Yesterday's "Fabricating Update" e-newsletter featured an item from businessweek.com that suggested the U.S. is undergoing a "manufacturing renaissance." The article, "Manufacturing booms as Deere exemplifies productivity surge," quoted Wells Capital Management Chief Investment Strategist James Paulsen, who believes that because "once-ailing manufacturers are enjoying a robust rebound as cost-saving moves from job cuts to a greater reliance on technology help drive stronger-than-forecast growth," the renaissance potential exists.
Paulsen predicted that the industry will set the pace for U.S. expansion and the American stock market during this decade, as technology did in the 1990s.
Paulson said, "Manufacturing is leading the whole economy. U.S. manufacturers 'had to find religion.' They've really cleaned up their balance sheets. What is left is the cream of the crop."
The article cited Cooper Industries Plc, Deere & Co., Kennametal Inc., and Timken Co. as being among businesses that have emerged quite strongly and are able to benefit not only from the domestic recovery, but the global strength of markets.
"Timken, the Canton, Ohio-based maker of roller bearings and steels used in tools, cars and farm equipment, hired back all 3,500 manufacturing workers it had laid off in the recession and is creating 200 new jobs at three plants in its hometown, said spokeswoman Lorrie Paul Crum. It's also added new product lines in areas such as wind energy, she said.
"'The company is now on pace to achieve record earnings this year, and sales are growing substantially around the world,' Crum said."
Also among the companies supporting the renaissance theory is Logansport, Indiana-based Materials Processing Inc. After a 40 percent drop in sales from October 2008 to February 2009, the company laid off workers, changed the way it sets prices, and took fewer risks in the volatile commodities markets.
The efforts returned the company to profitability starting in March 2009, and sales are back to pre-crisis levels, said Chief Executive Officer Clay Barnes.
"Fabricating Update" asked its readers to share their thoughts about the potential manufacturing renaissance.
A shop owner from Washington State sees his business growing, but has concerns about the future that might restrict a manufacturing renaissance: "We are a job shop, repair shop, and specialty equipment manufacturer and have seen steady sales increases for the last 9 months. What I'm concerned about is market saturation, the lack of a sustainable economy, and poor management by elected officials.
"Most of our products have a 5- to 20-year life and continue to improve productivity for our customers the same as our equipment suppliers do for us, so there ultimately is less total demand and fewer people required to produce the same volume of products.
"In a truly sustainable economy each person must produce more than they consume as there will be portions of their life where they cannot provide all they need. Because of regulations and the lack of vision, sustainability is becoming less possible.
"Most elected officials will not make the hard choices required to fix many of the fundamental problems the economy faces. First, all taxpayer-funded retirement programs need to be folded into Social Security and benefits cut to the same as private sector retirees. Second, eliminate foreign aid. Third, make all people on public assistance work for 8 hrs a day doing road clean up, sorting garbage, or some other project to improve the countryside."
A reader from Michigan responded with something else that occurred to him as he read about companies increasing profits, "I would like to see you do a survey concerning wages. It is great that the companies are making increased profits; but with the trade agreements, are they doing it by suppressing wages? We have companies here in Michigan that use the threat of moving work to Mexico to gain wage concessions!"
Point taken Michigan reader. We will cover this topic in a future issue of the newsletter.
It remains to be seen if the U.S. will experience a manufacturing renaissance. However, you can learn more about how some metal fabricating companies are doing by reading about the Fab 40 in the June issue of The FABRICATOR® magazine. This article also will be published on thefabricator.com.
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About the Author: Vicki Bell
Ms. Bell,
I hate to tell you this but the company that is re-locating to Mcallen Tx, is not going to help any Americans. Mcallen's un-employment rate is at 45%. The company moved down here for tax advantages and cheap Mexican labor. I would be willing to bet that 95% of the jobs created by this move will be filled by aliens from Mexico. I live here in Texas and deal with this mess every day. The company I work for went down and opened a shop. It lasted 1.5 yrs. and had to close down and come back to Dallas. The company thought they could go down there and save a ton of money. They got all these tax breaks, but the people couldn't or wouldn't do the work so It cost the company a ton of money. That's what happens when you use cheap Mexican labor. So check your facts about the company relocating, because they have underlying reasons. This company will be putting Americans out of work.
Thank You…Carl Morris
[...] they need it. (For more insight on this, see comments from my colleague Vicki Bell, both on her blog and [...]
I used to hear that one manufacturing worker supported ten people in the respective community (not just passing around wealth as in finance, services, etc., but actually creating wealth and injecting new wealth into a community.) When looking at towns where manufacturing was lost, it is true: out go the department stores and family restaurants, and in come the pay day loan and rent to own outfits. Middle class is getting thin. Other than getting a government job, no way for an honest working class person to learn a trade and make a good living. My barber was a tool and die man. The guy working behind the counter at the local welding supply store has a machinist certificate. That is nuts.
There is no tax revenue from businesses which do no exist (and no personal income tax, and no property tax, and no generated wealth to support the community either). If labor is ~ 10% the cost of something, and if the federal government is taking 30% in corporate income taxes, the solution seems obvious. For manufacturing, why not just abolish the corporate income tax? If labor is only ~10% of cost for most manufactured goods and if there is a 30% drop in tax, why would anybody off shore anything unless it is to improperly dispose of toxic waste? This country would go from unemployment to trying to find new workers in short order. This isn't to make the rich richer, people with stock in manufacturing companies would still pay capital gains taxes.