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https://www.themadeinamericamovement.com/wp-content/uploads/2017/08/Made-in-America-Movement-Logo_340x156.png 0 0 MAM Team https://www.themadeinamericamovement.com/wp-content/uploads/2017/08/Made-in-America-Movement-Logo_340x156.png MAM Team2012-10-10 12:00:472012-10-10 12:00:47China Needs Its Own Dream

By Jerry Hirsch
October 6, 2012

Honda announced its third big recall of the week Saturday, this time to correct a faulty automatic window switch in 268,000 model-year 2002-2006 CR-V sport-utility vehicles that can malfunction and start a fire. 

Earlier in the week Honda recalled about 1.4 million Civics, Accords and Pilots to fix a variety of safety issues.

In the CR-V recall, the automaker said rainwater or spilled liquids may enter an open driver’s window and drip onto the master power window switch. Over time, exposure to liquids can cause electrical resistance in the switch, making it overheat, melt and cause a fire. No crashes or injuries have been reported related to the problem but Honda said it knows of four switch fires.

On Thursday, Honda expanded a March headlight recall to include 820,000 model-year 2002-2003 Civic sedans and model-year 2004-2005 Pilot sport-utility vehicles in the United States.

The automaker said a problem with the wiring of the headlight switch could cause the low-beam headlights to not work. The loss of headlights could limit a driver’s ability to see the road and potential hazards and increases the risk of a crash. However, Honda said no crashes or injuries have been reported in connection with the problem.

In March, Honda recalled 550,000 CR-V small SUVs from the 2002 through 2004 model years and Pilots from 2003 because of the same problem.

On Monday, Honda said it would expand a recall of Acura TL sedans to include 572,000 model-year 2003-2007 Accord V6 vehicles in the United States.

But the automaker said the Accord recall, to fix leaking power steering hoses that could cause fires, will be delayed into next year because the automaker doesn’t have enough parts to fix the problem. The updated power steering hoses won’t be available until early 2013.

Honda is sending out a notice to Accord owners telling them of the problem and describing the symptoms. Drivers who think their cars are affected should take them into the dealership for an “interim” repair, the automaker said. The most commonly reported symptom is a smell from the seeping fluid. 

Forbes Leadership Forum, Contributor
(This article is by Robert McCutcheon, the U.S. industrial products leader of PwC.)

A number of signs, beyond the current cyclical recovery in domestic manufacturing, suggest that the U.S. may be entering a longer-term manufacturing resurgence. People have long worried about the nation’s relatively high labor costs and challenges in competing with developing markets, particularly in Asia and Latin America, but after decades of manufacturing migration overseas, the tide may be turning.

That’s not only because of the nation’s improving labor cost competitiveness. Economists have noted that China’s labor costs are rising, affecting its manufacturing profits. Yet the overall cost premium, based on the difference in absolute wages between the U.S. and China, is actually expanding, so labor arbitrage involving China and other low labor cost markets will likely persist. The real news is that a range of structural changes are emerging that could drive a U.S. manufacturing renaissance. A sustained manufacturing rebound could lead to potentially improving investment, employment, production output and research and development.

PwC’s recent report A Homecoming for U.S. Manufacturing? evaluates the key factors that may lead to the U.S. becoming a more attractive manufacturing location. Many manufacturers are increasingly reevaluating their U.S. strategies, such as their separation of R&D and production, and their production abroad and importation back to U.S. buyers. Depending on the industry, they may find considerable benefits in establishing regionalized supply chains and R&D facilities in the U.S., including reducing costs, shortening lead times, protecting intellectual property, and avoiding many of the risk factors of developing markets. Localizing production can help reduce supply chain disruptions that cost American industrial manufacturers $2.2 billion last year, according to the PwC report. Bringing manufacturing production back to the U.S. generally holds greater advantage for some industries than others. Taking into account labor, materials, transportation, and energy costs, the chemicals, primary metals, and heavy equipment manufacturing industries stand to benefit most from maintaining or expanding facilities in the U.S. Companies in wood, plastic, and rubber products could also benefit significantly, but their lower net imports might limit their benefits from on-shoring.

