Posts Tagged ‘American manufacturing’

Newer Entries »

Will the AME, NAM and NACFAM Alliance Revitalize Manufacturing?

Tuesday, March 6th, 2012

The Association for Manufacturing Excellence (AME) is joining with leading organizations, such as the National Association of Manufacturers (NAM), and the National Council For Advanced Manufacturing (NACFAM) to form an alliance to revitalize manufacturing and grow the economy, while improving the standard of living of all citizens in North America.  These organizations are inviting public and private sectors to come together to build on the NAM study, A Manufacturing Renaissance: Four Goals for Economic Growth.

The AME white paper “Challenges Facing the Manufacturing Industry…” states “The strategy calls for putting people, schools, businesses and the government to work; producing literate career-ready citizens capable of joining the workforce; and enabling manufacturers to once again lead the designing, building and exporting of quality products and services around the globe.” The top three priorities are:

  • Build a better educated and trained workforce
  • Promote product and process innovation, as well as research and development
  • Improve global competitiveness for companies

AME advocates that each priority “must be considered in developing public policies that support the revitalization of the manufacturing sector, and policy-makers must consider these elements in shaping future public policy and legislation.”   The goal is to help companies and our education systems transform themselves by using more innovative processes to become more competitive to put people back to work in making things in America.

I  strongly agree with AME’s viewpoint that we need to revitalize American manufacturing because “manufacturing is very critical to economic growth, prosperity and a higher standard of living.”  This is because manufacturing jobs have a multiplier effect-? every manufacturing job creates three to four other jobs.  Manufacturing creates more wealth than any other sector in the economy.  “Manufacturing pays higher wages and provides greater benefits, on average, than other industries. It performs almost two-thirds of private sector research and development, creates the highest number of jobs to support the industry while serving the surrounding communities, and contributes to more than 50 percent of the country’s total exports.”

The White Paper notes that we’ve lost nearly six million manufacturing jobs in the United States since January 2000, for an average of about 54,000 per month, according to the Bureau of Labor Statistics.  We also lost 56,190 manufacturing facilities from 2001 to 2010, or about 15 per day.

AME has issued a call for action to policy-makers, industry professionals and academic leaders to play critical roles in revitalizing the economy through the rebirth of manufacturing jobs.  To do this, we need to ensure the supply of educated citizens, necessary physical infrastructure, and a favorable tax and regulatory framework that fosters increased collaboration between public and private sector partners.

AME has been leading the “Revitalization of Manufacturing” initiative, wherein AME and their allied organizations have been reaching out to policy-makers nationwide, and encouraging them to join or develop efforts focusing on local and state job creation.  AME states that “itt is imperative that policy-makers recognize the importance of an industry that has been the backbone of the North American economy.  To date, AME has received more than 400 signatures of support from state and federal policy-makers, industry trade associations and operations executives representing manufacturers across North America.”

AME advocates “a renewed emphasis on making businesses more competitive by developing the educational and training infrastructure to produce qualified individuals to fill these new opportunities.”   To accomplish these initiatives, AME is joining with leading organizations to adopt the three priorities by:

Reforming public education to produce career ready citizens – Parents, teachers and business leaders need to recognize that other nations are both out-educating us and out-competing us.  Some of the ongoing initiatives by manufacturing organizations to help reform public education are:

  • The Manufacturing Institute’s Roadmap to Education Reform for Manufacturing, a comprehensive blueprint for education reform
  • American Productivity and Quality Center’s (APQC) Education North Star program that helps school districts do more with less by transforming education through process and performance management
  • Career Pathways,  a program that encourages students to consider a career in manufacturing and help prepare them by using the Manufacturing Pathway Map

Last fall, I wrote about a number of programs sponsored by other organizations to interest and prepare youth for careers in manufacturing in the article, “How Can we Attract Youth to Manufacturing Careers?”

