Hot Topic -- China! |
Manufacturing In America: A Comprehensive Strategy to Address the Challenges to U.S. Manufacturing - Dept. of Commerce Publishes Results of Manufacturing RoundtablesManufacturing CoalitionBusiness Advisory Council Resignation LettersJim, Hello Mr. Schoonmaker, It was suggested by Jim Altfeld that I contact you. I wanted to thank you for your kind words and emphasize with your frustration as well. As I had emailed Jim in response to forwarding and publishing my commentary, is that had I known he was going to do that, I would have taken time to edit it so it reads better and done more research to make any information I threw out more accurate. Most of it should be in the ballpark and obviously makes the point. I am suprised at how many women and non-manufacturing type people are aware of the situation and concerned from all of my encounters! There have been recently several good articles in the LA Times newspaper as well. i.e. Saturday, Oct. 25, "Factory Job Losses Could Hurt Bush" Sunday, Nov. 2, "In Japan, as in the US Companies Fear China" and todays paper Nov. 10, "German Firms Seek to Cut Staff Costs as Prospects Dim" in which the German firms will likely outsource those jobs which they are not really telling you. The 527 thing looks interesting. I also believe in principal that nothing short of a "Boston Tea Party" will wake us up, although I do not advocate destroying property and never have really done so. (maybe when I was a kid inadvertantly) I am not sure what the answer is, but something must be done much sooner then later, because this economic upturn right now could easily be nothing but a blip in the radar scope. Another huge surge in outsourcing manufacturing labor and engineering functions and services will continue to happen again, because of the dramatic savings corporations financial people in power see despite the fact that most of us including corporations can afford the products and services based on our price structures. That's what is sad. Let me know how I could assist. A friend of mine is the brother in law of the boxer Sugar Ray Leonard who is very good friends with Arnold Schwarznegger. I have had the notion to set up a meeting and would love support. Sincerely, Jim, I have already looked an NAM, etc.. Mostly they talk about "regulatory relief" as the reason we are losing. I don't love the EPA, OSHA, NLRB, but I think they have their place. Unions, in particular, are groups one can count on to really fight back (although usually in a misguided manner). Truly the most amazing thing is "quality". For decades, the CEO's closed plants because they didn't have Japanese quality. People assumed that was why the plants were closing, and then the CEO's slipped right into China-sourcing which people figured was just like Japan (they're both in Asia anyway). Now, I can only buy Chinese junk, and all the quality priests are silent (I ought to know; I published an ISO 9001 book). I would love to know how many plants that won the Baldridge Award are actually still operating... Another interesting thing is blatant stock manipulations. My proxy statements from Ingersoll-Rand (a once proud company I worked for now headquarterd in Bermuda) indicate that the CEO gets a $1,000,000 bonus if he can get the IR stock to close for 90 days above a dollar target. Why not just ask him to cook the books on a gas stove? Oh, and the Bermuda thing. A labor union from Connecticut (good for them) did a ballot item at the stockholders meeting to bring the headquarters back to the USA. The "directors/traitors" (hiding behind the ever-so-convenient fiduciary obligation thing) stated in the proxy statements that IR is saving $30,000,000 per year in not paying Uncle Sam, and that the ballot item should be defeated. Now that has just got to warm your heart. IR gets to skip on $30,000,000 and I get to pay more now in taxes and then pay all the interest on the debt. You would think I am happy as a stock holder in the company but the 10 bucks more I'll get when I retire (if people still retire in the year 2030) will be totally swamped by the trillions I will be paying (if there even is a US Treasury then). Forget going through the existing "system" and/or lobbying; it is time to do something radical. How about a nationwide factory strike? How about having all factory/technical people in the country send their paychecks to the CEO of WongMart and mark them 'For Deposit Only'. Call the news networks and have the CEO explain to everyone what he is going to do with the honest money (he probably won't know what to do with honest money). Looking for a new path, Mr. Schoonmaker, I forwarded your email on to Mr. Kuntz as well as others. Rather than go the PAC route, I encourage you to get active in NAM or NFIB. NAM is extremely involved in fighting China and is working with the Dept. of Commerce and Congress. I am not yet convinced that is going to resolve the issue, however. This is going to require a united front and effort. A splinter group mentality is not going to get the job done. And, one lonely congressman will have a snow ball's chance in hell of making a difference. If it is to be done politically, it will require a third party with a pro-manufacturing platform. The Reps and Dems are tied at the hip along with the multi-national corporations. This is more like The Terminator where we are fighting an uphill battle against a very powerful machine. It is going to require a lot of guts, determination and a Ross Perot style campaign. Perot's problem, the first time, was that he duped the people because he had no intention of winning. His one and only aim was to see George Bush defeated. The thing he proved though, is that a third party can win and with the right platform, can make a difference. Yours truly, Jim, I hope you let Mr. Kuntz know that there are people who do care about this situation. He sounds as frustrated as I feel. I have already been