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July 21, 2003
U.S. Manufacturing -- An Update by Jim Altfeld
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guess commentary

U.S. Manufacturing -- An Update

by Jim Altfeld


In last week's issue of MCAD Weekly Review, we published a guest commentary by Jim Altfeld that explored some of the issues and concerns facing U.S.-based manufacturers as they struggle to compete in a global economy. This week, Jim gives us an update.


Well, apparently the first shot has been fired by the Bush administration. The China North Industries Corp. (NORINCO) has been banned from importing anything into the US for two years. The Bush Administration found that this major Chinese industrial conglomerate had been selling missile parts to Iran. According to the State Department, Norinco sold parts for ballistic missiles to the Shahid Hemat Industrial Group, an Iranian producer of medium and long range missiles. The State Dept. went on to say that these parts were sent in October, clearly two months after the Chinese government had been issued an edict banning the sale of such products to Iran. Norinco began as a provider of tanks,
machine guns and other weapons. They have since diversified and now produce more than 40,000 products, including light industrial goods, electronics, textiles, handicrafts, motorcycles and guns. China exports in excess of $100,000,000 worth of products to the US annually. Apparently this is the first time that a state-owned company has been issued a blanket sanction on its entire product line. Is this just the first of many? Perhaps, but perhaps not. We'll have to wait and see.


Organizations

I have done a lot more investigating as to what is or is not going on with China. Turns out that there is not just one, but several groups all worried sick about the U.S. losing its manufacturing base. These include: (Save American Manufacturing)
www.SAMNOW.com, NAM (National Association of Manufacturers)
www.nam.org, the National Coalition for Manufacturing Leadership, the Manufacturing Coalition, and more. However, everyone seems to be running hither and yon yelling the sky is falling. There is no one spokesperson, and there needs to be. Former GE CEO Jack Welch was my first choice, but he declined the offer. Other suggestions?


Roundtable Discussions

On Monday, July 7th, the Dept. of Commerce held a roundtable discussion at the Davidson Conference Center at USC (University of Southern California) to discuss the problems of manufacturing in California. Nearly 100 small to mid-size manufacturers attended, as well as a number of heads of manufacturing associations. It was standing room only. In short, National Director of the US Dept. of Commerce's Minority Business Development Agency, Mr. Ronald Langston, received an earful. The two primary complaints were "give us a level playing field" and "give us access to capital." No one in attendance was either shy or bashful about how they felt. There was passion, zealousness and anger.


A number of key points were made, including:
  • U.S.-based manufacturers are forced to deal with high operating costs due to city, state and federal regulations and mandates when the rest of the world does not.
  • Higher operating costs equates to fewer workers, higher unemployment, lower profit margins, less working capital, poor cash flow, and downsizing. Which part of that don't you get?
  • U.S.-based manufacturers have limited access to cash. What a manufacturer has to do to get an SBA loan is ridiculous. We are competing with foreign countries using the latest machinery and equipment with the cheapest labor pool. Without easier access to low-interest loans, a U.S.-based manufacturer cannot buy the machinery and equipment it needs to compete
  • Unfair tariffs favor those companies importing to the U.S. I pay 60% going out and they pay 2% coming in. What sense does that make?
  • A final point made was that we felt Mr. Langston himself was sincere and concerned. But taking the message of what he heard to the Secretary of Commerce and President Bush, and then getting action is something we can only hope to see happen. In the meantime, these manufacturers have few options. They can hang on and try to cope, leave California, partner with whichever foreign country works best, or call it quits. Apparently, these kinds of roundtable discussions are happening throughout the United States and I am confident they are hearing many of the same things stated with the very same passion. The thing that is on our side is that we have an election year coming up.


    Jim Altfeld has over thirty years of experience as an industry marketing and sales professional in the manufacturing sector, with a key part of his career spent at GE Plastics. He is also a successful author and business consultant who is dedicated to preserving the future of U.S.-based manufacturing. Write to Jim at:
    jaltfeld@altfeldinc.com.


