any service provider (phone service, security, engineers, lawyers, architects or any company providing a service) can enter into a TPP partner country and provide that service. Companies don’t have to hire Americans or pay American wages – they can bring in own workers and pay less than the American minimum wage.

TPP would Increase Job Losses in Key Industries: If you work in the automotive or textile industries, you may lose your job. The Center for Automotive Research projects a loss of 91,500 U. S. auto jobs to Japan with the reduction of 225,000 automobiles produced in the U. S. Also, the National Council of Textile Industries projects a loss of 522,000 jobs in the U. S. textile and related sectors to Vietnam.

TPP would Reduce Reshoring: Because TPP will reduce tariffs in trading partner countries, such as Vietnam, it will make the Total Cost of Ownership analysis to return manufacturing to America more difficult to justify. The high U. S. dollar has already diminished reshoring in the past year, so Harry Moser, Founder and President of the Reshoring Initiative, recently told me that “The combination of the high USD and TPP will reduce the rate of reshoring by an estimated 20 – 50%.”

Remember that the TPP is missing any provisions to address the mercantilist policies practiced by our trading partners: currency manipulation, Value Added Taxes that are both a hidden tariff and a hidden export subsidy, government subsidies/state owned enterprises, and “product dumping.”

America is at a crossroads. We can either continue down the path of increasing trade deficits and increasing national debt by allowing anything mined, manufactured, grown, or serviced to be outsourced to countries with predatory trade policies. Or, we can forge a new path by developing and implementing a national strategy to win the international competition for good jobs, sustained economic growth and strong domestic supply chains. If you support the latter path, then add your voice to mine and millions of others in urging Congress not to approve the TPP in either the regular session before the Presidential election or the “lame duck” session after the election.

Tags:"Buy American", currency manipulation, mercantilism, trade deficit, Trans-Pacific Partnership Agreement, VATs
Posted in Country of Origin, Inellectual Property, Jobs, Manufacturing, National security, Reshoring, Trade Policy | No Comments »

Is Reshoring Increasing or Declining?

Thursday, January 21st, 2016

In December, two conflicting reports were released, one by A.T. Kearney and one by the Boston Consulting Group. The A. T. Kearney report states that reshoring may be “over before it began”, and the Boston Consulting Group report states that it is increasing. Why the difference in opinion and who is right?

This was the second report by A. T. Kearney, in which their “U.S. Reshoring Index shows that, for the fourth consecutive year, reshoring of manufacturing activities to the United States has once again failed to keep up with offshoring. This time the index has dropped to –115, down from –30 in 2014, and it represents the largest year-over-year decrease in the past 10 years.”

In fact they conclude that “the rate of reshoring actually lagged that of offshoring between 2009 and 2013, as the growth of overall domestic U.S. manufacturing activity failed to keep pace with the import of offshore manufactured goods over the five-year period. The one exception was 2011.”

The authors of the A. T. Kearney report identify the two main factors contributing to the drop in the reshoring index to be “lackluster domestic manufacturing growth and the resilience of the offshore manufacturing sector.”

With regard to the lackluster domestic manufacturing, the report states that data from the U. S. Bureau of Economic Analysis predicted that U. S. manufacturing gross output would shrink by 3.6% through the end of 2015 based on data through November [December data not available.]

On the other hand, the Boston Consulting Group survey results showed that “Thirty-one percent of respondents to BCG’s fourth annual survey of senior U.S.-based manufacturing executives at companies with at least $1 billion in annual revenues said that their companies are most likely to add production capacity in the U.S. within five years for goods sold in the U.S., while 20% said they are most likely to add capacity in China…The share of executives saying that their companies are actively reshoring production increased by 9% since 2014 and by about 250% since 2012. This suggests that companies that were considering reshoring in the past three years are now taking action. By a two-to-one margin, executives said they believe that reshoring will help create U.S. jobs at their companies rather than lead to a net loss of jobs.”

The difference of opinion is based on different data. A. T. Kearney notes that “The manufacturing import ratio is calculated by dividing manufactured goods imports from 14 Asian markets [list of countries] by U. S. domestic gross output of manufactured goods. The U. S. reshoring index is the year-over-year change in the manufacturing ratio.”

In contrast, the Boston Consulting Group data is based on “an annual online survey of senior-level, U.S.-based manufacturing executives. This year’s survey elicited 263 responses. The responses were limited to one per company…Respondents are decision makers in companies with more than $1 billion in annual revenues, across a wide range of industries.”

“These findings underscore how significantly U.S. attitudes toward manufacturing in America seem to have swung in just a few years,” said Harold L. Sirkin, a BCG senior partner and a coauthor of the research, which is part of BCG’s ongoing series on the shifting economics of global manufacturing, launched in 2011. “The results offer the latest evidence that a revival of American manufacturing is underway.”

The BCG survey identified such factors “as logistics, inventory costs, ease of doing business, and the risks of operating extended supply chains” are driving decisions to bring manufacturing back to the U.S. The primary reason for 76% of respondents reshoring production of goods to be sold in the U.S. was to “shorten our supply chain…while 70% cited reduced shipping costs and 64% said “to be closer to customers.”

The reasons cited by the BCG survey are consistent with the case studies that the Reshoring Initiative has captured, but the reshoring trend over the last few years has also been driven by a range of factors including rising offshore labor rates, especially in China, as well as the increased use of Total Cost of Ownership analysis to quantify the hidden costs of doing business offshore. The threat of Intellectual Property theft, cost of inventory (space to store and cost to buy larger size lots to get the “China price,) and quality/warranty/rework are also cited frequently. Longer delivery, cost and time of travel to visit offshore vendors, transportation costs, and communication problems also influence the decision to reshore.

About 60% of companies ignore these hidden costs and only look at wage rate, quoted piece price or at best, landed cost. Because of inaccurate data, many companies make the decision to offshore on the basis of faulty assumptions. The reality is that many companies are saving less than they expected, and in some cases, the hidden costs exceed the anticipated cost savings.

As an authorized speaker for Harry Moser’s Reshoring Initiative for the past five years, I have been conducting my own informal surveys of manufacturers that I meet at trade shows and conferences. Most of these companies are Tier 2 or 3 suppliers of assemblies, sub-assemblies and component parts. Each year, more and more companies have told me that they are benefitting from reshoring.

At the trade shows I attended last year and conducted my informal survey, I didn’t meet a single company that hadn’t gotten new business or recaptured an old customer because of reshoring. I believe that there is a great deal more reshoring going on than A. T. Kearney or even the Boston Consulting Group can quantify because it isn’t a whole product. It is an assembly, subassembly, or component part, such as metal stamped part, machined parts, sheet metal fabricated parts and assemblies, plastic and rubber molded parts, printed circuit boards, etc.

I now have slides for 300 case studies of companies that have reshored in the last six years provided to me by the Reshoring Initiative to use in my presentations. I can tailor my presentation to include slides for particular industries or geographical location. For example, when I spoke at the Lean Accounting Summit in Jacksonville, Florida in October, I shared case studies of companies that had reshored to the Southeast and when I spoke at the Design2Part show in Pasadena later that month, I shared case studies for companies that had reshored to California.

The Reshoring Initiative estimates that “if all companies used Total Cost of Ownership (TCO) analysis, 25% of the offshoring would come back.” Their data reveals that about 100,000 manufacturing jobs have already been reshored in the last six years. Harry Moser states, “Excess offshoring represents an economic inefficiency that can be corrected at low cost. It is less expensive to educate companies than to incentivize them.”

During a recent conversation with Harry Moser, he said, “The economic bleeding due to increasing offshoring has stopped. The rate of new reshoring is now equal to the rate of new offshoring. The challenge is now to reshore the 3 to 4 million manufacturing jobs that are still offshored.” He provided me with the following chart to use in the presentations I gave last fall:

	Manufacturing Jobs / Year
	2003	2013	% Change	Feasible 2016
New offshoring *	~150,000*	30-50,000*	– 70%	20,000
New reshoring	2,000*	30-40,000**	+ 1,500 %	70,000
Net reshoring	-148,000	~0	-100%	+50,000

*Estimated / ** Calculated

In the past, corporate cultures, supply chain reward systems, and investment have been heavily focused on offshoring. Many companies followed each other offshore in what Harry and I call “herd behavior.” We are endeavoring to change the mindset from offshoring is cheaper to sourcing domestically may be the better choice.

Another way would be to change the way buyers/purchasing agents in supply chain groups are being evaluated and rewarded on the basis of their success in achieving purchase price variance; i.e., selecting sources on the basis of the cheapest price. Chief Financial Officers need to allow their company’s supply chain department to utilize expenses in the other accounting categories that need to be taken into consideration in doing a Total Cost of Ownership analysis, such as transportation costs, travel and communication costs related to the supply chain, and the cost of quality problems related to rejected parts and reworking of salvageable parts.

Transforming to the value stream method of Lean Accounting would also facilitate being able to do a Total Cost of Ownership analysis more than Standard Cost Accounting because all of the costs related to that value stream are put into the category of Conversion costs and not put in the separate accounting categories of standard cost accounting.