sent toEastern Europe to train others to do our engineering. I don't know how the > people that run my company sleep at night. The executive that is forcing us to do this outsourcing is a West Pointer. And the guy that owns the Eastern Europe company is an Annapolis man. In any case, I have done a little poking around and found this site interesting: www.irs.gov/charities/political/article/0,,id=96350,00.html I was thinking of founding a PAC somehow, but it seemed pretty complicated. But this Chapter 527 thing looks ridiculously simple (just make up a name and open a bank account). I was thinking of mailing out letters asking for donations and then funneling all the effort against a single small-fry candidate (US congressman probably) that will not completely swear off Free Ride Trade. What do you think? Stephen J. Schoonmaker Hello Jim, I have read your publications with great interest especially the fall 2003 concerning China. I t has educated me on many new areas. I have the following commentary to add to it as following: 1) China was never rated in the top 10 economies in the world ever and recently took the number two spot away from Japan which Japan held for the last thirty years. If China keeps growing at the rate it is it will take over the US #1 spot that it has held for over 100 years in the next six months to one year. China is also buying up all of the gold. 2) A VP of finance from a very large prominent company told me about six months ago that he was appalled by what he saw at his contract manufacturer recently at that time when he saw their operation. 400 men, women and children living in one big bunk room full of bunk beds at the company site with one main common kitchen and one main common bathroom. He said he was glad to even get them jobs which they would not have if it was not for his firm. They overhead pay for the workers is fifty cents per hour where the actual workers receive seven cents an hour. Most of them cannot even afford a bicycle despite the company supplying room and board. To me, the VP is no different then the black slave master in this country 150 years ago. There is no difference! 3) Someone had told me that China had purchased a controlling interest and outright ownership in another into several aerospace contract defense companies in the states and abroad, (I cannot remember the names) where the US facilities must manufacture here. One of them makes nukes! By the way, why is it that government contract work must be manufactured here but everybody else is free to go? 4) China is about to kick start the largest electrical power plant in worlds history at the three gorges river. While we complain about our energy costs with Enron scandals etc., the US has enjoyed the lowest energy costs per person in the world as an average for a long time. The next most competitive country is 3-4 times more expensive. What do you think China's new largest in the world power plant will do? The same goes with gasoline type fuels. We obviously pay 3-4 four times less then Europe and most of the rest of the world. 5) What US corporations are doing in China is not unique. The European industrialized nations companies and Japanese have been doing the same. Look at Japans economy over the last 10 years as a model as to what will happen to us just to start. We talk about deflation, well look out. Japan has been aggressively outsourcing to China over the last ten years. Their unemployment rises. Mexico has lost a lot of business to China as well and is licking it's wounds. Mexico is $1.00 per laborer, Poland and some other former east block countries seventy-five cents and China fifty at the cheapest in the world. Western Europe's economies have been suffering as bad and worse then the US for the same reasons, outsourcing manufacturing. We are all treating it as a commodity and not as a trade secret anymore. Chinese companies are cloning contract manufacturers down the street and selling the products on the black market. Dumb ass american companies. They are sucking the belly right out of our country so there will be only poor and rich eventually here. 6) China is communist. Thirty forty years ago someone would have been shot for even thinking of manufacturing over there. What happens if China takes an adversarial position against us like say to defend Iraq when we entered there or even lighter but took the stance, "we are cutting off all shipments of goods"? China would lose a lot of revenue, but the US would be hurt worse. What the hell are we doing? 7) The fault of this windfall is the corporate bean counter! They have taken control of short and long term decision making away from engineering and manufacturing long term visions and goals that typically were accomplished long term in the past. The bean counter wants the quickest bottom line results now, so they can walk away from the company with their pockets full from stocks and golden parachute benefits and leave the corporation damaged, saying "I was just doing my job satisfying our investors short term demands"! They might as well smoke a crack pipe. To me they are no different then the instant gratification hound caring nothing of the damages of the people who care and truly gave them the opportunity in the first place. We need a Boston tea party! It is time. 8) Why is it we are paying a 70% tariff for our stuff going into China and China is only paying 2% for stuff coming here? What is wrong with that picture? Most of Chinas manufacturing is along the coastline for lowest cost shipping reasons while the bulk of the population is inland. As manufacturing is forced inland due to saturation, they will find that they will need to build up a huge transportation infrastructure due to the huge lack of it. i.e. highways, railways, airports and the interconnection network of all of them. China has nothing in comparison to what modern Europe, Japan and the US have. That cost will need to