Thanks to the distribution of its position paper and presentations of its concerns, the Manufacturers Council of The Right Place Program Inc., has learned of two pieces of federal legislation responding to the council’s concern.
One, submitted by Sen. Ernest Hollings, D-S.C., would establish an Office of Manufacturing in the U.S. Department of Commerce. The other, sponsored in the House, would create a U.S. Under Secretary of Commerce for Manufacturing.
According to J. Daniel Hess, a member of and one spokesman for the Manufacturers Council, the concern leading to the submission of those bills is that about a million American manufacturing jobs have disappeared overseas in the past two years.
And some of them, he added, disappeared from this community.
The council’s paper is entitled, “A Growth And Innovation Agenda for Manufacturing.”
And according to the council-funded research that undergirds the paper, Hess said those jobs are disappearing largely to the Far East, and particularly to Taiwan and China.
Hess, a Detroit native who is president of Paragon Die and Engineering Co. and a member of the council, said the research results “raised the bar on manufacturing performance and the world-class competencies which we talk about and try to promulgate in our meetings.
“The future,” he said, “will be based on innovations, R&D, adaptation and education. And American manufacturing needs support in all those areas.”
Hess said he was in China just before the Christmas holidays and got a sobering look at what’s occurring on the receiving end of the manufacturing job flow.
“A container ship leaves Hong Kong every five minutes,” he said, “and they can deliver large tools to California within 10 days. Smaller tools, they can deliver by air right into Chicago on a next-day basis.”
He said that despite the fact that mainland China has a nominally communist government, that nation rapidly is moving to an entrepreneurial economy and becoming a very competitive environment.
“One out of five people on the planet live in China,” he said, “and they have the fastest-growing economy in the world.”
He said he saw small shops where the average worker works six days a week, 12 hours a day for about $400.
But aside from the willingness of the Chinese to work like beavers for a pittance, he said, they also design tools with government-supplied computers every bit as modern as those found in Grand Rapids.
“In fact, I saw one version that was newer than the one in my plant back here,” Hess said.
“They work with state-of-the-art CNC chip-cutting machines,” he added. “This is German and Japanese stuff.
“And they have armies of people handling the finishing work — mostly women, because they feel that women do a better job.”
He said the manufacturers council isn’t out to cut U.S. pay to Chinese levels or to seek federal subsidies for American firms.
“We’re trying to increase the visibility of manufacturing,” he said.
“What we’d really like to see is a champion at both the state and federal levels. We have a secretary of agriculture and a secretary of labor. We’d like to see a secretary of manufacturing who would be our voice in Washington.
“The U.S. Secretary of Agriculture represents only about 3 percent of our population,” he added, “and I don’t have anything against farmers. I’m from a farming background myself. It’s just that what we’re after is the same level of representation.”
He said that in terms of technology, the Chinese still lag somewhat behind their counterparts in the United States.
“We’re still ahead of them with respect to our knowledge of how to design a tool to get maximum productivity, how to get the best cycle time and how to have the least maintenance.
“When their stuff arrives here,” he added, “it requires quite a bit of tweaking — or tuning, as we call it in the tool and die business.”
Hess said he judges that the Chinese are perhaps five years behind American manufacturers in the efficiency with which they use technology, but he’s not so sure it will take them five years to come level with American manufacturing.
“They’re going very, very quickly,” he said.
“It reminds me of the Japanese over here 20 years ago with their pads and pencils and cameras — and going to our graduate schools.
“Right now,” Hess added glumly, “it seems as if our technical graduate schools have more foreign students than they do North American students — and a lot of them are going back overseas.”
What he said the manufacturers want out of the federal government are more incentives for R&D and more collaborative R&D.
He also said that if manufacturing had enjoyed a cabinet-level profile in previous years, the administration might have been less eager to raise protective tariffs for steel, and Congress might be more willing to end double taxation of investment dividends.
He said the economics seem particularly acute right now in the tool and die industry. “Locally,” he said, “we’ve heard numbers like 20 percent to 30 percent of the companies in my industry have gone out of business.”
Some industry observers, he said, also see other lower-tier automotive suppliers as being vulnerable.
“I read that the auto industry has 90 days of inventory out there. They’re not really seeking parts, so a lot of smaller companies that had expanded — well, all of a sudden if we have a big auto-buying slowdown, the volume’s going to die on them, and the banks are getting real squirrely.
“I read that a lot of smaller auto suppliers will go out of business in the next 90 to 120 days,” he added, “and a big part of that is this never-ending drive to lower prices.”
Another part of the problem, he said, is auto manufacturers are very slow in paying suppliers. “They don’t want to pay us until they get final approval, which can be a year after we ship the tools. That could be $1 million. Of course, we build the financing into the price, but smaller companies can’t carry that kind of working capital financing.”