The reality is that companies will only bring back the majority of offshored work if the economics of producing in the U.S. improve. The actions needed for more reshoring are the same as needed for manufacturing in general. These include developing a national manufacturing strategy that encompasses skilled workforce training, corporate tax reform, regulatory reform, and Border Adjustable Taxes (aka VATs) while addressing the predatory mercantilist practices of other countries with regard to currency manipulation, product dumping, and government subsidies.

Let’s return to the question of the status of the reshoring trend. The government keeps no related data. ATK tries to measure reshoring indirectly by measuring imports. It would be better to measure the actual phenomenon. BCG uses surveys of reshoring plans, but companies’ actions often differ from plans. The Reshoring Initiative counts the actual reshoring cases and jobs reported in the media and privately by companies. Readers can help resolve the dispute by reporting their cases of successful or failed reshoring to Harry Moser or to me, so I can write about them in future articles.

Tags:Manufactured goods, offshoring, reshoring, Reshoring Initiative
Posted in Economic Development, National security, Reshoring | No Comments »

CPA Releases Competitiveness Strategy for the United StatesCPA Releases Competitiveness Strategy for the United States

Friday, November 20th, 2015

For several years, organizations and elected representatives in Congress have proposed developing a national manufacturing strategy. For example, the Information Technology& Innovation Foundation (ITIF) released a report, “The Case for a National Manufacturing Strategy,” in April 2011 and the Alliance for American Manufacturing has repeatedly put forward a “Plan to Save Manufacturing,” calling for a national manufacturing strategy to reverse the decline in U.S. manufacturing and the good jobs that come with it. Bills sponsored by Illinois Rep. Dan Lipinski (D) have even passed the House of Representatives, but have died in the Senate.

On November 11^th, the Coalition for a Prosperous America (CPA) released “A Competitiveness Strategy for the United States – America at a Crossroads,” which addresses other sectors of our economy in addition to manufacturing.

“America needs to start winning again,” said Michael Stumo, CEO of CPA. “That is why the mission of the Competitiveness Strategy is to:

‘Win the international competition for good jobs, sustained real economic growth and prosperity with a national strategy to counter foreign mercantilism, balance trade and grow strong domestic supply chains.’”

“Across the USA, localities and states employ plans to attract jobs,” said Brian O’Shaughnessy, CPA Chief Co-Chair and Chairman of Revere Copper Products. “Other countries have sophisticated national strategies to acquire industries and bring good paying jobs to their countries. The USA has no comprehensive national strategy for domestic production and good paying jobs to guide trade negotiators and administration officials.”

CPA’s Competitiveness Strategy argues that:

The United States is losing an economic competition against other nations whose mercantilist strategies are destroying our manufacturing jobs, critical industries, our standard of living, our national security, the security of our food supply, and our children’s futures.

The threat to the U. S. economy and national security is grave. Other trading nations are using comprehensive strategies to import jobs across all economic sectors, but are particularly focused on strategically significant technologies and industries. American companies in these sectors face not only wide-ranging mercantilist practices and non-tariff trade barriers such as currency manipulation, tariffs and subsidies, but also much more sophisticated and specific strategies aimed at identifying, acquiring, or otherwise controlling critical technologies.

CPA’s strategy holds out the promise that the U. S. is in control of its own destiny and can re-assert itself as a great manufacturing and producing nation with a rising standard of living for all. We can develop and implement a comprehensive strategy that retains and reinforces our leadership in innovation, locates investment and production in the United States, and raises employment by creating good paying jobs.

The ultimate mission of the strategy is to win the international competition for good jobs and sustained economic growth. The mission recognizes we are in competition with other countries. The Competitiveness Strategy includes nineteen action steps focused upon three interrelated goals:

Identifying and countering foreign mercantilist strategies that grow their economies at the expense of other countries through achieving a persistent trade surplus
Balancing the national trade deficit
Growing domestic supply chains

“All three goals are interrelated and must be pursued together,” continued Stumo. “The President rightfully created the National Network for Manufacturing Innovation to grow domestic supply chains, but the effort cannot succeed unless we combat powerful foreign tactics to take those industries away. Further, a new effort to counter foreign mercantilism and trade cheating is essential, but must have the goal of balancing trade to be fully effective.”
“Additionally, balancing trade is essential, but merely exporting raw materials is insufficient. American must grow and retain a diverse array of industries that add value to our products and create good jobs, with special attention paid to advanced and critical industry supply chains,” Stumo concluded.

CPA’s competitiveness strategy shown below is succinct, yet comprehensive:

“Identify and counter foreign mercantilist strategies that grow their economies at the expense of other countries through achieving a persistent trade surplus

End both currency exchange rate imbalances and the accumulation of excessive US dollar holdings by non-US public and private entities.
Impose offsetting tariffs to neutralize foreign government subsidies to industries and supply chains that compete with ours.
Counter foreign government policies that force offshoring by conditioning access to their markets on transfers of technology, research facilities and/or production to their countries, as well as compliance with export performance and domestic content requirements, while their exporters have access to US markets without these conditions.
Ensure that foreign greenfield investments in the US and acquisitions of existing US companies provide a clear “net benefit” to the US with special scrutiny in cases of state influenced foreign entities.
Protect US food security from foreign government tactics to seize markets.

Balance trade

Offset cumulative trade deficits of recent decades and excessive accumulations of dollar reserves through sustained trade surplus to ultimately achieve a long term overall trade balance.
Insure that the composition of trade includes a substantial trade surplus in high value added and advanced manufactured goods.
Make the US workforce more cost competitive by promoting fair pay, rising living standards and safe working conditions for workers everywhere.
Reduce US producers’ trade disadvantage through tax reform which finances the reduction of payroll taxes and health insurance costs with a border adjustable consumption tax in a revenue and distribution neutral manner.
Lower corporate tax rates and end corporate inversion and profit shifting tax avoidance by taxing the income of unitary business groups, whether domestic or foreign, based upon proportion of global sales in the US.

Grow Domestic Supply Chains

Preserve and develop domestic manufacturing and agricultural supply chains to maximize value added production in the US.
Develop, build and maintain a world-class land, water, air, communications and energy infrastructure.
Safeguard our military strength and national security by insuring that critical technologies, weapons & IT components are developed and manufactured in America by American controlled companies.
Develop, commercialize and retain strategic and economically significant advanced technology and grow their manufacturing supply chains in the US.
Increase public support for, and incentives for private investment in, basic and applied research, infra-technologies and new product and process technologies.
Continually raise the competitiveness of American workers by improving Science, Technology, Engineering and Math (STEM) education available at all levels, systematically enhance lifelong learning for existing workers, and fostering a national system of apprenticeship and paid internships through collaborative public-private endeavors that are connected to actual opportunities in the labor market.
Raise the competitiveness of small and medium sized domestic enterprises by increasing long-term private sector financing, the sharing of research on common issues and the diffusion of new technologies and production methods.
Preserve our right to adopt and enforce domestic policies that insure the quality of our food and goods, and protect the health, safety and general welfare of our citizens without restrictions from international trade agreements.
Ensure that domestic manufacturing and agriculture benefit fully from an expanded supply of low cost US produced energy”

Anyone involved in efforts to revitalize American manufacturing already has a bookshelf full of books, studies, and reports containing recommendations on a national manufacturing strategy. My book, Can American Manufacturing Be Saved? Why we should and how we can has a chapter on “How Can We Save American Manufacturing?” that contains a summary of the recommendations of many organizations as well as my own recommendations, which I incorporate into articles and presentations whenever possible. As chair of the California chapter of CPA, I plan to incorporate this competitiveness strategy into future articles and presentations whenever possible.

The brilliance of CPA’s strategy is that it is not limited to manufacturing and is not a “to do list” of actions to take. The Competitiveness Strategy will work best when pursued as a whole. The three objectives are interrelated because, for example, we cannot balance trade without growing domestic supply chains to produce more, and add more value in the U. S. We cannot grow domestic supply chains unless we neutralize foreign mercantilism (trade cheating) that offshores otherwise competitive industries that we started and developed in the U. S. We cannot address foreign mercantilism without the guidance of a balanced trade objective.

Businesses must have a strategic plan to start and grow. This strategic plan guides the business with regard to product development, finance, marketing, production, procurement, etc. Many other countries have an economic strategy to grow their economy. A country’s strategy guides their economic, fiscal, trade, innovation, finance and monetary policy, so that they all work together to enhance their competitiveness as a nation.

The United States has no comprehensive strategy ? just a hodgepodge of laws and rules. Trade negotiators have had no strategic plan to guide them, and neither do the administrative agencies relevant to manufacturing, agricultural, and use of natural resources. The United States needs a comprehensive competitiveness strategy that clearly expresses exactly what we want to achieve for our country… not for an industry or special interest… but our country as a whole.

We do not have to “keep reinventing the wheel.” It is time for our leaders to “stop fiddling while Rome burns” and show some real leadership. Action, not lip service is what we need now!

Tags:currency manipulation, manufacturing strategy, mercantilist practices, supply chains, Trade agreements, trade deficit
Posted in Economic Development, Economy, Jobs, Manufacturing, National security, Reshoring, Trade, Trade Policy | No Comments »

Traditional Industries Generate High-tech Spinoffs in Southwest Florida

Tuesday, November 3rd, 2015

My last article featured the stories of two companies that I visited, so this article will feature the four other companies I toured during my brief visit to Lee County earlier this month as the guest of the Lee County Economic Development Office.