come from somewhere which should increase their pricing in the long haul. Like you said in your article, why should we set up all of these standards of living and uphold certain values in this country to let China demise it all. There is an unfair competition act that congress passed over 100 years ago which needs to be broadened internationally. Anyone that pays less then our standard minimum wage in this country to any laborer or employee cannot sell product in this country. If we do it other modern industrialized nations will follow. But the powerful lobbyists representing corporations will block it and your ideas. Also look at the complication and costs to protect a patent or even have a patent worldwide cost wise. The US does nothing to police or protect our patents in especially machinery and product somewhat. I own a company that has been in business over 34 years, I along with everybody else have had to go through two major paycuts and two major layoffs. That has never happened before. Some serious changes need to take place otherwise many of us will lose a lot. We lost 2.5 million manufacturing jobs over the last twenty years, in the last two years we have lost another 2.5 million manufacturing jobs. Nothing has been done. A lot of government officials here in California are aware of it and were in support of the recall, but they say the state can do nothing. It is a federal issue! Thanks for taking the time to read this. What do we do now to stop it and turn it around. Talk and writing will do nothing without true action and money to do something. Sincerely, I am a US citizen and also am from Hong Kong. I read your quarterly newsletter (fall 2003) and would like to make some comments: If you ask people from Hong Kong, 80% will say they are Chinese. Inner Mongolia's population is 60% Han ethnic group ( I guess according to you logic=Chinese) Even though a bit far fetched, but again using you same logic, US did the same terrible things to the Native Americans. I agree that PRC is a communist country but every country is different such as in the Middle East there are Muslim countries and in Europe, there are socialist countries. We got to respect different systems and values. Your narrow minded approach will only do more harm to America than help. I believed that every country or culture has its uniqueness and that is why this world is so exciting. You point of having a uniform system based solely on American value is no different than an autocratic or authoratative country treating its people and looking at the outside world. This is another form of control. In fact I would say that this is majority tyrannry. Our founding fathers when they draft the constitution, they had this concern in their minds and majority tyranny is something they tried very hard to ensure it will not happen in America. The problems that you pointed out in your article are definitely of major concern for all Americans but instead of blaming another country, we should prepare ourselves for the challenges. One has to understand, we don't live in a perfect and fair world. If we believe in ourselves, we can overcome any difficulties. Your approach is, if I may, close-door policy. How can we ask every country on the face of the earth to follow exactly the same rules as dictated by us. What is the difference between what you advocate compared to Stalin treating his people? Understanding, tolerance and courage are good virtues in the American society but not hatred, bigotry and narrow-mindedness have no place in this great country. Steve Jim, I read some of your newsletter (it is pretty long; I'll get to the rest soon). I appreciate your efforts. Unfortunately, it is basically "old news". The "powers that be" have known this all along. Of course, your putting the information together in one place is helpful. Even better, it would be great to get into the hands of the "people" (not just us "fight-backers"). Another point is that politicizing this as a Democrat vs. Republican issue is a mistake, in my opinion. They are both against us. The Democrats are glad the supposedly filthy factories are gone, and the Republicans are glad whenever multi-nationals are happy. Indeed, voters are the ones that need to change their habits (to looking at problems instead of looking at rhetoric), and most voters are just "working people" of one kind or another. Someone (since unions have failed so miserably at this) needs to speak to them and make them understand the complexities of fiduciary obligations and industrial policy (to pick just 2 concepts). I see no one filling the need for impartial, statesman-like, policy explaining (especially among the 2 parties). Do you know of anyone on the national scene that is doing this? In the 20 October 2003 issue of eWeek magazine (high tech press), the former CEO of Intel, Andy Grove, said "We haven't even articulated the problem" when speaking in Washington DC about the impending end of the country's high tech industry. This was at the Business Software Alliance's Global Tech Summit. Best regards, Jim: I was sent a copy of your Fast Facts Fall 2003 Newsletter by a knowledgeable colleague. I have been doing some research on the "China Challenge" issues to assist my Manufacturing Clients understand what they are up against. Your published work is astounding and I thank you for it. Perhaps you are already aware of Joe White from the Machinist Magazine, who has like you (and now I) been trying to inform those who would listen that Manufacturing Matters. You can get to him at www.manufacturingcoalition.com where he too has mounted a PAC as his way of doing something about it. As a management consultant to manufacturing companies for 27 years, I have never seen anything like the mindless rush to China. I got my start twenty some years ago when I was fortunate enough to get a close up look at the "Japan Inc" phenomenon, and then took some two dozen study missions