The U.S. manufacturing sector needs to be strengthened and even rebuilt to foster economic growth. That’s the message of The Association for Manufacturing Technology (AMT), and the organization offers a strategy. It involves a Manufacturing Mandate that advances a new and coordinated manufacturing policy. AMT President Douglas K. Woods discusses an urgent situation that needs to be immediately addressed.

As U.S. manufacturers struggle to climb out of one of the fastest and deepest order declines in history, credit continues to hinder a manufacturing expansion in 2010. In surveys conducted in June 2009 and January 2010, members of The Association For Manufacturing Technology (AMT) shared that working capital, credit lines and financing for their customers were the top three critical issues their businesses faced. In the January 2010 survey, a third of the members reported that their lines of credit were either cancelled or hadn’t yet been renewed. One AMT member received a multimillion-dollar order but could not get its supply chain started because its decades-long banking partner cancelled its line of credit shortly after the company got the order.
However, it isn’t just small companies that face this challenge. Overall, the banking industry appears to be deserting the manufacturing sector. In a recent leasing/financing workshop held at the American Machine Tool Distributors’ Association’s annual meeting, one of the speakers—a bank executive—revealed that many of his competitors would not lend to manufacturers because the risk had become too great, given the penalties for extending risky loans. The banker leading the workshop shared that one large Pennsylvania-based bank is forcing all the regional and local banks it plans to purchase to eliminate their relationships with machinery manufacturers immediately and extend no credit.

The situation would be understandable if money was tight, but banks are hoarding their cash in the Federal Reserve, where their deposits are 24 times larger than the reserve requirement. That is more than $1.2 trillion dollars, or about one-tenth of U.S. GDP, sitting in the Federal Reserve rather than being circulated through loans, lines of credit and financing investments to help the U.S. economy grow. Certainly, new restrictions imposed by the Fed on bankers have fostered a conservative backlash in lending. Bankers’ wariness about the future of the financial system may be raising additional fears. Regardless, the Obama Administration and the Fed need to work in concert to get this money back into the economy. The government needs to make it less attractive to have excess reserves. It needs to reward lending practices that grow businesses in a smart fashion. The administration needs to extend the Small Business Administration loan guarantees of 90 percent.

AMT has built a comprehensive road map for ways that government, industry, and academia can work together to strengthen manufacturing in the United States, which would in turn foster a return to strong economic growth. A key part of this is assuring the availability of credit and working capital to the manufacturing industry. In addition, this Manufacturing Mandate lays out a clear path for a federal policy of collaboration that would “incentivize” innovation and R&D, increase global competitiveness, minimize structural cost burdens, and enhance and build a better-educated and trained “smart force.”

A solid recovery has been slow to take hold, and that has been especially true in the manufacturing sector where credit remains tight and uncertainty over the future has prevented companies from retooling, diversifying, and investing in R&D. But by shifting attention away from fear and turning it toward innovation and the implementation of smart public-private partnerships, we can move toward change and progress and keep our economy moving forward – and bring about the highly skilled, well-paid jobs that naturally follow.

Globally, there is an entire realm of new technological fields that the United States should be dominating on the forefront. Instead, we are lagging behind our trading partners in these new fields because of a business and regulatory environment that thwarts progress. If government policy and resources aren’t redirected to focus on innovation and R&D, there will be more missed opportunities for American technological leadership. U.S. citizens will ultimately suffer.

It is possible for the government, industry, and academic communities to work together, utilizing an infrastructure already in place, to revitalize the manufacturing sector and promote real economic growth. AMT is poised to work with the federal government to implement a national manufacturing strategy – a Manufacturing Mandate that will establish the United States as the worldwide leader in next-generation manufacturing technologies and the world-class products and services they provide. But first we must assure that these technology providers have access to the capital necessary for a climate of innovation, productivity, and growth.

To see the Manufacturing Mandate in its entirety, visit www.AMTonline.org. A link to the Mandate can be found in the left rail.


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