Shaw Development is a family-owned company with the third generation now involved and specializes in the design, development and manufacturing of custom fluid management solutions, including Diesel Emissions Fluid (DEF) systems (headers, reservoirs, caps, adapters, strainers, etc.) for heavy-duty vehicles and machinery, such as trucks, buses, construction, mining, military vehicles, as well as agriculture and forestry equipment, power generation, and locomotive equipment.

Stephen Schock, Director of Manufacturing, gave us a plant tour first, and then we met with Lane Morlock, Chief Operations Officer. Lane told me that Frank Shaw founded the first Shaw company, Shaw Metal Products, in 1944 Buffalo, New York as a machine shop to support the military and developing aerospace market.

Shaw Aero Devices, Inc. was founded in 1954 to add engineering to their core capability and develop products with proprietary intellectual property. Frank’s son, Jim Shaw, headed up this company, and it became the industry standard for a variety of fuel, oil, water, and waste components and systems. Shaw Aero Devices moved Naples, Florida (Collier County) in the early 1980s and moved to Fort Myers in Lee County 1993. The company relocated back to Naples in 2001 after it outgrew its Lee County location.

Lane, said, “Shaw Development, LLC was formed in 1959 to transfer Shaw Aero Devices technology to ground vehicle markets particularly the lift and turn technology for fuel caps. We moved into our current 50,000 sq. ft. plant in Bonita Springs in 2008. Shaw entered into the DEF system business early on, and business has grown dramatically in the last 6 to 7 years.”

When I asked how much they outsource, he said, “We have a fair amount of capability in-house ? machining, stamping, forming, welding, paint, assembly and test capabilities. In 2009, we vertically integrated plastic injection molding by acquiring Gulf Coast Mold to bring back our molding from China. We bought a robot for welding that saves us a great deal of time. We buy some machining and sensors outside. In 2014, we added 17,000 sq. ft. to our production space in the plant and expanded our injection molding operation by 6,500 sq. ft. We added 75 employees over the past 3 years and our revenue has been increasing +25% YOY in this time period. We are now up to about 200 employees, so we are the second largest manufacturer in the region.”

In response to my question about their challenges, Lane said, “Our biggest challenge is to get the right talent. We work with Florida Gulf Coast University (FGCU) and more recently, we have engaged with the University of Miami to find the right talent. We work with local schools and the Southwest Regional Manufacturers Association to develop curriculum and manufacturing industry awareness to the local area. We are heavily involved with STEM and bring in students as interns and offer them the opportunity to work on private projects. One of our welders took a job with the local technical college to train welders, and this has provided us with an opportunity to work with this program and provide them with industry experience.”

With regard to my inquiry about being a lean company, he said that he had spent two years at NUMMI (Toyota Joint Venture) gaining an in-depth understanding of the Toyota Production System prior to spending seven years in a leadership role at General Motor’s corporate Lean Office. He added, “We have a full time Lean black belt to train our employees. We have gone from 43-day material turnaround to an average of 27 days in the past two years. Our model for business planning is Hoshin Kanri, and we have a five-year business plan and an annual business plan tied into it. Our on-time delivery is 98.8% year to date, and our quality PPM has improved by 60% in the past two years. We use a two-bin Kan Ban system and one-piece flow for our assembly line operations. Our employees are cross trained, and we review our manufacturing cell metrics at weekly meetings.”

With this emphasis on lean and the fact Shaw Development is both ISO 9000 and 14000 Certified, I could see why the company has been recognized as the Manufacturer of the Year for the State of Florida and Southwest Regional Manufacturer of the year.

My next visit was to American Traction Systems (ATS), a privately owned company formed in 2008 by Bonne Posma, as an affiliate of his other company, Saminco, Inc. ATS specializes in the design and manufacturing of electric propulsion systems for on and off road electric vehicles such the Ford Fusion, fuel cell buses, Hybrid trucks and buses, streetcars, trolleys, trams, GenSet Locomotives, Hybrid Diesel-Electric marine vessels, airline ground support vehicles. ATS has manufactured electric traction drives for Fuel Cell Buses designed by Ballard and Georgetown University, Hybrid-Electric systems for Allison Electric Drive division of General Motors as well as over 3,500 AC/DC and DC/DC controllers for underground mining vehicles. All design and manufacturing is performed in the Fort Myers, Florida facility with the capacity to deliver production of several hundred units per month.

General Manager Lem Vongpathoum led the plant tour at ATS and then we met with Mr. Bonne Posma and his niece, Cari Posma Wilcox, Vice President of Saminco, Inc. In a phone interview with Cari after returning home to clarify some details, she told me that Bonne was born in Indonesia of Dutch parents just as WWII erupted in Asia and spent the war years in a prison camp with his parents. His family returned to the Netherlands after the war and then immigrated to Canada. Mr. Posma founded Saftronics in 1968 in Johannesburg, South Africa and then opened a second facility in Ontario, Canada in 1976, which is still in operation as Saft Drives. He opened a Saftronics plant in Buffalo, New York in 1986, which he moved to Ft. Myers, Florida a year later. He left Saftronics and founded Saminco in 1992. Saftronics was sold to Emerson in 2005. After founding American Traction Systems in 2008, he opened a Saminco service office in China in 2009 and a service office in South Africa in 2011. He also opened an ATS facility in South Africa in 2013. Bonne’s energy and excitement about his companies was that of someone half his age when he showed us around Saminco and gave us a demonstration of some of the mining equipment at their testing yard.

Bonne clarified the difference between the three companies he has founded, saying “Saftronics made variable speed drives. Saminco makes solid-state electric vehicle traction controllers powered by batteries, diesel-hybrid, fuel cells and power systems, mainly for underground mining equipment. American Traction Systems makes electric and hybrid-electric propulsion systems for a variety of vehicles and equipment. I am the sole owner of both Saminco and ATS, and we have about 120 employees at the Ft. Myers Saminco and ATS plants. We also have a repair facility in Huntington, West Virginia that has 35-40 employees.”

Bonne explained, “We are competing with major corporations like Siemens, ABB and GE. We have to be more nimble to compete successfully. We competed against these companies for a Navy contract for a propulsion system for the USNS Waters operated by the Military Sealift Command and won the contract. We are getting into solar and working on a new diesel electric propulsion system for a Load Haul Dump (LHD) vehicle that is like a large Bobcat. We are also working on a new induction motor for ‘Mag lev’ trains.”

When I asked him about his suppliers, he said, “We use all American suppliers for what we can’t do in-house. We buy machining and sheet metal fabrication and use a contract manufacturer for our PCBs. We do full power testing in our lab.”

He added, “American workers are some of the highest paid workers in the world. There are three things that have destroyed American manufacturing: litigation, regulation, and taxes. If we want to level the playing field, we need to get rid of these three things.”

On my last morning in southwest Florida, we visited JRL Ventures, Inc. dba Marine Concepts headquartered in Cape Coral, Florida. The facility contains 42,000 sq. ft. of manufacturing and office space, equipped with state of the art CNC robotic machining centers and other technologies. Marine Concepts opened its doors in 1976 under the leadership of Augusto “Kiko” Villalon to be able to go from design to production of boats. Marine industry veterans, J. Robert and Karen Long, purchased Marine Concepts in 1994. As a leading manufacturer for nearly 40 years, Marine Concepts is now the largest manufacturer of tooling and molds for the marine industry in the United States. They make CNC plugs, composite molds (open and closed silicone/LRTM), CNC molds, CNC parts, limited production composite parts, scale models, and CNC cold mold kits. In 2012 Marine Concepts opened a facility in Sarasota, Florida with over 260,000 sq. ft. of manufacturing and office space. The two plants provide 300,000 sq. ft. of manufacturing space and seven 3 – 5-axis CNC milling machines.

Mac Spencer, CFO, gave us the plant tour where we watched a boat mold being machined by their very large machining robot. We met with Dan Locke, Design Manager and Senior Designer, who has been designing boats since the 1980s, using Unigraphix software that provides more free style for designing surfaces than Solid Works. Mr. Spencer said that normally their business was 80% marine vs. 20% non-marine, but during the recession, it was reverse. They diversified into making composite figures and structures for resort parks, such as Disneyland, Universal Studios, and Six Flags. They also make composite parts for trams and electric buses. Design work for other marine companies is also a growing part of their business. We briefly met with President Matt Chambers before departing.

My last visit was to Nor-Tech Boats where we met with Cindy Trombley, Director of Administration. She said the company was founded in 1980 by Trond Schon, who had moved with his family from Norway to Cape Coral, Florida. Nor-Tech manufactures high performance powerboats using advanced technologies, unique manufacturing processes, and stylish designs. The main manufacturing facility in North Fort Myers encompasses over 45,000 sq. ft. complete with a 20’ x 60’ downdraft paint booth. Within the main building a state of the art rig shop and in house upholstery departments are climate controlled year round to insure a clean and work friendly environment. The in-house engine development and production division is housed in a secondary facility along with the service department and a rigging facility. We could see three boats in various stages of production in the main plant, but we did not have time to go visit the secondary facility.