of senior mfg. execs to Japan in order to help them understand the realities of what they needed to do. I have been to China a couple times as well, but in all honesty cannot say that I can advise anyone about what to do, based on what I know. Your work is helping to catalyze my thoughts and reinforce my determination to stop the destruction of our manufacturing base. It seems to me that no company could expect to remain a factor in the business they are in if they cannot actively participate in producing their product competitively. Last week I was a participant in a conference with Herb Spivak, EVP of New Balance Athletic Shoe who said as much. While NB does in fact produce 4 million shoes in Asia (China, Vietnam) they are continue to produce 2 million here in New England in order to maintain the mastery of the processes they also subcontract. They are the last and only manufacturer of athletic shoes in the USA. Herb says he is under no illusion of being able to compete on cost against China, but his disadvantage is partially offset by not paying $90.0 million for endorsements. (about $3.00/shoe) as NB's competitors do. There seems to be many sides to this question of competition from China and while I don't want to lose our manufacturing base to unfair competition, I also continue to expect that USA manufacturers will still need to go through some gut wrenching change in order to stay competitive. Too many don't but whine loudly and get sympathetic attention. You and I can figure that out, but our job is to raise the awareness in others who maybe can't see it yet. Please let me know if you can include me in some effort where I would be of value to your mission. On another item, I have a volunteer responsibility with AME (Association for Manufacturing Excellence) and for next October's Annual Conference in Cincinnati, I have been asked to organize a Panel of Experts to address the "China Challenge." The format is a half day keynote plenary session, hopefully with strong expert knowledge on all sides of the question. Please let me know if you might be interested in participating with me and AME? Thanks again for your excellent work, and be confident that I will be recommending others to your site. Kenneth J. McGuire An interesting article would be comparing CEO's pay, including options, etc., to the number of foreign hires they have made while in their positions. Also, it would be interesting in knowing what role the corporate boards have played in this matter, and what pay they also get from whatever sources of income they get. I can't get over how companies are allowed to get government contracts using employee tax payers dollars while panning the jobs overseas as fast as possible. It seems the officials responsible for oversight have been, well, looking in another direction. It all makes me sick. This is not America. CB Jim, What a great publication, huge, huge amount of research went into this thank you for your efforts. I want to read it slowly and get the full impact.. Caught a typo in early paragraph, word "ever" s/b never. I will spend more time on it and perhaps say more, but for now thanks for such good work, this is really an important issue and it's getting some attention as our manufacturing jobs are in such steep decline.. Tom Hynes Thanks Jim, great reading. Especially for us who are putting a small toe in the Chinese waters. Bryce Adolph Successful beginning on the Antarctic project. Your quarterly is a bit of a rant, comprehensive, but so lengthy as to be needing even greater length. As a call to arms, also a good thing, but needing a little more time in the forge to become a real sword. I haven't the time this morning to say more, but I'm glad you did it. Kevin McCarthy Subject: Commentary: The Loss of U.S. Manufacturing Jobs I read with interest (and dismay) the commentary by Dana Matejka titled The Loss of U.S. Manufacturing Jobs. A full-page ad in the March 2003 issue of MoldMaking Technology magazine also caught my attention. Words in large print read: "Help Keep Manufacturing in the United States. Speak Up and Be Heard in Washington. Join the Fight to Stop the Deindustrialization of the U.S." It goes on to say that manufacturing in the U.S. is disappearing before our eyes, and if something isn't done soon, American manufacturing will be a thing of the past. These tough words are from the Chicago Chapter of the American Mold Builders Association (AMBA). As you may know, it is unusual for a chapter of any association to sponsor the cost of a full-page magazine ad. I believe the goal of the ad is to stir the emotions of readers to the point of action. The ad outlines the threat to American manufacturing, specifically moldmakers, and asks readers to respond. This effort, called the "Save American Manufacturing" (SAM) initiative, has stimulated hundreds of letters to the White House. An article on SAM was published in the same issue of the magazine and includes interesting but sobering excerpts from some of these letters. If you are interested in learning more, visit www.samnow.org or contact Cynthia Petrucci at cynthia@badiemold.com, phone 630-978-4747. She will send you sample letters, making it easier to write to our policy makers in Washington. Best regards, I just read Fast Facts, your quarterly Newsletter and I would like to comment on some of the points you make: 1. I am not particularly fond of Affirmative Action, but to make it the focus point of why our educational system is deteriorating is ridiculous. When a Newsletter, which is supposed to be somewhat objective or at least supposed to explore multiple sides of an issue, becomes a disguise for pushing certain political agendas, it loses all credibility. You make some good points (i.e apprenticeship programs), but unfortunately the message is lost because of your controversial and unsubstantiated opinions. 