The bull market in energy commodities has driven up transportation costs for manufacturers with global supply chains, leading some machinery companies to produce more in the U.S. for sale in North America. If transportation costs remain elevated, perhaps because of growing global demand for energy, production closer to home may grow more attractive. Also, it can cut down on lead times, reduce inventory levels, diminish some currency risks, increase control over intellectual property, and reduce supply chain disruption risks. In addition, progress in extracting natural gas from shale has created new opportunities for manufacturers in several industries, particularly chemicals and metals, thanks to more affordable energy and greater downstream demand.

Also, manufacturers are increasingly concerned about currency fluctuations.  The depreciation of the dollar and rise of China’s currency has narrowed the cost gap between producing domestically and importing from China for domestic consumption. Moreover, the long-term decline in the dollar helps make the U.S. a potentially more competitive location for manufacturing for export, and there has been strong growth in the exports of goods since the end of the recession. The appreciation of the yuan relative to the U.S. dollar may continue longer-term as China’s economy grows, which could further help U.S. manufacturers.

U.S. demand remains supreme. Although China and other emerging markets are expected to keep having faster gross domestic product growth than the U.S., our advantage in wealth, in real GDP per capita, is expected to persist, dwarfing China and other emerging markets. This difference in  standard of living, as well as the size of the U.S. market, supports investment in the domestic production of goods targeted for U.S. consumption.  In addition, the U.S. labor force remains strong.

As for the availability of capital, although credit standards aren’t at the levels reached during the financial crisis, banks have resumed tightening their credit requirements. Borrowing in China and has become more difficult, too, though, so manufacturers may shy away from longer supply chains and the risks they carry, including getting inventory stuck in transit, particularly in industries with short product cycles or high spoilage.

The U.S. has the highest statutory corporate tax rate among developed countries. This has spurred talk of tax reform to boost economic growth and employment. Proposals include a lower statutory rate, tax incentives, and extending or making permanent the R&D tax credit. However, the tax and regulatory environments do bring uncertainty to the expansion of domestic manufacturing.

All these considerations, as well as labor costs, are affecting manufacturers’ decisions whether to establish production facilities in the U.S., closer to their domestic customers. Can we expect an increase in re-shoring as a result? Will “Made in USA” become more common? Only time will tell, but a wide range of signals now suggest a potential renaissance of the U.S. manufacturing sector.

Eamonn Fingleton

Some of us have long argued that the United States has been committing economic suicide by letting its once-peerless manufacturing base fade away. To those who have investigated the facts, the case has, for decades, seemed unchallengeable.

Yet it has received virtually no support from the American scholarly establishment. Now finally academe seems to be waking up.  At least that is how I read the forthcoming publication of Producing Prosperity: Why America Needs a Manufacturing Renaissance. Written by  Harvard  management professors Gary P. Pisano and Willy C. Shih, and endorsed by former Harvard president (and noted economist) Larry Summers, the book argues that if a nation loses its manufacturing industries, it loses its ability to innovate. That is hardly the strongest case that can be made for manufacturing  – there are much more compelling and direct arguments concerning exports,  jobs, wages, and a nation’s ability to pay its way in the world — but at least the academic establishment has now  finally been engaged.

The only previous serious academic treatment I can remember was Manufacturing Matters by the Berkeley economist Stephen S. Cohen and his political scientist colleague John Zysman. Written as far back as 1987, this was an inspired  book but precisely because it was so early,  it was forgotten long before the future problems the authors so presciently identified became universally obvious.

Why is manufacturing so important? In  my book In Praise of Hard Industries: Why Manufacturing, Not the Information Economy, Is the Key to Future Prosperity in 1999, I made three points:

1. Jobs. Manufacturing creates a much better mix of jobs than advanced services — jobs for everyone from ordinary blue collar workers to capable  engineers, brilliant scientists, and resourceful and far-sighted top managers.

2. Wages. Those who in the 1970s began dismissing America’s manufacturing base as the “Rust Belt” displayed deep ignorance of modern First World manufacturing. Such manufacturing has long been highly capital-intensive, which means that each worker’s productivity is greatly leveraged by sophisticated production machinery. This creates plenty of room for employers to pay high wages. Advanced manufacturers moreover require great accumulations of secret production knowhow – typically knowhow acquired over generations of “learning by doing” – and this powerfully shields them from low-wage foreign competition.

