Posts Tagged ‘American manufacturing’

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Congress Must Strengthen Buy America Act

Tuesday, June 4th, 2019

The Buy American Act was passed by Congress in 1933. It required the U.S. government to give preferential treatment to American producers in awarding of federal contracts. The Act restricted the purchase of supplies that are not domestic products. For manufactured products, the Buy American Act used a two-part test:  first, the article must be manufactured in the U.S., and second, the cost of domestic components must exceed 50 percent of the cost of all its components.

After the end of the Cold War and the end of the subsequent Gulf War in 1991, the provisions of the “Buy America Act” were eased to allow purchasing off the shelf commercial parts (COTS) from foreign countries by the Defense Department and other government agencies if they met the same fit and function of parts made to strict military specifications. Previously, parts, assemblies, and systems were required to be substantially made in the United States or in a NATO country, such as Great Britain, France, or Germany.

In the early 1990s, most commercial parts were still being made in the United States, with some outsourcing to the Philippines, Hong Kong, and Singapore, so this change was pretty safe. However, permitting commercial parts to replace Military Specification parts probably drove out of business the small companies that catered exclusively to the military and provided Traceability of Origin per Military Specifications for parts supplied to government agencies, military contractors, and subcontractors. This was all done in the name of cost savings.

Gradually over the last 26 years, the manufacturing of most commercial electronic components and microchips was transferred offshore, so that now they are fabricated in China, Vietnam, or South Korea. 

This is the root cause of counterfeit Chinese parts becoming part of the military/defense industrial supply chain.

The President has authority to waive the Act in response to the provision of reciprocal treatment to U.S. producers. Under the 1979 GATT Agreement on Government Procurement, the U.S.-Israel Free Trade Agreement, the U.S.-Canada Free Trade Agreement, the North American Free Trade Agreement, the Central American Free Trade Agreement, and the Korea Free Trade Agreement, access to government procurement is granted by certain U.S. agencies for goods from the partner countries to these agreements.

It was reported by Reuters in January 2014 that “The Pentagon repeatedly waived laws banning Chinese-built components on U.S. weapons in order to keep the $392 billion Lockheed Martin Corp F-35 fighter program on track in 2012 and 2013, even as U.S. officials were voicing concern about China’s espionage and military buildup.”

To address weaknesses in the defense supply chain and to promote the adoption of aggressive counterfeit avoidance practices by the Department of Defense and the defense industry, an amendment to the National Defense Authorization Act for Fiscal Year 2012  was adopted in the Senate and signed by President Obama.

Instead of implementing the requirements of the Act, it appears that DOD “entered a new phase… characterized by globalization of supply chains” according to Richard McCormack, publisher and producer of the Manufacturing & Technology News, May 20, 2015 edition.

McCormack reported on comments made by Bill Lynn, CEO of Finmeccanica North America and former Deputy Secretary of Defense from 2009 until 2011, at the April 29, 2015 meeting of the Center for Strategic and International Studies in Washington, D.C.

The defense sector and the U.S. military have “moved from being a net exporter of technology to a net importer,” Lynn stated, adding “When their R&D budgets are combined to total a scant $3 billion (or only 1.6 percent of revenue), the five biggest defense contractors — Boeing, Lockheed, Raytheon, L3 and Northrop — would not even make the list of the top 20 global companies that invest in R&D.”

Lynn told the meeting, “Those are things where the commercial industrial base is stronger than the defense industrial base and in many ways the key to maintaining our future [defense] technology edge is to be able to import those technologies into our defense industrial base… Since many of the underlying technologies now reside outside of the United States, DOD has to figure out how to deal with foreign corporations and state-owned enterprises that hold the keys to its success.”

McCormack noted, “The Department of Defense and its major contractors are now dependent on foreign manufacturers for many of the military’s most advanced weapons systems…The defense industry is a shadow of its former self, representing less than 3.5 percent of the U.S. economy, a position that continues to decline as defense budgets reach new lows with no chance of them growing faster than the economy.”

Lynn commented that “DOD is slowly catching up to the structural change caused by globalization of technology and supply chains. It is wrestling with the regulatory and procurement systems it has in place to monitor and conduct business with foreign suppliers, but it has little time to waste.”

Lynn stated “that changing perceptions about foreign involvement in the defense industry are similar to what happened in the U. S. auto sector…Americans and their representatives in Congress were skeptical about foreign nameplates. But as foreign auto companies started building technologies in the United States and hiring American workers, the tide turned… “

It is incomprehensible to me to compare what happened to the U. S. auto industry to what is happening to the U. S. defense industry. The whole purpose of the defense industry is to protect our national sovereignty and national security. How can anyone in their right mind want to make our defense supply chain vulnerable to the foreign country, namely China, that has a written plan to replace the U.S. as the world’s super power? The Chinese have stolen our technology to build up their own military power as evidenced by the uncanny similarity of China’s stealth fighter, the J-31and the Chengdu J-20 fighter jet to the F-35 Lightning II advanced fighter jet. 

Does anyone believe that we will get the parts and assemblies needed by our defense industry when China has decided we are so weak that we cannot stop their aggression in Asia? We are not even safe to have parts sourced in Taiwan, South Korea, the Philippines, Malaysia, Indonesia, or Vietnam. These countries would all be targets for takeover by China once the Chinese lose their fear and respect for U. S. naval and air power.

Four of the last five sessions of Congress attempted to address this problem, but the following bills to strengthen the Buy American Act introduced in Congress failed to be enacted: 

H.R. 4553 (111th), introduced February 2, 2010

S. 2391 (113th), introduced May 22, 2014

S. 2167 (114th), introduced October 8, 2015.

At least, President Trump issued an Executive Order on Buy American and Hire American onApril 18, 2017, which set forth a policy to “maximize …use of goods, products and materials produced in the United States” through federal procurements.

This was followed by the introduction of the 21st Century Buy American Act (S.2196) on Dec. 6, 2017 by Sen. Chris Murphy, D-CN, and a similar bill, H.R. 4812 introduced in the House by Representative David Cicilline. D-RI.  Both bills aimed to strengthen existing Buy American standards, but after considerable support, both failed to be enacted. The legislation focused on five change areas.

  1. The cost of components test for non-commercial-off-the-shelf items would be modified to require that an item’s U.S. component costs exceed 60% of the item’s total costs for the item to be deemed “domestic.” From the current 50%
  2. The so-called “overseas exemption” regarding items procured for use outside the United States would be limited significantly.
  3. Agencies would not be permitted to apply a public interest exception unless it considers the short-term and long-term effects of applying such exception on employment within the U.S.
  4. A program to make or guarantee loans would be created for contractors seeking to manufacture certain items that are not currently manufactured in the U.S.
  5. Actions would be taken to increase transparency related to the use of exceptions

On May 2, 2019, Congressmen Dan Lipinski (IL-3) and Mike Bost (IL-12) “reintroduced the BuyAmerican.gov Act, which helps ensure that federal agencies adhere to Buy American laws and prioritize the purchase of American-made goods. The legislation, H.R. 2472, directs the General Services Administration to establish a website, BuyAmerican.gov, to collect and display information about each request by a federal agency to bypass ‘Buy American’ laws and purchase foreign-made products.  Once the law is approved, manufacturers and others will be able to use the site to identify contract opportunities and challenge pending ‘Buy American’ waivers sought by federal agencies.”

The press release stated, “In the last five years, federal agencies have spent $34 billion on goods manufactured by foreign firms.  The Department of Defense, the largest purchaser of manufactured goods in the world, has spent almost $200 billion on manufactured goods made by foreign companies since 2007.…This bill applies “Buy American” requirements to federal spending programs that are not covered under current law and closes loopholes in “Buy American” programs.

Under current law, federal agencies are exempt from following Buy American laws if American-made goods are unavailable or cost-prohibitive. Unfortunately, federal agencies are too often abusing this waiver authority and there’s no way to hold them accountable,” Lipinski said.”

Senators Rob Portman (R-OH), Chris Murphy (D-CT), Lindsey Graham (R-SC), and Sherrod Brown (D-OH) introduced companion legislation the same day in the Senate.

This bill increases transparency related to waivers and exemptions to the Buy American Act, but it doesn’t address the other four issues that previous bills addressed.

Congress must act to strengthen the Buy American Act, not weaken it, eliminate the incentives for offshoring, and provide incentives for bringing manufacturing back to America. We must protect the supply chain for defense and military products and systems, so that the Defense Department can fulfill its primary mission of defending our country.

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Are Tariffs Reducing the National Debt and Federal Deficit?

Wednesday, March 6th, 2019

There is increasing evidence that Trump’s tariffs are working to expand American manufacturing and create jobs.

According to the February 11, 2019 U.S. Manufacturing Technology Order Report press release of The Association for Manufacturing Technology, “The year- end order total for 2018 was $5.5 billion, up 19 percent from the annual sum for 2017…’We finished a fantastic run up in manufacturing technology orders during 2018, with most analysts looking for good growth in units and modest growth in revenue in 2019,” said AMT President Doug Woods.”

In an Op-Ed for The Hill on February 12, 2019, Michael Stumo, CEO of the coalition for a Prosperous America, wrote: “There’s no doubt that America’s manufacturers are currently rebounding. The tariffs that President Trump imposed a year ago on steel, aluminum, solar panels and washing machines have already created more than 11,000 new jobs.”

In 2016 when he was a candidate, Trump told the Washington Post that he could make the U.S. debt-free “over a period of eight years.” Thus, the question is:  Are Trump’s tariffs reducing the Federal budget deficit and paying down the national debt?

For clarity, the Federal budget deficit is the annual difference between what the federal government takes in as revenue and what it spends for expenses. The U. S. has run a federal budget deficit every year since 2001 by spending more than it raises. The national debt is the total amount of money that has been borrowed and not yet repaid.  