2. I agree that our elected officials do not have a good grip on how to solve the "China problem". However, your analysis is confrontational and offers few constructive solutions. It seems that your main goal is to stir up antagonistic emotions about China among your readers. For instance, your paragraph about China's sale of equipment to Iraq was at best irrelevant and at worst hypocritical. Let's not forget that we, Americans, have armed the entire country of Iraq during the Reagan/Bush Sr. years, adopting the not so wise adage: "The enemy of our enemy (Iran) must be our friend". 3. Why do you think America's manufacturing is not as strong as it was in the 50's and 60's? For one simple reason, because the GM, Ford and GE and Zenith and other staples of American manufacturing fell asleep at the wheel. In these days, all they had to do was to produce according to internal demand, run inefficiently and rack up huge profits, because they didn't have to worry about competing foreign products. One day, the first Toyota car and the first Sony TV showed up at local retailers and everyone cried foul. This was a wake up call and the Industry eventually shaped up and improved to become competitive again. Europeans Manufacturers, who have to export if they want to survive, weren't caught so flat footed. Sure, their governments also used protectionist measures, but in the proper balance. Protectionism is a powerful tool. Too little or too much can be devastating, but in the right amount, can allow innovation through competition, and help level the playing field. The "China Problem" is a rerun of what happened in the 70's and 80's. The question is, are we going to point fingers and cry, or are going to take our responsibilities and, with the help of our elected officials, innovate and improve? The choice is ours. Unfortunately, all I see in the literature these days is a lot of crying and feeling sorry for ourselves. Paul Ricard Mr. Altfeld, I wonder if any of the California Governor candidates would consider the wipe-out of the state's industrial infrastructure a worthy campaign issue? California has benefited from the China trade on the one hand, but just look at the aerospace job losses, and how China forces Boeing to source work there in order get the aircraft sales. Now Airbus is going to develop a new jumbo, and we have nothing to counter. What is interesting is that it is a win-win for a candidate. They can blame the Feds, but still whip up a frenzy about it. I can just see Arnold on his Humvee sitting in the middle of an empty factory (how about the old GM assembly plants?). What exactly is in City of Industry now anyway? Then there's Intel - they're only go to make the latest Pentium chip in Red China... Although nothing of substance would happen, the public may finally make the connection between the industrial past and the economic and military security of the past. Thanks for listening, Mr. Altfeld, When I first received your Spring 2003 publication, I was amazed at how well you really understood and communicated the problem of small business manufactures dealing/competing with the low cost, China manufacturing companies. I was particularly impressed with your comments relating to loss of US manufacturing jobs, in conjunction with the out of control immigration situation we have in California, (although we are not alone). For some time I have expressed concern with the lack of both state and federal government foresight (thinking), in seeing the tremendous exit of "touch labor" jobs, and the equally tremendous increase of unskilled (although generally capable of being trained) immigrant population. I have said to friends discussing this situation that the "revolution" will come to LA some day, as there are fewer and fewer jobs. I had intended to communicate how impressed I was with the content of your publication, and well, I just never got to it... However, I have now received your Summer publication and I just had to write regarding your thoughts for leadership. I agree that this issue needs focus by a leader who can communicate with Washington, also someone who can pull together and contribute ideas as to how we should deal with this complex problem. Your suggestion that GE's former Chairman, Jack Welch be our spokesperson is a bit off base, to put it mildly. My company has been a 22 year supplier to GE and I have lived/survived through Mr. Welch's personal directive to his Supply Management people to place orders outside of the US. I first saw this about 8 to 10 years ago, he even coined a term for the overall effort, "LCC", Low Cost Country. China has been the direct recipient of this effort, although India is also a beneficiary. Products formerly supplied by my company are now made/supplied by firms in China, lower overall quality, but all at a much lower cost, all employing a reasonable touch labor content. The raw materials are pretty much the same. Although the parts are supplied to GE, the China firms are now seeking other US customers, now that they have the base/experience/technology. One of Mr. Welch's protégé's left GE and took this supply methodology to Honeywell, who now also place considerable business in the China manufacturing sector. It's hard to knock a company effort to lower cost. I understand this, but what's happening is that we/USA, are losing our touch labor manufacturing base, and to be left with service jobs, is not a economically healthy prospect. The problem is complex.. Thomas G. Hynes Dear Jim: Asia Pacific-USA Chamber of Commerce is proudly presenting a 10-Day Business Trip Trade Mission Event to China from October 16, 2003 to October 25, 2003. This 10-day event is dedicated to advancing cultural and commercial understanding through intensive networking with Chinese government and corporations. A wide variety of industries, such as Agriculture, Machinery, Manufacturing, Real Estate and Construction, tourism and recreation, schooling, and Financial Services, are invited to the