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In Ohio and Beyond, President Obama Sees Model for an American Manufacturing Revival

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U.S. President Barack Obama delivers remarks on the economy after touring Linamar Corporation that manufactures parts for the truck industry in Arden, North Carolina, February 13, 2013. Credit: Reuters/Jason Reed

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Andy Sullivan
February 14, 2013
(Reuters) – A former furniture warehouse in a struggling Rust Belt city has emerged as a national model for innovation after President Barack Obama highlighted it in his State of the Union speech on Tuesday.
Obama now aims to convince Congress to spend $1 billion to replicate the model nationwide. But it will be a tough sell to Republicans, who oppose government spending on industry and argue private capital will respond if there is real demand.

Yet even before the facility is fully up and running, local business leaders say Youngstown, Ohio’s National Additive Manufacturing Innovation Institute (NAMII) is already spurring interest in a promising new technology known as “3D printing” that could bring new manufacturing jobs to the region.

They say the federal government is bringing together researchers and businesses that could make the region a hotbed of cutting-edge manufacturing.

“This is absolutely a net positive for the Youngstown area,” said Eric Planey, a vice president with the Youngstown Chamber of Commerce.

Also known as additive manufacturing, 3D printing creates solid objects from a digital model by laying down successive thin layers of material, rather than the traditional “subtractive” approach, in which objects are created by cutting them out of a solid chunk of metal or plastic.

The process has been used to build prototypes for 25 years, but now is making its way into regular production. Companies such as General Electric Co plan to use 3D printing to build lightweight aircraft parts, while dentists use it to create crowns in the space of an hour rather than two weeks.

The Obama administration has been promoting the idea of a manufacturing revival as labor-saving technology, rising costs overseas and cheap energy at home have prompted some manufacturers to bring factory jobs back from overseas.

Economists say the United States is long past the days when steel mills, auto plants and machine jobs boosted millions of unskilled Americans into the middle class. Manufacturing now represents 12 percent of the U.S. work force, down from 20 percent in 1979.

Youngstown has seen some manufacturing jobs return since its giant steel mills shut down in the 1970s, but increased automation means that they employ fewer people than they would have several decades ago.

A new pipe factory that would have needed 1,000 workers 25 years ago now employs 350, Planey said, while a General Motors assembly plant that employs 5,000 produces as many cars as it did when it employed 14,000 people.

Obama administration officials say manufacturing might not ever employ as many people as it once did, but the sector has broader benefits to the economy because it spurs research and development and boosts exports.

Taking a page from similar efforts in Germany, the administration last year picked Youngstown as the site of an “innovation institute” that would spread new manufacturing ideas among a wide range of businesses.

“You are using a facility as essentially like a teaching hospital,” Gene Sperling, the director of the White House National Economic Council, said on a conference call on Wednesday. “When there are developments in technology and research, you have the capacity to share them with smaller businesses.”

GOVERNMENT, BUSINESS, UNIVERSITIES

Government agencies such as the Department of Defense, the Department of Energy, NASA and the National Science Foundation put up $30 million for the effort, matched by $40 million from businesses such as Northrop Grumman Corp and universities including Carnegie Mellon.

In his State of the Union speech, Obama asked Congress to spend $1 billion to set up 14 more innovation centers across the nation. He said he would set up three facilities on his own, using existing funds, if lawmakers do not act.

Republicans, who have fought Obama’s stimulus for green technology, are unlikely to soften their stance on spending.

“Washington has a spending problem that threatens the prosperity of every child, every family, and every small business in America,” House of Representatives Speaker John Boehner, who ran an Ohio manufacturing firm before entering politics.

When the Youngstown center is fully up and running in the next several weeks, the 11,000 manufacturers in the region will get a chance to learn how 3D printing works and determine whether they want to invest in it themselves, said NAMII president Ralph Resnick.

Local workers also could learn how to operate the new equipment, and experts could ensure that the final product will meet existing quality standards.

The idea is to create enough of a body of expertise around the technology to turn the region into a hotbed of additive manufacturing, Resnick said.

“What we’re looking to work on is pervasive issues,” ones that affect many manufacturers, he said. “If we solve it, it’s all good for the community in general.”

Like other forms of “high tech” manufacturing, additive manufacturing doesn’t have much use for low-skilled workers doing repetitive tasks on an assembly line.

But if it catches on, it could create more demand for industrial designers, inventory managers and other skilled workers, said Todd Grimm, an industry consultant based in Kentucky. It also could spur a new wave of business startups as the barriers to entry are much lower than they are in traditional manufacturing, he said.

“The economy will benefit. To what extent? Will it even be measurable? Who knows – that’s for somebody with a crystal ball,” he said.

SOURCE:  Reuters

This Might Be The Year For A Pro-Domestic Manufacturing Policy Agenda In Congress

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Richard A. McCormack 
February, 2013
The U.S. Senate might be more open this year to legislation aimed at improving U.S. manufacturing and reducing the U.S. trade deficit. A number of new senators and those reelected to the chamber ran campaigns that focused on bringing manufacturing back to the United States.
One of the chamber’s new members, Chris Murphy (D-Conn.), says supporting American manufacturing in his campaign had “political potency,” and helped him win against former CEO of World Wrestling Entertainment Inc., Republican Linda McMahon. During the campaign, Murphy described her as having made millions of dollars by offshoring work to China and Pakistan. “It dovetailed with the similar conversation that was happening in the presidential election,” says Murphy.

Murphy, the youngest member of the Senate at age 39, says he intends to be a leader on issues related to “Buy American” acquisition laws, currency manipulation, tax policies that promote investment in plants and equipment in the United States, and government investment in infrastructure that improves industrial competitiveness. “I have already reached out to other senators like Debbie Stabenow [D-Mich.] to join the pro-manufacturing efforts underway here in the Senate,” he says. “If we get together as a party and movement to push this new strategy there will be a lot more people than just me in the Senate and the House ready to follow.”

Murphy says the Republican Party could come around, too, on issues that favor domestic manufacturing. “There is an examination happening in the Republican Party as to why they hemorrhaged votes and seats in 2012,” says Murphy. “They would be smart to realize that one of the reasons they lost votes is they continue to be on the wrong end of the outsourcing debate. They are coming around on immigration because they recognize that they can’t win elections unless they change their tune on immigration. I think the same thing is true when it comes to manufacturing and outsourcing. If the Republicans continue to be identified as the supporters of outsourcing, they cannot win national elections. They certainly can’t win presidential elections in places like Ohio and Pennsylvania. And so I think that our hopes — to the extent that we have any hope of moving this agenda through the House — is that the Republican consultant class, who tend to dictate what the Republicans stand for in the House, will realize that they have to get on the other side of this debate, and fast.”