Establishing consortiums of like-minded individuals with the same mission to help sustain and grow businesses through sharing technology and innovative ideas.  AME recommends that businesses “grow a culture that achieves results through engaging their people” to “develop pragmatic, working-level leaders who can pull it all together.”  In addition, businesses “need to foster rapid advancement of technology and innovation by establishing regional consortiums to help bring jobs back home.”

“AME Northern Kentucky/Cincinnati Consortium is the first building block of the AME Consortia network, and the organizations plans to deploy at least 10 more in 2012.  AME also has alliance partners, like the Virginia Business Excellence Consortium.”

Reshoring by making better informed business decisions  to keep and bring jobs back home – the Reshoring Initiative was founded by Harry Moser in 2010.  He is collaborating with AME to promote reshoring as part of the “Revitalization of Manufacturing” initiative.  AME recommends that companies use the Total Cost of Ownership (TCO) analysis tool Mr. Moser developed “to effectively compare total cost of local and offshore sources, enabling them to make informed business decisions. ‘We are committed to changing the sourcing paradigm from ‘off-shored is cheaper’ to ‘local reduces the total cost of ownership,’ said Moser.”

Redeploying Training Within Industry (TWI) programs to train or retrain workers to have the skills to work in advanced manufacturing jobs to revitalize manufacturing and re-energize the economy.  First created during WWII to replace workers who left the factories and went off to war, the TWI programs were revived in 2001 by the Central New York Technology Development Organization, a member of the U.S. Manufacturers Extension Partnership (MEP), after which the TWI Institute was formed to oversee the global deployment of the program.

AME’s White Paper only identifies the TWI programs, but I wrote about training programs sponsored by other organizations, such as the Society of Manufacturing Engineers’ Tooling U and The Fabricators and Manufacturers Association, International in my article, ”What’s Being Done to Address the Lack of Skilled Workers?

In order to be more globally competitive, AME recommends that companies use Lean Certification, an internationally recognized certification process developed by the Society of Manufacturing Engineers (SME), AME, Shingo Prize, and the American Society for Quality (ASQ), which establishes the standard for continuous improvement and Lean practices.

The White Paper states that at its 2012 national board meeting, “AME reaffirmed its commitment to helping small-and medium-sized businesses create more manufacturing jobs, and the organization’s strategic plans address the challenges facing manufacturing by formulating counter-measurements to address them with its public and private alliance partners.”

In conclusion, the White Paper states, …the public and private sectors must come together to build an integrated plan supportive of these initiatives, especially NAM’s Manufacturing Strategy for Jobs and Competitiveness and Roadmap to Education Reform for Manufacturing; the LEARN Act; and the Reshoring Initiative.  These will ultimately revitalize the industry and grow the economy.”

I have repeatedly said in my book and blog articles that it will take the efforts of the public and private sectors, as well as individual Americans, to first save and then revitalize American manufacturing.  I agree that these strategies will be beneficial, but they will not be enough to accomplish this goal.   First of all, I do not agree that the challenges to accomplish this goal are the “four major challenges on which its future depends and has been failing to meet… globalization, the revolution in information technology, the nation’s chronic deficits and its pattern of energy consumption” that are quoted from Thomas L. Friedman and Michael Mandelbaum’s book, That Used to Be Us, How America Fell Behind in the World It Invented and How We Can Come Back.

These are all realities that must be addressed, but they are not the main challenges that face America’s manufacturing industry.  The main challenge can be summed up in one word:  China.  By this I mean China’s predatory mercantilism in the form of currency manipulation, export subsidies, theft of intellectual property, product “dumping,” export restrictions on raw materials, and more recently, technology transfer and rare earth hoarding.

As long as companies that are members of AME, NAM, and NACFAM, such as Westinghouse, General Electric, and Caterpillar, choose to close factories in the United States to offshore manufacturing to China for the illusion of selling to the 1.3 billion Chinese consumers, we will continue to lose manufacturing jobs.

