Why U.S. Manufacturing Won't Die

WSJ ^ | July 3, 2003 | CLARE ANSBERRY

[edsheppa]

What role will U.S. manufacturing play in the national and global economies in the coming years? What jobs will be left for American workers?

It's more than an academic question for many company owners. Stan Donnelly, who owns Donnelly Custom Manufacturing Co. in Minnesota, is studying Mandarin in case he has to move his machines to China. Already, he buys molds from China to make his custom-designed plastic parts. To date, Mr. Donnelly has been able to keep production of those parts in the U.S. But as his customers increasingly demand lower prices, he wonders if he will one day need to move production to Asia as well.

[GrandMoM]

THANKS!....to bad there aren't more American businessmen like you!

[Malsua]

>>"The Mill" OWNS both metal and plastic custom manufacturing machinery markets<<

They do alot of CNC, edm and injection mold equipment...at least based on the website, that appears to be the case. Much of that capacity will go offshore and much already has. A trained monkey can run that equipment, it's very good stuff.

My efforts are directed at other types of equipment. Imprinting on vinyls and plastic substrates. We don't make the mass produced "raw material" stuff. We get that in bulk from Asia and customize it here. It used to be entirely domestic but all that went westward. Lets face it, the lack of EPA and other regulations alone save pennies per piece. The labor saves more pennies. Put it together with millions of pieces and outsourcing it from Asia adds up to big dollars.


While my company is smallish(<200million sales), it wouldn't suprise me if there were guys at the big companies doing the same types of things. Automating the labor cost out of a piece as much as possible. At that point, you're down to overhead costs, which if divided up by enough pieces becomes an acceptable cost. I suppose once every other factor has been reduced to nothing, they'll hit the light switch on the way out to Asia. One can hope to push that date out as far as possible.

[Willie Green]

I've subscribed to the WSJ for years, this is by far one of the stupidest things I've ever read out of it.

It sure is. It completely ignores the complex supply chain that's necessary to support the manufacturing infrastructure. High-tech is glitzy and glamorous, but if you erode the foundation of the industrial base, the whole kit and kaboodle will collapse.

[ninenot]

Aha.

Now--what did you say?

[ninenot]

The Bemis lawn chair facility in Sheboygan Falls, WI., has a plant around 25,000 sf. with only 3 humans in it--some mix the plastic beads for color and watch the Milacron machines, the others stuff the chairs into boxes.

Couldn't believe what I saw. They don't really have to watch the machines, either--they sort of wander around between batch mixes.

[PatrioticAmerican]

"I will leave fighting windmills for you chaps."

If we are only fighting windmills, then why are you here? I mean, is watching people fight windmills all that interesting?

I'd say anything good is worth fighting for, no matter how silly the fight may seem to others.

[Bluntpoint]

Nine Knot (ninenot) Spell

You need: string, cord or yarn (13 inches), incense of choice, and 2 candles of appropriate color.

Cord magick requires you to charge each knot with your energy, and can be used for any situation you need. For example, healing, keep the cord with you till the spell is complete. For negativity, bury the cord or put it away after the completion of the spell.

In a quiet place, light 2 candles of appropriate color and incense. Place the cord (13 inches) in the middle of the candles, tie the knots as follows:

1---6---4---7---3---8---5---9---2

Relax, and make the sign of the pentacle and say:

Gracious Lady

I ask that you bless this cord

As I perform this rite.

Concentrate on the goal and Say:

By the knot of one, this spell's begun

By the knot of two, my words are true

By the knot of three, it comes to me,

By the knot of four, may this spell be strengthened more

By the knot of five, may this spell come alive,

By the knot of six, the spell is fixed,

By the knot of seven, may the power through me be givin,

By the knot of eight, may the power within be great,

By the knot of nine, may the thing I wish for be mine.

In the Name of the Lady

This spell is cast, so mote it be.



Then play some Wayne Newton tunes.

[upcountryhorseman]

Where do you get "free trade"? There is no such thing!
Every industial country imposes import charges and
subsidizes their industries.

[harpseal]

So are you proposing tarriffs to protect American jobs?

Not as a first step. I honestly think that we should first and foremost eliminate all the subsidies to overseas investment and to the hiring of guest workers in the USA. IMHO that may well be enough to make teh turn arround. However, I think tarriffs may prove useful for dealing particularly with those nations that engage in unfair trade practices such as the PRC and India with its capital controls. If, however the USA is still seeing a net outflow of capital then I would agree that a protective tarriff is needed. I would not have any problem whatsoever if the income tax was replaced with revue tarriffs as a means of funding the federal government. Nor would I have any problem with a national sales tax replacing the income tax.

Enterproise zones where corporate income taxes were eliminated and much eased regulatrions were in place would also make sense to me if the companies locating there in agreed to the maximum American content possible for all production therein in return for the eased restrictions. If such areas became the fuel for an economic success then maybe it would lead to these reforms becoming nationwide.

For certain national security industries I wqould prohibit foreign outsourcing for national security reasons. for example missle guidance systems.

[ninenot]

I am a step further than you on this one. I think that the tariffs should be applied immediately--but they should be carefully designed to offset the costs-of-doing-business in the USA, nothing more.

For example, the tariff should offset the cost of 'minimum wage' adjusted for overall cost of living; the cost of regulation, including FSLA; the cost of environmental controls, etc., etc.

I suspect that in many cases that will be more than enough.

[ninenot]

Sorry--almost forgot taxes. The tariff should be designed to offset the cost of income taxes paid to State and Fed, property taxes, and personal property taxes paid to locals.