Other senators ran successful campaigns on similar pro U.S. manufacturing issues, notes Scott Paul, President of the Alliance for American Manufacturing. Among them were Democrats Tammy Baldwin of Wisconsin, Joe Donnelly of Indiana, Bob Casey of Pennsylvania, Sherrod Brown of Ohio and Kirsten Gillibrand of New York. Other Senate allies include Democratic Sens. Amy Klobuchar and Al Franken from Minnesota and Charles Schumer of New York, “and that’s just touching the tip of the iceberg,” says Paul. “In the Senate, there is an extraordinary amount of interest in pursuing” a domestic manufacturing agenda. “I am cautiously optimistic that in the Senate we can make some significant progress this year. Will the House listen? I don’t know, but we were able to extract some modest improvements in the Buy American laws in the infrastructure bill that passed the Republican-led House in the last Congress because it would have been too painful for some of their members to vote against it.”

Who is working against the pro-domestic manufacturing agenda? The organizations that represent multinational companies that have outsourced production, replies Paul. Identifying those outside groups “will shed some light on who on the inside [in Congress] is working against us,” he notes. On the issues of “Buy American” and cracking down on Chinese currency manipulation and unfair trade practices, it is the U.S. Chamber of Commerce and the Club for Growth. “You think of the senators and those in the House of Representatives who take their guidance from the Club for Growth and the Chamber and you have your answer.”

Even with those forces lined up against, the China currency bill was able to pass in the Senate during the last session with bipartisan support, despite the threat of a filibuster from Senate Minority Leader Mitch McConnell (R-Ky.). “There were enough Republicans including Lindsey Graham [R-S.C.], other southern senators and even [Sen.] Rob Portman [R-Ohio] who bucked him on this to support the bill,” says Paul. “It was the only bill to overcome a Mitch McConnell filibuster. We are making some progress, but they are baby steps, not giant steps. I am hoping in the Senate this year, we can make giant steps and broader shame some of the Republicans in the House to go along with this. There are rank and file House Republicans who support this agenda — not a lot of them, but enough to provide a majority.”

Sen. Murphy says backing a strong domestic manufacturing agenda is a good political strategy for Democrats. As the former member of the House of Representatives who created the Buy American Caucus, Murphy says that most voters realize that the U.S. economy cannot fully recover unless there is a healthy manufacturing sector. “This necessitates a new agenda,” he says. “I have always seen this issue as one of a few that allows Democrats to reach constituency groups that they might not traditionally reach. First and foremost, you are out there talking to small manufacturers and businesses which aren’t used to having Democrats coming into their factories and talk to them about what they need. Second, you are talking to a demographic of families associated with manufacturing trades that also aren’t traditionally Democratic constituencies.”

Murphy said he held a seat in the House of Representatives from a conservative district — one that had been Republican for the previous 24 years prior to his winning in 2006 — “in part to my speaking to them on the issue of making things here in America.”

The pro-domestic manufacturing issue was a big part of last year’s election campaign, notes Paul. “One of the most popular images in American political advertising in 2012 was the American factory,” he notes. “We have data to back that up.” There were almost one million political ads last year addressing issues related to jobs, companies that ship jobs overseas and the auto rescue. “There were over $45 million in ads in the presidential contest alone just on the China trade issue,” says Paul. “And in virtually every close race — Indiana, Ohio, Wisconsin, Pennsylvania and in Sen. Murphy’s race in Connecticut — one of the primary focus points for the victors was support for an American manufacturing policy.”

Even Obama pledged during the campaign to create one million manufacturing jobs over the next four years. “So now we have a metric to hold the Obama administration accountable,” says Paul. “It’s something that is easy to measure. So every month we will lay out how much or how little progress the President is making on his goal.”

Murphy says he will start a Buy American caucus in the Senate “because the U.S. government, year after year after year, is outsourcing taxpayer funded procurement to foreign countries,” he says.

Murphy would like to raise the requirement under the current law for agencies to buy 50 percent U.S. content to at least 60 percent and, better, 75 percent. He would get rid of
loopho
les that allow the U.S. government to buy foreign-made products if those products are being consumed outside the United States. And he would beef up the enforcement mechanism in the law by making it difficult for government agencies to approve waivers to the act.

As for free trade issue on Capitol Hill, Robert Borosage of the Campaign for America’s Future says the financial sector collapse in 2008 and subsequent recession may have broken the stronghold that multinational corporations and Wall Street have had on policymakers. “Corporate-defined free trade that does more to guarantee investment abroad than it does to guarantee jobs at home has been the centerpiece of the bipartisan consensus in this country for many decades,” says Borosage. The Democratic Party — directed by Wall Street and Clinton White House titan Robert Rubin — was fully on board with this strategy “even though it was widely opposed by broad majorities of Americans across both parties,” he notes. “One of the moments we are in given the collapse of that economic model is whether that broad public sentiment against that policy can start to gain traction in the Congress despite these very powerful forces lined up against it. What is interesting about the array of allies and the progress on the [last session’s] China currency bill that went further than many would have thought, is that we do have a moment here were popular opinion can finally start to be reflected in the halls of Congress in a way that it hasn’t in the past.”

What Do American Manufacturers Owe Their Country?

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Michele Nash-Hoff
February 5th, 2013
Last week The Economist conducted an on-line debate on the question:  Do multinational corporations have a duty to maintain a strong presence in their home countries? After a very intense written debate between Harry Moser, former president of GF AgieCharmilles  and founder of the Reshoring Initiative, and Jagdish Bhagwati, Professor of Economics and Law, Columbia University, the vote was 54% “yes,” and 46% “no.”

The moderator of the debate was Tamzin Booth, European business correspondent for The Economist, who introduced the topic by stating, “after the Great Recession, with high levels of unemployment persisting in rich countries, politicians are putting enormous pressure on firms to either keep operations at home or bring them back. The offshoring and outsourcing of work overseas have never been more unpopular. So strong is the backlash against firms which shift jobs abroad that many companies are choosing not to do it for fear of igniting a public outcry. And a “reshoring” trend, bringing factories home to America from China and elsewhere, is gathering pace and support from several American multinationals, including General Electric and Ford Motor Company.”

While Mr. Moser acknowledges that multinational corporations (MNCs) “have a responsibility to enhance shareholder return and obey relevant laws and regulations,” he believes that “MNCs also have a duty to maintain a strong presence in their country of origin,” which he defines “as investing, employing, manufacturing and sourcing at least in proportion to their sales in the origin country.”

He states, “This duty has two sources. The first is a quid pro quo for the special benefits that their charter provides. The second is based on understanding that a strong presence is almost always in the interest of their shareholders.”

In his pro argument for the first duty, Mr. Moser quotes Clyde Prestowitz: “Corporations are not created by the shareholders or the management. Rather they are created by the state. They are granted important privileges by the state (limited liability, eternal life, etc). They are granted these privileges because the state expects them to do something beneficial for the society that makes the grant. They may well provide benefits to other societies, but their main purpose is to provide benefits to the societies (not to the shareholders, not to management, but to the societies) that create them.”