Cindy said they currently have 107 employees, but survived the recession by dropping down to only 35 and going into debt. She said they can make boats up to 80 ft. long, and most of the larger sized boats go overseas or to Canada. They make every style of powerboats except for “T-tops.” Cindy said, “Our biggest challenge outside of heat and humidity in Florida is finding skilled labor. There are no vocational schools teaching how to build boats. We have low turnover, but an aging workforce. One of the advantages of Florida is that there are no corporate or personal income taxes.”

A common thread for most of these companies is the concern about finding the right workers now and in the future. As I have discussed in past articles, this is a nationwide problem, not just in southwest Florida. During discussions with the management of the Lee County Economic Development office and members of the Southwest Regional Manufacturers Association at breakfast, lunch, and dinner meetings during my visit, I shared what is being done to address this problem in other parts of the country and by organizations such as SME’s PRIME schools, ToolingU, and Project Lead the Way that I have written about in previous articles. The more manufacturers and trade associations that get involved in solving this problem, the more successful we will be in attracting and developing the next generation of manufacturing workers.

Tags:American manufacturing, innovation, Lean training, taxes, training, workforce development
Posted in Economic Development, Education, Innovation, Lean, Manufacturing, Reshoring, Taxes/Regulations, Workforce Development | No Comments »

Southwest Florida Attracts Manufacturers, not just Retirees

Tuesday, November 3rd, 2015

During my recent trip to southwest Florida as the guest of the Lee County Economic Development agency, I learned that in recent years, there has been an increasing number of business owners that have been regularly vacationing in the area who have decided to either move their business or set up a business where they like to play.

Lee County is on the Gulf of Mexico side of Florida about 125 miles south of Tampa and about 50 miles north of the Everglades National Park. There are five incorporated cities in the country: Cape Coral, Ft. Myers, Bonita Springs, Ft. Myers Beach, and Sanibel. The county population grew 63% from 1994 to 2014, but 55% live in the unincorporated area.

My tour host, Shane Farnsworth, Manager of Business Development for the Lee County EDO, told me that Cape Coral was a planned “bedroom” community, but many people never built homes on the lots. So, Cape Coral offers the greatest area of growth for industrial development through the purchase and combining of these parcels into industrial sites. Ft. Myers is the oldest of the five cities, so there is very little undeveloped land and new industrial sites will occur through redevelopment. During my visit, I met with executives of several manufacturing companies in three of five and the city of Naples to the south in Collier County (most of Collier County is taken up by the Big Cypress National Park.).

My first interview was with Bill Daubmann, founder and Senior V. P. of KDD, Inc. dba My Shower Door and a member of D3 Glass LLC. Bill originally had established a closet organization business in Springfield, MA in 1986 and obtained a license agreement with Mr. Shower Door in 1989. After visiting the Lee County region for several years on vacation, he decided to move to Naples in 2001 and opened a showroom in 2003. His son, Doug, moved also and joined the company. He took the Fast track entrepreneur course by the Kaufman Foundation with one son in 2007 to “hone” their management skills, and took it again in 2011 with his other son.

Bill said, “It was a tough struggle from 2008 – 2010 due to the Great Recession, as southwest Florida was “ground zero” for the decline in the new home building market. We survived by mostly doing home remodeling.”

In 2011, they were informed that their Mr. Shower Door license would not be renewed for 2012, so they explored setting up their own manufacturing plant to make the tempered and glazed needed for shower doors. After analyzing how much glass they were buying out of the state and the problems they had with breakage and defective glass, they set up D3 Glass LLC in 2012 when new home building started coming back in a building they had bought during the recession. Bill’s oldest son, Keith, became President of KDD, Inc. dba My Shower Door. Bill said that the ovens for tempering the glass cost one million and everything else cost another million. They had to buy two custom-outfitted trucks to deliver the glass to their showrooms and customers.

Since Florida requires a license for the glass and glazing business, Bill and his sons took the test and got their licenses. Bill said, “We hired a consultant to do a “SWOT” analysis for our shower door business to make sure that our business model worked in all parts of the country. We wrote a business plan and did a beta test site. We are now selling our business model to others and running an academy on how to run a shower door business. We have four affiliate stores: Oklahoma City, OK, Grand Rapids, MI, St. Paul, MN, and York, PA. We also sell the specialized hardware for shower doors to our affiliates and other shower door companies.”

In the last two years, they expanded from just doing shower doors into other markets for tempered glass and recently finished providing all of the tempered glass for the new Hertz headquarters building that will open next month. Bill said, “We went from 22 to 50 employees in 18 months and are now up to 64 employees. We just made the INC magazine list of 5,000 companies at #2,085 and will be going to the big event next month.”

After I told him that I am part of the Reshoring Initiative to promote bringing back manufacturing to America, he said, “We were buying aluminum extrusions from China, but just switched to a vendor in the United States.”

In answer to my question about the advantages of being located in the region, he responded, “It is easy to deal with the people in the local government agencies, there is good transportation available on I-75 and Rt. 41, the new airport has flights going to our markets, and there are good local colleges for preparing the future workers we will need.”

My second interview was with Brian Rist, President and CEO of Smart Companies, of which Storm Smart is the largest subsidiary. Storm Smart is Florida’s largest manufacturer & installer of hurricane protection products and is the ninth largest manufacturer across all industries in Lee County. Brian is the inventor of the innovative Storm Catcher Wind Abatement Screens. He also moved from the northeast to southwest Florida to run his business. Brian said, “I started out with a couple of partners in a general contracting business and wound up as the sole owner. The first three years were a struggle to find a niche. The building codes were changing and I became the expert in the new codes, even teaching architects. After Hurricane Ambrose came in 1994, I tried to find a fabric that would replace plywood for covering windows. We talked with people in energy management and got everyone’s opinion. I founded Storm Smart in 1996 to manufacture fabric window protection. We became known as who to talk to about window protection. If you fail to plan, then you plan to fail. We did a CD on what businesses could do for emergency planning because 83% of businesses that have a disaster never recover.”

Brian explained that the building codes changed in Florida for developing sites in 1997 requiring window protection to be part of building a home. In 2001 new codes came out and insurance regulations changed also. Everyone has to have separate hurricane insurance. Insurance companies offered special rates for homes that had protection, and the State of Florida offered a rebate program.

“We started making polypropylene window protection by hand cutting the material, but we needed to ramp up to higher production. Getting a sales tax credit helped us to be able to buy a laser cutting machine in 2013, and it eliminated the bottleneck in our business helping us develop new products.”

They work with the biggest companies in the world that use fabric for hurricane protection. While their products protect homes from hurricanes, they also reduce energy costs. Brian said, “You can build a business based on a known market of saving energy and not just protection from hurricanes. Impact-rated windows are a fast growing part of our business. Most new homes come with impact rated windows.”

He added, “The building codes changed again and they are much more about retaining heat rather than saving heat. International codes are also changing. We watch what percentage of our business is with builders. We went to Cancun and set up small operation during recession in Mexico. We are currently doing work in Los Cabos, Mexico also. We sell to Caribbean countries like Bermuda, Jamaica, and wherever else there are resorts.

We have experienced fast growth and have been picked by Inc. magazine four times as one of the 5,000 fastest growing companies. We went from 26 employees to 100 employees after Hurricane Charlie. We went from five to six jobs per month to about 100 jobs per month.

We looked at all of their jobs and decided to really go back into the customer service business to be a sustainable business. We started to invest in our people and getting to know who they were. We had to make sure they were doing things right. We have to ‘walk the talk.'”

After we discussed some of the articles I have written on developing and recruiting the next generation of manufacturing workers and my involvement with the Coalition for a Prosperous America, he added, “‘ Walking the talk” also involves working with students and getting involved with the Southwest Regional Manufacturers Association [for which he is in the current Vice-President.] He said, “We won the manufacturer of the year for the local region last year. We work with five different academies related to construction. Only about 20% of kids go to college and only about 20% of them graduate from college. We had a tour of our plant during Manufacturing Day and had about 13-14 students come on the tour. Florida is too reliant on tourism and construction. Manufacturing creates more different opportunities for good-paying jobs. Our Governor was at our plant three weeks ago, and he understands manufacturing. By partnering with government and education, we can be more effective in growing manufacturing in Florida. In order to grow, we have to develop the next generation of manufacturing workers. Team building, time management, and ethics are the same regardless of the industry.”

In answer to my inquiry about Lean training, he said, “We have been very involved with lean manufacturing and are working with the Florida Manufacturing Program. We are going through a program for an ERP system in order to continue to grow. We have a plan to develop the company over the next three years. Part of it will involve having licensed dealers.”

The outlook for business in Lee County is very good according to the Lee County Business Climate Survey Report, Third Quarter, 2015 prepared by The Regional Economic Research Institute, Lutgert College of Business, Florida Gulf Coast University, released on August 27th, 2015. The key findings were:

74 percent of executives stated that the current economic conditions have improved over last year
66 percent of the executives stated that the current economic conditions for their industry have improved over last year
67 percent of executives expect economic conditions for their industry to improve over the next year
68 percent of companies expect to increase investment next year and none expect to reduce investment levels
61 percent of executives reported increasing employment over the last year, while four percent reported reducing employment
57 percent of executives expect to increase employment at their companies during the next year

While manufacturing represents only 2% of the economy of Lee County today, the staff of the Lee County Development agency is working with the economic development offices of the five cities and members of the Southwest Regional Manufacturers Association to grow the manufacturing industry and expand that percentage. Their work will be aided by the fact that Florida ranks 5^th in the 2015 State Business Tax Climate Index with a score of 6.91. The corporate income tax rate is only 5.5% for C corporations only. There is no inventory tax for businesses, and there is no personal income tax. There are nine universities and colleges, and the two largest, Florida South Western State College and Florida Gulf Coast University have a combined enrollment of over 30,000 students. There is good technical training at the two-year community college level as well as at the Fort Myers Institute of Technology, Cape Coral Institute of Technology, and at the ITT Technical Institute. The Ft. Myers airport (RSW) is served by 15 air carriers offering nonstop flights to 46 destinations, most of which are east of the Mississippi.

