Manufacturing in America - alive and well!

[Thinker]

To counter the notion that manufacturing in America is "dead," I'll start this thread showing evidence to the contrary.

While jobs in manufacturing are certainly declining, America is producing more than it ever has. In other words, we're producing more, using fewer people.

In addition, the things we're producing are increasingly higher-value-added products. That is, we're producing more airplanes, elevators, machinery, chemicals and things of that nature, while producing fewer blue jeans, childrens' toys, cheap electronics and things of that nature.

This first article explains it best - if you read just one article in this thread, you should read this one . . .

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Wall Street Journal
Monday, July 17, 2005
Manufacturing Sector Displays Unexpected Vigor
Output climbs as Payrolls Shrink; Surging Demand for Business Equipment
By Jessica E. Vascellaro and Jon E. Hilsenrath

The import-heavy shelves of Home Depot, Wal-Mart and Best Buy paint a grim picture of the health of the U.S. industrial sector, which doesn't appear to be producing much of what American consumers are buying.

But that isn't the full picture. While employment keeps declining at American factories, they are cranking out more products than ever, and they are running closer to capacity than they have in half a decade.

In the past year, the growth in output of high-tech equipment, machinery and aerospace products has outpaced overall economic growth. Even production of motor vehicles - despite the problems of Ford Motor Co. and General Motors Corp. - is growing at a healthy pace, expanding by 8.5% in the past 12 months as foreign auto makers have increased ouput in the U.S. to win market share. Production of some consumer products - like food and toiletries - is also rising.

"Contrary to the view out there that American manufacturing is dead or dying, [production] is growing at a pretty good clip," says Joseph Carson, director of global economic research with Alliance Capital Management LP in New York.

It is a counterintuitive view, but the point was underscored Friday with the monthly report by the Federal Reserve on the state of the manufacturing sector. Industrial production rose 0.9% in June, the largest increase in nearly a year and a half.

Rising utility output was an important part of the increase, but so was manufacturing. It rose 0.4% from the month before and now looks to be back on a growth track after a slump in March and April led some economists to worry that an inventory glut could send the sector into another tailspin.

"Manufacturers are putting the second quarter's inventory adjustment behind them and are gearing up for increased demand," Nigel Gault, an economist at Global Insight, an economics research firm in Lexington, Mass., said in an analysis of the Fed's report. When businesses build up too much inventory, they usually reduce output to work off existing stock.

Two larger trends are at play in the increases. The first is continued productivity gains in the manufacturing sector, which means factories are producing more products with fewer workers. The other is a growing global economy, which allows U.S. producers to expand production even as upstart factories in places like China and Mexico build up market share.

The Fed's index of manufacturing production, which measures the volume of output, now stands 3% above levels seen at the height of the last economic boom. In June, production of business equipment - computers, industrial machinery, tractors, airplanes and other products used by businesses, rather than consumers - was up 8.2% from a year earlier, while output of computer and electronic parts rose 15.6%. Information-processing and defense and aerospace equipment also registered double-digit growth rates.

Some companies say they are feeling the lift. Boeing Co.'s orders this year already exceed the total for 2004, thanks in part to orders from overseas. Proctor & Gamble Co. says demand for soap, babycare products and diapers is so strong that it has had to add to its facilities in Pennsylvania and Missouri. Campbell Soup Co. said it plans to build an $80 million factory in Everett, Wash. As a result of the move, the company expects its StockPot business, which makes fresh refridgerated soups and sauces for the food-service industry, to boost capacity by 50%.

And amid worries that U.S. manufacturers can't compete with Asian rivals, more of these rivals are looking to produce in America. Hyundai Motor Co., based in South Korea, in May opened two-million-square-foot plant in Montgomery, Ala., that has the capacity to produce 300,000 vehicles a year.

To be sure, manufacturing isn't expected to reclaim its position as the key locomotive of the U.S. economy, which is increasingly services-oriented. Just as the agricultural sector did during the industrial revolution, manufacturing is shrinking as a percentage of overall economic output. In 2004, manufacturing was 12.7% of gross domestic product, down from 13.2% in 2001 and more than 20% in 1980. While some companies are boosting production in the U.S., many are also moving some production to low-wage countries.