This view is corroborated by a recent essay, “The American Corporation,” by Ralph Gomory and Richard Sylla, in which they provide a brief history of corporation formation in America. From 1790 to 1860, over 22,000 corporations were chartered under special legislative acts by states, and

several thousand more were chartered under general incorporation laws introduced in the 1840s and 1850s. These state granted charters were not perpetual and had to be renewed periodically, “with its “powers, responsibilities?including to the community?and basic governance provisions carefully specified.”

The essayists comment that general incorporation laws were the answer to the problem of corruption in legislative chartering, but created their own problems in the late 19th Century with the rise of “Robber Barons, both the business leaders who amassed great power and wealth in the rise of mass-production and mass-distribution industries, and the great financiers of Wall Street who collaborated with them.” The concentration of wealth and power in the hands of so few led to the passage of antitrust laws and corporate regulations at both the federal and state levels regulations in the 20th Century to prevent or rein in monopolies.

The stock market crash of 1929 and the Great Depression resulted in a multitude of “New Deal” reforms and regulations on the corporate and financial sectors to protect and inform stockholders and the general public.

Gomory and Sylla write that for decades after WWII, “the problem of corporate goals seemed under control,” and “the interests of managers, stockholders workers, consumers and society seemed well aligned” while the U. S. and the Soviet Union were fighting a Cold War.

As late as 1981, the U. S. Business Roundtable issued a statement recognizing the stewardship obligations of corporations to society:  “Corporations have a responsibility, first of all, to make available to the public quality goods and services at fair prices, thereby earning a profit that attracts investment to continue and enhance the enterprise, provide jobs, and build the economy.” In addition, “The long-term viability of the corporation depends upon its responsibility to the society of which it is a part. And the well being of society depends upon profitable and responsible business enterprises.”

Establishing plants in another country in order to do business in that country and be closer to your customers is a reasonable business decision for many companies whose products are sold globally, such as Coca Cola and other food and beverage manufacturers. I concur with Mr. Moser’s statement. “We do not question multinational companies’ right to invest offshore.” However, it is another thing to transfer all or most of the manufacturing of your products to be sold mainly in the U. S. market to another country, at the cost of hundreds, if not thousands, of American jobs.

This brings us to Mr. Moser’s second pro argument to the question; namely, “a strong presence is almost always in the interest of their shareholders.” He states that his experience with the Reshoring Initiative’s free Total Cost of Ownership Estimator™ (TCO) has shown that “in their excessive focus on offshoring of manufacturing, many MNCs make suboptimal decisions, actually reducing the long-term return to their shareholders. Thus many MNCs will more fully maximise returns for shareholders if they maintain a stronger presence.”

This is because most MNCs do not accurately measure the “Total Cost of Ownership” or “landed costs” in making decisions regarding where to manufacture their products. They ignore the “hidden costs” of doing business offshore about which I have written extensively in my book , such as:  quality problems, legal liabilities, currency fluctuations, travel expenses, difficulty in making design changes, time and effort to manage offshore contract, and cost of inventory.

In addition, Mr. Moser states that the behaviors of MNCs include:

  • “Ignoring a whole range of medium-term risks: IP loss; impact on innovation; and loss of competence and control due to increasing reliance on offshore outsourcing firms. The further a firm is removed from the manufacturing of its products, the harder it is to evolve and make future related products.
  • Ignoring longer-term catastrophic risks associated with shifting their presence offshore, including the decline
    in Am
    erican economic, technological and military strength: risk of losing sales and assets in developing countries, especially when competing with local state-owned enterprises (SOEs); loss of the government-funded R&D that gives them a head start in many technologies; loss of strong origin-country defence and legal systems that protect the corporate charter; loss of “Pax Americana” that protects their trade around the world; and populist calls for anti-MNC political actions resulting from income inequality driven by a shriveling middle class.”

One important risk that Mr. Moser did not mention is the risk of theft of Intellectual Property by offshore manufacturers, especially in China. For many years, China has been doing this by reverse engineering, counterfeiting, and cyber espionage, but it has been made easier in the past two years by the mandatory technology transfer required by the Chinese government for corporations who set up plants in China.

In his con argument, Professor Bhagwati asserts that global sourcing and locating plants around the world has happened already, and “there is little point in tilting at reality.” He states, “Multinationals’ products, after all, can now hardly even be defined as American, French or any other nationality when their parts come from every corner of the world. All that matters, he argues, is that worldwide operations bring profits to the multinational, thereby benefiting the country in which it is headquartered. , “MNC investment abroad is good, not bad, for America unless it is a result of distorting tax policies that lead to overinvestment abroad. Asking MNCs to have a presence at home, and subsidising or forcing them under threat of penalties to do so, makes little sense unless you claim that this presence produces some externalities…the benefits to the MNC, and hence to America most likely, will accrue regardless of where the MNC does R&D, in Bangalore or Boston.”

In is rebuttal, Professor Bhagwati states, “Compelling an American MNC to retain a strong presence in America would be the wrong prescription no matter which of the two rationales you accept…Forcing them to produce at home when that makes them uncompetitive in world markets is surely the wrong prescription: it makes them uncompetitive in markets which today are fiercely competitive.

While I realize and have written about the fact that American manufacturers are under a disadvantage in dealing with countries like China that practice “predatory mercantilism,” it is my opinion that American multinational and national manufacturing corporations have more than a “duty to maintain a strong presence in their home countries.” As American citizens, we “pledge allegiance to the Flag of the United States of America, and to the Republic for which it stands, one Nation under God, indivisible, with liberty and justice for all.” Thus, we owe “allegiance” to our country, which is defined as “the loyalty of a citizen to his or her government.” Other synonyms are:  fidelity, faithfulness, adherence, and devotion.

Obviously, if you are a loyal, faithful, devoted citizen of the United States this means that you take actions in your personal and business life to support your country and do not purposely take actions that may cause harm to your country. Moving a majority of manufacturing to other countries, especially China is doing harm to your country since China has a written plan to replace the United States as the world’s super power. Therefore, American multinational corporations and other American manufacturers owe allegiance to the United States of America by maintaining a strong presence in our country.

SOURCE:  Saving US Manufacturing

Michelle Nash-Hoff is the author of “Can American Manufacturing Be Saved? “

SKILLS GAP PUTS MANUFACTURING IN THE U.S.A. AT A COMPETITIVE DISADVANTAGE

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Matthew Lavoie
February, 2013
NAM President & CEO Jay Timmons testified before the House Committee on Education and the Workforce hearing on the “Challenges Facing America’s Workplaces and Classrooms”.   NAM Chief Calls for Comprehensive Immigration Reform as Key Building Block for America’s Workforce
WASHINGTON, D.C., 02/05/13 –  National Association of Manufacturers (NAM) President and CEO Jay Timmons testified before the House Committee on Education and the Workforce at today’s hearing on the “Challenges Facing America’s Workplaces and Classrooms.” His testimony highlighted the need for comprehensive immigration reform both to strengthen the workforce by providing access to skilled workers and allow the United States to live up to its full potential. Timmons has previously met with key members of Congress to discuss comprehensive reform, and manufacturers will continue congressional outreach to work with policymakers to offer input as the debate moves forward.