The stories of these two companies are good examples of innovation to develop new products, becoming a lean company, creating a new business model, and expanding into new markets. These are some of the recommendations I made in the chapter “What manufacturers can do to save themselves” in my book, Can American Manufacturing be Saved? Why we should and how we can.

Having no corporate and personal income taxes and providing a friendly business climate are ideas I discuss in the chapter on what government can do to save manufacturing in my book. My next article will tell the stories of other companies I visited in Florida.

Tags:American manufacturing, innovation, reshoring, workforce development
Posted in Economic Development, Education, Innovation, Lean, Manufacturing, Reshoring, Technology, Workforce Development | No Comments »

New Technologies Featured at DMEDS 2015

Thursday, April 30th, 2015

In these busy times when face to face appointments have nearly become a thing of the past, don’t miss the opportunity for face to face interaction at the Del Mar Electronics and Design Show on May 6^th and 7^th at the Del Mar Fairgrounds.

This show is our only local trade show and convention for people who design, manufacture, and test products. The two-day event is free for industry professionals and will be held at the Del Mar Fair Grounds with plentiful free parking and easy highway access. Show hours are 10:00 AM – 5:00 PM Wednesday, May 6^th and 10:00 AM – 3:00 PM, Thursday May 7^th. Stay to network at the free reception at the Mexican Plaza and enjoy the free food and music after the show ends on the first day. Visit here for more information or to register.

Over the last 19 years, the show has evolved from a sales rep/distributor show to become a major exhibition of local, regional, and national manufacturing companies and organizations.

Since San Diego is a hotbed of innovation and start-up companies, there will be a special program on May 6^th starting at 3:00 PM, “Starting Block to Success – Utilizing San Diego’s Resources to Start and Grow Your Business.” First, CONNECT CEO Greg McKee will share some of his experience as an entrepreneur and executive at innovation companies, as well as discuss the ways in which CONNECT supports tech and life science companies at every stage of the business lifecycle. CONNECT provides resources for start-ups, mid-market, and multi-national enterprise companies.

From 3:30 – 4:00 PM, Jeff Draa, President & Board Member of Tech Coast Angels will discuss available sources of capital for startup companies, how to access these sources, which are the right ones at the right times. He will answer the questions about what early stage investors want to see from startups to help guide entrepreneurs through successful funding events which can determine success or failure in early stage businesses.

From 4:00 – 4:30 PM, Rory Moore, CEO and Founder of the EvoNexus incubator will share real life examples of companies at that have been “incubated” at EvoNexus.

Finally, from 4:30 – 5:00 PM, Lou Kelly, Director & Chairman of the San Diego Regional Innovation Cluster at San Diego State University will describe how their federally funded organization brings together 23 organizations in the San Diego area to create a customized package of support for high tech small businesses to help them grow, commercialize their product, and bring it to the market.

Program Manager Douglas Bodenstab stated “This year we are focusing on San Diego’s entrepreneurial spirit with a special program consisting of San Diego’s premier incubators, funding, and entrepreneurial organizations. The Del Mar Fair Grounds presents a relaxed atmosphere that is representative of San Diego’s entrepreneurial business personality, and the show is seen by the local community as the annual event to catch up with old friends, and also see what is new.”

New technologies will be displayed on the show floor with over 500 exhibitors. Dozens of free seminars will be provided on both show days. A few of the technical topics to be presented are:

How to Reduce Costs Using Rapid Prototyping Techniques

3D Printing Processes and Materials

3D Functional Inkjet Printing of Solder Mask & Legend on PCBs

Batteries: Yesterday, Today, and Tomorrow

What’s New in Wire and Cable

Integrate Mobile and Cloud Technology in our Next Electronic Product

Non-technical topics include:

Growth Strategy: How to use Market Intelligence to Shorten the Sales Cycle

How to use LinkedIn to Advance your Career

Using Digital Marketing to Accelerate your Sales Cycle

I will be one of the first speakers at the show on the topic of “How to Return Manufacturing to America” at 10:00 AM on Wednesday, May 6^th, in Room A of the Mission Tower building, (adjacent to Mexican Plaza across from the show buildings). Workshops on this topic at other venues can cost hundreds of dollars, so save money by attending my free seminar.

It has become common knowledge that cost savings of outsourcing in China have eroded due to higher labor rates and shipping costs. Quality problems, IP theft, and counterfeit parts are causing companies to rethink where to source. I will discuss how to select the right parts and products to reshore, how to calculate the Total Cost of Ownership using the Reshoring Initiative’s worksheet, what are the latest trends of reshoring, and share some new case stories of companies that have reshored.

My company, ElectroFab Sales, will be exhibiting at Booth 223 in the Bing Crosby Hall at the show. We will have sample parts on display for Century Rubber Company and some of the companies we represent.
One of the other companies we represent will have their own booth in the Exhibit Hall: A Squared Technologies (booth # 437). Please drop our booths.

Posted in Economy, Manufacturing, Reshoring | No Comments »

Additive Manufacturing is Making Rapid Technological Advances

Tuesday, April 7th, 2015

Advances in additive manufacturing and 3D printing are occurring so rapidly that there is now a daily newsletter on 3D printing for which I recently subscribed. Design News, Industry Week, Manufacturing.net, and many other publications are also publishing frequent articles on additive manufacturing, and most trade shows are now scheduling one or more sessions related to the topic of additive manufacturing/3D printing.

The latest e newsline from Manufacturing.net had the headline, “Liquid Printer Turns 3D Manufacturing Upside Down” and describes the new 3D printer introduced by Carbon3D at the TED conference on March 16. The new “3D printer can print up to 100 times faster than conventional additive manufacturing thanks to its ability to ‘grow’ materials upward from a pool of liquid,” using “their Continuous Liquid Interface Production (CLIP) technology, which builds material upward in a continuous stream.” The Carbon3D printer uses UV light to trigger “polymerization, the creation of three-dimensional polymers, while oxygen inhibits the reaction” and “can be used with a broad range of polymeric materials.”

Dr. Joseph DeSimone, the CEO and co-founder of Carbon3D, said “Our CLIP technology offers the game-changing speed, consistent mechanical properties and choice of materials required for complex commercial quality parts.”

A couple of weeks ago, I was contacted by Zach Simkin, Co-President of Senvol LLC, a company that does analytics exclusively for the 3D printing industry, letting me know that they recently launched a tool, the Senvol Database, which is the first and only searchable database for industrial 3D printing machines and materials. Simkin said, “Users are able to search the database by over 30 fields, such as machine build size, material type, and material tensile strength. The database is online and free to access. The database already has thousands of regular users since launch, many of whom are engineers across a variety of verticals.”

A few days later, I interviewed Annie Wang, Co-President of Senvol LLC, and she said, “Additive manufacturing is never going to replace 100% of subtractive manufacturing.” She emailed me the Video link to their presentation from the RAPID Conference last year ? “Determining Cost-Effectiveness of Additive Manufacturing.” She also emailed me the write up from the Wohlers report (“Cost-Benefit Analyses for Final Production Parts”), which gives an overview of two case studies that they did for GE and Johnson Controls. She said, “We used the Senvol Algorithm to determine whether or not it’s cost-effective to switch from conventional manufacturing to additive manufacturing.”

While the results of the analysis are proprietary, Wang and Simkin provide guidelines in the introduction of their study, writing, “However, just because a part can be produced using AM does not mean that it should be. Prior to implementing the technology, it is essential to conduct a thorough cost-benefit analysis. Generally speaking, it is often stated that AM is economically suitable for parts that have the following features: low volume, complex, and small. Although this can be true, it is not sufficient to only consider features of the part. Rather, when trying to determine whether a particular part can be cost-effectively produced using AM, it is critical to analyze the entire supply chain.”

In the report, they provide “… the seven supply chain scenarios that tend to lend themselves well to AM. If a part falls into one or more of these scenarios, then that part may be cost-effective to produce via AM. If a part does not fall into any of these scenarios, then the part almost certainly will not be cost-effective for AM given the current AM technology.” They are:

Scenario

Description

Expensive to Manufacture

Do you have parts that are high cost because they have complex geometries, high fixed costs (e.g. tooling), or are produced in low volumes? AM may be more cost-efficient.

Long Lead-Times

Does it take too long to obtain certain parts? Are your downtime costs extremely high? Do you want to increase speed-to-market? Through AM, you can often get parts more quickly.

High Inventory Costs

Do you overstock or understock? Do you struggle with long-tail or obsolete parts? AM can allow for on-demand production, thus reducing the need for inventory.