    Comments? Feedback? Tell us what you think about this topic or if you have additional information you'd like to share on this subject. To join the discussion,
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    See also:


    commentary: Testimony Before the Committee on Small Business of the House of Representatives On Behalf of U.S. Manufacturers [15 Jul 2003]




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    Letters from our Readers


    RE: Can the U.S. Afford to Export its Manufacturing Economy?


    Hello Jim,


    I read your recent article with interest. Just this weekend, I was discussing the exodus of manufacturing to China with an 83 year old manufacturing engineer and his question to me was "OK, then what do you think we should do about it?"


    I had to confess that I didn't have a ready answer to that question. But all evidence points to a trend that could affect the strategic balance of power.


    China is being very smart in subsidizing the purchase of high technology for its manufacturing sector. A similar subsidy for American manufacturing would fail unless we accompany that effort with a China-sized effort to educate and train a new workforce. I don't see any activity or discussion of any such program in the US. The facts in your article point to a long-term loss of jobs and workforce that shows no sign of reversing.


    We make proud noises about gaining control of the oil and gas in the Middle East, but China will be very interested in powering its growth with that same oil. Our administration appears unconcerned over losing our manufacturing to a country that could one day stand up to us as the #2 or possibly the #1 superpower. What if they decide they want better access to "our" oil? What has now become a clichi is the question "Will we be asking China to make our guns for us as well?"


    Knowing what you know, how would you answer the question posed by the elder engineer?


    Regards,


    Robert A. McGill

    Director, SolidWorks Business Alliances

    SolidWorks Corporation


    Dear Editor,


    I think Jim is right on the money, we have a serious problem coming straight at us. Why would I buy a more expensive product of the same quality? I was told in school that my degree in Industrial Technology (Class of 2000) was in demand. After surviving 7 rounds of layoffs in two companies, I wonder if I made the right decisions in school. I wish I had something constructive to add to the discussion, but I don't think the bleeding, at least in the high tech sector, can be stopped.


    Alan Cantey

    San Jose, CA


    Jim,


    I find your article "Can the U.S. Afford to Export its Manufacturing Economy?" very interesting. However, there appears to be no good solution for the dilemma. It is like the many issues that plague America today (e.g. health care, education costs) where many know the problems but no one has a solution.


    Today, many companies are also moving software development jobs overseas (e.g. India, the other country with more than 1 billion people). For software, the finished product can be sent back here with a simple mouse click with no shipping cost. This makes it even easier for companies.


    Lay Tan


    Jim,


    As still a GE engineering employee, I believe the China drain is somewhat of a threat to the American way of life & standard of living.


    However, what "effective" steps can be taken to "preserve the future of U.S.-based manufacturing" by average white-collar engineering workers, if the corporate management establishment continues to push for a low cost country production shift to embellish the shorter term bottomline? Just wondering your thoughts...


    Again, thanks for speaking out!


    Regards, Ron White

    GE Consumer Products


    Jim,


    I want to congratulate you on the very well written article about China. We are going through a paradigm shift, our economy is rapidly moving towards service, or sales and marketing. In CA, it is almost impossible to operate as a manufacturer. All my clients are facing the same problems. First, workercomp insurance, it has gone up about 65% on the average. Second, all the EPA requirements and legal costs. Third, high electricity cost in the hot months.


    The only way to compete with China is on QUALITY and DELIVERY. Then you don't need to fight the pricing war with the cheap imports. This is still a short term solution. Being Chinese, I know we are like the Japanese, know how to make but not good at selling, even with a superior product; also we are not as creative.


    Most of the new products are invented here in the US. Therefore, at the design stage, we need to take into consideration that the products require less and less labor. What are we saving in China is labor and overhead.


    Regards,


    Dominic Ching


    Jim,


    Nice commentary, and right on the mark! However you worked for an international giant who has a lot of overseas manufacturing operations in place, right? Does seem a bit ironic on the surface.