Manufacturers are committed to a reformed immigration system that accounts for all aspects of legal immigration. As part of comprehensive reforms, manufacturers are asking Congress and the Administration to focus on addressing the lack of high-skilled workers, settling the issues regarding the undocumented population and establishing a commitment to strong legal enforcement.

“Talent and skill have no borders, and it is time that American immigration policy reflected that truth,” said Timmons. “Manufacturers need to be able to hire the right person with the right skills at the right time. Congress and the Administration must move forward with comprehensive immigration reform that allows manufacturers to meet their current and future workforce needs. The current system, unworthy of our ideals, is broken and holding the United States back. Without major reforms, we’ll be ceding talent to our competitors and turning away a future generation of entrepreneurs. Comprehensive reform will ensure that manufacturers have access to innovative workers who will help lead and grow our economy.

In addition to border security, structural reforms and verification issues, immigration reform must also address the millions of undocumented individuals who currently live in the United States. It is essential that we find a solution for these men, women and children living outside the system, and in doing so, we will build a stronger country. Members of Congress and President Obama must not waste this critical opportunity. Manufacturers look forward to working with policymakers toward a more vibrant economy that leads to more investment and jobs in America.”

A study released by the Partnership for a New American Economy found that more than 40 percent of Fortune 500 companies were either started by an immigrant or the child of an immigrant. American manufacturing enterprises founded by immigrants span all sectors, from technology, to steel, to chemicals, to medical devices, to many others. All told, major companies founded by immigrants or children of immigrants have an economic impact larger than all but two U.S. competitors—Japan and China—according to the report.

Approximately 600,000 manufacturing jobs remain unfilled due to an ongoing skills gap that has left employers unable to find appropriately skilled workers. As part of its efforts in support of comprehensive immigration reform, the NAM has partnered with businesses and education groups to form a coalition to address the need to fix America’s skilled worker crisis. As the debate moves forward, inSPIRE STEM USA will call on Congress to act on immigration reform to strengthen America’s workforce and education system both for today and tomorrow.

Made in USA Sees An Uptick

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LOCAL TIES: Paulette Garafalo of Brooks Brothers, which manufactures neckwear at a factory in Long Island City. | Photo: Buck Ennis

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Adrianne Pasquarelli
February, 2013
Apparel-making picks up (slightly) in NYC as trends favor city manufacturers.
Manufacturing clothes in the garment center might seem like a step back in time—but it’s actually forward growth for Ricky Schiffer. In December, the third-generation sweater maker, with his business partner, Leonard Keff, opened a 7,500-square-foot knitting factory on West 36th Street.

“We are just the first of many to come,” said Mr. Schiffer, who has committed $2.6 million to the project. “We’ll keep growing.”

The Made in USA movement is gaining steam, as retailers from Brooks Brothers to Walmart push to manufacture their wares in the United States to appeal to patriotic consumers and avoid costly overproduction as overseas labor and shipping costs rise. Surprisingly, the trend is playing out on a smaller scale in the city.

For an area that has seen apparel-making plummet—last year, on average, there were 14,900 apparel manufacturing workers in New York City, and two decades ago, there were more than 80,000, according to the New York State Department of Labor—new factories are welcome additions.

Mr. Schiffer’s factory, Keff NYC, has eight knitting machines (each costs $100,000), and he has ordered a dozen more. Though the company is currently making samples, Mr. Schiffer expects to engage in production of up to thousands of units. The company has already signed Abercrombie, Opening Ceremony and Burt’s Bees Baby as clients. It’s also producing uniform accessories, including hats, gloves and scarves, for the 2014 Winter Olympic Games.

Orders up by 30%Meanwhile, Stoll America, a 140-year-old knitting-machine seller that also makes apparel, opened an outpost on West 39th Street in 2009 and has been growing ever since. The company employs 21 workers, up from 12 four years ago, and has seen orders increase by 30% since 2010.

“Up until now, no one was around where designers could get samples done,” said Marcus Kirwald, product development manager. “They had to send them out, and there was lot of time and frustration involved.”

Brooks Brothers has made a name for itself in local production—it has manufactured its ties at a Long Island City, Queens-based factory for decades, for example, and operates two additional East Coast facilities—and is working to strengthen its capabilities. In its neckwear factory, which last year produced 1.5 million cravats, Brooks Brothers employs 300 workers, up 10% since early 2011. Three years ago, the brand overhauled its operations from assembly line to “module,” or manufacturing by team, to become more efficient, and it began producing apparel for other brands, such as Club Monaco and Jack Spade.

The clothier now promotes its American-made wares through a special section on its website and specific catalogs—recognizing that consumers are paying attention to the origin of their clothing. (Ralph Lauren was criticized last summer for making the U.S. Olympic team’s uniforms in China.)

“It’s really critical as part of our heritage and our culture that we maintain and actually increase American manufacturing,” said Paulette Garafalo, president of international and manufacturing at Brooks Brothers.

Asia’s rising middle class also has altered the landscape. Asian shoppers are beginning to covet U.S.-made brands, according to some designers. New York-based designer Patrik Ervell, who launched his eponymous menswear business seven years ago and manufactures 95% of his goods in the U.S., has noticed that buyers from Japan, China and South Korea are looking to stock only apparel manufactured in the U.S. If it doesn’t carry that label, they’re not interested, he noted. Currently, Asia represents 25% of his wholesale business.

Shifting pattern”People have started to fetishize this ‘Made in USA’ thing; it has an aura around it,” said Mr. Ervell, who sells to upscale stores such as Barneys New York and Opening Ceremony. “That period of churning stuff out of China and shipping it here is shifting.”

Domestic production is pricier—by as much as 40%—but the gap has been narrowing in recent years. In addition, manufacturing here means that retailers can get smaller batches of products into stores more quickly, reducing the need for end-of-season markdowns.

“It’s the unsold portion which becomes the albatross around their necks,” said Andy Jassin, head of retail consultancy Jassin Consulting Group. “It’s a matter of what’s efficient, and we’re beginning to see the efficiency of ‘Made in USA.’ “

And Americans appear increasingly willing to pay for it. About 75% of consumers said they would shell out more for American-made goods, up from 50% in 2010, according to America’s Research Group. Typically, U.S.-made products have been limited to small high-end designers, but now larger mainstream retailers, like Ohio-based Abercrombie, are investing in U.S. manufacturing.

“A lot of these stores are strategizing how they can do a ‘Made in USA’ product now because they think the country is ready for it,” said Mr. Schiffer.