Sole-Sourced from Suppliers

Are any of your critical parts sole-sourced? This poses a supply chain risk. By qualifying a part for AM, you will no longer be completely reliant on your current supplier.

Remote Locations

Do you operate in remote locations where it is difficult, time consuming, or expensive to ship parts to? AM may allow you to manufacture certain parts on-site.

High Import / Export Costs

Do you pay substantial import/export costs on parts simply because of the location of your business unit and/or your supplier? On-site production via AM can eliminate these costs.

Improved Functionality

AM can enable a part to be redesigned such that its performance is improved beyond what was previously possible.

Just like a Total Cost of Ownership analysis is beneficial to determine whether or not to offshore the manufacturing of a particular part or product or return manufacturing to America from being manufactured offshore, Simkin and Wang state, “For parts that fall into one or more of the above scenarios, a detailed, quantitative cost-benefit analysis is warranted. To conduct such analyses, an algorithm, courtesy of Senvol, was used to determine what types of parts can be more cost-effectively manufactured using AM versus the status quo. The algorithm analyzes an array of variables that span the entire product life cycle.”

I told Wang that 3D printing is greatly accelerating the development of new products by the inventors that I advise as part of the San Diego Inventors Forum, but there are many times that a part can be made by 3D printing that can’t be replicated in a production process. For example, you can produce “chunky” plastic parts using 3D printing that cannot be made in the production process of injection molding. The use of 3D printing is enabling inventors to have a sample part to show/demonstrate in person or by means of a video to secure potential investors, but the inventor needs to do a careful analysis of the best manufacturing process to use for production, depending on where it will be used (home, office, or outdoors), product certifications required, and projected life cycle volumes, among other considerations. A 3D printed sample can be the essential ingredient of a video to do a crowdfunding campaign via Kickstarter, Indiegogo, or GoFundMe.

I told her that I give a presentation each year at our meetings on “How to select the right manufacturing process and sourcing location for your product,” which incorporates the Reshoring Initiative’s Total Cost of Ownership analysis. We agreed that companies could benefit from doing a cost-benefit analysis of comparing conventional manufacturing to additive manufacture as well as doing the Reshoring Initiative’s Total Cost of Ownership analysis when making the decision to manufacture in the U. S. vs. offshore.

Posted in Innovation, Manufacturing, Reshoring, Technology | No Comments »

Looking Back at 2014 and Ahead to 2015

Tuesday, January 20th, 2015

Most economists are predicting a rosy forecast of more than 3 percent expansion for the U.S. economy in 2015, up from 2.3% in 2014. If it does, this “would mark the first time in a decade that growth has reached that level for a full calendar year.” The unemployment rate is also predicted to drop from the current 5.6 percent to 5.3 percent. The questions are: How much will American manufacturing benefit from this expansion and how many manufacturing jobs will be created?

While the country gained 252,000 jobs in December, only 17,000 were manufacturing jobs according the monthly report from the Bureau of Labor Statistics ? “In December, …Manufacturing added an average of 16,000 jobs per month in 2014, compared with an average gain of 7,000 jobs per month in 2013.”

This was a significant increase over the previous year, but notice that President Obama recently stated that “more than 764,000 manufacturing jobs have been gained since the end of the recession.” This means that we still have a long way to go to recoup the 5.8 million manufacturing jobs that we lost between the years 2000 – 2009. According to Scott Paul, President of the Alliance for American Manufacturing, “…December’s manufacturing job gains were behind the previous month, and that halfway through the president’s second term, the country is just over one-quarter of the way to his pledge to create 1 million new manufacturing jobs in that four-year span.”

While the U3 unemployment rate dropped to 5.6 percent, the U6 rate is double at11.2 percent. The U-6 rate includes “Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force.”

In a recent article, business reporter Jonathan Horn of the San Diego Union-Tribune noted, “the unemployment rate fell in part because people dropped out of the labor force ? they either retired or left the labor force. Last month, the number of unemployed persons fell 383,000 to 8.7 million. However, less than one-third of people out of work found jobs; the rest stopped looking. The percentage of Americans who are either working or looking for work fell back to a 37-year low last touched in September.”

The January 6-11, 2015 edition of the San Diego Business Journal’s reported that manufacturing jobs in San Diego increased by 3.3 percent from November 2013 through November 2014, for a total of 97,400 industry jobs, up by 3,100 jobs. However, we still have a long way to go to get back to the 122,600 manufacturing jobs in the San Diego region we had at the end of 1999.

Two manufacturing sectors led the job growth in San Diego: shipbuilding and Unmanned Aerial Vehicles (drones.) General Dynamics’ Nassco division has contracts for five commercial tankers and one Navy ship and plans to “add about 300 additional jobs to the shipbuilder’s staff, bringing the total workforce to about 3,500.” General Atomics Aeronautical Systems Inc’s “local employment grew 9 percent year over year to 4,843 as of June 2014.”

In this same article, I was quoted as saying, “For those with skills and experience in a particular industry, things were definitely trending up in 2014…This (2014) has been a year when people could find jobs.” I’m also quoted as saying, “San Diego greatly diversified its economy following the previous major recession in the early 1990s, and that’s made a huge difference in the past several years…One of our strengths is that we’re not hurt as much from the lack of new defense programs.”

Looking Back at 2014

The R&D tax credit that had expired December 31, 2013 was extended for 2014, but has now expired again as of December 31, 2014. The R&D Tax Credit was originally introduced in the Economic Recovery Tax Act of 1981 sponsored by Rep. Jack Kemp and Senator William Roth. The credit has expired eight times and has been extended fifteen times. The frequent expiration of this tax credit creates unnecessary uncertainty for business investment planning. The R&D Credit Coalition, National Association of Manufacturers, and many other business groups recommend that this tax credit be made permanent.

One bright spot on the national scene is that a bill requiring a National Strategic Plan for Manufacturing authored by Rep. Daniel Lipinski (D-IL) and Rep. Adam Kinzinger (R-IL) became law right before Christmas. Three of Lipinski’s previously authored bills had passed the House three times over the past five years, but failed to either pass or be considered in the Senate. This bill was included in legislation that passed both houses and was signed into law by the President. U.S. Senators Mark Kirk (R-IL) and Chris Coons (D-DE) and Mark Pryor (D-AK) introduced the language in the Commerce, Science and Justice Appropriations bill passed by the Senate.

Rep. Lipinski stated, “After many years of hard work, my bipartisan legislation to boost domestic manufacturing and American jobs by. The bill requires that at least every four years the president works with public and private stakeholders to produce and publish a plan to promote American manufacturing. In addition, every year the president’s budget blueprint will have to contain an explanation of how it promotes the most recent manufacturing strategy. This bill guarantees that Washington has to pay attention to what can be done to help manufacturers and workers. Getting this provision into law can really make a difference by leading to economic growth, increased American security, and more middle class jobs that pay hard-working Americans a good wage. I look forward to finding many more “Made in USA” labels on products we see in our stores and online.”

In June 2013, I wrote an article criticizing an earlier version of this bill, H.R. 2447, the American Manufacturing Competitiveness Act of 2013, and was contacted by Rep. Lipinski’s Chief of Staff to discuss my criticisms. I am anxious to see whether or not the current language included in the Commerce, Science and Justice Appropriations bill addressed these criticisms.

In his 2014 State of the Union address, President Obama pledged to launch four new manufacturing institutes this year, for a total of eight institutes launched so far on an original goal of creating 15 manufacturing innovation institutes. On December 11^th, President Obama announced that” the government will invest more than $290 million in public-private investment for two new Manufacturing Innovation Hub Competitions.

One will be in smart manufacturing at the Department of Energy and one in flexible hybrid electronics at the Department of Defense. Each institute will receive $70 million or more of federal investment to be matched by at least $70 million from the private sector for a total of more than $290 million in new investment.”

“The Department of Defense will lead a competition for a new public-private manufacturing innovation institute in flexible hybrid electronics…The Department of Energy will lead a competition for a new public-private manufacturing innovation institute focused on smart manufacturing, including advanced sensors, control, platforms, and models for manufacturing…” The press release invites interested applicants to find more information on the manufacturing innovation institute competitions at www.manufacturing.gov.

While funding manufacturing institutes may have a long-term benefit similar to funding research at other government institutions, there are actions that President Obama and Congress could take that would have a more immediate benefit on the manufacturing industry and create more jobs, such as making the R&D tax credit permanent, addressing currency manipulation by our foreign trading partners, easing taxes to repatriate corporate profits, and actually doing comprehensive tax reform. Let us hope that the economic predictions of a better 2015 than 2014 will come true and that more manufacturing jobs will be created by even more companies returning manufacturing to America.

Tags:manufacturing institutes, Manufacturing jobs, manufacturing strategy, R&D tax credit
Posted in Economy, Jobs, Manufacturing, Reshoring, Taxes/Regulations | No Comments »

San Diego is a Hotbed of Innovation

Tuesday, December 16th, 2014

On Thursday, December 4^th, CONNECT held its 27^th Annual Most Innovative New Product (MIP) Award dinner to honor San Diego companies that had launched innovative new products within the last year. There were more than 700 attendees at the event held at the Hyatt Regency La Jolla at Aventine, led by Mistress of Ceremonies Maureen Cavanaugh of the Midday Edition of KPBS. There were 102 nominations that were narrowed down to 24 finalists by 100 judges, culminating in eight new MIP winners. The 2014 MIP Award winners selected were:

Aerospace & Security Technologies

CyberFlow Analytics for FlowScape – The “platform enables Advanced Threat Protection through a sophisticated Anomaly Detection system and has been designed in a modular fashion in alignment with cloud computing principles and runs entirely in the context of virtual machines…the system involves a series of connected multi-model ‘analytics engines’ that contain hundreds of mathematical predictors that can machine learn network communication transmissions and identify odd anomalous behavior across an entire network…[It} is scalable to handle big data network and application flows through cloud-ready virtualized analytics engines.”