At 7 PM on March 6, 2019 when I finished writing this article, the national debt was $22.109 trillion, and the Federal budget deficit was at $846.945 billion according to the U. S. National debt clock website (it registers an increase every second.)  In a CNN Business article by Lydia DePillis, on January 4, 2019, “The US national debt stood at $21.974 trillion at the end of 2018, more than $2 trillion higher than when President Donald Trump took office, according to numbers released Thursday by the Treasury Department.” On the other hand, the national debt nearly doubled under Obama’s eight-years as President going from $10.626 trillion when he was sworn on January 20, 2009 to $19.947 trillion when he left on January 20, 2017.

A Bloomberg article by Mark Niquette on January 17, 2019, states, “According to data from U.S. Customs and Border Protection, more than $13 billion in duties imposed by the Trump administration were assessed on imported goods as of Dec. 18…Customs and Border Protection collects the tariffs based on the price paid for shipments and the tariff rate in effect, and duties are charged when shipments are released into the U.S. The assessed amount now tops $13 billion, with $8 billion coming from the duties on Chinese goods…The duties are deposited in the U.S. Treasury.”

Thus, although President Trump claims that the tariffs are being paid by China and other countries, the tariffs are actually being paid to the U. S. Treasury by companies that import products.   

As I wrote in my last article, tariffs were a large source of revenue for the U.S. government for over a hundred years. However, in 1913, the 16th Amendment established Congress’s right to impose a federal income tax, and tariffs have represented a smaller proportion of receipts ever since. 

According to an article on the Center for Strategic International Studies website, “As of 2017, 47.9 percent of revenue came from individual income taxes, 35 percent from payroll taxes, 9 percent from corporate income taxes, 5.6 percent from other taxes, and 2.5 percent from excise taxes (taxes on specific goods like gas).”  Their projections for 2018 were that of the “$3.34 trillion in revenue in FY 2018, just $40.437 billion of that is projected to come from customs duties, representing 1.21 percent of the government’s total expected receipts.”

Since nearly half of tax revenue comes from individuals, the growth of high-paying manufacturing jobs as American manufacturing expands will generate more tax revenue and lower budget deficits.  Most people are unaware that it takes four to five persons paying taxes to pay for the unemployment benefits for one out of work person. Therefore, more people working and paying taxes lowers the Federal government’s expenses for unemployment compensation.  In turn, more people working stimulates the economy through their increased spending and consumption.

In fact, economic growth and the tariffs have helped make up for the decline in corporate tax revenue as a result of the reduction of corporate tax rates from a high of 34 percent down to 21 percent. A Breitbart article by John Carney on January 9,2019 states, “Revenue from taxes on corporate profits declined by $9 billion or 15 percent due to the deep cuts in corporate tax rates…The decline in corporate tax revenue, however, was nearly entirely offset by a rise in tariff revenue. These jumped by $8 billion, largely because of new tariffs on steel, aluminum, and Chinese imports imposed by the Trump Administration last year.”

Carney wrote, “Fiscal year i2019 will be the first to fully incorporate the tax cuts passed by Congress and signed by President Donald Trump in 2017. The first quarter’s numbers show that tax receipts have not declined but are in fact rising, albeit at a slower pace than spending. Which means that thanks to the economic acceleration of 2018, tax cuts are close to achieving the Trump administration’s projection that they would pay for themselves.”

We know that President Trump has proposed a 25 percent tariff on $200 billion of imports from China and another 25 percent tariff on all cars and car parts.  Even if the proposed tariffs get up the projected $140 billion, it would still be a long way from making up for the projected budget deficits to pay down the Federal budget deficit, much less start to pay down the national debt.

However, saving the American steel and aluminum industries, fostering the expansion of our domestic manufacturing industry, and preventing the loss of more manufacturing being transferred offshore to China is still reason enough to impose the tariffs on steel and aluminum and justify the additional tariffs on $200 billion of Chinese goods.  

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Tariffs Benefit the American Manufacturing Industry

Wednesday, February 13th, 2019

Most people are unaware that for over 150 years, the American government protected the development and growth of its manufacturing industry with high tariffs, ranging from a low of 5% to as high as 50% in some cases. The first tariffs were imposed by the Tariff Act of 1789, whose purpose was to raise money for the new federal government, slash Revolutionary War debt and protect early-stage American industries from foreign imports.

Prior to achieving its independence, Americans were dependent on goods imported from England, France, and Holland, so it was critical to develop their own manufacturing base to maintain independence as a country in the event of future wars.

These protectionist policies enabled its fledgling manufacturing industries to grow until the United States became the preeminent industrial nation in the 20th century.  American manufacturing dominated the globe for over 70 years.

After World War II, the U.S. switched from protectionism to free trade in order to rebuild the economies of Europe and Japan through the Marshall Plan and bind the economies of the non-Communist world to the United States for geopolitical reasons.

To accomplish these objectives, the General Agreement on Tariffs and Trade (GATT) was negotiated during the UN Conference on Trade and Employment, reflecting the failure of negotiating governments to create a proposed International Trade Organization. Originally signed by 23 countries at Geneva in 1947, GATT became the most effective instrument in the massive expansion of world trade in the second half of the 20th Century.

GATT’s most important principle was trade without discrimination, in which member nations opened their markets equally to one another. Once a country and one of its trading partners agreed to reduce a tariff, that tariff cut was automatically extended to all GATT members. GATT also established uniform customs regulations and sought to eliminate import quotas.

By the 1970s, Japan’s economy was flourishing to the point that Japan became a major exporter to the U. S. for consumer electronic goods such as cameras, stereos, radios, and TVs. During the 1980s, Japan further expanded its U. S. market share with automobiles and machine tools for the manufacturing industry, such as mills, lathes, and turret presses.

Germany focused on high-end products in all of the same markets as the Japanese, so that American products faced stiff competition at the low end and high end.

Manufacturing employment in the U. S. reached a peak of 19.5 million in 1979, and slid down to 17.3 million by 1993 from the effects of job losses from increased imports from Japan, Germany, and other countries because of free trade policies and lower tariffs.

By 1995, when the World Trade Organization replaced GATT, 125 nations had signed its agreements, governing 90 percent of world trade.

Another major blow to the American manufacturing industry took place when the North American Free Trade Agreement (NAFTA) was negotiated under President Bill Clinton and went into effect in January 1994. The agreement was supposed to reduce market barriers to trade between the United States, Canada, and Mexico to reduce the cost of goods, increase our surplus trade balance with Mexico, reduce our trade deficit with Canada, and create 170,000 jobs a year. Twenty years later, the fallacy of these supposed benefits is well documented.

According to the report “NAFTA at 20” released in 2014 by Public Citizen’s Global Trade Watch, “More than 845,000 specific U.S. workers have been certified for Trade Adjustment Assistance (TAA) as having lost their jobs due to imports from Canada and Mexico or the relocation of factories to those countries.”

In 1994, GATT was updated to include new obligations upon its signatories. One of the most significant changes was the creation of the World Trade Organization (WTO.) The 75 existing GATT members and the European Community became the founding members of the WTO on January 1, 1995. The other 52 GATT members rejoined the WTO in the following two years, the last being Congo in 1997. Since the founding of the WTO, a number of non-GATT members have joined, and there are now 157 members.

The loss of jobs accelerated after President Clinton granted Most Favored Nation status to China in the year 2000, and China was able to join the WTO. As a result, the U. S. lost 5.9 million manufacturing jobs from 2000 to 2010, and manufacturing employment dropped from 17.3 million down to 11.4 million in depth of recession in February 2010. In addition, an estimated 57,000 manufacturing firms closed.

On January 31, 2017, the Economic Policy Institute released a report, “Growth in U.S.–China trade deficit between 2001 and 2015 cost 3.4 million jobs,” written by Robert Scott.

Scott stated, “Due to the trade deficit with China, 3.4 million jobs were lost between 2001 and 2015, including 1.3 million jobs lost since the first year of the Great Recession in 2008. Nearly three-fourths (74.3 percent) of the jobs lost between 2001 and 2015 were in manufacturing (2.6 million manufacturing jobs displaced).”

Why were so many jobs lost? A large percentage of the people who lost jobs were in industries decimated by Chinese product dumping and below market pricing; i.e., textiles, furniture, tires, sporting goods, and garments. In addition, American manufacturers chose to outsource manufacturing offshore as the U.S. Department of Commerce data shows that “U.S. multinational corporations… cut their work forces in the U.S. by 2.9 million during the 2000s while increasing employment overseas by 2.4 million.”

Thankfully, manufacturing employment increased to 12.8 million by December 2018 as shown by the chart below. This was the result of a very slowly improving economy, reshoring (returning manufacturing to America), and increased Foreign Direct Investment (foreign manufacturers setting up plants in the U.S.) Notice that it took six years to increase by 904,000 under the Obama Administration, and it’s only taken two years to increase by another 441,000 jobs under the Trump Administration. While an increase of 1.4 million jobs is good news, at this rate, it would take about 30 years to recoup the 5.8 million jobs we lost from 2000 to 2010.

 

We need to accelerate the growth of manufacturing jobs, and that is what the tariffs imposed by President Trump are designed to do.  In the only few short months since the tariffs went into effect, I’ve seen the following headlines about job growth in the past week:

“U.S. Steel Corp. Restarts Texas Plant That Closed in 2016,”  IndustryWeek, February 5, 2019

“Tariffs Helping US Manufacturers Add Jobs, Says Group,” IndustryWeek, February 7, 2019

“US Steel Resumes Construction on Idled Facility,” IEN, February 11, 2019

On December 04, 2018, the article “Contrary to popular belief, Trump’s tariffs are working” by Jeff Ferry, Research Director for the Coalition for a Prosperous America (CPA), stated,  “The tariffs have contributed to this growth directly and indirectly. Directly, we’ve catalogued some 11,000 US jobs that are being created by companies in the four tariffed industries, and that’s not including any of the Section 301 industries. Since that 11,000 tally in August, more investments and jobs have been announced, like the massive $1.5 billion steel plant to be built by Steel Dynamics, which will create some 600 new jobs in the southwest. Solar Power World lists a dozen solar companies now investing in US production of solar modules.”