Even so, manufacturing locally, whether in New York’s garment district or Garland, N.C.—where Brooks Brothers operates a factory—continues to present challenges. Most apparel sellers buy fabrics overseas, because Environmental Protection Agency rules for printing with dyes make local sourcing difficult. Meanwhile, when brands began outsourcing manufacturing and shuttering their local factories decades ago, younger workers, especially in the garment district, started abandoning the field for more lucrative industries.

So far, the return of some factories has not been enough to reverse the loss of manufacturing jobs in the city, where fashion jobs have steadily declined from 200,000 in the heyday of the 1960s.

“You don’t see the kids of the kids in the factories anymore,” said Alex Garfield, who has been in the apparel industry for more than two decades, currently as a founder of women’s pants brand Peace of Cloth. “A whole generation is missing.”

Still, the dynamic is shifting.

“Ten years ago, it was six times cheaper to manufacture in China,” said Ms. Garafalo. “Today, it is about three times less expensive, so the opportunity for better margins [there] is reducing.”

U.S. Congressman Cicilline (D-RI) Unveils The Make It In America Manufacturing Act

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January 31, 2013
“Make It In America Manufacturing Act” would provide targeted investments to support small business expansion.
PAWTUCKET – As part of his ongoing work to get Rhode Island’s economy back on the right track, U.S. Congressman David N. Cicilline (D-RI) today unveiled the Make It In America Manufacturing Act to target federal investment in manufacturing, helping create jobs, generate public-private partnerships, and support small business growth.

“When they’re competing on a level playing field, American workers outperform competitors across the world,” said Cicilline.  “Rhode Island’s economy was built on the strength of our manufacturing industry and that’s why I am pleased to introduce the Make It In America Manufacturing Act in order to help give manufacturers the resources they need to compete successfully, grow jobs, and get our state and national economy moving again.”

Senator Kirsten Gillibrand (D-NY), who has introduced the Senate version of the Make It In America Manufacturing Act, collaborated with Cicilline in recent months to build upon legislation they introduced in the 112th Congress. Cicilline also received feedback from Rhode Island constituents and the Brookings Institution on ways to enhance the manufacturing proposal.

If signed into law, the Make It In America Manufacturing Act would create a competitive incentive grant program, jointly administered through the Departments of Labor and Commerce. States or regional partnerships may apply for the program, and successful applicants will receive grant funds to help implement innovative Manufacturing Enhancement Strategies.  Funds can be used to create a revolving loan fund, to issue low interest loans to manufacturers, or to provide grants to non-profits, including community colleges, helping manufacturers to:

  • Address the skills gap that hinders growth in the manufacturing sector
  • Increase exports and domestic supply chain opportunities
  • Improve energy efficiency
  • Retool and expand existing manufacturing facilities to compete in the 21st century economy

“There is tremendous potential for job creation in the advanced manufacturing sector here in Rhode Island and throughout New England, and this innovative proposal would provide the kind of investment needed to support growth,” said James T. Brett, President & CEO of The New England Council.  “The Council is proud to support Congressman Cicilline’s Make it in America Manufacturing Act and we look forward to working with him as he continues to fight for our region’s ongoing economic recovery.”

Cicilline, who was a leading advocate for the House Democratic Make It In America agenda during his first term in Congress, has pledged to continue working with colleagues to find commonsense solutions for the obstacles facing small business owners and manufacturers – especially those in Rhode Island.

Congressman Tim Ryan (D-OH), an original co-sponsor of the Make it in America Manufacturing Act and the Co-Chair of the House Manufacturing Caucus, added, “I am proud to support the Make it in America Manufacturing Act of 2013. This bill should receive the support of my colleagues from both parties as it seeks to maintain the revitalization of manufacturing that continues around the country. This competitive grant program will provide low-interest loans to small business and job training assistance to employees and community colleges, just the things we need in my District to keep our traditional manufacturers thriving and continue building our advanced manufacturing sector. This bill will also allow U.S. manufacturers to refine their processes, train both new and existing employees on the most updated machinery, and innovate their product line to stay ahead of the competition. This is what we need right now.”

The Make It In America Manufacturing Act has already received endorsements from several national groups, including the American Small Manufacturers Coalition, National Association of Counties, National Skills Coalition, United Steel Workers, AFL-CIO, and National Association of Development Organizations.

Woolrich Bringing Manufacturing Back to Pennsylvania

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BY WOOLRICHJANUARY, 2013
…At the Outdoor Retailer Winter Market show in Salt Lake City, Utah, Woolrich, Inc. President Nicholas P. Brayton issued an open letter to the public on the company’s commitment to domestic manufacturing. Brayton’s open letter addresses the company’s current and past U.S. manufacturing challenges and outlines future strategic goals to bring manufacturing back to the historic Pennsylvania Woolen Mill… 
 Nicholas P. Brayton – President

  CORPORATE ANNOUNCEMENT

It’s a popular thing to be manufacturing in the United States right now.  Companies of all sizes are listening to their consumers and their hearts, and finding a way to build it here again.

At Woolrich, we have been actively manufacturing in the United States since our company’s founding in 1830.  We proudly operate the oldest continually running mill in America, right here in the town of Woolrich.

As proud as we are of our manufacturing legacy, it’s true that we don’t make 100% of our products in the USA as we once did.  As the global economy grew and matured over the last 20 years, many core mill customers took their woolen business overseas.  To remain relevant, competitive and solvent, we made the same difficult choice.

In today’s world, the hard reality is that making things here is hard to do.  But like our customers who embrace adventure every day, Woolrich is preparing to tackle a new challenge… bringing manufacturing back to Pennsylvania, one step at a time.

Toward this end, Woolrich is setting three significant domestic manufacturing goals:  for our mill, for our customers, and for our brand.

1. To increase the yardage of wool produced in our woolen mill by 50% in 2013.

2. To introduce a 100% American-made apparel collection in Fall 2013.

3. To increase our American-made product offerings by 2015, ensuring that more than 50% of Woolrich Woolen garments proudly include American-made wool.

In the coming months, for Woolrich to set and accomplish these goals, it’s going to take more than a company commitment.  It’s going to take support from our loyal customers as well.

At Woolrich, we are proud of our rich heritage, and eager to begin writing the next chapter of the American manufacturing story.  Moreover, we are excited to work side by side with you to accomplish these worthwhile goals.

Sincerely,
Nicholas P. Brayton
President
Woolrich Inc.

SOURCE:  Woolrich Blog

American Manufacturing Bouncing Back

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Art Pine
January 2013
America’s manufacturing sector is recovering and poised for a modest rebound. The question is how much?
The long decline in America’s manufacturing sector finally is over. During the past two years, manufacturing output has regained almost three-quarters of the stunning 20% drop it took during the Great Recession. And manufacturing firms have pared their production costs and improved their efficiency. Now they are poised for a comeback.