    I've written to my Congresswoman in the past about this loss of manufacturing. I've been screaming for years to anyone within earshot of what this destructive effort of American self-betrayal will mean in the future, let alone the carnage it has already brought to those it has already affected.


    When I was in the Navy, early '70s, I was assigned to work on a repair tender (type of ship) . To my knowledge, every single item the Navy used at that time was made in America. Supposedly, Congress is trying to get that supply/manufacturing base percentage up to 65% of being labeled 'made in America'. What a joke! What if we were to run into trouble with one of our foreign country 'friends' who supplies our military for various essential resupply manufactured items just decides to cut us off?


    Having worked for various manufacturers, I know that many great ideas come from the ground floor. Whatever group of people, who turned our manufacturing-based economy to the present day service-based economy, gets my vote for the ultimate, all time American betrayer. All they cared about was the money they stood to make. It's obvious that very short-sighted people have decided our nations fate and it just plain reeks. I am thoroughly disgusted with what our so called leaders have allowed, our manufacturing base to nearly disappear from sight.


    Our manufacturing people who have lost their economic buying power are rapidly being taken out of the buying consumer mode. If they no longer have money, who is going to buy cars, who is going to buy homes, housing goods, tools, cameras, film, etc.? These companies better count on the Chinese to buy their stuff back.


    I just wish that the people responsible for the decline of our manufacturing base would be held accountable for what they have done. I never thought I'd say this but I really believe we will be about a fifth rate nation in the near future. Once that wealth of manufacturing experience is gone, then it will be gone forever. Returning on a national based manufacturing effort will not just easily happen and seeing the competitiveness of the foreign efforts is just plain scary to me.


    Keep up the banter,


    CB


    Jim,


    I could not agree more with the content of your article. I am an experienced manager in the moldmaking sector and have seen our trade and business vanishing before my eyes over the years.


    Last year I visited my daughter in Palo Alto, CA and was surprised at the lack of moldmaking facilities in the area .


    The problem, it would appear, started in your own backyard when on the face of it, it looked like a great idea to make a quick buck by exploiting areas of cheap labour.


    Once a trend like this gains momentum, it will become impossible to stop. As skilled trades shrink they will eventually die out as trades learned over the years will not be passed on to our young people.


    It will not be long till the people of great manufacturing nations will have no job oportunities other than working in Macy.s, Call Centres or Starbucks.


    Kind regards,


    Jim Andrew

    Proprietor

    Andrew Mold Design

    Paisley, Scotland


    Jim,


    Just read your piece in MCAD.


    Spot on I think is the word. It's the same in the UK and has been since the end of WWII.


    What annoys me most is the way people think we can hang on to technical jobs when manufacturing jobs have gone. People in the Far East aren't stupid, they can do my job, no problem.


    I'm not an economist but most service jobs only recycle money within an internal economy, they don't create export wealth like manufacturing. Basically people earn far too much in the west and until we drop our money things will keep going east. The only thing I can see that could help us is that the Chinese will expect us to buy their goods and if we're all destitute we won't be able to. However China on it's own in the future could be a big enough market for their own goods.


    The next thing has got to be the Chinese becoming the big brand owners. The Chinese Nike, Dell, B&D, etc. Then even the wealth created by Western companies from manufacturing in China will not be ending up in the West.


    Personally I think the USA's empire is coming to an end (it happens to us all!!). I'm not too worried about that as such, but it means the countries like us, the Germans, and the Japanese that have been hanging on to your coat tails will be going down too.


    I think we are at the start of the great Chinese empire. I wonder how long it will be before they get fat and lazy like us?


    Best Regards,


    Julian Wooster

    Mechanical Design Engineer

    Panasonic R&D Centre

    Matsushita Electric (UK) Ltd

    Pentwyn Cardiff

    UK


    Jim,


    What a great article! The cry has gone out for many, many years, but, somewhere along the way the American consumer gave in. We used to look for that "made in America" label as eagerly as a pearl, but today look the other way because every item turned over says "made in China". We certainly don't have a vision. And we certainly don't understand history or man's nature.