“At CPA, we built an economic model looking at the effects of the tariffs on the US economy from 2018 through 2021. We found that the tariffs boosted US economic growth, adding $9 billion to GDP this year. Further, our growing economy leads to growing US imports each year. In other words, by boosting our own economic growth, we buy more goods from our trading partners, not less.”

If we want to protect our national security and maintain our national leadership in the 21st Century, we cannot continue down the path of increasing trade deficits and increasing national debt by allowing countries with predatory trade policies to destroy the American manufacturing industry.  I support the new path the Trump Administration is forging by developing and implementing a national strategy to win the international competition for good jobs, sustained economic growth, and strong domestic supply chains.

 

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Navarro Warns of Fragility of U.S. Manufacturing and Defense Industrial Base

Tuesday, December 4th, 2018

If you don’t watch CSpan, you missed an important speech by Dr. Peter Navarro, White House National Trade Council and Office of Trade and Manufacturing Policy Director, on November 9th at the Center for Strategic and International Studies in Washington, D. C.

Dr. Navarro spoke about the manufacturing and defense industrial base and how U.S. economic strength is an element of national security and how it fits with the Trump strategy in dealing with the broader economic and defense issues. Dr. Navarro said that in December 2017, as part of formulating a national security strategy, President Trump introduced the maxim that “economic security is national security.”

He explained that everything that the Trump administration has done is part of this strategy, such as tax cuts, deregulation to reduce the onerous regulations put in place by the Obama Administration, ending the war on coal, and the steel and aluminum tariffs. These are all part of supply side economics to help companies be more competitive and grow in a non-inflationary way.

He commented that instead of the “doom and gloom” of economists, there has been “a flood of new investment and capital expenditures” by steel and aluminum companies, and “the waivers granted by the Department of Transportation have gone down from a flood to a trickle.”

He said, “In my estimation, we have the finest U. S. Trade Representative in U. S. history.  Doing the Section 301 investigation was a power that lay dormant for decades. This is the way we are able to now protect our technology from Chinese predation.  It has been tremendously successful in doing that.”

He outlined how Trump’s tough trade policy, backed up by tough action, has led to the renegotiation of two out of the three main trade deals – NAFTA, the Korea deal, and the WTO.  With regard to NAFTA, now called the USMCA, he said, “The whole essence is a provision to bring domestic content back onshore and share the fruits of the assembly and supply chain with our neighbors to the south and to the north. This is a deal which will strengthen all three countries and strengthen the defense industrial base.”

He commented that President Trump is a man who thinks every day about how to put more American men and women back to work, particularly those who work with their hands. He discussed how during his time on President Trump’s campaign trail, a report came out stating that one out of four people were out of the workforce, the so-called “discouraged workers” – men and women who had given up looking for work. He said, “We were told that the jobs for people who work with their hands were never coming back. Now, we have historically low unemployment., and rising employment among Blacks, Hispanics, and woman. Over a million people are back in the workforce through a fundamental restructuring of the manufacturing and industrial base.  It isn’t just the quantity of jobs; it’s the quality of jobs.”

He said, “I was blessed to be part of a large team that restructured the sale of arms to our allies and partners.  From an economic security point of view, it means more jobs here, good jobs with higher wages.  When you reactivate a supply chain, you activate 400 suppliers in that supply chain in 41 states. It helps expand production lines. If you are able to sell arms to allies and partners, it makes that country stronger.”

He then turned his attention to the findings of the “Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States Report” that was prepared by the Interagency Task Force in Fulfillment of President Trump’s Executive Order 13806.

He said that an Interagency Task Force, led by DoD, created sixteen working groups with over 300 subject matter experts from across the federal government. Nine working groups focused on traditional industrial sectors, and seven working groups assessed enabling cross-cutting capabilities, such as machine tools. The report revealed that there are almost 300 gaps and vulnerabilities in America’s manufacturing and defense industrial base.  The Executive Summary states, “Currently, the industrial base faces an unprecedented set of challenges: sequestration and uncertainty of government spending; the decline of critical markets and suppliers; unintended consequences of U.S. Government acquisition behavior; aggressive industrial policies of competitor nations; and the loss of vital skills in the domestic workforce.”

Dr. Navarro asked the rhetorical questions, “How did we get to the place where the greatest military power in the world faces serious gaps, close to 300 gaps, in the defense industrial base?…What happens when you randomly cut off dollars from the defense department?

He explained, “There are five macro forces that bear down on the defense industrial base:

  1. Budgets and sequestration
  2. Decline of American manufacturing capability and capacity
  3. S. government procurement practices
  4. Industrial policies of competitor nations
  5. Decline of U.S. STEM and trade skills

He commented that the decline of the manufacturing base itself was due to the forces of globalization as well as the industrial policies and unfair trade practices of our economic competitors, our so-called allies, and our strategic rivals, particularly China.  He said, “This report called out China for its policies of economic aggression…China is engaged in unfair trade practices and currency manipulation.  From 2003 to 2014, it was documented that China was the worse currency manipulator in the world…so that we are running up annual trade deficits of half a billion dollars.”

He showed a chart, titled “China’s Categories of Economic Aggression.”  He said, “This chart is founded on the underlying assumption that China is a non-market economy, a state-directed economy. They use international rules when they benefit them and violate them when it’s to their benefit.”  He outlined` six economic strategies that China uses:

  • Protect their home markets from competition and imports
  • Protect China’s share of global markets
  • Secure and control core natural resources globally
  • Dominate traditional manufacturing industries
  • Acquire key technologies and Intellectual Property from other countries and the U. S.
  • Capture emerging industries of the future that will drive future growth and advancement in defense industries.

He said, “There are over 50 ways that China engages in these acts, policies and practices s to achieve these strategies…, if you could negotiate to eliminate 25 of these tactics, you would still have 25 that would hurt us.”

This point is very relevant to the preliminary agreement that President Trump negotiated with Chinese President Xi Xinping at the G20 this past weekend. The agreement included a 90-day delay to the planned January increase in US Section 301 tariffs—which were set to rise from 10 percent to 25 percent on $200B of Chinese imports.

Judging from past history of negotiations with China, it is unlikely that China will keep their part of the bargain of this latest agreement. It will probably unravel before the 90 days are up. Dr. Navarro alluded to the problem of negotiating with China when he said, “The biggest problem is the trust issues. One of the things about working in the White House is that you can ask for stuff. I asked them to give me all the instances where China has agreed to something and then not kept their promise. I got back like five pages of stuff going back 30 years. It’s frightening…”

Space does not permit me to cover his discussion of the tactics China uses. Through research, I discovered that Dr, Navarro had used this same chart when he spoke to the Hudson Institute on Thursday, June 28, 2018, an image of which can be viewed at this link..  It looks to me that he created the chart to be a visual summary of key points made in his report, “How China’s Economic Aggression Threatens the Technologies and Intellectual Property of the United States and the World,” which he submitted to President Trump in June 2018.

His comments included mention that the globalization of the supply chain has resulted in having only a single source for some critical product or components. For example, he mentioned that there is only one company that can make turrets for tanks. He said, “The F-34 has a seven-tier supply chain, and you need to make sure that production lines for parts can continue and expand if there is a surge of demand…If you have foreign sources for products and components, that is a big problem, especially if China is the source.”

He also briefly commented on the problem of the decline of U. S. STEM and trade skills saying that if you have labor shortages because you don’t have enough skilled labor, that is a problem.

He concluded by saying, “The day that Pat Shanahan turned in the report, DoD and other agencies of government were already moving forward to fill these gaps and vulnerabilities. The day that the report was handed in, we signed two Defense Protection Act Title III orders that would help a couple of small companies in that fragile supply chain…We have initiatives for the national defense stock pile program to help with critical material issues. There is an effort to modernize the organic industrial base…This administration is working tirelessly, tirelessly, to fix those gaps and vulnerabilities. This effort really is the purest expression of the principle of economic security is national security.  We will strengthen America’s manufacturing and defense industrial base, and in the process, we will create jobs and build factories and better protect our homeland…”

I’ve made the point repeatedly that we can’t protect our national security or even defend our country without a strong manufacturing base. After writing about how and why we needed to save and now rebuild our manufacturing industry by writing three books and over 300 articles since 2009, it is gratifying to me that action is finally being taken to address this situation the Trump Administration.

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How tariffs Could Rebalance U.S. trade relations with China

Tuesday, November 27th, 2018

President Trump has been accused by many of starting a trade war. Are we really in a trade war and did the U. S. start it?  Economist Ian Fletcher recently stated “I define trade war as a cycle of tariff and retaliation where the retaliations are driven not by rational desire to balance trade or achieve the benefits of a tariff-protected economy, but simply by one-upping the other side’s last cycle of retaliation…I believe it is absolutely crucial to make the distinction between trade war, and the ongoing trade conflicts which have always been going on even under nominally free-trade circumstances, clear to the public.  If China imposing tariffs on us for years hasn’t been “trade war,” why is it suddenly “trade war” now that we’re doing the exact same thing?”

Michael Stumo, CEO of the Coalition for a Prosperous America, recently stated, “China started the trade war in 1994 with currency devaluation and state-directed capitalism. Then they got better at it.”