The Manufacturers Alliance for Productivity and Innovation, the industry’s trade group, predicts that manufacturing output will rise 2% this year, 3.3% in 2014 and 4.2% in 2015 — a modest rebound, but headed in the right direction. Some industry experts see decidedly better days after that, and talk of a renaissance in U.S. manufacturing fills the air.

The sweeping structural changes that manufacturing companies have undergone are putting U.S. factories back in the game. Over the past few years, U.S. productivity has improved, wages have remained flat, and automation has replaced many human workers. Labor unions have lost much of their clout. Other costs have fallen sharply: Interest rates are low. Oil and gas supplies have mushroomed, while energy prices, particularly for natural gas, have plunged. And the dollar’s value has declined, making U.S. exports less expensive and foreign imports more costly to buy.

At the same time, rising wages in China, combined with the spread of robotics here at home, are eroding the attractiveness of outsourcing production to low-wage countries. The nuclear disaster in Fukushima, Japan, gave companies pause about global supply chains. The upshot: A growing number of U.S. firms have begun to bring production home.

“The U.S. has gotten more competitive,” says Harold L. Sirkin, a Boston Consulting Group analyst who watches manufacturing. He predicts the U.S. will create up to 1 million manufacturing jobs over the next 10 years. “The U.S. will become a manufacturing center, and not just for American companies,” he says.

Sirkin foresees visible gains in overall manufacturing output in industries such as computers and electronics, appliances and furniture, chemicals, fabricated metals, plastics and rubber, and automobiles and automotive parts. “We’re really seeing signs of a turnaround,” he says.

Even so, most analysts expect that manufacturing won’t take off for another couple of years, at least. The U.S. economic recovery continues to be anemic, without enough oomph to propel factories at full speed. And the global economy is lagging further, so manufacturers can’t count on exports to spur production at home.

“The missing ingredient is demand. Everything else is falling into place for manufacturing,” says Mike Montgomery, an economist at IHS Global Insight in Lexington, Massachusetts. “The structural issues that manufacturing faced before have almost entirely sorted themselves out. But demand isn’t growing fast enough.”

And the golden days of the 1960s and early 1970s aren’t likely to come back anytime soon. The resurgence will be modest. Large multinationals will continued to retain large plants abroad. At best, the gains will replace much of the employment losses incurred during the recession.

“You can say that the worst is over for American manufacturing,” says Barry P. Bosworth, a Brookings Institution economist who keeps tabs on manufacturing. “The loss in factories will be slower than it’s been over the past three decades because we no longer have to shed low-skill jobs and increase our efficiency in order to compete.”

Even so, while U.S. manufacturing has come a long way in adjusting to the post-1970s world, it still faces some daunting challenges. Already, factories are having difficulty finding skilled workers for today’s manufacturing jobs, and the problem will intensify as the work force ages. So far, the U.S. has done little to address it.

And while innovation in this country is going strong in a few high-profile scientific fields, such as nanotechnology and computer science, translating that into manufacturing is going more slowly than economists say is needed. Labor Department figures show, for example, that the number of new start-up firms has been declining steadily since 1998.

SOURCE:  Kiplinger

Made in America: The Next Boom

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KOPIN TAN
JANUARY 2013
Cheap natural gas and increasingly competitive labor costs are bringing factories and jobs back to the U.S. Eight ways to win.
As the only industrialized superpower not decimated by World War II, the United States once made nearly 40% of the planet’s goods. These days, that number has shrunk to 18%. We make American Girl dolls in China, Levi’s jeans in Mexico, and enough movies in Vancouver to nickname it Hollywood North.

After decades of outsourcing, however, the U.S. is quietly enjoying a manufacturing revival, and companies like Apple (ticker: AAPL), Caterpillar (CAT), Ford Motor (F),General Electric (GE), and Whirlpool (WHR) are making more of their goods on American soil again. It isn’t just U.S. companies that are drawn to our cheap energy, weak dollar, and stagnant wages. Samsung Electronics (005930.Korea) plans a $4 billion semiconductor plant in Texas, Airbus SAS is building a factory in Alabama, and Toyota (TM) wants to export minivans made in Indiana to Asia.

The Rust Belt owes its new shine to many factors, including rising wages and industrial-land costs in Asia. But none is bigger than the U.S. energy boom. Thanks to a head start in extracting oil and gas from shales, North America now produces far more natural gas than any other continent. Unlike oil, gas isn’t easily transported across oceans, and a result is some of the world’s cheapest energy within our reach: Natural gas here costs $3.55 per million British thermal units, versus roughly $12 in Europe and $16 in Japan. Cheap energy not only reduces our trade deficit and our addiction to Middle East oil, it also makes our factories more competitive globally — a boon for a country that had gone from exporting American goods to exporting American jobs.

The biggest beneficiaries are energy-guzzling companies like chemical producers and steelmakers, and Barron’s has identified eight stocks that should prosper in our gas-fueled manufacturing upswing. They are Southwestern Energy, LyondellBasell Industries, Nucor, Dover, Calpine, CF Industries, Williams, and Union Pacific. But any glow will also rub off on regional lenders, home builders, and local small businesses. “The U.S. is the Saudi Arabia of natural gas,” declares Nancy Lazar, co-head of the New York research firm International Strategy & Investment. “And Middle America is my favorite emerging market.”

Our energy boom got cracking with fracking, a controversial process in which pressurized fluids are pumped through rock formations, often a mile or more under the ground, to extract oil and gas. Critics condemn fracking, which they contend causes environmental harm, but even they agree that it’s led to an abundance of cheap gas. Over the past six years, U.S. production of petroleum and natural gas has jumped from 15 million barrels of oil-equivalent a day to 20.1 million, a 20-year high. Over the same period, imports have fallen from 14 million barrels a day to below eight million, a 25-year low.

It’s a sign of the times: Graduates from the South Dakota School of Mines & Technology — acceptance rate: 88%; mascot: Grubby the Miner — now command a median starting salary 16% higher than that of Yalies.

By 2020, the U.S. will become the world’s biggest oil producer, says the International Energy Agency. By 2025, North America will be a net energy exporter, predicts ExxonMobil (XOM).

That edge should remain ours for decades. “It isn’t just the huge reserves we have underground,” says Tim Parker, who manages T. Rowe Price’s natural-resource stock portfolios. “No one else has our predictable cocktail of infrastructure already in place, know-how, a relative abundance of water, and a favorable royalty regime that give landowners a stake in the exploration game.” Europe, for instance, is averse to fracking and has little infrastructure; Japan has hardly any shales; and while China has vast reserves, only shales nudging the Yangtze River have enough water for fracking.

Of course, an especially frigid winter could send gas prices soaring, but any such spike should be temporary. Given our expanding reserves and record inventory, commodity strategists expect U.S. natural gas to stay between $3 and $5 per million BTUs for years — well below prices abroad.