event. Through the event, you will be able to build strong relationships with counterparts and learn practical, informative business tips. For more detailed information, please review the registration form or feel free to contact us at (626) 795-9486 or email us at stacysun@apucc.org I am looking forward to hearing from you. Sincerely, Jim, I read your article in MCAD Cafe Weekly I would like to comment. I must first state that I am no expert on the matter and you obviously are. These are my humble opinions. Many of the views you state regarding the level playing filed are expressed here in Europe too specifically including Netherlands, too many they are even more applicable here then in the states. I personally believe that the views are based on the common perception within companies that success is due to internal factors and failure due to external factors like unfair 'tariffs'. One of the biggest industrial conglomerates in The Netherlands has been expounding the views expressed in your article for decades. It was always external factors high wages, taxes, tariffs, expensive money (low share prices) causing their lack of success. To my mind, I have dealt with many of their operating companies, it is due to lack of entrepreneurship, bad management and antiquated operational and business practices. I am not the only person with these views, most stock analysts have the same view this conglomerate needs to reinvent itself no amount of 'protection' will help. The protection it has received in the past is most probably the very reason for the current poor state of affairs. The company has become dependent and addicted to quick fix government/EU protection and hand outs. One of the most successful industrial business economies in Europe albeit small is Denmark. In many respects this country is at disadvantage to be successful in the international market. Denmark has no natural resources, high wages (very), high taxes, money is expensive. But here against all odds operates one of the most successful European shoe brands, not in the high end but in the low to midrange price bracket. This is in direct competition with products based on cheap labor imported from elsewhere. This company is no exception there are many other examples of success. I have had the pleasure to work with some of these Danish companies in the past. It was like experiencing a breath of fresh air. From the top right down to the base everyone was committed to quality, embracing modern management and operational practices not only by mouth but in practice. I am sure that there are many of these successful examples in the states, companies big or small that 'make it' seemingly against all odds. These are the examples to follow not the ones dependent on handouts and protection these companies are inherently sick and either have to reinvent themselves or die out like the dinosaurs of "Old Europe." Protection and hand outs are a dangerous thing and an obvious obstacle to a level playing field. Implementing them yourself is maybe a short term quick fix but in the long run creates a slippery slope creating a corporate culture that is unable to compete on a level playing field. I my humble opinion I suggest that focusing on education and creatively implementing modern management and operational practices is far more effective in creating long term success. With kind regards,
Rene, Thank you for taking the time to respond. Your comments are very insightful. Yes, business must first and foremost be introspective. As a management consultant, I work with the small to mid-size businesses. However, I did cut my teeth at one of the largest and most efficient conglomerates in the world - General Electric - having worked at NORYL Plastics and GE Silicones - so I have an understanding of what you are addressing. As a strategic planner, I am an advocate of internal synergy and interdependence. I have seen companies go from being dysfunctional to becoming strategically aligned, horizontally integrated and customer focused. I have introduced programs to eliminate waste, reduce non-value added work and increase value added work. I have seen business tremendously improve their efficiencies and effectiveness and realize greatly reduced operating costs. With the small and mid-size companies, it is difficult but far from not insurmountable. As one of my clients put it to me, "Ya gotta wanta or it ain't gonna happen." My point being that I agree with you in that every business needs to fix itself internally before it can begin complaining about the unfairness of the external rules. Once that is accomplished however, then it becomes a horse of a different color. Yes, too many large corporations look to the government for an edge or to even bail them out. I am not speaking for them. I am speaking for the small and mid-size guys who are left in the wake of the Titans. Many of them have or are doing all the right things. Unfortunately, they don t always get to be heard. Organizations like NAM seem to represent the larger concerns. And our elected officials in Washington DC appear to have more of a cocktail commitment to the small businessperson than a true one because the small businessperson can t put money in the coffer for their re-election like big business can. The big guys don t appear to be the ones complaining. They have already moved their facilities to China, Viet Nam, India, Ireland, Korea, Mexico and parts unknown. They also either have the capital to withstand most anything that the government or anyone else throws at them or the where with all to avoid these additional operating costs by moving to these places. The small and mid-size guy may be able to do that, but they d much prefer staying where they are. They are more committed to their employees and the community in which they live and work. It is a completely different mind-set. What their argument is all about, and mine, is that in spite of doing all