Mr. Stumo is right because for the past 24 years, the U. S. has experienced an ever-increasing trade deficit with China, transferring America’s wealth to China and losing nearly six million manufacturing jobs. In 1994, our trade deficit with China was $29.5 billion, and by 2004, it had doubled to $162.3 billion. After a slight dip in 2009 during the depths of the Great Recession, the trade deficit grew to $375 billion in 2017.

Previous administrations did nothing to fight against the trade war that China started.  In fact, they aided China’s efforts to win the trade war starting when China was granted “Most Favored Nation” status by Present Clinton in 2000.

The January 31, 2017 report, “Growth in U.S.–China trade deficit between 2001 and 2015 cost 3.4 million jobs,” written by Robert Scott, Director of Trade and Manufacturing Research at the Economic Policy Institute, states that when China entered into the World Trade Organization (WTO) in 2001, “it was supposed to bring it into compliance with an enforceable, rules-based regime that would require China to open its markets to imports from the United States and other nations by reducing Chinese tariffs and addressing nontariff barriers to trade.”

However, Scott wrote, “China both subsidizes and dumps massive quantities of exports. Specifically, it blocks imports, pirates software and technology from foreign producers, manipulates its currency, invests in massive amounts of excess production capacity in a range of basic industries, often through state owned enterprises (SOEs) …China has also engaged in extensive and sustained currency manipulation over the past two decades, resulting in persistent currency misalignments.”

Robert D. Atkinson, President of the Information Technology and Innovation Foundation (ITIF) expanded on Chinese mercantilist policies in his report, “Enough is Enough:  Confronting Chinese Innovation Mercantilism (February 2012). He wrote, “China’s strategy is to win in virtually all industries, especially advanced technology products and services… China’s policies represent a departure from traditional competition and international trade norms. Autarky [a policy of national self-sufficiency], not trade, defines China’s goal. As such China’s economic strategy consists of two main objectives: 1) develop and support all industries that can expand exports, especially higher value-added ones, and reduce imports; 2) and do this in a way that ensures that Chinese-owned firms win.”

In a speech to the Hudson Institute on October 4, 2018, Vice President Mike Pence stated, “Over the past 17 years, China’s GDP has grown 9-fold…And the Chinese Communist Party has also used an arsenal of policies inconsistent with free and fair trade, including tariffs, quotas, currency manipulation, forced technology transfer, intellectual property theft, and industrial subsidies doled out like candy, to name a few. These policies have built Beijing’s manufacturing base, at the expense of its competitors – especially America.

He commented, “Yet previous administrations all but ignored China’s actions – and in many cases, they abetted them. But those days are over. Under President Trump’s leadership, the United States of America has been defending our interests with renewed American strength…we’re also implementing tariffs on $250 billion in Chinese goods, with the highest tariffs specifically targeting the advanced industries that Beijing is trying to capture and control. And the President has also made clear that we’ll levy even more tariffs, with the possibility of substantially more than doubling that number, unless a fair and reciprocal deal is made.”

Most people are unaware that America staunchly protected its domestic industries with tariffs on imports until the end of WWII.  On August 16, 2018, MarketWatch published an article by Jeffrey Bartash, in which he stated, “One of the very first bills new President George Washington signed, for instance, was the Tariff Act of 1789. He inked the bill on July 4 of that year. The tariff of 1789 was designed to raise money for the new federal government, slash Revolutionary War debt and protect early-stage American industries from foreign competition.

Most goods entering the U.S. were subjected to a 5% tariff, though in a few cases the rates ranged as high as 50%. It was the first of many tariffs that Congress passed over a century and a half. They generated the vast majority of federal revenue until the U.S. adopted an income tax in 1913. In some years tariffs funded as much as 95% of the government’s annual budget.”

Why did we allow the Chinese to win the trade war for so long?  Because our economic “experts” and advisers to past administrations naively thought that free trade and free markets would have a transformative effect on China’s totalitarian form of government, gradually democratizing it.

The question is whether or not the tariffs will help rebalance U. S. trade with China.  In the article posted on the trade blog of the Coalition for a Prosperous America (CPA) on July 30, 2018, CPA Research Director Jeff Ferry examines “China’s heavy dependence on – or overexposure to – the US for their trade surplus and their exports. He wrote, “But the fundamental message of all the data is that the US is not only the world’s number one consumer and importer, but China’s number one customer. That makes China more dependent on us than we are on them.”

In other words, China would be hurt more by the tariffs reducing their imports to the U. S. than the U. S. would be hurt by having to pay more for imports. Over time, the tariffs would rebalance our trade with China as imports of Chinese goods are reduced, which would reduce our deficit with China.

In contrast to numerous articles projecting job losses from the tariffs, the Coalition for a Prosperous America (CPA) published a press release on August 17, 2018, that provided “details of its new ‘Tariff Job Creation Tracker’ that tallied US manufacturing jobs gained in the wake of recent tariff actions. CPA found 11,100 jobs announced or planned in four major sectors affected by tariffs. These results have now prompted a corresponding study of job losses related to the tariffs. To date, CPA has identified only 514 jobs lost specifically due to tariffs—which means that job gains exceed job losses by a 20:1 ratio.”

On November 27, 2018, CPA released a press release: “Steel Tariffs Creating Jobs, Boosting GDP” which stated:  “This ground-breaking economics study by the CPA Economics team shows that the steel tariffs are benefiting the US economy,” said CPA Chairman Dan DiMicco. “The same is true for other tariffs implemented this year. If we continue to follow rational trade policies, the benefits will be felt by every worker, farmer, and shareholder in the US.”

CPA Research Director Jeff Ferry said, “The performance of the US economy since the steel tariff was implemented in March has been outstanding, with over a million more jobs in the US economy today than in March, and GDP growth roughly half a point higher than economists had predicted.”

Already the tariffs are resulting in an expansion of U. S. steels jobs and investment by U. S. steel companies in their facilities. On August 17, 2018  Manufacturing News & Insight featured this article “US Steel to Invest $750M in Gary  Works Plant in Indiana” stating, ”U.S. Steel plans to spend at least $750 million to upgrade a century-old steel mill along northwestern Indiana’s Lake Michigan shoreline…Company and government officials said Thursday that the project will help preserve Gary Works’ nearly 3,900 steelworker jobs, and could help ensure the 112-year-old mill lasts another century. The investment accounts for more than a third of U.S. Steel’s $2 billion asset revitalization program…”

Manufacturing is the foundation of the U.S. economy and our country’s large middle class. Losing the critical mass of our manufacturing base would result in the loss of the large portion of our middle class that depends on manufacturing jobs. American manufacturers supply the military with essentials including tanks, fighter jets, submarines, and other high-tech equipment. We can’t manufacture these goods without domestic steel and aluminum.  If we lose the domestic capacity to produce steel and aluminum, our national defense would be in danger, and it would be impossible to maintain our country’s position as the superpower of the free world. Let’s give them time to work to rebuild our U. S. steel and aluminum industries.  Hopefully, the tariffs will inspire China to open up their markets to U. S. goods to create to a freer, more open trade relationship between our two countries.

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MFG Day Motivates Youth to Pursue a Career in Manufacturing

Tuesday, October 23rd, 2018

Since 2012, thousands of manufacturers around the country open their doors to inspire and recruit the next generation of manufacturers on Manufacturing Day (MFG Day), which was held this year on Friday, October 5th.

MFG Day is produced by the National Association of Manufacturers and the Manufacturing Institute. MFG DAY had ambitious goals: “to change public perception of manufacturing, inspire students to pursue manufacturing careers, and strengthen the future of manufacturing by avoiding the talent shortage on the horizon.” According to the MFG Day website, “We wanted to correct the idea that manufacturing involved repetitive, unskilled tasks that happened in dark, dirty factories — a ridiculous idea to anyone who has actually worked in manufacturing — and show people what manufacturing really looks like.”

Those of us in the industry know that today’s manufacturing jobs are high skilled, and take place in clean, well-lit, technologically advanced facilities. The problem was that there was no way to know whether perceptions were changing until Deloitte became a sponsor of MFG DAY in 2015 and conducted surveys of attendees.

The results of the survey of 2015 showed:

  • 81% of students emerged “more convinced that manufacturing provides careers that are interesting and rewarding.”
  • 62% of students were “more motivated to pursue a career in manufacturing”

The 2016 survey results showed that the percentages rose to 84% and 64% respectively.

The 2016 Deloitte report said, “Projections indicate that roughly 600,000 people attended MFG DAY events in 2016 and that 267,000 of them were students. That means that nearly 225,000 students walked away from their MFG DAY 2016 event with a more positive perception of manufacturing, according to Deloitte’s findings…. Based on the 267,000-student attendance figure, that’s potentially 171,000 new members of a next-generation manufacturing workforce.”

The Deloitte surveys showed that “71 percent of student attendees both years said that they “were more likely to tell friends, family, parents, or colleagues about manufacturing after attending an event,” meaning that they weren’t just convinced — they were inspired.”

This year, the MFG Day website listed 2,739 events planned across the country. In California, there were events planned at more than 250 locations throughout the state. The CMTC October 9th newsletter stated, “This year, CMTC and its California’s Manufacturing Network were much more active in sponsoring, organizing and coordinating events statewide. CMTC was also very committed in pairing up schools wishing to attend Manufacturing Day events with manufacturers and other organizations hosting open houses, career fairs, and expos. CMTC and its California’s Manufacturing Network’s efforts directly resulted in over 50 schools attending these events. At these events, students received first-hand exposure about today’s manufacturing technologies in industries that employ highly-skilled and well-paid individuals while offering exciting, rewarding, innovative work environments.”

Since I moved up to Hemet, CA in September, I attended events in Riverside County instead of San Diego County.  There were five events in the city of Riverside, one in Menifee, one Murrieta, one in Perris, and one in Redlands.  This is in comparison to my former home county of San Diego with 22 in the city of San Diego, three each in Carlsbad and San Marcos, two in El Cajon, and one each in Chula Vista, Oceanside, and Vista.