The sector also faces numerous challenges domestically. Manufacturing profits could reach new heights this year, but at $106 billion in 2004, they were still shy of their 1998 levels, according to the Bureau of Economic Analysis.

Import competition is as intense as ever. High oil prices and rising health-care outlays are putting upward pressure on costs. And the dollar has started to strengthen again, reducing the competitive edge that exporters enjoyed earlier in the year. It all forces manufacturers to work as hard as ever to control costs and increase productivity.

Manufacturing payrolls today are 1.6 million smaller than they were when the economic recovery started in November 2001. More Americans now are employed in health care and social services than in manufacturing, where payrolls stood at 14.3 million in June on a seasonally adjusted basis. That was just a little more than 10% of total payroll employment.

"We need fewer and fewer workers for the same amount of production," says Dean Maki, chief economist at Barclays Capital. "That drives the perception of the declining manufacturing sector."

Yet some economists say the manufacturing sector is quietly adjusting to a demanding environment by shifting to higher-end products that might not be on many consumers' shopping lists.

In studies on plant shutdowns in manufacturing in the 1980's and 1990's, J. Bradford Jensen of the Institute for International Economics, Andrew Andrew Bernard of Dartmouth's Tuck School of Business and Peter Schott of the Yale School of Management found global competition has been hardest on U.S. companies that depend on low-skill workers. Mr. Jensen says these workers tend to be in industries, such as apparel, furniture or leather manufacturing, that produce consumer products recognizable in stores.

Survivors, by contrast, have tended to be in "capital intensive" industries that rely on expensive machinery and skilled workers to operate them. These capital-intensive industries tend to produce business equipment that can't be tossed into a shopping cart at Wal-Mart, such as industrial machines, bulldozers or airplanes. "Most people don't buy these things," Mr. Jensen says.

In the past year, compared with the 8.2% increase in the output of business equipment, output of consumer goods has increased by half as much, or 4.1%

JLG Industries Inc., a maker of construction equipment in McConnellsburg, Pa., is an example of these forces at play. It makes excavators, loading machines and other heavy industrial equipment and has seen sales soar 54% in the U.S. and 75% overseas in the past year, to $505 million in the three months ended May 1. "We have had to boost production to meet demand," says Juna Rowland, corporate-relations director.

Baldor Electric Co. of Fort Smith, Ark., a maker of generators and electrical motors, expects business in linear motors, used to make everything from semiconductors to baggage-handling equipment, to double in the next few years. In response, Baldor is building a new plant, the company announced in March.

Slow growth in places like Europe and Japan has made it harder than expected for many manufacturers to expand overseas. But Mr. Carlson, of Alliance Capital, says that is starting to change. He estimates that in May, nearly 20% of all manufacturing shipments ended up overseas, near a historical high. "It gives a sense to me that domestic demand growth around the world is picking up."

[Thinker]

This next article from the NY Times is long but similar . . . if you're bored and want to read something long this might be for you. Otherwise the article above should suffice . . .

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http://www.nytimes.com/2005/09/04/business/04manu.html?pagewanted=print

http://graphics8.nytimes.com/images/2005/09/03/business/04manu.inline.gif

The New York Times
September 4, 2005
If You Can Make It Here ...
By LOUIS UCHITELLE

MILWAUKEE

MATTHEW S. LEVATICH hovers intently over the shiny red-and-chrome Harley-Davidson motorcycle parked near his office. He is annoyed. A reporter has questioned the American purity of Harley cycles and Mr. Levatich, as the vice president in charge of procurement, is defending the faith. He is slowly circling an employee's bike, identifying the source of each visible part.

True, the silvery, cylindrical shock absorbers, which rise like a "V" from the front-wheel axle, are from abroad. So are the aluminum wheels and spokes. That is because such things are not manufactured in the United States, or not as well here as they are in other countries. Various dashboard gauges are also imported. Once made in the United States, they are not anymore - feeding the perception that American manufacturing is in decline.

But the leather seat and saddle bags are from a supplier here in Milwaukee, Mr. Levatich said, tapping them emphatically as if they were items on a checklist. So are the metal brackets that attach the bags to the bike. The fenders, the gas tank, the brake system, the headlight assembly, the engine, the transmission, the muffler and the exhaust - all these were also Made in America, and the entire motorcycle was assembled here, too.