the right things internally, they are faced with operating costs that companies in China and elsewhere don t have. Not just labor, but Workman's Comp Insurance, taxes, EPA, OSHA, export tariffs, and a list of rules and regulations. Here in California, for example, companies are being forced to either call it quits or move as a result of our state s runaway Workman's Comp Insurance problems. There are documented stories of businesses being forced to pay 3 and 4 times more for their annual workman s comp than the year before. That equates to hundreds of thousands of dollars that was never budgeted for and cannot be passed on to the customer. Then there is the other issue of counterfeiting. The latest of which appears to be auto parts and pharmaceuticals. To give you an example, I represent a company that manufacturers a unique type of blower. Imagine trying to compete against a knock off in Europe that not only looks like your blower but has the same name on it, yet it is not yours. If the WTO is going to allow that to happen, you not only cannot compete, but when the thing falls apart, or worse, kills someone, who gets the black eye? Not the counterfeiter, because they will only remember the name on the product. Rene, the counterfeiting has to stop. The tariffs need to be set so everything is equal or at least close to equal. China is scary because it has all the resources required to swallow the USA whole, especially with the playing field tilted toward them. I am not an advocate of isolation-ism. I just want to know that if I ve come expecting to play soccer the other guys are not allowed to play rugby. Thank you again for your time and input. Feel free to re-but this note and contact me again, any time. Yours truly,
Jim, Thanks for your extensive reply. Most of my consultancy experience is also based on small to mid-size companies. With a few obvious exceptions we hardly have big manufactures in the Netherlands. I would love to say the same things you say about companies becoming aligned and customer focused. We are not there yet, and in many cases we aren't even aware that we are not there. The only thing that is visible is low or non existent profit margins. As your customer put it so poignantly "Ya gotta wanta or it ain't gonna happen.". I sometimes wonder don't they 'wanta'? Sitting back and complaining is certainly not going to help. Again there are some exceptions with companies utilising brilliantly focused business procedures to create first class products. They are market leaders and I am happy to say that for some I have played a small role in them getting there. What I find differentiates the real leaders from the laggards, this includes small and medium sized companies, is that they not only posses efficient business processes but the fact that they are creating products with perceived added value for their customers. I am under the impression that world beating products will always capture a market. The days that a manufacturer could capture a market just by having very efficient operations are behind us. Companies have to create world beating products thereby creating their own playing field. It is a hard and fast race to keep the creative edge. The good news is that the states and to a lesser extent Europe has always been good in this race. Its just being aware that this is the race to be in and not the other one of finger pointing. Here too in the Netherlands big corporations receive handouts and benefits. It's a good thing to remove mechanisms which create an unfair un-level playing field. The small guys have a rougher ride but because they are small they can be much more agile. Because they are local they can listen better to the specific wishes of their customers. The small and midsize companies should focus on these opportunities and pluck the fruits of their intellectual resources. In Europe we face the same or even stiffer competition then in the states. Some of the unfair competition is even within the EU including counterfeiting. If you are complaining you should see what a manufacturer has to comply with here. Here they point at the states as the glowing example to follow it being the land of milk and honey for manufacturers. We also face stupendous rules dreamt up by civil servants sitting behind desks never considering what the impact would be to the market. Although I must say things are improving even within the EU. We are striving, with hiccups, for a level playing field. We now also understand that tariffs are not the way to go it just makes companies sick in the long term. Probably because "Old Europe" has been much longer at this game then the states companies are starting to learn how to cope with these external obstacles. Even under these un-level conditions there are still many successful Dutch companies because they are creating products with sufficient added value to be successful. To me it is a question of we used to play soccer, which is a game with simple rules. Now its is rugby with much more complicated rules. We just have to be just that little bit more clever and creative. Some countries are better at playing soccer and others better at rugby. But don't try to play the wrong game in the wrong country. Rene Jim: I keep wondering how can China keep making products so cheap and how long will their cost of living stay low for the current business model to work. You see some of the products sold in discount stores such as Wal-Mart and wonder if the Chinese manufacturers are even covering their shipping costs. Is there an economic bubble forming over there that will eventually pop (hopefully soon)? Also what is happening to the billions of US dollars that is going over to China every year. One would think that the exchange rate will eventually adjust for the huge trade imbalance? One interesting perspective is to look at manufacturing in Japan, Korea and Taiwan for the past 30 years and how that has changed. Francis