The other finalists were: Cubic Defense Applications for Halo Array, 3D Robotics for IRIS, Space Micro, Inc. for IPC7000, Image Processing Computer.

Communications & IT

Cubic Transportation Systems for NextBus Fleet Management Application – The “application is a modular, mobile gateway for connecting passengers and public transport operators to valuable real-time travel and operations information. For passengers, this means knowing exactly where their next bus is so they know how long their wait time is. For operators, it is a cost-effective, high-quality and reliable application to keep buses on schedule and drive efficiencies in their services.”

This award shows that long-established company can still develop an innovative new product. Cubic Transportation System is “the leading provider of revenue collection management systems and services worldwide” and is one of three business segments of parent company, Cubic Corporation. Walter J. Zable founded Cubic Corporation as a small electronics company in San Diego in 1951, and he remained involved in the management of the company as CEO until his death in 2012 at the age of 97.

The other two segments are:

Mission Support Services is “an industry leader in providing comprehensive support services for all echelons of national militaries and security forces in the U.S. and allied nations.”

Cubic Defense Applications is “the leading provider of live air and ground combat training systems worldwide, a key supplier of virtual and immersive training systems, communications and electronics products, and an emerging provider of cyber technologies and global tracking solutions for commercial and national military customers.”

I started working at Cubic Defense when I was 19 years old for the Chief Scientist, Chief Physicist, and a Staff Engineer in the Marketing Department. The latter had previously developed the geodetic SECOR satellite surveying system, the first of its kind to produce a direct coast-to-coast measurement of the United States long before the Global Positioning System was developed. He was on the fast track for advancement and was promoted to Marketing Manager three years later, and I moved up with him as his assistant at age 22. When I started my own manufacturers’ sales rep agency in 1985, both Cubic Transportation and Cubic Defense became customers for companies that I have represented over the years.

The other finalists were: DVEO division of Computer Modules, Inc. for Ad+EAS Serter™ and Tricopian, LLC for FuelRod.

Diagnostics & Research Tools

Organovo, Inc. for 3D Human Liver Model – “Organovo’s Bioprinted Human Tissue Models are multi-cellular, dynamic, and functional 3D human tissue models for preclinical testing and drug discovery research. Created using proprietary 3D bioprinting process, the tissues remain viable and dynamic for extended time in vitro and exhibit key architectural and functional features that mimic key aspects of the natural 3D tissue environment. Biochemical, genomic, proteomic and unique histologic endpoints can be assessed over time.”

In addition to the MIP award, the life science magazine The Scientist’s selected Organovo’s ex Vive 3D human liver tissue for the seventh place spot of the top 10 innovations for 2014.

The other finalists were: bioTheranostics, Inc for Breast Cancer Index (BCI) and Edico Genome for DRAGEN Bio-IT Processor.

Mobile Apps

Rock My World, Inc. for RockMyRun – this is a mobile app that takes biometric data from smart phones and fitness wearable devices “to adjust the tempo of the music you’re listening to in order to match your pace or motivate you to push just a little harder.”

The other finalists were: GreatCall for Urgent Care and Visual Mobility Inc. for SEENiX.

Pharmaceutical Drugs and Medical Devices

Topera, Inc. for Topera’s 3D Mapping System – the system “consists of the FDA cleared and CE marked RhythmView™ Workstation and FIRMap™ Catheter, which are used in combination for the identification and localization of the sustaining mechanisms of cardiac arrhythmias such as atrial fibrillation, atrial flutter, atrial tachycardia, and ventricular tachycardia.”

On October 30, 2014, the Chicago-based healthcare company, Abbott announced it would acquire Topera “with all outstanding equity for $250 million upfront with potential future payments tied to performance milestones.”

The other finalists were: Bioness for Vector Gait and Safety System and Diazyme for 25-OH Vitamin D Assay for Clinical Chemistry Analyzers.

Software

CloudBeds for CloudBeds – It is an operating system for hotels to “provide the hotel with an automated website, booking engine, Facebook presence, revenue management platform, distribution channels, rate and package manager, and light-weight property management system. The system “automates many of these functions so that an hotelier can focus on its guests instead of managing its property and selling its rooms.” Their “goal is to continue to help streamline connectivity between small hotels and their customers using the latest innovations in software — improving their operational and communication efficiencies.” Their focus is on “the large developing world marketplace.”

The other finalists were: Intific for NeuroBridge 2.0 and Raken, Inc. for Raken.

Sport & Active Lifestyle Technologies

Electrozyme LLC for ProFit SE Real-Time Sweat Electrolyte Sensor – this is world’s first wearable personal hydration monitor that can asses assess fluid and electrolyte loss in a real-time non-invasive way to determine if it’s time to rehydrate, what to rehydrate with, and how much to rehydrate.

The other finalists were: Bast Surf for Bast and Cardiff Skate Co. for Cardiff Skates.

Sustainability

Solatube International for Solatube SkyVault Series – the patented technologies of the Sky Vault series combines breakthrough optics with progressive engineering to enhance light capture, focus light over greater distances, or spread light evenly throughout a space.

I wrote about Solatube in the second edition of my book because they “reshored” by returning manufacturing from China to their plant in Vista at the end of 2011, partially because of the risk of intellectual property theft of their proprietary technologies, in addition to increasing costs and difficulty in managing their offshore manufacturing.

The other finalists were: Blue Wave International, Inc. for ClearWaveAir and Measurabl for Measurabl.

Two other awards were given at the event: CONNECT’s Distinguished Contribution Award for Life Sciences Innovation was awarded to philanthropist T. Denny Sanford received, and the Distinguished Contribution Award for Technology Innovation was awarded to Dr. Robert S. Sullivan, Dean of the Rady School of Management, University of California, San Diego.

From inventors being educated and mentored through the San Diego Inventors Forum to entrepreneurial teams developing technology based products being assisted and mentored through CONNECT’s Springboard program, San Diego is a hotbed of innovation. “Since the inception of the program in 1993, more than 3000 scientific and technological breakthroughs have been guided through the process of innovation to commercialization. Together, these companies have raised over $ 1.4 Billion in capital.” To me, this makes San Diego the “Silicon Beach” of California.

Tags:innovative products, manufacturing, reshoring, technology
Posted in Innovation, National security, Reshoring, Technology | No Comments »

“Manufacturing in Golden State Summit Highlights Threats to Prosperity”

Tuesday, October 28th, 2014

On October 16th, about 130 business leaders met at the conference facilities of AMN Healthcare in San Diego for the third “Manufacturing in the Golden State – Making California Thrive” economic summit. The summit was hosted by State Senator Mark Wyland in partnership with the Coalition for a Prosperous America and a long list of other regional businesses and associations. The purpose of the summit was to discuss how several national and California policies are threatening the growth and prosperity of California manufacturers and what policies should be changed to help them grow and thrive.

After State Senator Wyland welcomed attendees, Michael Stumo, CEO of the Coalition for a Prosperous America, provided an overview of the schedule for the day.

I provided an update to the overview of California manufacturing that I had presented at our summit in Brea on March19th covered in a previous article. California lost 33.3% of manufacturing jobs between 2000 and 2009 compared to 29.8% nationwide and 25% of its manufacturing companies. California lags in manufacturing job growth at a .36% rate compared to the national 6.09% rate.

I highlighted that the San Diego region offers a great deal of help for inventors and start-up technology based companies through the San Diego Inventors Forum, CONNECT’s Springboard program, the Small Business Development Centers in North County and South County, CleanTech San Diego, as well as groups like the San Diego Sports Innovators. San Diego also offers more career path and workforce training programs than most other states, including those offered by three of our event sponsors: California Manufacturing Technology Consulting, the Center for Applied Competitive Technologies, and the Lean Six Sigma Institute.

The good news is that California is benefitting from the reshoring trend that is sweeping the county. According to data collected by the Reshoring Initiative, California ranks first in the number of companies (28) that have reshored and third in the number of jobs created by reshoring (6,014).

I then moderated a panel of the following local manufacturers, who gave their viewpoints of the effects of some of our national policies and the challenges of doing business in California:

James Hedgecock, Founder and General Manager of Bounce Composites
Scott Martin, President, Lyon Technologies
Robert Reyes, Head of Strategic Sourcing, Stone Brewing Company

Hedgecock stated that Bounce Composites is less than two years old and makes thermoset composites, starting with paddle boards and branching into small wind turbine blades this year. He bemoaned the fact that in California you have to pay $800 to incorporate a company, which is double to quintuple the cost of incorporating in other states. Also, as a LLC, you have to pay taxes on gross profits rather than net profits, which is tough on a start-up company.