THAT's FAIR TRADE!!!

[ninenot]

- Yesterday, the Labor Department released another employment shocker: the U.S. unemployment rate jumped from 6.1% in May to 6.4% in June, the highest in more than nine years. Weekly jobless claims also spiked - up 21,000 to a hefty 430,000 new claims for unemployment insurance. Meanwhile, the Rust Belt continues to rust. Manufacturers lost 56,000 jobs last month, the 35th straight decline. Since July 2000, factory employment has fallen by a staggering 2.6 million jobs to 14.7 million.

From 'The Daily Reckoning' of July 4, 2003.

Now I know why the WSJ's cute little graph does not show 2003 numbers.

[maui_hawaii]

Free trade prevents me from buying a $1200.00 microwave and $600 tennis shoes.

Bullsh#t.

[maui_hawaii]

What would you like to know about FDI in the US or Doha?

FDI in the US takes on an entirely diffferent shape than FDI in other countries.

With China for example the largest investors by far are US corporations who are locating factories etc there.

By far the largest investors in the US are bankers and people pursuing retirements. We have the system for it.

In other words in China our companies buy and build factories. In the US the Euros and whoever else by treasuries or CDs or stocks.

The thing with the investments in China is that China rarely sees the profits from them. They see the investment dollars and job gains, but little else, depending on the nature of the set up. In brief, made in China, sold wherever, and profits sent to New York corp HQ.

[FLAUSA]

The situation today is not much different than it was 100 years ago.

100 years ago folks were losing their jobs in agriculture. Today folks are losing their jobs in manufacturing.

100 years ago a lot of people worked in manufacturing and were paid very low wages. Today a lot of people work in the service sector and are paid very low wages.

100 years ago the folks that owned and managed the manufacturing plants made enormous amounts of money. Today the CEO's are paid enormous amounts of money.

Ya gotta ask yourself, "why did the manufacturing wages go up so much, from slave rates to middle class income?"

Unions!

If the only jobs the CEO's will let Americans perform is service industry jobs, then we need to make those jobs middle class jobs. The way to do that is unions.

There's a lot of money in the pipeline. When companies pay rock stars and jocks millions of dollars to endorse their products, when CEO's are making tens of millions per year, when companies are slashing their labor cost by 90% by moving manufacturing overseas, there's a lot of money in the stream between the Chineese guy making $5 a day and your local Wal-Mart.

You would think that with all the money that manufacturers save by outsourcing jobs that prices would go down, right? Wrong! The cost of living has not decreased, not even a fraction of one percent. So where's the money? Rock stars, jocks, and CEO's. Hey, that's your money as they say on TV. You want higher pay? Unionize! That's the way our fathers and grandfathers did it. You think Wal-Mart would go broke if the paid their workers more money? Not hardly. Can they outsource those service jobs to China? Not hardly! Ya, I know Republicans think unions suck. Well, guess what? Poverty sucks.

On July 4th we should remember our veterns. So let's remember the boys who came home from WWII. They went to work in the factories and they joined unions and made a better life and a better country for all of us.

[Bluntpoint]

Bullsh#t.

There you go. A true entrepenaur. Do you deliver or do I need a truck to pick up. My garden thanks you.

[maui_hawaii]

Lets compare business experience.

I still think your assertation that free trade prevents you from buying a $1200 microwave and $600 shoes is laughable.

If you think differently back it up.

[ChadGore]

" they joined unions and made a better life and a better country for all of us."

That's the funniest thing I've read on FR all day ! Thanks for the laugh. I'm happy most americans know the Leninist view when they read it.

[NMC EXP]

It's more than an academic question for many company owners. Stan Donnelly, who owns Donnelly Custom Manufacturing Co. in Minnesota, is studying Mandarin in case he has to move his machines to China. Already, he buys molds from China to make his custom-designed plastic parts. To date, Mr. Donnelly has been able to keep production of those parts in the U.S. But as his customers increasingly demand lower prices, he wonders if he will one day need to move production to Asia as well.

Many experts believe that the pattern of past years will continue -- that low-skilled jobs making lower-value, mass-produced items will keep migrating to countries where labor is plentiful and cheap, while manufacturing in industrial nations, such as the U.S., Japan and Western Europe, will center on complex, value-added products and systems

The author of this article knows nothing about the production of plastic parts. In this example, the complex value added product is the mold which was made in China. Mold making is a labor intensive complex, tightly toleranced machining job.

On the other hand, once the mold is installed in a plastics injection molding machine the actual plastic part production operation consists of one operator babysitting several automated injection molding machines while the machines spit out finished parts. Load the injection molder hopper with plastic pellets, hit the start button, and walk away.

THe labor content on plastic parts is low so by conventional wisdom such operations would be the last to be shipped to low wage countries. However, moldmaking is a detailed and complex task the likes of which the author said would stay here.

Manufacturing is dead.

Want fries with that?

Regards

J.R.

[NMC EXP]

The chart says it all.

THe chart is meaningless. It displays the absolute number of people employed in manufacturing. What has the population done in that time? What percent are employed in manufacturing? Here is a clue, it has steadily declined for 30 years.

For centuries, productivity increases have been freeing up employees to take better higher paying jobs, and it lowers costs, too,

That is what the economics textbooks tell us. Unfortunately, empirical data proves the theory wrong.

Read "The Pooring of America - the Myth of Free Trade" by Dr Ravi Batra. He uses US Bureau of Labor and the Economic Report of the President government stats to demonstrate that these assumptions failed ca 1973 and explains why.

It is because of free trade.

Regards

J.R.