As long as these organizations and their member companies advocate so-called free trade policies and are afraid to stand up to China’s predatory mercantilism and urge our elected officials to demand that China adhere to the terms of its admission into the World Trade Organization, our huge trade deficits will continue to escalate.

These companies must stop being Chinese apologists and appeasers just to add more profit to their bottom line.  They need to realize that complying with China’s demand for technology transfer in order to build or establish a plant in China is destroying the future of their own companies.

Now is the time for action.  The best thing that AME, NAM and NACFAM members could do is to take a pledge to not close any more plants in the U. S. to set up manufacturing in China.  Then, we would really be able to revitalize American Manufacturing.

 

Tags:, , , , , ,
Posted in Economy, Manufacturing, Outsourcing, Trade Policy, Training | No Comments »

Will President Obama’s Blueprint Save American Manufacturing?

Tuesday, February 7th, 2012

In his State of the Union address, President Obama laid out a blueprint for an economy that’s built to last – an economy built on American manufacturing, American energy, skills for American workers, and a renewal of American values.

I share the President’s believe that “this is a make or break moment for the middle class and those trying to reach it.  Manufacturing is the foundation of the middle class, and we are losing the middle class because of the loss of manufacturing jobs.  I’ve seen the middle class eroding for decades because manufacturing and the good jobs the industry provides began leaving our shores long before the recession.  Too many manufacturers have sourced all of most of their manufacturing offshore, especially in China.  It’s the loss of manufacturing jobs that is keeping unemployment so high and creating budget deficits at the local, state and federal level.  People who are working pay taxes that generate revenue for our government whereas the unemployed create expenses to government for their “safety net.”

The President’s blueprint has one section covering manufacturing titled, “Manufacturing: Create New Jobs Here In America, Discourage Outsourcing, And Encourage Insourcing,” so let’s examine the points one by one to see if they will make enough difference to “save American manufacturing.”

1.        Remove tax deductions for shipping jobs oversees and providing new incentives for bringing them back home:  It’s been outrageous that we’ve been giving tax incentives to companies to outsource manufacturing offshore by allowing companies moving operations overseas to deduct their moving expenses and reduce their taxes in the United States.  This proposal would eliminate deductions for moving their operations offshore and give a 20 percent income tax credit for the expenses of moving operations back to the U. S. to create jobs for Americans.  Eliminating this tax incentive for outsourcing offshore is one of the recommendations mentioned in my book.

2.        Target the domestic production incentive on manufacturers who create jobs here at home and double the deduction for advanced manufacturing:  This proposal would reform the current deduction for domestic production by more narrowly focusing it on manufacturing activities, expanding the deduction for manufacturers, and doubling the deduction for advanced manufacturing technologies from its current level of 9 percent to 18 percent.  This proposal would benefit manufacturers utilizing advanced manufacturing technologies, but I see no reason why it shouldn’t apply to all domestic manufacturing and why oil production should be eliminated from this deduction.

3.       Introduce a new Manufacturing Communities Tax Credit to encourage investments in communities affected by job loss:  “The President is proposing a new credit for qualified investments that help finance projects in communities that have suffered a major job loss event … would provide $2 billion per year in incentives for three years.”  For example, if a major employer closes a plant or substantially reduces the workforce with a mass layoff, the tax credit would support qualified investments in the affected community that would improve local economic growth.   This proposal would help communities that lose manufacturing companies or suffer mass layoffs, but would have no effect in preventing manufacturers from leaving or closing plants.

4.       Provide temporary tax credits to drive nearly $20 billion in domestic clean energy manufacturing: The President is proposing to extend the Advanced Energy Manufacturing Tax Credit tax credit for investment in domestic clean energy manufacturing to ensure new windmills and solar panels will incorporate parts that are produced and assembled by American workers.  However, the U.S. solar industry filed a trade case at the Department of Commerce late last year alleging dumping and unlawful subsidies by China.  Until we address China’s currency manipulation and dumping of products including solar panels and windmill parts, America’s clean energy industry will remain at a competitive disadvantage to China.  Senate bill 1619 that passed the Senate last fall, and H. R. 639 waiting for a vote in the House would be a good start in addressing China’s currency manipulation.  Unfortunately, President Obama has indicated he would veto the bill if passed.