CHEAP GAS ISN’T THE ONLY booster in our tank. In the decade since China joined the World Trade Organization in 2001, that nation has become Earth’s low-cost factory. But wages and benefits there are rising 15% to 20% a year, while they’re stagnant here. Despite Beijing’s efforts to hold it down, the yuan has gained 33% against the dollar since 2005. Industrial land averages $10.22 a square foot across China, but rises to $11.15 in the coastal city of Ningbo and $21 in Shenzhen — compared with $1.30 to $4.65 in Tennessee and North Carolina. “Within five years, the total cost of producing many products will be only about 10% to 15% less in Chinese coastal cities than in parts of the U.S. where factories are likely to be built,” says Hal Sirkin, a senior partner at Boston Consulting Group. Add duties and shipping, and the cost gap shrinks further.

Location-scouting manufacturers also are looking beyond mere costs. Moving part of their supply chains closer to the U.S. — still the world’s biggest consumer market — helps companies react faster to changes and also speeds innovation, says Gary Pisano, a Harvard Business School professor. Adds Robert McCutcheon, who heads PricewaterhouseCoopers’ U.S. industrials practice: “You protect not just the intellectual property of your products, but your processes as well.”

Companies, of course, won’t completely shutter overseas factories. U.S. corporate taxes are still high, compared with many other countries’, and there’s a limit to how many jobs will return, given advances in automation and productivity. But BCG’s Sirkin conservatively estimates that 2.5 million to five million manufacturing positions will be added by 2020, which could shave two to three percentage points from our unemployment rate, now near 7.8%. We’ll also expand exports, at the expense of higher-cost developed rivals, such as Germany and Japan. And U.S. ports stand ready and idle, operating at just 54% of capacity, well below 59% in Europe, 67% in Latin America, and 76% in Southeast Asia.

Busier factories would help the entire country. For every dollar spent on manufacturing, another $1.48 is added to the economy, says the National Association of Manufacturers. Another bonus: Manufacturers account for two-thirds of what the private sector spends on research and development.

And we’ve only just begun: Abundant gas and a weak dollar are long-term trends, and U.S. wages should behave until unemployment falls well below 6%, says Jeffrey Korzenik, chief investment strategist at Fifth Third Private Bank. “Offshoring had gone on for decades, but the re-shoring trend is only in year two or three.”

Here are eight stocks that should benefit:

Southwestern Energy (SWN)
Cheap energy is a boon for manufacturers, but a curse for exploration companies, and investors are shunning the producers most exposed to slumping gas prices. With 99% of Southwestern’s production and reserves in natural gas, you’d think the Houston company’s managers would be anxiously sweating over prices near decade lows.

But they aren’t. That’s because Southwestern is a highly efficient, low-cost producer. It works its 926,000 acres in the Fayetteville shale with operational aplomb, using dense wells, some of its own rigs, and vertically integrated services. The company has another 187,000 acres in the Marcellus shale. At $34, its shares trade at a small premium to its gassy peers but still a discount to its net asset value.

Ken Settles, who co-manages the RS Global Natural Resources Fund, expects gas prices to hit $5 to $6 eventually. “But the benefit of focusing on a low-cost producer is that, even with gas prices below sustainable long-term levels, Southwestern’s assets are still profitable and creating value for its owners.”

Southwestern plans to increase 2013 production by 11% to 13%, and analysts see its per-share profit climbing 19% this year. Earnings will grow even more if natural-gas prices rally, but you won’t sweat waiting for that to happen.

Southwestern plans to increase 2013 production by 11% to 13%, and analysts see its per-share profit climbing 19% this year. Earnings will grow even more if natural-gas prices rally, but you won’t sweat waiting for that to happen.

LyondellBasell Industries (LYB)
Chemical makers guzzle energy and also rely on byproducts from oil and gas purification — stuff like ethane, butane, and propane — for raw materials. So the shale boom delivers a double blessing of cheap feedstock and energy. In fact, PwC thinks that we might start seeing more plastic-based substitutes for materials like metal, glass, or wood. That’s good news for diversified specialty-chemical giants like DuPont (DD), and also Dow Chemical (DOW), which is investing $4 billion to boost production and build an ethylene plant in Texas that could hire 2,000 workers.

Still, Tim Parker of T. Rowe Price says that the narrower profit margins of more commoditized base-chemical companies might see a bigger boost from the new world order of cheaper feedstock and energy. His pick: LyondellBasell.

Since the Rotterdam-based company emerged from bankruptcy in April 2010, its New York-listed shares have climbed 184%. The shares, recently trading at $62, fetch 10.7 times 2013 profits. LyondellBasell’s management team is boosting earnings and returning capital to shareholders through share buybacks and dividends. The stock yields 2.6%. And net profit margins of 5.6% trump the 3.7% average of its peers. With new capacity, cheap feedstock and $14 billion in free cash flow, it can earn $10 a share by 2016 and become a $100 stock, Deutsche Bank analyst David Begleiter maintains.

Nucor (NUE)
Steel-making isn’t just another energy-intensive business. Steel pipes and products are integral to energy exploration and transportation, not to mention manufacturing and construction. With 99% of its revenue earned in America, Nucor, the largest U.S. minimill operator and metals recycler, is well-hitched to that energy and manufacturing boom.

The steel industry is vexed by excess capacity, and its volatile stocks surge or slide with temperamental economic data. So it helps that Nucor is more defensive than its peers. Wells Fargo steel analyst Sam Dubinsky favors it over the long haul, “due to its lean cost structure and product diversity, both of which have resulted in earnings at the high head of the peer group.” Nucor also is most levered to the bottoming construction market. A healthy balance sheet and a 3.1% dividend yield further burnish the appeal of its stock, recently at $47.78.

Dover (DOV)
Is the U.S. really ready to make more things again? The average age of our manufacturing plants is 15.5 years, while our equipment has been around almost six years. Both are near five-decade highs. “Old equipment and manufacturing plants suggest the need for a large replacement cycle,” writes ISI. Over the next five years, the research firm expects capital expenditure’s share of the economy to rise from 10.2% to 14%, putting it near its early 1980s peak. That’s good news for Dover. The conglomerate makes a vast array of industrial products — from refrigeration systems and specialty pumps to drill bits and bar-code equipment — making it a proxy for our manufacturing boomlet.
Compared with other economically sensitive stocks, Dover is more diverse and more stable. Management has allocated capital shrewdly, making acquisitions, buying back shares, and lifting return on capital to 12.4% — a decade high. Dover has a 2.1% dividend yield, and its 9.7% profit margin trumps the sector’s average. Yet its shares, at $67, trade at 12.8 times 2013 profits, a discount to the market and other machinery stocks.

Calpine (CPN)
Calpine is the largest independent U.S. producer of gas-powered electricity, and runs some of the newest, most efficient plants. Just six years ago, nearly half the nation’s power came from coal. But gas’ share has swiftly risen from a fifth to a third, while coal’s has waned.