    According to Revelation 9:14-16, an army of 200 million soldiers will cross the Euphrates from the East to fight at Armageddon. Taking a look at the vast difference in population, one can surmise China might be a good candidate. How long will American money be used to advance the economic status of China before that money is spent on military might. I shudder to think of our naivete. Certainly it makes me pay close attention to what my Bible says.


    Your article was thought provoking and well-written. Thank you for pointing out the facts - and being brave enough to state them.


    Lori Hardy

    President, R-I Sales & Service, Inc.


    Dear Mr. Altfield;


    I really loved your article and it moved me emotionally. I am a small software dealer selling software applications to the manufacturing and design sector (CAD/CAE/PDM). Since January of 2003, our industry as seen a slowdown. I am concerned about our long-term future about selling into the manufacturing market. Everyone we talk to is seeing manufacturing jobs moving to China.


    After reading your article, I was wondering if you made any comparisons to how European countries adjusted their economies when the US took away manufacturing. How have these countries survived? Will the US follow suite in a similar fashion?


    I would like to know your thoughts on these questions.


    Todd Majeski

    3DVision Technologies Corp.

    Cincinnati, OH


    Jim,


    Excellent article. Thank you for writing it.


    I am very interested in reading a counterpoint (to open my eyes as to why the us is doing what it is doing).


    I'm sure you have contacts that could write one as qualified as yours.


    If you know of any already written, Iwould be very interested in receiving the links to those sites.


    Dave Powers

    Scanning Services Manager

    Metron Systems, Inc.

    Snoqualmie, Washington


    Jim,


    I am a retired President of well known machine tool companies and am sensitive to the topics you discuss in your commentary in MCADCafe. As a matter of fact, a recently published book discusses many of those and related issues.


    It is entitled "Sweet & Sour Grapes" - "The Culture of Yankee Ingenuity and Machine Tools". I think that you would find it interesting. I wrote the book following about 45 years in the industry and watching its serious recent decline. The book is available through Amazon, Barnes and Noble etc.


    I'm not in the habit of selling books, this way or any other way, but it seems to fit in this case.


    Best Regards,


    Jim Egbert


    Dear Editor,


    It was interesting to see that your top story last week was a simple letter decrying the end of US manufacturing (which is inevitable without fixing our DemoRepublicat capitalism). All of us in true "industrial" pursuits have seen this coming for many years. Wal's Mart is really Wong's Mart. I personally would not mind losing our industrial base to another nation such as China, if they had rule of law, environmental protection, labor laws, and intellectual property rights. People in the Far East have none of those things in the manner to which we are accustomed and which are necessary to make industrialization safe, clean, and beneficial to society. Furthermore, there is no surprise that it
    is not seen in the media. We didn't even do anything when the Red Army slaughtered intellectuals like me over 10 years ago. Wal's Mart owns the media even more tightly than they own retail marketing. How could they stand to let everyone see how naked we have become (while they have profited so handsomely all the while using an obscene slogan of Bringing it Home to America)?


    What is to be done? The answer is simple. A grass-roots organization is needed to preserve and enhance the simple idea of industrialization in America. I think engineers, in particular, understand this need, and I propose the NERDPAC (PAC=Political Action Committee). I would certainly contribute $100 per year to join, and I would volunteer to act on its behalf. It is time for mass mailings, targeted media campaigns, etc.. Most importantly, we need to get in touch with the Pentagon personnel who (amazingly enough) are already planning to deal with China on a military basis. These Pentagon folks (who will certainly not want to be exposed) are probably desparate to get the message out. Also,
    NERDPAC needs to fund disclosures of the true plight of our virtual-slaves in places like China.
    Would your publishers be willing to help fund the founding of NERDPAC? If not, do you know any foundations, etc. who would?


    Best regards,


    Stephen J. Schoonmaker

    Chambersburg, PA




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