Martin said that Lyon Technologies has been in business since 1915 and has changed its products several times over the years. Current products include bird and reptile incubators, poultry products, and veterinary products, which they export to about 100 countries. He stated that the Value Added Taxes (VATs) that are added to the products they export and the currency manipulation practiced by several countries make it difficult for their products to be competitive in the world marketplace.

Reyes said they are expanding out of San Diego and are building a new $25M brewery and restaurant in the Marienpark Berlin, scheduled to open by end 2015/beginning 2016. Stone exports beer to Germany and other European countries and having a brewery in Germany will ave on shipping costs for exporting. They are also planning on opening a brewery on the East Coast in Virgina.

The national expert panel included Greg Autry, Adjunct Professor of Entrepreneurship, Marshall School of Business, University of Southern California; Pat Choate, economist and author, “Saving Capitalism: Keeping America Strong”; Mike Dolan, Legislative Rep., International Brotherhood of Teamsters; and Michael Stumo, CEO of CPA. The focus of the talks was on national security, manufacturing growth strategies, tax strategies and fixing the trade deficit.

Autry, led off the national panel with the topic of “National Security Concerns with U. S. Trade Regime.” He began by stating, “An economy that builds only F-35s is unsustainable – productive capacity is what wins real wars. Sophisticated systems require complex supply chains of supporting industries. They require experienced production engineers and experienced machinists.” He added that we cannot rely on China to produce what we need for our military and defense systems. “We should not be relying on Russia’s Mr. Putin to launch our satellites and space vehicles and provide us a seat to get to the international space station.”

He pointed out that our technical superiority in military systems will not assure our national security any more than the technical superiority of Nazi Germany’s aircraft and tanks did for them. Economic superiority is what matters. The manufacturing industry of the U. S. out produced Germany during WWII and the Soviet Union in the Cold War.

Autry stated that Wall Street’s new hero, Jack Ma, founder of Chinese company Alibaba Group Holding Ltd, is a danger to American interests by the fact that Alibaba just overtook Amazon as the world’s largest online retailer by market capitalization. It was the wealth he created at Amazon that enabled founder Jeff Bezos to now lead a new company, Blue Origin, which was just selected by the United Launch Alliance to finish development of a new engine to replace the Russian made RD-180 rocket engine used by ULA’s Atlas 5 rocket. There is considerable skepticism by many of Mr. Ma’s independence from the Chinese government. Mr. Ma’s next target appears to be PayPal, which is responsible for the wealth of Elon Musk, now CEO and CTO of SpaceX, CEO and chief product architect of Tesla Motors, and chairman of SolarCity.

Next, Michael Stumo presented “A Competitiveness Strategy for America: Balance Trade and Rebuild Domestic Supply Chains.” He said, “Our ultimate goals should be: improved standard of living, full employment, and durable, sustainable growth. America has no strategy to win. Our trade deficit cuts our growth in half. Domestic supply chains were sacrificed to global supply chains; i.e. offshored and hollowed out….We need a strategy to win.”

He pointed out that “free trade is supposed to produce balance and address foreign mercantilism, but our trade policies enable mercantilism…We must replace the goal of ‘eliminating trade barriers’ and have Congress establish a new directive via statue to balance trade.”

He said that to achieve balanced trade, we must address, reciprocity, currency manipulation, forced technology transfer [by China], foreign VAT rebates, state-owned enterprises, and government subsidies.

In conclusion, he recommended that we should:

Create durable comparative advantage through technical superiority, infrastructure, low energy costs, etc.
Balance trade and fight foreign mercantilism
Create our own comparative advantage
Maximize domestic value added
Identify and minimize our advantages while minimizing our disadvantages

In conclusion, he urged, “Don’t be afraid of asserting and pursing our national economic interest.”

The next speaker was Mike Dolan, Legislative Representative for the Teamsters, who has long experience working for Fair Trade (fighting expansion of the job-killing NAFTA/WTO model). He said that big corporations want Congress to pass Trade Promotion Authority in the “lame duck” session to grant the president Fast track Authority for the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) Agreements. He called the TPP “NAFTA on steroids” and said that TTIP is just as bad. He said that Fast Track was invented by President Nixon and has been used 16 times. He said that we need a new form a Trade Promotion Authority where Congress has input with regard to the countries involved in the Agreement, certifies that negotiating goals were met, and votes to approve it before it is signed. He urged attendees to contact their Congressional Representative to oppose the TPP for the following reasons:

“Lack of transparency during negotiations warrants more thorough consideration than a up or down vote
Under previous trade deals, the U. S. has hemorrhaged jobs and cannot afford more of the same
The TPP is too large and complex to delegate constitutional authority away from Congress”

Pat Choate (Economist; Author, Saving Capitalism: Keeping America Strong) discussed how our trading partners have used Value Added Taxes (VATs), and currency manipulation to their advantage and to the disadvantage of the U. S. VATs or border adjustable consumption taxes are used by other countries to offset income, payroll, or other employer taxes to help their manufacturers be more competitive in the global marketplace or to offset other costs like national health care or pension programs. VATs range from a low of 10% to a high of 24%, for an average of 17%.

While tariffs have been dropped since 1968 as part of many trade agreements signed since then, the effective trade barriers have remained constant because of the VATs being imposed.

These consumption taxes have been a causative factor in increasing our trade deficits with our trading partners, which was $471.5 billion in 2013, $318 billion with China alone. He supports CPA’s advocacy of making changes in U. S. trade policy to address this unfairness which tremendously distorts trade flows.

During lunch, keynote speaker Dan DiMicco, Chairman Emeritus of Nucor Steel Corporation, spoke on “Seizing the Opportunity.” He led off by shocking the audience with facts about the real state of our economy and our unemployment rate. By September 2014, we still had not reached the level of employment that we had when the recession began in December 2007 although 81 months had passed. We lost 8.7 million jobs from December 2007 to the “trough” reached in February 2010, but because our recovery has been much slower than the previous recessions of 1974, 1981, 1990, and 2001, the gap in recovery of jobs compared to these recessions is actually 12,363 jobs.

In contrast to the misleading U-3 unemployment rate of 5.9% for September 2014 that is reported in the news media, the U-6 rate was 11.8%. The government’s U-6 rate is more accurate because it counts “marginally attached workers and those working part-time for economic reasons.”However, the actual unemployment is worse because the participation in the workforce has dropped from 66.0% to 62.7%. In other words, if the December 2013 Civilian Labor Force Participation Rate was back to the December 2007 level of 66.0%, it would add 8.2 million people to the ranks of those looking for jobs.The manufacturing industry lost 20% of its jobs, and the construction industry lost 19% of its jobs.

Unemployment Data Adjusted For Decline in Civilian Labor Force Participation Rate
(Adjusted For Decline from December 2007 Level Of 66.0% to 62.8% in September 2014)

Reported Unemployed U.S. Workers	9,262,000
Involuntary Part-time workers	7,103,000
Marginally Attached To Labor Force Workers	2,226,000
Additional Unemployed Workers With 66% CLF Participation Rate	8,199,000
Unemployed U.S. Workers In Reality	26,770,000
Adjusted Civilian Labor force	166,287,000
Unemployment Rate In Reality	16.1%

DiMicco said, “We got in this position from 1970 until today because of failed trade policies allowing mercantilism to win out against true FREE Trade. We bought into wrongheaded economic opinions that America could become a service-based economy to replace a manufacturing-based economy. Manufacturing supply chains are the Wealth Creation Engine of our economy and the driver for a healthy and growing middle class! The result has been that manufacturing shrank from over 30% to 9.9% of GDP causing the destruction of the middle class. It created the service/financial based Bubble Economy (Dot.com/Enron/Housing/PONZI scheme type financial instruments.)”

He added, “We have had 30 years of massive increases in inefficient and unnecessary Government regulations. These regulations, for the most part, in the past have been put in place by Congress and the Executive Branch. However, today they are increasingly being put in place by unelected officials/bureaucrats as they intentionally by-pass Congress.

American’s prosperity in the 20^th century arose from producing more than it consumed, saving more than it spent, and keeping deficits to manageable and sustainable levels. Today, America’s trade and budget deficits are on track to reach record levels threatening our prosperity and our future.”

He said, “Creating jobs must be our top priority, and we need to create 26-29 million jobs over the next 4-5 years. There are four steps we can take to bring about job creation:

Achieve energy independence.
Balance our trade deficit.
Rebuild our infrastructure for this century.
Rework American’s regulatory nightmare.

In conclusion, DiMicco said, “We need to recapture American independence through investment in our country’s people, infrastructure, and energy independence, and by reversing the deficit-driven trends that currently define our nation’s economic policy. Real and lasting wealth IS, and always has been, created by innovating, making and building things — ALL 3 ? and servicing the goods producing sector NOT by a predominance of servicing services!”

As the mid-term election approaches, we need to cast our votes for candidates who address the serious issues discussed at the summit, so that we can work together as Americans to restore California to the Golden State it once was and restore America to be “a shining city upon a hill whose beacon light guides freedom-loving people everywhere,” as declared by Ronald Reagan in 1974.

Posted in Economic Development, Jobs, Manufacturing, National security, Reshoring, Taxes/Regulations, Trade Policy, Training | No Comments »

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Archive for the ‘Reshoring’ Category

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