3. Exports. I have calculated that, per unit of output, manufacturing businesses are nearly ten times stronger exporters on average than services. Thus America’s investment in postindustrial activities (such as computer software, internet development, finance, and legal services) cannot  hope to bridge the trade gap opened up by the decline of manufacturing. One reason for manufacturing’s superior export prowess is that manufactured products generally require little adaptation to sell around the world. By contrast services have either to be performed in a customer’s home country or at least – in the case of computer software, for instance – have to be expensively adapted to meet different cultural needs in different  foreign markets. Thus the net receipts transmitted back to the United States are often minimal.

What explains the American establishment’s complacency in the face of the near collapse of the national manufacturing base? The answer is mainly a misplaced faith in  laissez-faire.  American opinion leaders have trusted to the theory  that if a factory closes, this is dictated by the “wisdom of the market.” In reality free markets have next to nothing to do with it. American manufacturers are competing in a globalized marketplace that is comprehensively rigged to hollow them out. If other advanced nations protect their domestic markets (Japan and Germany come to mind in the case of car industry, for instance) , their home producers enjoy greatly enhanced retained profits to plough back into improving their production technologies. After five decades of such unequal trade, this begins to add up. It is hardly surprising that Japan and Germany are now the leaders not only in cars but all sorts of advanced producers’ goods that once defined American leadership of the world economy.

As for the Pisano/Shih book, detailed comment must await its official publication later this month. In the meantime Pisano is making an appearance at a reception in Washington tomorrow hosted by, among others, the Kearny Alliance and Asia Policy Point at the offices of the King & Spalding law firm.

The key question is what America should do. Judging by the Amazon.com page for the book, the Pisano/Shih answer is a bromidical call to government and business to work more closely together on basic and applied research. This is little more than hot air and will do nothing to address the real issue, which is an unfair world  trade system. The fact is that almost as soon as American corporations  invent new, more efficient production  technologies, they come under pressure from foreign governments to transfer these  out of the United States. If they don’t do so, they face non-tariff barriers in the foreign markets concerned. By definition, given their single-minded focus on profits (and their acknowledged lack of concern  for the American job base and wider national interest), they cave. They suffer no penalty for doing so. Quite the reverse: they improve their access to key foreign markets while they can continue, of course, to sell unhindered into the American market. This sort of economic blackmail has been taken to a high art by China in particular, with results that are now redefining the world’s future.  Virtually every major American corporation has been persuaded — often under duress — to transfer key production technologies to China. Just some of the more notable names include General Electric,  Ford, General Motors, and Motorola. Ultimately the fault does not lie with these companies. Rather they are creatures of an economic environment that was wished upon them by others — not least generations of Ivy League economists who thought that free trade and the resulting move to postindustrial services would bolster American competitiveness.

Jeremy Quittner
October 3, 2012

Bucking a 30-year trend, more and more small businesses are manufacturing in the U.S., and exporting products abroad. The New York area leads the way.

For Lumitec, a lighting product company in Delray Beach, Florida, manufacturing in the U.S. is essential, but so is exporting to clients overseas.

Lumitec’s products, which are designed for extreme environments, require exact specifications that need frequent product monitoring. So the lag time to make changes typically associated with manufacturing thousands of miles away in China is not an option. To accommodate these needs, Lumitec’s headquarters are in a 10,000-square foot facility that can handle the customization and assembly that clients require.

Lumitec is like an increasing number of small companies that are manufacturing in the United States, and bucking a 30-year trend of outsourcing such production overseas.

These companies find increased control, quality, and production standards domestically that may cancel out the cost savings that could come with manufacturing overseas. They are also turning the table on recent history in other ways, by exploiting sales in international markets, and uncovering opportunities by selling their goods to other countries in addition to domestically. They find the ‘Made in the U.S.A.’ stamp brings them unexpected cachet.

“We attend trade shows outside of the U.S. and people are always pleasantly surprised that we manufacture in the U.S.,” says John Kujawa, chief executive of Lumitec, which exports its lighting products to more than 30 countries. “it is understood that many products manufactured in the U.S. are greater quality than those from certain other countries.”

Manufacturing businesses have added 500,000 jobs in the United States since 2009, though the sector has a lot of ground to make up, having lost 2.3 million jobs since the start of the recession. States that led the way were Michigan, Ohio, Indiana, Texas, and Illinois, which combined added a quarter of a million of those jobs over the same period.

