May 26, 2012 Revitalization Challenges: Substantial But Rewarding

Volume 15 | Issue 2

There’s an old saying, “Be careful what you wish for, lest it come true.” Who hasn’t wished for an American manufacturing renaissance?

These are historic times for American manufacturing. We’ve lost ground over three decades but now witness revitalization.

Analysis of manufacturing technology orders provides a reliable leading economic indicator, denoting that manufacturing firms are investing in capital equipment to increase capacity and improve productivity. Manufacturing technology provides the manufacturing foundation. It turns raw materials (e.g., steel, iron, plastic, ceramics, composites, and alloys) from their original stock-material state into durable goods such as airplanes, cars and appliances, as well as daily-use consumer goods.

Experts cluster in forecasting either a small increase or small decrease in manufacturing technology orders for 2012, compared to 2011. Whatever the result for the 2012 cycle, it will either be the top or second-best number in the past decade. The year 2011 has top honors so far.

Pessimists believed that 2012 would simply not do as well as the phenomenal 2011. But the 21-percent increase in orders compared to 2011 (as well as quotation activity and supply chain news) suggests the pessimistic outlook for 2012 is unwarranted. Looking forward to 2013, AMT expects an uptick as U.S. manufacturing continues forward momentum, and as reshoring becomes more prevalent.

SHIFTING LANDSCAPE
U.S. manufacturers will seek these gains in productivity through automation and innovative technologies to increase their global competitiveness. The weak dollar is making exports strong. The manufacturing base is reinvesting in the latest tools. Energy will continue to be a large investment factor in manufacturing technology. The automotive industry is making major changes to address “green” issues, which will lead to significant investments in production technology, as well as spending to support the shift of the industry’s center from Detroit to the South/Southwest. Aerospace green field investments will continue in the Southeast and West.

THE MANUFACTURING MANDATE
That said, real work still needs to be done. In 2009, AMT introduced the Manufacturing Mandate that outlines a clear path for a federal policy of collaboration between government, industry and academia. This points to how American manufacturing will move forward in the next decade.

AMT believes cooperation and innovation are the keys. How do we achieve this vision? Federal policy would incentivize innovation and R&D in new products and manufacturing technologies; assure availability of capital; increase global competitiveness; minimize structural cost burdens; and enhance collaboration between government, academia, and industry to build a better educated and trained “Smartforce.” Progress is being made on these fronts, but momentum must be maintained.

Reshoring is in full bloom. More work comes back to the U.S., and there is greater foreign direct investment in U.S. facilities. The quality of U.S. work proves more valuable than thought in the off-shoring investment calculation. Companies face increasing costs in logistics issues, with the delivery of components and exportation of completed products to North America. Add to that the rapidly increasing labor costs in traditionally “low cost” labor markets, and the continued decline of labor in the overall share of total production cost, and the reshoring picture becomes clear. When total cost of manufacturing is calculated, the United States is a very favorable environment.

Research shows that certain goods (e.g., vehicles and auto parts, construction equipment, appliances, electrical equipment and furniture) arise from sectors that could create up to three million jobs as a result of a US manufacturing renaissance.

SMARTFORCE DEVELOPMENT
However, the job situation remains unresolved. Despite the high number of Americans out of work, manufacturing jobs continue to go unfilled. Why? The current factory floor is far different than before. It’s awash with new technologies and processes that require advanced training and adaptable skills. We need a “Smartforce” of workers up to the job.

AMT is actively engaged in doing something about this. Its MTUniversity allows AMT to deliver outstanding job assessments and online classes for new sales engineers and service technicians. It also provides AMT with a platform for working with the National Coalition of Advanced Technology Centers (NCATC) which includes more than 150 of the nation’s leading community colleges, with Project Lead The Way Schools, as well as with the nation’s top four-year degreed colleges and universities. Through education partnerships, the best candidates will be directed to our industry through MTCareers, to connect students to employers who have open positions that need to be filled.

AMT is now planting seeds in schools for the future of manufacturing and its Smartforce. Another initiative is jumpstarting apprenticeship programs by modeling successful programs that are still in place, newly created or working well.

Additionally, for shop floor employees, AMT is working closely with the National Institute of Metalworking Skills (NIMS) to assure that young people have the knowledge and credentials to get to work right away.

DISPATCHES FROM THE LEGISLATIVE FRONT
Good news – Manufacturing is receiving more attention in Washington DC than at any time since the 1980s.

In Washington DC, much of the remainder of this congressional session will be taken up with fiscal matters, including deficit reduction, the FY13 budget and the appropriation process. Support for adequate funding for the Commerce Department’s manufacturing programs, particularly the Manufacturing Extension Partnerships, remains stable, but tenuous, in the current volatile political environment.

Tax reform is also front-and-center on the agenda. President Obama and the House Ways and Means Committee Chairman Dave Camp (Mich.) have introduced competing corporate tax reform proposals that both reduce rates. However, Obama’s proposal keeps a worldwide system of taxation and further penalizes multinational companies by requiring them to pay a new “minimum tax” on foreign earnings. Conversely, Camp’s proposal switches to a territorial tax system.

The Bush-era tax cuts and a long list of tax incentives, including increased Section 179 expensing and bonus depreciation, will expire at the end of this year. The R&D tax credit, expired in 2011 for the 14th time since it was created in 1981. There is significant bipartisan support for extending some form of enhanced expensing and for a permanent R&D credit. But as the elections get closer, it appears more likely that these issues will not be considered until a post-election lame duck session.

The White House continues focusing on increasing exports, improving science, technology, engineering, and mathematics (STEM) education and community college education and strengthening advanced manufacturing. As part of the “We Can’t Wait” effort, the Administration will soon launch a competitive bid to launch a pilot Innovation Institute focused on additive manufacturing. This institute will be financed with $45 million in existing federal funds, which will leverage a matching amount from industrial, state, and other partners. It will serve as a proof-of-concept for a National Network for Manufacturing Innovation (NNMI) – a proposal to establish 15 innovation institutes around the country, each focused on a different manufacturing technology or challenge. NNMI emphasizes many of AMT’s Manufacturing Mandate priorities including greater collaboration between academia and industry, enhanced research and development, training a better “Smartforce,” and increasing the global competitiveness for American manufacturers.

Author Douglas K. Woods is president of the Association For Manufacturing Technology, an organization that represents and promotes the interests of U.S.-based manufacturing entities – those who design, build, sell, and service the continuously evolving technology that lies at the heart of manufacturing. Founded in 1902, the Virginia-based association specializes in providing targeted business assistance, extensive global support, and business intelligence systems and analysis – and it communicates the importance of policies and programs that encourage research and innovation, and the development of educational initiatives to create tomorrow’s Smartforce. For more information, visit www.AMTonline.org.

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