"We have more domestic content than we had 15 years ago," Mr. Levatich said, "but it is a very fluid situation, very dynamic right now."

The United States may not be the industrial dynamo it was a half-century ago, but reports of the death of American manufacturing are greatly exaggerated. The country has not even been toppled from first place among nations. Measured as value added, the United States accounted for 23.8 percent of the world's manufacturing output in 2004, according to the World Bank. And despite more than two decades of globalization, the country's share has barely dipped. The annual average since 1982 has been 24.6 percent.

"Value added" is the Cadillac measure of manufacturing performance. It calculates the dollar value created within each country when materials and labor are melded into finished products. (The whole is worth more than the sum of its parts.) Japan was second, at 20.9 percent - a perennial also-ran, narrowing the gap in some years since 1982 and falling back in others. China, however, although still a distant third at not quite 9 percent, has marched steadily upward, overtaking Germany in 2003. South Korea, in sixth place at 4.1 percent, has also gained ground, passing Italy just last year.

"When you go to conferences of manufacturers," said L. Josh Bivens, an economist at the Economic Policy Institute, "it is really surprising the number of companies still manufacturing in this country." More than 100,000 have at least 20 employees, the Census Bureau reports.

Some are foreign, like Toyota or Honda or BMW. But the great majority of manufacturers that stay put in the country, resisting globalization, are American-owned and share certain characteristics that help to keep them at home. More often than not, they are the nation's small and midsize manufacturers - those employing fewer than 1,000 people - but together they account for nearly 80 percent of the country's value added, according to Census Bureau data.

Whatever the corporate size, many of the chief executives grew up with their companies, gaining considerable expertise along the way and an unusual attachment to the products they make. James L. Ziemer, 54, Harley's chief executive, started at the company as a freight elevator operator while he was still in high school, drawn by Harley factory workers who lived in his blue-collar neighborhood here and who raced Harleys on weekends.

"I'd say to myself, wow, these guys are being paid to ride motorcycles and burn rubber and everything else," Mr. Ziemer said, "so I said, one day I'm going to be paid to ride a motorcycle." He owns three Harleys now and rides one regularly to work, parking it in a lot reserved for employees' cycles.

GENE F. HAAS, 52, the founder, owner and president of Haas Automation Inc. in Oxnard, Calif., worked as a machinist while he was in high school and college, and he stuck to that trade, although he graduated with an accounting degree. From his experience and ingenuity - and that of a high school classmate, Kurt Zierhut, now the director of electrical engineering - came a line of computerized machine tools that makes Haas Automation a powerful presence in an industry otherwise all but lost to the Japanese and the Europeans.

The similarities continue. Innovation is often compulsively pursued at the manufacturing companies that stay in America. The engineers and designers at Harley and Haas - they constitute more than 10 percent of each work force - are constantly altering the companies' products in ways that are not easily imitated by lower-priced foreign competitors. The resulting cachet helps to sustain demand.

"There are tweaks to the product that we do regularly," said Rod Copes, general manager of Harley's main engine and transmission plant in Milwaukee. "It could be just the relocation of a hole in a casting. Having production here, we can make that happen."

Mr. Ziemer and Mr. Haas eschew layoffs, but in exchange for job security they require their workers to help squeeze out labor costs through automation and other efficiencies. More to the point, the manufacturers that stay put in America cannot add workers, in the opinion of Mr. Ziemer and Mr. Haas. Labor must be less than 20 percent of the manufacturing cost to withstand foreign competitors who employ more labor at very low wages, these executives argue.

"If the government expects manufacturers to employ more people over the next decade," Mr. Haas said, "it isn't going to happen."

The nation's manufacturing employment fell rapidly during the 2001 recession and the slow recovery that followed, but as output has rebounded, employment has not. One reason, apart from automation, is the migration of production abroad, not only by big multinationals but by some of their suppliers as well, companies like Hiwasse Manufacturing in Jacksonville, Ark., which makes steel strips for the control panels of appliances and is considering a plant in northern Mexico to be near a big customer, General Electric.

Timely government regulation has played a role in sustaining domestic production. Without tariffs and import quotas in the 1980's, for example, Harley and Haas Automation might not be here today. Quotas gave Haas a protected market for midsize computer-controlled machine tools just when Mr. Haas was starting up, and tariffs on "heavyweight motorcycles" - defined as those having engines with a total displacement of more than 700 cubic centimeters - discouraged the Japanese from exporting to the United States the muscular, ornate, throaty-engined bikes that are Harley's specialty. That gave Harley breathing room just when it was close to going under.