I attended only three events in Riverside County because they were located so far apart, and most of the events were held in the same time period between 10 AM and 2 PM. I began my day by attending the event in Menifee at Mt. San Jacinto College to introduce their new Makerspace to students.  The auditorium was nearly filled with students form Santa Rosa Academy where a panel of business professionals and professors shared the value of their education to their careers.  The event was sponsored by the City of Menifee, the Menifee Valley Chamber of Commerce, and CMTC. The audience was welcomed by Major Bill Zimmerman and Tony LoPiccolo, Executive Director of the Chamber.

Fortunately, I was able to get a private tour of the MakerSpace by Hal Edghill, the MakerSpace specialist, before the students had finished listening to the panelists. The MakerSpace has 15 inexpensive 3D printers and two more advanced 3D printers for students to use for their projects, as well as a small laser cutter/engraver. Mr. Edghill said the MakerSpace just opened in August, so this is the first semester it is available for students to use for projects.

There were so many students that they were divided into four groups for their tour.  Afterward, the students enjoyed pizza and soda before returning to school.

I then drove up to Riverside for a tour of Aleph Group, Inc. (AGI). AGI builds custom bloodmobiles, mobile medical and dental clinics, container hospitals, emergency command vehicles, mobile command centers, and specialty trailers, modular units, and vehicles.  Founder and President/CEO Jales De Mello conducted the tour personally, and we saw four projects in various stages of construction.  One bloodmobile was completed, ready to ship to Saudi Arabia.  Another nearly completed project was a mobile medical/dental clinic being built for a northern California Indian reservation.  The largest project under construction was a modular clinic.

Mr. de Mello said, “I started the company in 2001 with the goal of “making a positive on people’s lives. Our mobile health clinics are custom designed from the ‘ground-up,’ and are fully equipped for turnkey operation. Sizes range from 28 ft. up to 50 ft., and all of our vehicles and units are 100% wood-free construction, so as to eliminate all possibilities of bacteria and fungus growth associated with the use of wood products. The all-aluminum construction is lighter weight, has greater performance and longevity, and improves fire safety.” He believes that “his industry and its leaders must take a proactive approach in solving the needs of mankind.”

Next, I drove to Phenix Technology, Inc., which manufactures high quality fire helmets and other fire safety products and collectibles.  I arrived early for my 2:00 PM tour, so while the formal tour of manufacturing was being conducted, I had the pleasure of getting a private tour of their collectible museum of fire helmets from around the world and memorabilia related to fireman and fire stations. Museum tours are available upon request.

Phenix Technology, Inc was founded in 1972 by Former California State Fire Marshall, Ronnie Coleman and former Assistant Chief of the California State Fire Training Division, Ray Russell to make higher quality fire helmets. Four decades later, Phenix is still a family business who continues to proudly manufacture in the USA, and Mr. Coleman and Mr. Russell “are still there and available to answer any questions you might have about firefighter head protection.”

Tyler Meyer conducted the formal tour, and I saw three different styles of fire helmets being made in the production area.  Tyler said they have gone through Lean training and greatly improved their productivity and reduced lead times.  He said, “We can now make up to 20 helmets per hour instead of four.  Our lead times for most of our products, except for handmade leather helmets. went from 6 weeks to 6 hours in some cases. Our sales went up 51%, and our Net Operating Income went up 1600%+. We reduced our inventory by over $100,000, and our inventory turns are almost unmeasurable as we do everything just in time. We haven’t had any significant price increases in three years though our COGS increased as much as 30% because our controllable costs are down.”

He referred me to their Director of Global Operations, Angel Sanchez, Jr., who emailed me that “it is more important to talk about how Lean has created a culture of continuous improvement and total employee engagement. How Monday is most of our people’s favorite day of the week, not Friday. How we have learned that Lean is about creating a mindset where you see waste in everything and how everyone works together to eliminate it. If you are encouraging people to start a Lean journey, the focus has to be on the pillars of Lean, not the metrics.”

I was happy to get another example of the difference a Lean transformation can make in company performance and how important it is for American companies to become Lean enterprises to help rebuild American manufacturing.

I encourage more manufacturers to plan to participate in MFG Day in 2019.  Open your company to a tour.  Invite the families of your employees.  Invite your customers.  Invite the students of local high schools.  Invite your elected officials.  Many of them have never been in a manufacturing plant.  Let’s make 2019 the most successful MFG Day to date.

 

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Lean Frontier Summit Focuses on Transformation into Lean Enterprise

Tuesday, October 9th, 2018

On September 20-21,2018, Lean Frontiers held their annual Lean Leadership Summits at the Westin Hotel on Jekyll Island.  This was my fifth year to be invited as a speaker at the conference. This year’s summit continued the combination of Lean Management,/Lean Accounting, and Lean H.R./People Development summits that was begun last year.

Co-founder Dwayne Butcher explained last that year that “It’s about time that the whole enterprise be involved in becoming a Lean company. Lean is a business model and must therefore include every part of the business, including those in Executive Leadership, Accounting, HR, Sales, Product Development, Supply Chain. We need to breakdown the silos between these departments.”

Between the keynote speakers, there were four tracks related to Lean Management/Lean Accounting, and Lean H.R./People Development.  Besides giving my own presentation, “How Reshoring and Lean are Helping Rebuild Manufacturing,” based on my new book Rebuild Manufacturing – the key to American Prosperity, I attended the keynotes and several of the sessions in the Lean Management and Lean Accounting tracks.

Lean Frontiers is not a consulting firm. Its sole focus is to provide learning opportunities to

address:  Enterprise?wide adoption of Lean and the foundational skills needed to become a Lean company.

Co-founder Jim Huntzinger, said, “The first Lean Accounting Summit was held in 2005, and out of that summit, Lean Frontiers was born.  Lean is still perceived as a program with short term results by too many, and we need to make the transition to Lean as a business model.  We need to traverse unclear territory — trust the process to go from current condition to the target position. We can use XYZ Thinking:  If we do X, then we will get Y, but if we get Z instead, then we will learn.”

Mike DeLuca of the Lean Enterprise Institute introduced a Lean Accounting A3 for attendees to provide ideas on how to achieve the aspiration of having Lean Accounting be self-sustaining within five years.

Jim announced that the Journal of Cost Management has taken an interest in the summit and has a booth in the foyer. Lean Six Sigma Master Black Belt Gary Kapanowski, who is a Guest Editor for the Journal, invited attendees to sign up to contribute articles to the magazine in the coming year as they are interested in running more stories about Lean in the magazine.

Then, he introduced the first keynote speaker, Karen Martin, author and President of the Karen Martin Group, spoke about her new book, Clarity First.  Clarity was a concept that she introduced in her book, The Outstanding Organization, wherein she looked at common patterns at companies and individual performance. She covered four areas: clarity, focus, discipline, engagement in her previous book and was asked by her readers to expand on the topic of clarity.  She discussed “what is clarity and what it is not,” saying that “it is coherence, precision, and elegance. Information needs to be complete accurate and easy to understand. Think of your target audience as your customer. The opposite of clarity is ambiguity, which complicates, slows, frustrates, increases risk, and is expensive. Ambiguity is manmade and different than lack of certainty. Strategic ambiguity can be useful for certain purposes. “

She asked: “What type are you? Clarity pursuer, clarity avoider, clarity blind” She stated, “Children have a natural curiosity but it gets stamped down when they ask why. Same thing can happen at work. Close to curiosity is humility about how you are communicating and how you are being received. We have 180+ cognitive biases that affect communication. Rushing hampers clarity; take time to be clear. Fear can be underlining lack of clarity. Fear can be biggest reason for resistance to Lean transformation.

She explained that clarity liberates purpose, priorities, process, performance, and problem solving:

Purpose – great way to get people engaged about what you do.

Priorities – defining true north.

Process – Value stream thinking is critical to defining process

Processes: documented, current, followed, consistently monitored, regularly improved; Standard work description is necessary for each task

Problem solving – CLEAR

C = clarity

L = learn

E = experiment

A= access

R = Rollout

In conclusion she recommended, “Infuse clarity into your organization…You need a scoreboard at all levels of company showing how you are doing.”

Prior to the afternoon keynote speaker, Jean Cunningham announced the awardees for the Lean Enterprise Institute’s Lean Accounting professor and student awards.  Professor Laurie Burney of Baylor University and her student, Katie Kearny of KMPG received the award for their research on Lean Accounting that will be published this fall.

Harry Moser, founder and head of the Reshoring Initiative was the afternoon keynote speaker. He spoke on “TCO/Reshoring:  Simplify your Lean Journey, Improve Employee Morale.”  Harry developed the Total Cost of Ownership (TCO) calculator that quantifies he hidden costs of doing business offshore, which is free for companies to use at www.reshorenow.org. Harry highlighted the fact that the tide turned in 2016 between offshoring and reshoring as reshoring increased by 500% and offshoring fell by 75%.  Reshoring and Foreign Direct Investment (foreign companies setting up plans in the U.S.) are responsible for an increase of nearly two million jobs in the U.S.  He reminded the audience that Lean leaders, W. Edwards Deming, John Shook, and Jim Womack all advised companies to identify the “true cost,” and that offshoring multiples the wastes to be eliminated through Lean:  overproduction, waiting transport, overprocessing, inventory, motion, and defects. He stated that among the top ten reasons for reshoring are:  “quality/rework/warranty issues, freight costs, inventory, intellectual property risk, rising wages, and communication problems.”

He said, “By understanding the advantage of producing near the consumer, and the small TCO gap instead of the large price gap, U.S. companies can justify domestic investment, process improvement, automation, training, etc., and they do not have to sacrifice quality, delivery, time-to-market, or employees to be competitive and profitable.”  He announced two awards for reshoring for 2019: the first Sewn Products Reshoring Award and the second Metalworking Reshoring Award.