5.      Reauthorizing 100% expensing of investment in plants and equipment: The President is proposing to extend for all of 2012 a provision that allows businesses to expense the full cost of their investments in equipment, spurring investment in the United States.   This provision was part of the Bush administrations tax cuts and will sunset at the end of this year unless it is extended.  It needs to be extended well beyond the end of this year for it to have any real impact in benefitting manufacturers.

6.      Closing a loophole that allows companies to shift profits overseas: Corporations right now can abuse the tax system by inappropriately shifting profits overseas from intangible property created in the United States.  The President is proposing to close this loophole.  This is one of the several steps we need to take to incentivize companies to maintain manufacturing in the U. S. or bring manufacturing back from overseas.

At the same time the President is calling for immediate enactment of this plan, he is pushing forward on a framework for corporate tax reform that would encourage even greater investment in the United States, while eliminating tax advantages for outsourcing.  This framework would include:

Making companies pay a minimum tax for profits and jobs overseas and investing the savings in cutting taxes here at home, especially for manufacturing: The President is proposing to eliminate tax incentives to ship jobs offshore by ensuring that all American companies pay a minimum tax on their overseas profits, preventing other countries from attracting American business through unusually low tax rates.  The savings would be invested in cutting taxes here at home, especially for manufacturing.

This would only encourage more companies to reincorporate in tax haven countries to avoid paying any corporate taxes in the U. S., which has the second highest rates in the world.  A better plan would be to reduce corporate taxes down to the globally competitive 25 percent so that corporations will have less incentive to avoid paying U. S. taxes by building facilities in foreign countries.

Making permanent an expanded Research and Experimentation Tax Credit: The President is proposing to make the Research and Experimentation Tax Credit permanent, while enhancing and simplifying the credit.  Again, this is one of the recommendations in my book and would encourage manufacturers to keep R&D in the United States as only research and experimentation performed in the United States is eligible.
Simplify the tax code and close loopholes:  The Fact Sheet states that over the last 30 years since the last comprehensive reform, the tax system has been loaded up with special deductions, credits, and other tax expenditures that help well-connected special interests, but do little for our country’s economic growth.  The President’s framework will close these loopholes and simplify the tax code so businesses can focus on investing and creating jobs rather than filling out tax forms.  As I mentioned in a recent article, the Department of Treasury issued a report in 2007 that made many recommendations of how to simplify the tax code and close loopholes.  We don’t need to “reinvent the wheel” to study how to simplify the tax code.  Let’s just implement some of the previous recommendations immediately.

Cracking down on overseas tax avoidance and loopholes:  The Fact Sheet states that the President has taken strong steps to crack down on overseas tax evasion and loopholes, including signing into law the Foreign Account Tax Compliance Act, which targets tax evasion by U.S. citizens holding investments in foreign accounts, as well as measures to crack down on abuse of foreign tax credits  that have allowed multinational companies to inappropriately reduce the amount of taxes they paid in the U. S.
The Fact Sheet touts the tax incentives that President Obama signed into law in the last three years that have helped manufacturers, but he actually only signed legislation extending the tax cuts and tax incentives through 2012 that were originally passed by Congress under the Bush administration.  These tax cuts and incentives will end in 2013, if not extended again, and far higher taxes will be imposed under certain provisions of the Affordable Health Care Reform Act of 2010.

One of the big reasons manufacturers and other types of businesses are sitting on millions of dollars in corporate profits without expanding plants, buying new equipment, and hiring more workers is the fear of the higher taxes and health care costs they are facing in 2013 as a result of the Health Care Reform Act.