Hu 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, Below is an e-mail I sent to the MCADCafe editors on the subject of US un-manufacturing. We, as engineers, tend to think that when something is wrong, you point out the issue logically and then wait for non-engineers to come to the logical conclusion we know to be true. Executive/Lawyers/etc., on the other hand, make their living by making a particular result apper to be true no matter what the facts say. These are the people we are fighting against, and their method virtually always works. It is essential that we play hard-ball in some fashion. We must hook-up with organized labor or investigative journalists to change the entire perception of the situation. The executives/lawyers will be seen in an awful light if this perception can change. Another approach is to pitch to the out-of-power Presidential candidates. It is clear that our problem is one of losing military power eventually, but the current President is riding high on the fruits of military power (based on old technology really). When the loss of US manufacturing (by his generation in general) is perceived as loss of power, then he in fact becomes vulnerable (hopefully all the out-of-power candidates are not totally beholden to corporate interests). Naturally, the current President will come up with a feel-good solution instead of a real change, but at least it would put the issue on the radar for 2004. As I noted below, I stand ready to send money and to help. I just wish some non-partisan foundation or something would cover the start-up costs. I poked around the web a little, but I just don't have that kind of time and money. Best regards, To: MCADCafe-Editor@ibsystems.com 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, 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, I WOULD BE VERY INTERESTED IN RECEIVING THE LINKS TO THOSE SITES. Dave Powers 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 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 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 to worried about that as such, but it means the countries like us, the Germans. 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, DEAR JIM, I COULD NOT AGREE MORE WITH THE CONTENT OF YOUR ARTICLE I AM AN EXPERIENCED MANAGER IN THE MOLDMAKIND SECTOR AND HAVE SEEN OUR TRADE AND BUSINESS VANISHING BEFORE MY EYES OVER THE YEARS. LAST YEAR I VISITED MY DAUGHTER IN PALO ALTO 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 MACYS, CALL CENTRES OR STARBUCKS. KIND REGARDS, 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 seems 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. What ever 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'll will be gone forever. Re-turning 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, 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 cliché 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, 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, 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 US 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 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 issue that plagues 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 Greetings, I think Jim is right on the money, we have serious problem coming strait 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
I just read the Fast Facts Newsletter (Spring 2003) - Our country is losing its manufacturing base and shifting to a service-oriented economy. You hit it right on the head. We are a small manufacturing
company that has been in business for 36 years. We have never been
worried like we are now. We are not against free trade and competition,
but the current situation is way beyond that. We have a catalog
line of metal stampings for the lighting industry and have competed
with imports for more than 20 years. That was okay when there were
still companies here manufacturing/assembling, but now they are
bringing in the fixtures assembled, boxed, and ready to sell. The
American Lighting Association stated that 80% of lighting is now
coming in from offshore. It creates a domino effect - component
manufacturers do not have any one to sell to, therefore they (we)
are not buying steel/alum/other metals, we are not buying equipment,
tools, supplies, we are not using shipping services, etc. This is
not the "trickle down" effect that we looked forward to
in the 80s. Our company only employs about 20, but when you multiply
that by all the other 20's, there is going to be an awful lot of
people that do not have jobs. How then will we buy the "stuff"
coming in from China or paying for all the "services"
that the people here are providing in their new jobs.
When manufacturing is gone from the U.S., who is
going to protect us? Are we going to buy our military equipment
from China? That's an interesting concept - like the fox protecting
the chicken coop!
Why don't we hear of this in the mainstream media?
The only place I hear anyone talking about it is in trade magazines.
What can we do? Is there time to turn the tide?
Dana Matejka
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Trade Associations Yahoo's List of Trade Associations Another Listing of Trade Associations Searchable Database of over 10,000 Associations American Automobile Manufacturers Association American Supply and Machinery Manufacturers' Association Association for Manufacturing Excellence Automatic Identification Manufacturers Electronic Industries Association Industrial Distribution Association Manufacturing Execution Systems Association Material Handling Equipment Distributors Association Material Handling Industry of America Precision Metal forming Association Robotics Industries Association Service/Manufacturing/Commercial Association Telecommunications Industry Association NSPE AssociationCentral The
Institute for Industiral Engineers
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