In conclusion, he invited attendees to cooperate with the Reshoring Initiative by testing Made-in-USA impact on volume and price, incorporating TCO in your lean efforts, and documenting their reshoring cases.

The day ended with a Townhall Conversation on “The Lean Economy” in which panelists Jim Huntzinger, Tom Jackson, Harry Moser, and Bill Waddell discussed how Lean business and practice can be one of the most profound impacts for elevating a strong economy.

On Friday morning, Mike Wroblewski, author of Creating a Kaizen Culture and President of Dantotsu Consulting LLC, was the keynote speaker on the topic of “Leading a Lean Transformation.”  He said, “Most companies measure performance by EBITDA, which he defined as earnings before interest, taxes, depreciation and amortization. Cutting heads is the first thing management does to improve EBITDA by reducing costs. Which path are you on? Lean can be like the path to hell. You need upper management support but you also need lower level support. There are two things you can control – your effort and your attitude.”

He was taught Lean by Shifeo Shinzo from Japan in 1985 when he worked at Hill-Ron. He shared, “We did Kaizen events all week for SMED and after repeated Kaizen events, we got our die change from one hour down to 4 1/2 minutes.” He admonished, “ Kaizen needs to be your way life. It’s the culture. Lean isn’t meant to find blame faster. What do you do in the course of the day? Check email, respond to emails, make phone calls, plan, etc. How much time should you spend in Gemba? You should be spending 80% of your time in the Gemba. The standard you walk by is the standard you set for others.”

Space doesn’t permit me to highlight all the excellent breakout presentations during the summit.  If you haven’t started on your Lean journey, I recommend that you do so soon. If you are already on a Lean journey,I encourage you to put next year’s Lean Leadership Week on your calendar.

 

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Training for Skills and Lean are Important to San Marcos Region Companies

Wednesday, July 11th, 2018

My time in San Marcos, Texas included visits to more traditional companies, such as Mensor. On my first day, we met with Jason Otto, President of Mensor. He told me that he has been with the company for more than two decades, starting as an engineer, before moving up the management chain as product manager, director of sales, and other positions before becoming President.

He said, “Mensor was started in Houston in 1968 by Jerry Fruit and a small group of engineers from Texas Instruments. Jerry had an idea for designing and manufacturing precision pressure measuring and pressure calibration instruments and systems. The company shipped their first product, a quartz manometer for the aerospace industry, in 1970 and most of the company’s business was government contracts.

The company relocated to San Marcos in 1978, but in 1981, our building caught fire and burned to the ground. The company kept going with the help of vendors and customers while a new 26,000 sq. ft. building was built on the same site in only five months.  The employees kept their jobs by actually working to help build the new building.

Otto explained, “We acquired our control line of products from Texas Instruments and introduced new controller products in 1983, 1992, and 1997. We introduced a Quartz Pressure Calibrator in 2001, and the modern CPC6000 Automated Pressure Calibrator in 2004.

In 2006, we were acquired by WIKA Alexander Wiegand SE & Co. KG, a very large privately held company in Germany, with a U. S. facility in Lawrenceville, Ga. It was time for the owners of the company to “cash out,” and it was a smooth transition.

Our core competency is pressure sensor accuracy, and it is a very niche market.  It is tricky to hire talent, so we have to hire from competitors, as well as engineering graduates.  Texas State University, Texas A &M, and the University of Texas in San Antonio and Austin have provided many of our new engineers.  We also need calibration lab technicians, people skilled in technical assembly, as well as machinists for our in-house machine shop. We haven’t had any trouble hiring machinists.

I asked if the company has been through training in Lean Six Sigma, and he said, “Our Lean training started after our acquisition by WIKA. We currently have two Lean Six Sigma Black Belts, who do about 6 -8 kaizen events per year.  We practice 5S and use QCSD boards for visual management of teams. We put together cross functional teams, use cellular assembly, and have a vendor qualification program. We have never outsourced any of our manufacturing overseas, but we have customers in China and Malaysia. We use the WIKA global sales team, but use manufacturers reps to sell into Mexico and the maquilas because it is a long sales cycle. WIKA has 48 locations around the world, and as part of the WIKA Calibration Line, we represent about 6 percent of the company’s business.”

Next, we met with John Malik, General Manager of Altra Couplings in San Marcos. Malik said, “I grew up working in my dad’s auto parts store. I have been with the company since I graduated with an engineering degree and have survived three sets of company owners.  The company was started in Houston and moved to San Marcos in the early 1980s. We were sold to TH Woods in 1990, and then sold to ATR Inc. in 2007, whose corporate headquarters is located in Santa Ana, Calif. ATR has 28 plants and production facilities around the world, with seven locations in the U. S. We have about 120 employees currently.”

Malik explained, “We are a leading global designer, producer and marketer of a wide range of mechanical power transmission components. Our products control and transmit power and torque in virtually any industrial application involving movement and are sold in more than 70 countries worldwide in industries including: energy, general industrial, material handling, metals, mining, specialty machinery, transportation, and turf and garden. Our portfolio of products includes clutches, brakes, couplings, as well as gearing and power transmission components. However, we don’t do any high-volume couplings for the automotive industry.

When I asked about Lean, he said, “We have a team of company employees who have helped us become lean, and the productive gains are essential. It really comes down to asset utilization of people assets and capital assets.  You want to keep them adding value continuously. The approach we have taken is a value stream approach to our products. We go narrow and deep in an area and develop it, and then move on to another area.”

Malik added, “We have even implemented Lean Accounting.  I spent a lot of time with engineers to understand the true costs. We have some good decision rules for the “make or buy” decision process.  Our biggest promoter is our CFO, but our Lean program goes all the way to the top.”

I asked what Altra’s biggest problem is, and Malik responded, “Finding new employees. This is an area that doesn’t have a long tradition in manufacturing. People don’t know what manufacturing looks like, and the mind set for years has been getting a college degree rather than vocational training.   There are never enough trained applicants, so we train our own workers. We now have second and third generation workers. It is a lot about how we treat people and the opportunities for growth.”

He added, “We make all our own castings in our Erie, Penn. plant and buy the forgings we need.  We have three manufacturing facilities in the U.S. and have a plant in the U.K. We bought a company in Germany and have a plant in China.  That plant makes some parts for us, and we make some parts for them.  We also have a small facility in Brazil in order to have local content and avoid the high tariffs.”

On my last day in San Marcos, we visited CFAN, which was formed in 1993, as a 50/50 Joint Venture between GE Aviation and Saffron (SNECMA) of France. The partnership was created to introduce composite fan blades in a GE90 engine that powers the Boeing 777.  CFAN has leveraged the success of this product to introduce additional fan blades on the GEnx engines that power the Boeing 787 and Boeing 747-8.

We met with Mo Mattocks, who is the President and Plant Manager for CFAN. He is responsible for all plant operations including over 500 employees executing product delivery, quality, and productivity, as well as plant financial results and personnel safety. Mattocks said, “I am originally from New York, but graduated for the University of Michigan and Georgia Tech. I have worked for GE for 21 years and previously worked at the GE Aviation in Kansas City and Atlanta.”

He explained, ”CFAN successfully transferred the composite fan blade manufacturing process from the laboratory to the shop floor and delivered the first production GE90-94B fan blade in September 1994.  At first, our quality level was only about 80 percent, so there were a lot of rejects. We kept improving our processes using the widely recognized Six-Sigma methodology, focusing on eliminating defects and reducing variation in shop floor. Over the years, we kept improving our processes, so that our scrap rate is down to only about 1 percent.

In 2001, we started production of the composite fan blade for the GE90-115B growth engine. The GEnx1B fan blade was introduced to production in 2005 and the GEnx2B in 2007. In 2016, we started to make fan blades for the GE9nx, which had its first test flight last week. We are an approved FAA repair station for the GE90 and GEnx fan blades fan.  We have doubled our volume since 2009 and have produced more than 20,000 composite fan blades at our plant. We produce about 165 fan blades per week, and each fan blade takes about 340 hours. We expanded the plant from 160,000 sq. ft. to 275,000 sq. ft., and the whole plant is temperature controlled to keep the composite material from “curing” on hot days.”

I told Mr. Mattocks that in the past, I sold composite parts as a sales rep for a company located in Post Falls, Idaho so am familiar with the painstaking production methods used for pre-preg layup composite parts. When we walked the plant floor to see the whole production cycle from start to finish, I could see how meticulous the hand layup process is for these very critically dimensioned fan blades. It would be too tedious to describe the whole production process from start-to-finish, but the number of steps it takes to produce a finished fan blade was mind-boggling.

My last stop before leaving the San Marcos region to spend the weekend with my nephew and his family at their nearby ranch was to RSI Inc., located in Kyle, Texas. We met with President Harish Malkani, who founded the company in 1983. Malkani is originally from India where he earned a B.S. (Chemistry) from the University of Poona. He also received a degree in Chemical Engineering from the University of California at Berkeley and a Graduate Degree in Marketing from the University of California at Berkeley. He was employed with Ray Chem Corp. from 1969 to 1983.

While RSI’s website describes the company as distributor stocking and supplying standard mil-spec products including, but not limited to high-speed interconnect solutions and a wide range of electro-mechanical components, Malkani said, “I started the company as a distributor but over the years we became a value-added manufacturer. I can’t tell you about all of the defense and military programs for which we have used our expertise to provide solutions to the government and defense contractors because they were classified programs. We specialize in providing RFI/EMI solutions. We have done work for BAE, Lockheed, Raytheon, Aerojet, and other Department of Defense prime contractors.  We are a Silver certified supplier for Boeing. We also do work for companies in the energy, industrial, transportation, and the oil and gas industries.”