Therefore, a careful review of the President’s blueprint shows that it doesn’t do enough to save American manufacturing.  The few beneficial policies will be more than undone by the tax increases and regulations that will take effect in 2013 and thereafter.  What we need is an all encompassing national manufacturing strategy if we truly want to provide enough incentives to retain or bring back manufacturing to the U. S. and discourage corporations from outsourcing their R&D and manufacturing overseas.

Tags:, , , , ,
Posted in Economy, Taxes/Regulations | No Comments »

Why John Stossel is All Wet ? “Buy American” is Smart, not Stupid

Tuesday, November 8th, 2011

John Stossel’s blog article on WorldNetDaily® on November 1, 2011, “The stupidity of ‘Buy American,’ is based on a premise so fallacious that one wonders how a usually intelligent commentator like Stossel could have been taken in by it.

The premise is that “we should buy things where they’re cheapest.  That frees up more of our resources to buy other things, and other Americans get jobs producing these things,” according to the explanation of why “Buy American” is “nonsense” by economist David Henderson of the Hoover Institution.

First of all, “buying things where they’re cheapest” isn’t always the best decision on where to spend your money ? the old adage “you get what you pay for” is more often true.  Most of the everyday items that people buy today at “big box” and other retail outlets are being manufactured in China and other countries in Asia.

What do you get for your money when you buy products that are made in China and other Asian countries?  Clothes and shoes that don’t fit or fall apart, toys that choke or strangle children, baby buggies, strollers, and cribs that maim or even kill, household items that either don’t work properly, cause fires, and explode, and tainted food.  The U. S. Consumer Protection Safety Commission’s website provides a monthly list of products that have been recalled, and month after month, more than 90% are made in China.   For example, there have been eight recalls thus far in November, and seven of the eight products were made in China.  In October, there were 21 product recalls: 12 were made in China, two were made in Taiwan, two were made in Vietnam, two were made in Mexico, and three were made in the U. S.  The products ranged from glass bowls and toys to tents, battery packs, and baby strollers.

Recently, a Senate Armed Services Committee investigation led by Sens. Carl Levin (D-MI) and John McCain (R-AZ) reviewed more than 100,000 pages of DOD documents and found that U.S. Department of Defense had purchased counterfeit electronic parts (defective and with “back doors”) from China in 1,800 cases, running to more than 1 million parts.

Second, buying cheap goods that are made offshore only creates American jobs if you use the money to buy American products.  If you just buy more products made “offshore,” you don’t create any new American jobs.   About the best it does is keep people who work in wholesale and retail employed.  That’s why tax rebates and refunds haven’t created the jobs that were expected.  Consumers used the extra money to pay down debt, add to savings, or bought the everyday products that are now made mostly in China.

Why does it matter where products are made and why is it smart to “Buy American?”  A  report released in April 2011 titled, “The Importance and Promise of American Manufacturing, Why It Matters if We Make It in America and Where We Stand Today,” co-authored by Michael Ettlinger and Kate Gordon of the Center for American Progress provides the answer to these questions.  The Center for American Progress is a nonpartisan research and educational institute dedicated to promoting a strong, just and free America that ensures opportunity for all.

The authors opine that “Manufacturing is critically important to the American economy.  For generations, the strength of our country rested on the power of our factory floors—both the machines and the men and women who worked them.  We need manufacturing to continue to be bedrock of strength for generations to come … The strength or weakness of American

In addition to maintaining our standard of living as Americans, there are several other important reasons why it’s smart to “Buy American.”  They are:

Manufacturing is critical to our national defense ? American manufacturers supply the military with the essentials needed to defend our country, including tanks, fighter jets, submarines, and other high-tech equipment. The same advances in technology that consumers take for granted support the military, particularly soldiers fighting overseas.

The U.S. cannot rely on other countries to supply its military because their interests may run counter to its own.   America cannot risk being held hostage to foreign manufacturers when it comes to products that are essential for its national security and the U.S. military. It is crucial that key components and technologies that are critical to the production of U.S. weapons and the related industrial capacity to produce such items be located within the United States.