“You see manufacturers do more with less, as the unit labor cost goes down…[and] lean manufacturing has improved our overall competitiveness,” says Chad Moutray, chief economist for the National Association of Manufacturers.

About 40% of manufacturers are looking toward export trade as one of their primary growth vehicles today, the manufacturing association says.

At the same time, costs of labor, tariffs, and shipping overseas have risen. On average, it is still 20% more expensive to manufacture in the U.S. than it is with major trading partners overseas, excluding the cost of labor, according to the association.

The New York metropolitan area led the nation for exporting, shipping $105 billion of goods in 2011, according to the most recent numbers from the International Trade Administration, an increase of 25% from the prior year.

Alex Stadler is one of the entrepreneurs who has succumbed to the allure of New York’s manufacturing and exporting trade renaissance.

Stadler is the founder and sole proprietor of Stadler-Kahn, a textile manufacturer and retail store in Philadelphia. He manufactures hand-designed, high-end scarves in New York and exports them to Italy, in addition to selling in the U.S.

Because Stadler’s runs are so small, generally on the order of several hundred pieces at a time, he couldn’t work with the manufacturers he researched in China, he says. At the same time, Stoll, a German knitting machine company just establishing a foothold in Manhattan, jumped at the opportunity to help Stadler when he approached them.

And, in addition to Stoll, Stadler has found a whole cluster of businesses in New York City’s Garment District to work with him, including a manufacturer for his garment labels, and a distributor of the Merino wool he uses. These companies are all within walking distance of each other, Stadler says, so he can keep a close eye on things.

If Stoll ever has a question on his prototypes, Stadler says he can make it up to New York from Philadelphia in two hours.

Though Stadler admits that if he had the volume to engage a factory in China, he could make his product at a third his current cost, he says his customers feel good knowing they are paying for his American craftsmanship, not for middlemen, and extra shipping costs.

“People love to hear a product is made in the U.S., and those little letters `NYC’ hold a lot of glamour for customers,” Stadler says.

The decision to manufacture domestically depends primarily on your particular product, how easily and cheaply you can rent or buy space, and your ability to either hire or temporarily staff employees to do the work.  

One thing manufacturers like about assembling products overseas is the ease at which they can quickly ramp up or down without having to hire full-time employees. Some U.S. manufacturers like Brian Kline, chief executive of lighting company MSi SSL, have gotten around this hurdle by hiring temporary employees to do the work when they have it in the U.S.

MSi, based in Deerfield Beach, Florida, manufactures specialized LED bulbs for things like miners helmets, power lamps, and track lighting. While it uses a factory in China for 90% of its production, it also does 10% of its manufacturing in the U.S.

In situations when limited size orders have to be shipped to the customer on an extremely compressed time schedule that its Chinese factory can’t accommodate, it uses a team of temps to assemble the products in the small plant MSi has created above its office headquarters.

“Ramping up and ramping down is harder to manage here” with full-time workers, Kline says.

Similarly, there are a number of important things manufacturers need to keep in mind before they export. One of the first places you should probably turn to is the U.S. Commercial Service, a division of the U.S. Department of Commerce charged with helping U.S. entrepreneurs figure out the vicissitudes of exporting. (It recommends the federal site export.gov.) 

But the Commercial Service also has staff in 108 markets around the world that can help with things like identifying market opportunities and locating distribution partners. It offers free consultations and low rates for consulting work, which can includes finding suitable partners overseas. It also operates something called ExporTech, a pseudo university for entrepreneurs considering exporting, that helps develop international growth plans.

One of the most important things to consider about exporting, says Tom Moore, deputy assistant secretary for international operations at the Commercial Service, is making sure you have a robust market for your goods in another c
ountry
; that requires research and knowledge of competitors. It’s also critical to find an overseas partner you can depend on and trust. Working with someone you haven’t vetted properly can cost time and money.

Other best practices: research the rules and regulations of the market you’ll be selling into. That includes national product standards, certification requirements, electricity regulations, and packaging and recycling laws, as well as quality standards.

Knowledge of tariffs and other overseas taxes, as well as tariff codes is also essential, as entering the wrong tariff code can be a costly mistake, says Moore. For example, Moore says the Commercial Service worked with a globe manufacturer recently that had been entering a toy code instead of an educational code for its product. This cost the company an additional 20% in tariffs overseas.

“That can really impact your ability to sell into a [new] market,” Moore says.