When we toured the shop floor, I could see that the company has the manufacturing, assembly, and test equipment to produce custom assemblies and systems for a variety of applications.

Malkani noted, “Our biggest problem is getting qualified workers.  I have hired from Texas State University, but I need more help in finding people with technical skills who are not engineers.  We are going to train some teachers at the local high school in our technology.”

He was assured by Dr. Cara DiMattina-Ryan, Director of Existing Business & Workforce Development at the Greater San Marcos Partnership (GSMP) that they would help him get connected to the local programs at the Austin Community College’s local Hays Campus.

Since finding technical skilled workers is critical to all of the companies I visited, I was happy that my hosts arranged for me to have lunch the first day with Dr. Hector Aguilar, who is the Executive Dean of Austin Community College’s Continuing Education division. He said, “Maintaining a talented and productive workforce in a growing local economy requires a commitment to employee development. ACC meets the training needs of businesses by partnering with them to tailor a custom learning curriculum that can be delivered on-site to employees. We have seven campuses in the western Austin region and have about 60,000 students enrolled.  Each community college in the Texas system specializes in training for the types of industries in their area. Houston specializes in oil and gas. Austin specializes in semiconductor, aeronautical, and sensor industries, and San Antonio specializes in training for automotive. “

He explained, “The Texas Workforce Commission is responsible for helping companies get training for their employees, and Texas pays for the training. Samsung was the first large manufacturing company for which we provided training when they came to the region. They received a grant of $3 million for the training. Samsung came up with 12 techniques to be taught in an around the clock program under a three-year program (24-hours a day, seven days a week).  The original 12 topics became 63 topics, and we trained 1,530 employees in the three years. We had to hire specialists in industries and then cross-train each one so they could teach multiple topics. We did a pre-test and post-test for students. The average pre-test score is 20 percent, and the average post-test score is 85 percent.

He added, “Under our Workforce Solutions Rural Capital Area, training for future employees is provided for free.  For example, when EPIC Piping bought an existing facility in San Marcos in 2014, they needed to hire new employees. They do specialized welding of pipes. GSMP came to us to help set up training for new employees.”

I was informed by Ashley Gossen, Vice President of Marketing & Communications for GSMP that underemployment is high in the region – a selling point for companies looking for talent. She said that the greater San Marcos region has more than 5,400 workers with bachelor or graduate degrees working in jobs that don’t require them.

It is obvious that the San Marcos region has a great deal to offer startup, existing, and transplant manufacturers: a good business climate, low taxes, skilled workers, and the educational facilities and programs to train new workers.

 

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New Material Technologies Spur Growth in San Marcos, Texas Region

Thursday, June 21st, 2018

During my visit to San Marcos in March, I visited a diverse group of manufacturers both as to products and size of company.  The first company I visited, Urban Mining Company, is still in Austin waiting to relocate to San Marcos when their 100,000-square-foot building is ready later this year.

Right after being picked up from the airport by my hosts, we met with Scott Dunn, who is the CEO of Urban Mining Company. Dunn said that he had attended the United States Naval Academy and then received a degree from the University of Southern California. He said, “I started the company in late 2015, and we moved into our first space in January 2016.

We sought major investors from around the county because we wanted to be able to commercialize our technology very quickly. Out of 90-100 investor groups, there were only a few that fit our bill.  We spent a lot of time and money protecting our Intellectual Property with patents. We knew that we had original technology and had to be able to protect it. In June 2016, we secured $25M Series A Funding for to build our recycled rare earth magnet manufacturing facility.  After careful consideration, we chose San Marcos because it offers the skilled workforce and infrastructure needed to support our fast-growing operation. Once the facility is complete, we will be adding more than 100 manufacturing and technology jobs to the region.”

He explained, “I spent a lot of time in China to build relationships and skills to be able to buy down time from factory owners in China that had over capacity. Because of where we are right now, we are able to get a supply of components to use for recycling the rare earth materials. We are the only company producing Neodymium Iron Boron (Nd-Fe-B) rare earth permanent magnets in the United States. Our company’s patented Magnet-to-Magnet process repurposes domestic source materials from end-of-life products, such as hard disks or motors, to manufacture high-performance Nd-Fe-B magnets, using zero chemical inputs and wastewater. The magnets are then used to support the development of technology applications across the consumer, medicine, defense, aerospace, clean energy, and industrial sectors.

He added, “Most people don’t understand the ubiquity of magnets. The only rare earth mine and production facility in the U. S., MolyCorp Inc., went into bankruptcy in 2010, and the assets were bought by Chinalco’s subsidiary, Shenghe Resources in 2011.  The equipment was dismantled and moved China.  It’s critical that we develop this technology because China has the goal of controlling the supply of rare earth products by 2025.  If they succeed, then they could control the world. “

He concluded, “We are working with Tesla, GM, Ford, and many other OEMs like Raytheon, Northrop Grumman, and Boeing to develop products for the commercial and military/defense industries. I believe that reusing rare magnets is critical to a cleaner future, and we have created a closed loop supply chain to upcycle these materials into products that can have a positive impact.”

When we visited Texas State University’s incubator, STAR Park, we met with Dr. John C. Carrano, founder and CEO of Paratus Diagnostics, a firm that specializes in medical devices for point-of-care diagnostics.

 I asked Dr. Carrano how long he has been in the incubator. He responded, “We have been here just over two and a half years, but I actually founded the company in 2012. We are well past the startup phase and are about 18 months away from being cash positive. It’s a long and complex product development cycle for medical devices. Medical diagnostics is not viewed by investors as a get-rich-quick kind of venture, but it is going to be a $10 billion industry in the future. “

I asked him about his background that led him to start the company, and he said, “I retired from the Army in 2005 after 24 years. I am originally from Long Island, NY, but obtained my B.S. from West Point and my Ph.D. in Electrical Engineering from the University of Texas at Austin. I was recruited to teach at the United States Military Academy at West Point in the Department of Electrical Engineering and Computer Science. Then, I was recruited to be a program manager at DARPA where I led several major Defense Department programs related to bio-sensing after the Anthrax attacks occurred in Washington, D. C.  Prior to founding Paratus, I was Vice President of Research and Development at Luminex Corporation., a medical device company, and developed an implantable device to diagnose a medical threat.

He explained, “Our goal as Paratus Diagnostics is to develop point-of-care diagnostic solutions to make healthcare more accessible and affordable. Our hand-held Paratus PreparedNow® System and the ParatusSDS® Cartridge, allows clinicians to make decisions during a patient visit – resolving issues associated with lengthy delays waiting on lab results and improving patient outcomes. There is a big need to diagnose periodontal gum disease because of the serious health consequences if it goes untreated, so our first diagnostic test will be a periodontal test as there is zero competition in this market. Our device tests for the six highest risk periodontal pathogens and two key cytokines using saliva.  The results are provided in 20 minutes and displayed on a smart phone by color bar graphs.

We have 26 full-time employees and will probably be up to 37 by year end.  We have raised $5 million in private equity from angel investors. We also have grants and plan to launch the product into the marketplace in about 18 months.”

At the STAR Park incubator, we also met with Tim Burbey, President of Blueshift Materials.

He said, “Dr. Garrett Poe and I founded the company in 2013 with the mission to commercialize Polymer Aerogels. In July 2014, we became a member of the FLEXcon Holdings family of companies. In 2015, we officially launched our AeroZero® line of products, which consisted of rolled film and monoliths. This was the first commercially available Polyimide Aerogel in the world. Its creation derived from customer demand for a clean, lightweight, small footprint insulation material that can easily be incorporated into composites. We wanted to be ale to make the material in a continuous way as it had always been done in a batch process. We call the products aerogels because they are similar to a foam and are 85% air.  It starts out as a polyimide resin and through a proprietary process, it is transformed into the various aerogel products.”

He said, we moved into the STAR Park incubator in the fall of 2016 and also have an applications engineering lab facility in New Braunfels, TX (about 20 miles southwest). We also polymerize our own materials from polyimide at our facility in San Antonio, TX. We have a good relationship with the Materials Science, Engineering, and Commercialization (MSEC) program at Texas State University and have hired graduates.”

He showed me several different shapes and styles of the products they can make now, from blocks to film to powder. It had good properties for thermal management. Since it is 100% plastic, it is very good for incorporating into composites.

He explained, “Our product designs have applications across the aerospace, cryogenic, membrane separation, radio frequency, electronics, and automotive industries. We make a film for a Formula One race car by adding it to Kapton.  We work with a lot of electronics and RF product companies. Our materials have RF transparency, so will allow signals to go through, but they also provide thermal management.  Our polymer aerogels can withstand extremes of temperature from as hot as 300 degrees C down to as cold as -200 degrees C. Our polymer aerogel has a high strength to weight ratio, especially when bonded to other materials and as a composite core. Our new process for make aerogel film will only take minutes to make vs. weeks, which will greatly reduce cost and open new markets.”

He added, “We are developing new products by teaming with a research company in Palo Alto to look at using different polymers besides polyimide. In June 2016, we got a $3 million Department of Energy DOE grant to develop transparent and thermally insulating Aerogel for single pane windows as part of a project to restore historic windows in the Northeast.”

On the second day of my trip I also met with Paul Brown, President of Bautex Systems LLC, which is focused on transforming the building industry by providing builders and architects with smarter, stronger, more versatile building materials and solutions. He is a serial entrepreneur, who earned his undergraduate degree from the Plan II honors program at The University of Texas at Austin and his MBA at Duke University’s Fuqua School of Business. He has enjoyed a diverse career working in industries ranging from technology and telecommunications to construction products.