The ongoing switch to cleaner natural-gas-generated electricity is one reason whyBarron’s has been bullish about the stock (see “Calpine Gets Ready to Light Up,”July 23, 2012). The company also has unused capacity that puts it in the driver’s seat as utilities replace decades-old coal plants.

At first blush, that advantage seems well reflected in the shares, which, at $19, fetch 27.6 times 2013 profit estimates of 69 cents a share. But that seemingly lofty multiple is below its median over the past five years, and Calpine is generating more than $1 a share in free cash flow and continuing to pay down debt. “When power prices are low, Calpine benefits by taking market share from less-efficient producers,” says MacKenzie Davis, who co-manages the RS Global Natural Resources Fund. “But it also benefits if power prices rise, since margins and cash flow will improve.”

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CF Industries (CF)
Energy can account for nearly 70% of the cost of producing fertilizer, and Jack Ablin, BMO Private Bank’s chief investment officer, singles out CF Industries as a big beneficiary of plentiful natural gas.

The company, which produces nitrogen and phosphate fertilizers, earns 85% of its revenue in the U.S. Shares of Deerfield, Ill.-based CF, at $226, have outrun their peers and climbed 73% over the past two years, the latest leg coming as drought sent corn and soybean prices soaring. Fearful that cyclical earnings have peaked, analysts are downgrading the stock, and investors fret that margins and share buybacks will suffer as management spends $3.8 billion to expand its nitrogen capacity.

But any pullback is an opportunity for long-term investors. Cheap gas costs should keep operating margins near a record 50.1%. Tight corn supplies, low water levels in the Mississippi, and a still-dry Corn Belt should support grain and fertilizer prices, and CF’s investment-grade credit rating and low debt let it borrow money cheaply should it need to. Its stock trades at just 8.2 times what CF earned over the past 12 months, well below the 12.3 times median since it went public in 2005.

Williams (WMB)
So why aren’t American drivers enjoying a bigger windfall at the pump? For one thing, global demand dictates gasoline prices. After decades of ferrying imported oil, our infrastructure also needs to be re-oriented toward redistributing domestically produ
ced na
tural gas. That benefits master limited partnerships that operate pipelines, and for investors who want to avoid MLPs’ complex tax-filing regimes, their parent companies.

Williams gathers and transports natural gas, and owns 78% of its namesake MLP, Williams Partners (WPZ). It has diverse assets, pays a 3.9% yield, and thrives as demand increases for natural-gas processing and infrastructure.

However, 2012 was the first year in the past 13 in which MLP returns trailed the overall stock market’s, thanks to weak gas prices, tax concerns, and profit-taking after years of gains.

Williams Partners, which sports a 6.6% yield, fell 22%. Shares of its parent also struggled after it issued stock to help finance a complicated $2.25 billion investment in privately held Access Midstream Partners and the MLP it controls.

Still, the deal boosts Williams’ position in the Utica and Marcellus shales, and adds steady fee income that tempers Williams’ exposure to fluctuating commodity prices. Investors fret that Williams, which trades at $34, may have to raise more money, but cash flow of about $1.6 billion this year exceeds the adjusted net income of $816 million that Wall Street expects and should more than cover payouts, letting Williams deliver on its promise to increase dividends at a 20% annual rate through 2015.

Union Pacific (UNP)
All manufactured goods must move from the factories in which they’re made to somewhere else. Kansas City Southern (KSU), which has a unique North-South network linking the Midwest with Mexico, could benefit from any spillover of manufacturing south of our border. But the king of rail remains Union Pacific.

Spawned 150 years ago, after Abraham Lincoln signed the Pacific Railway Act, Union Pacific’s dense network blankets the map west of the Mississippi. Stephens’ transportation analyst Brad Delco flags Union Pacific as one of the rail stocks most exposed to energy-intensive groups like autos, chemicals, and steel. It hugs the Gulf Coast, has the largest U.S. chemical franchise among rail carriers, and hogs 75% of the western U.S. traffic for assembled autos and parts. Its relative absence along the East Coast further shields it from coal’s dying embers.

Union Pacific shares have run up 44%, to $133, over the past two years, nearly twice as much as the rail group has. But the stock trades at 14 times projected profits, a small premium to its peers, and no higher than its own historical average. Management has lifted operating margins to a decade-high 36%. The stock boasts a 2.1% yield, and the company has paid a dividend every year since 1899, when the steam engine propelled the U.S. to its first industrial boom. The rail giant’s in great shape for the next one

SOURCE:  Barrons

Made in U.S.A. Supplier Summit Coming Soon

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Mike Troy
The first indication that something big was brewing with Walmart on the domestic sourcing front came last week.
That’s when Walmart announced internally at that SVP of home, Michelle Gloeckler, would assume additional responsibilities for a new U.S. sourcing and manufacturing initiative. Reporting to Gloeckler is Greg Hall who was named vp of U.S. sourcing and manufacturing after previously serving as vp of marketing for Walmart.com.

Both appointments were a little lost in the shuffle as the new responsibilities for Gloeckler and Hall were listed at the bottom of a memo that included announcements about 15 other merchandising executives. They aren’t lost in the shuffle anymore following the announcement earlier this week by Walmart U.S. president and CEO Bill Simon that Walmart plans to purchase an additional $50 billion worth of merchandise from U.S. suppliers during the next five years.

Gloeckler and Hall now figure prominently into those plans and accompanied Simon to the National Retail Federation convention where he was a featured speaker on Tuesday morning when the purchasing initiative was announced in front of several thousand people.

“Walmart and Sam’s Club will grow U.S. manufacturing on two fronts: by increasing what we already buy here – in categories like sporting goods, apparel basics, storage products, games, and paper products.　 And by helping on-shore U.S. production in high potential areas like textiles, furniture, pet supplies, some outdoor categories, and higher end appliances,” Simon said.

He indicated the company will help convene a manufacturing summit this summer to bring the retail industry together and promote domestic sourcing more broadly.

“Instead of working on these issues separately, we will accelerate these changes by working together,” Simon told the NRF attendees. “And when we do, it will benefit all of us. Any new factory can sell to any of us.　Every investment made in partnership with one of us lowers the cost for all of us.　Every new hire at one of our suppliers is a new customer who might come through your doors or ours.”

While Walmart has committed to $50 billion in new domestic manufacturing, he suggested the broader retail industry could set its sights at $500 billion in purchases over a 10 year period. Such a commitment would give American manufacturers the confidence they need to invest in domestic manufacturing at a time when rising energy costs and overseas labor rates are causing suppliers to give domestic manufacturing a second look.

Simon contends suppliers just need a nudge. So in addition to the $50 billion commitment, Walmart plans to execute longer term purchase agreements to give company’s greater visibility into demand for their goods.

SOURCE:  Retailing Today

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