Manufacturing supplies millions of jobs ? Manufacturing jobs are the foundation of the U.S. economy and the basis for its middle class. Manufacturing provides high-paying jobs for nearly 12 million Americans.

Manufacturing Jobs Pay Higher Wages than Service Jobs ? Manufacturing wages and benefits are approximately 25 – 50 percent higher than in non-manufacturing jobs.

In an opinion article in Industry Week magazine, John Madigan, a consultant with Madigan Associate, wrote “Jobs paying $20 per hour that historically enabled wage earners to support a middle-class standard of living are leaving the U.S… only 16% of today’s workers earn the $20-per-hour baseline wage, down 60% since 1979.   Service and transportation jobs, per se, cease to exist in the absence of wealth. Rather, they exist and thrive as by-products of middle-class incomes buying products and services.”

Manufacturing Creates Secondary Jobs ? There is a multiplier effect of manufacturing jobs that reflects linkages that run deep into the economy. For example, every 100 steel or automotive jobs create between 400 and 500 new jobs in the rest of the economy. This contrasts with the retail sector, where every 100 jobs generate 94 new jobs elsewhere, and the personal and service sectors, where 100 jobs create 147 new jobs.  It is manufacturers who hire services such as banking, finance, legal, and information technology.

Manufacturing is the Engine of American Technology Development and Innovation ? American manufacturers are responsible for more than two-thirds of all private sector R&D, which ultimately benefits other manufacturing and non-manufacturing activities. More than 90 percent of new patents derive from the manufacturing sector and the closely integrated engineering and technology-intensive services.

Manufacturing R&D is conducted in a wide array of industries and businesses of all sizes. The heaviest R&D expenditures take place in computers and electronics, transportation equipment, and chemicals (primarily pharmaceuticals.)

Manufacturing is an incubator for technology and science, which require proximity to facilities where innovative ideas can be tested and worker feedback can fuel product innovation. Without this proximity, the science and technology jobs, like customer service jobs, follow the manufacturing jobs overseas.

Manufacturing Generates Exports — The United States was the world’s first-largest exporter until 1992 when Germany took over this position.   Germany remained number one until 2009 when China surpassed it to become the world’s top exporter, and the United States fell to being the third-largest exporter.  The difference between the top three was small:  Germany exported $1.17 trillion compared to the $1.057 trillion of the U. S., but China’s exports were $1.2 trillion in 2009.

Manufactured goods make up more than 60 percent of the value of U.S. exports, double the level of ten years ago. While agricultural exports amount to about $50 billion a year, manufacturers export about that much each month.  High tech products are America’s largest export sector, and the European Union was the top importer of these goods, followed by Canada, and Mexico.

Manufacturing Supports State Economies ? Manufacturing is a vital part of the economies of most states – even in those areas where manufacturing has declined as a portion of the Gross State Product (GSP). As a share of GSP, manufacturing was among the three largest private-industry sectors in all but ten states and the District of Columbia. Manufacturing is the largest sector in ten states and in the Midwest region as a whole. It is the second largest in nine states, and the third largest in 21 others.

For the past decade, manufacturing corporations paid 30 to 34 percent of all corporate tax payments for state and local taxes, social security and payroll taxes, excise taxes, import and tariff duties, environmental taxes and license taxes.  Since many small manufacturers are not incorporated and pay individual taxes as sole proprietors, the tax revenue generated by all manufacturers is impossible to calculate.

In summary, it’s smart, not stupid to “Buy American” because manufacturing is the foundation of the U.S. national economy and the foundation of the country’s large middle class. Losing the critical mass of the manufacturing base will result in larger state and federal budget deficits and a decline in U.S. living standards. This, in turn, would result in the loss of a large portion of our middle class, which depends on manufacturing jobs. America’s national defense will be in danger, and it will be difficult, if not impossible to maintain the country’s position as the world’s super power.  “Buying American” will help ensure that American manufacturing survives and grows in the global economy.

Tags:, ,
Posted in General, Outsourcing | 1 Comment »

Newer Entries »