He said, “I had moved back to Austin, TX during the dot.com bust and was involved in a VOIP company. I love to build and started building houses.  I found a technology very similar to the Bautex technology,” and he invested in the company. But, he wanted to do manufacturing in the right way, and that company needed a better manufacturing process. “Oliver Lee is my business partner, and we did the original research in 2007.

We found the right machine in Europe, so in 2008, we had some custom molds made and took them over to Europe. We rented factory time for two weeks and replaced the wood filler with polystyrene to make blocks. We mixed the ingredients together and poured it into the mold.  It was an expensive and slow process. We added sand to the blocks and reduced cycle time to 30 seconds to make four 32 X 16-inch blocks in the mold. We had a goal of a weight of less than 50 lbs.

We spent a couple of years doing R & D before we moved to San Marcos, TX. We started shipping products in 2013 and now have six plants along the I-35 corridor.”

He explained, “The Bautex Wall System, comprised of a proprietary cement mixture and expanded polystyrene (EPS), is used to build interior and exterior walls for commercial and residential construction. The benefits to the contractor is that it is complete system that simplifies construction by combining structure, enclosure, continuous insulation, and air and moisture protection in a single, integrated assembly. With the Bautex Wall System, architects can specify an integrated solution that can be installed by a single contractor, saving time, effort and cost.  We are two and a half times what the new building energy codes started requiring in 2016.  Our system provides 26% more energy savings.”

He said, “We need a new paradigm for construction in this country. The process of building has to be better. When you analyze building construction, 90% of the work to build a house is non-value-added.  We need to reduce the costs of construction, and the buildings need to perform better. We had five buildings that were within five miles of Hurricane Harvey, and they did well.”

He added, “Six of the ten fastest growing counties are in Texas, but the access to labor for the construction industry is not here. There is a shortage of masons in Texas. Panelization in construction is appealing to a new generation of contractors.  His concern with panelization is that the industry has stayed with the same old technology. In 2020, a new building code will take effect, and each code changes pushes the bar higher.

We are now building one- to three-story buildings, and we can build faster than traditional construction methods using our Bautex Wall System. We have been nearly 99% commercial, but now we are going after residential work.“

Notice that three of the four companies we visited have developed products using new materials for diverse applications. These companies are examples of the spillover of research in technologies related to the MSEC program at Texas State University.

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Texas Hill Country Transforms into Innovation Corridor

Monday, June 18th, 2018

After returning from Washington, D. C. for the CPA conference and legislative visits in mid-March, I traveled to San Marcos, Texas as the guest of the Greater San Marcos Partnership (GSMP).  The Greater San Marcos Partnership is the economic development group representing Hays and Caldwell Counties as a region. San Marcos is strategically located midway between the two major metros of Austin and San Antonio in the beautiful hill country of central Texas. The region is home to a number of other rapidly growing cities, including Kyle and Dripping Springs in Hays County, and Lockhart and Luling in Caldwell County.

I have had a personal connection to San Marcos as my sister lived there for many years, and it is where her youngest son was born. San Marcos is a college town, and the view of the hill above the downtown square is dominated by the campus of Texas State University, only a few blocks away.  My sister actually worked at the university when she first moved to San Marcos.

Dr. Denise Trauth, President of Texas State University is Chair of the GSMP Board of Directors, and Adriana Cruz is President of GSMP. My guides for my visit to the region were Ashley Gossen, Director of Communications and Community Engagement for GSMP and Hanna Porterfield of DCI, the PR firm for GSMP.

The 2017 Greater San Marcos Partnership Annual Report states, “It’s no longer a secret — Greater San Marcos is among the most promising regions in the nation. Hailed by Forbes as ‘America’s Next Great Metropolis’ and ranked among Thrillist’s list of ‘America’s Best Small Cities to Move to Before They Get Too Popular,’ Greater San Marcos is increasingly being recognized by the national media, talent and corporate executives as a region to watch.

The report explains that GSMP “continues to serve as a change agent for smart and purposeful economic growth in the two-county region known as the Innovation Corridor…from welcoming new employers and job creation programs to working major projects and garnering national media placements.”

Compared to the other metropolitan areas of Texas, the greater San Marcos area still offers affordable homes nearly (40% less in housing than Austin), as well as large and dynamic workforce. Each town in the region offers its own unique assets and charm, which provide a strong force in attracting new jobs and investment.

When I met with Ms. Cruz, she said that “A major driver of this progress has been our laser-focus on executing the strategies laid out by Vision 2020, a five-year strategic plan to drive economic development in the region, established in Fiscal Year 2015…For example, 2017 was the first full year of utilizing the Vision 2020 Implementation Work Groups — stakeholder groups that work collectively to maximize the region’s biggest strengths and tackle some of our existing weaknesses in key areas such as infrastructure, workforce and higher education and destination appeal.”

From the annual report, I also learned that “San Marcos, together with Austin, College Station, Fredericksburg, New Braunfels and San Antonio, was selected by the U.S. government to host an exclusive innovation and entrepreneurship event, which brought decision-makers from more than 20 countries to San Marcos to explore partnerships and economic development opportunities. Through the 7th Americas Competitiveness Exchange on Innovation and Entrepreneurship (ACE), Greater San Marcos worked with our neighboring cities to share best practices with this influential international audience and to promote the larger Central Texas region as a leader in innovation. The Greater San Marcos portion of the tour included a visit with many of our major employers, a tour of Texas State University and STAR One and a Glass Bottom Boat Tour at The Meadows Center for Water and the Environment.”

Texas ranks second in the 2018 Small Business Policy Index by the Small Business & Entrepreneurship Council for not charging a corporate or individual income tax or capital gains tax in addition to having low gas taxes and workmen’s compensation tax. Here are some other key facts about the region:

  • 3M Talent Pool within a 45-mile radius
  • 66,087 Population Ages 25-44
  • 34% of Adults have a Bachelor’s Degree or Higher (Master’s, Doctoral)
  • The High School graduation rate for Hays County is 89% and 90% for Caldwell County
  • Only 12% of Adults are without a High School Diploma

The top ten Manufacturers in Hays and Caldwell Counties are:

Company Employees Products
CFAN 700 Composite fan blades for GE engines
Philips Lighting 369 LED lights for outdoor structures & areas
Thermon Mfg. 345 Electric heating cables and control systems
Epic Piping 260 Pipe fabrication including carbon steel, chrome moly, stainless steels, duplex steels, nickel-based alloys
Heldenfels Enterprises 170 Manufacturer/installer of precast/prestressed concrete structures
UTC Aerospace Systems 160 Engine casing and aftermarket support for Boeing 787 and Airbus A350
TXI 145 Provides every step of concrete production, from

mining raw materials to refining the finished product.
Altra Couplings 95 Offers the largest selection of industrial couplings
Mensor Corporation 80 Designs and manufactures precision measuring instruments and automatic pressure test and calibration equipment.
Hunter Industries 75 Manufacturer of hot mix asphalt.

When we visited Texas State University, I realized that the research being done at the university is contributing greatly to the region transforming into the Innovation Corridor of Texas. In 2012, the University was designated as an Emerging Research Institution, working on semiconductors, 3D printing, composite material. This opened the door to major research funding, global research talent, and has contributed to a spike in patent filing activity in Hays County.

I had the great pleasure of being given a tour of the Engineering Technology building that houses the Material Science, Engineer, and Commercialization (MSEC) Program by Dr. Thomas H. Meyers, Associate Dean of MSEC.  Dr. Meyers happened to be home on a break from a year-long sabbatical in Spain. We were joined by Dr. Jennifer Irvin, Director of MSEC, and Dr. Andy Batey, Associate Professor and Chair of the Department of Engineering Technology.

The purpose of the MSEC program is “to train graduate scientists and engineers to perform interdisciplinary research while equipping them to emerge as effective entrepreneurial leadership the advancement of 21sto-century global discovery and innovation.”

We walked through several labs focusing on different kinds of materials research, such as the semiconductor and solar cell materials lab, Dr. Meyers said, “We work with companies like Texas Instruments and First Solar to do materials research. Students, faculty, and industry work together on multi-year, multi-company contracts to solve problems.  We started a Ph.D. program in 2012 to help students and faculty be able to commercialize technology.  We have graduated about 30 students from the three-year program.  We are not a department, but a program within the College of Engineering Technology.  Students are required to work on important projects, such as purifying water from fracking.”

Dr. Meyers said, “We have two levels of clean rooms, a Class 10 and Class 100, and we are working with Hitachi to teach semi-conductor manufacturing and the fundamentals of making a device. We are one of only two universities in Texas to have a full spectrometry lab, which has been certified since 1990, and there are only 20 in the whole U.S.”

When we walked through the machine shop that contained manual, CNC controlled machines, and a 5-axis machining center, Dr. Batey said, “We want our students to get hands on experience in traditional industries during their four-year engineering technology degree program.  Engineering technology degrees focus on the planning, fabrication, production, assembly, testing, and maintenance of products and services. We offer degree programs in Electrical Engineering, Manufacturing Engineering, Mechanical Engineering, Environmental Engineering, and Civil Engineering.

As we walked through the construction materials lab, Dr. Batey said, “We also offer a B. S. degree with a major in program in construction science and management and concrete industry management. We can do chemical analysis of constructions materials and concrete in our lab.”

Dr. Irvin said. “Texas State University also has a 58-acre site off-campus Science, technology, and Advanced Research Park (STAR Park), which is dedicated to the university’s research and commercialization efforts.  The 36,000 sq. ft. facility serves as a technology incubator for startup and early-stage businesses and provides tenants access to secure wet labs, clean space, conference rooms, and office space.  Since 2014, companies located in STAR Park have created over 60 jobs, funded over $1.5 million in university research, hired 14 Texas State graduates, and raised more then $32 million through equity and strategic alliance investments.”

My next article will feature my visit to some of the tenant companies in Star Park, as well as other companies in the region.

 

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