Manufacturing a Break in the Weather.First Quarter Thoughts on US Manufacturing

I was recently interviewed by a writer for the Cleveland-based COSE Update for an edition they are doing on manufacturing.

The interview started off with the usual questions related to the view that “that manufacturing is dead”. We spent a few minutes correcting that misperception. Manufacturing still represents roughly 19% of northeast Ohio’s jobs and roughly one-third of its gross regional product. So much for being “dead”.

WIRE-Net staff have visited over 140 unique manufacturing companies (i.e., no repeat visits in that count) over since September 2006, nearly all located in the City of Cleveland. Roughly 23% of those visists were with companies that were expanding in one way or another: buying property they formerly rented, moving so they could expand, adding equipment, or hiring new staff. That amounts to 32 Cleveland based companies expanding in the manufacturing sector just in the last few months.

According to the US Federal Reserve, factory output declined slightly in the Sept-October 2006 period, due primarily to slumping automotive output. Put differently, output in everything but automotive improved.

Industry Week reported in December of 2006 that there were nearly 400 mass layoffs (of more than 50 employees) in manufacturing. However, 67% of the mass layoffs were in non-manufacturing sectors of the economy. Guess the “BOE” (balance of economy) is dead and dying!

Timken is adding almost 80,000 square feet to their Harrison Steel operation in Canton, in a deal they put together with Daido Steel. This will improve Timken’s position with the automotive transplants.

Companies need two things to survive and thrive, and neither is simple nor easy.

• First, a solid strategic plan that is well executed; and
  
• Second, a receptive political environment that allows the individual US based firm to compete fairly here and around the world.

To the seond point, the November election was a wake-up call for the Bush Administration and many Democrats, and led directly to the US Trade Rep filing a major “export subsidy” case against the Chinese government before the World Trade Organization . Look for that complaint to go nowhere fast.

Meanwhile, mainstream Democrats (like Charlie Rangel of NY, the influential head of the House Ways & Means Committee) are horsetrading around the President’s Fast Track Trade Authority, which expires this June. They are getting a receptive ear to include tougher rules on currency manipulation, labor and environmental protections in new trade agreements. This reminds me of similar deals that the Fair Trader Congresspersons made with former President Clinton during the NAFTA negotiations, and that resulted in nothing productive. Lets hope the “surge” of new Fair Trade reps elected to both the House and Senate in November stand firm and learn from the NAFTA failure. Some 39 of 42 newly elected Congressional reps signed a letter recently, stating that trade policy was a major issue in their election, and that the status quo as far as trade policy would not be acceptable.