The pressure for intervention that existed in the 1980's and that prompted President Ronald Reagan to act is less evident today. With the birth of the World Trade Organization and the entry of China into that group, free trade is more established now than it was then. That makes it easier for American manufacturers, particularly big multinationals, to shift production abroad and to export back to the United States. Companies like Harley and Haas that keep their factories in America are also under pressure to globalize, but in a different way. Materials and parts that go into their products come incessantly from abroad.

Mr. Levatich, Harley's procurement chief, says he tries to buck the flow. He argues that working with nearby suppliers enhances quality. In addition, he says, Harley calls on parts makers to make frequent changes in the components they supply, and having suppliers in this country makes that practice easier.

"We are not buying off-the-shelf components just on price - not even a fastener," Mr. Levatich said, adding that before Harley looks for parts abroad, "we have to be certain that we can't get what we need in the United States."

Robert Whaley, the procurement chief at Haas Automation, is more philosophical. Some things that Haas needs for its machine tools, like high-grade electric motors, flat-screened computer panels and some specialty steels, are no longer made in America, so Mr. Whaley must buy them overseas, and the value added to make those components goes to the foreign suppliers. Other parts are off-the-shelf commodities, and Haas buys them from the lowest bidder that is qualified.

Machine tools shape metal into finished parts, using dozens of tools to cut, drill, grind and bend. Some of those tools - drill bits, for example - do not change from one year to the next, so it makes sense to buy them from suppliers, some located overseas. And that is what Haas does. The cast metal housing for a water pump falls into the same category, and these come from Asia.

"There has been a gradual increase in overseas content," Mr. Whaley said, "and further down the line, my suppliers in America are buying more offshore than they did 10 years ago."

Harley-Davidson

Patriotism, Yes,

And Union Pacts

Ask Mr. Ziemer or any of his executives - or the leaders of Harley's unions, which work hand-in-hand with the company - why they keep production in the United States, and the answer comes back almost as a chorus: the Harley motorcycle is an American icon, a way of life, the vehicle of choice for open-road individualism. Its customers would not tolerate production abroad.

"People are even aware of the parts, where they might come from," Mr. Ziemer said. "Not every single person, but a lot of our customers. And there are a lot of motorcycle magazines that write on this theme - hey, we're metal, we're not plastic; we're American made, we're not foreign made."

But put aside the American-centric explanation and more fundamental reasons emerge. Harley nearly failed 25 years ago, when it was caught up in a disastrous merger, endless labor strife and shoddily made motorcycles. A leveraged buyout in 1981 featured a group of Harley executives who wanted to save the company and eventually did. Mr. Ziemer, who still sometimes comes to work in the factory-worker clothing of his early days, rose in this milieu, becoming chief financial officer in 1991 and chief executive last April. The company now has more than $5 billion in annual revenue.

What he and the others did along the way was not always pretty. For openers, to survive, they axed 40 percent of the work force. But as motorcycle sales gradually revived - thanks in part to four years of tariff protection starting in 1983 - Harley's managers made an unusual deal with their unions, the International Association of Machinists and the Paper, Allied-Industrial, Chemical and Energy Workers. A partnership arrangement was written into the union contracts, requiring labor and management to agree on decisions affecting workers.

The unions, for example, had a say in the selection of a new assembly plant site in the mid-1990's. Two of the three members of the site selection committee were from the unions, and Kansas City, Mo., got the nod, rather than a lower-wage state with a right-to-work law (which wouldn't require workers to join or support a union). Assembly is done at the Kansas City plant and at an older facility in York, Pa., while engines and transmissions are made in Milwaukee, the headquarters city. The pay for all this is $17 to $33 an hour and rising at 2.5 percent a year. Still, with the partnership as a framework, labor costs are continuously whittled down as a condition for keeping production in America.

Management recently proposed going to Germany to buy the gears for a new transmission, rather than making them at the main plant here. The union wanted the work in-house and got it, but only after agreeing, as an offset, that future retirees would pay health insurance premiums beyond a certain cap. The company now pays the premiums without a cap.

"The unions have been forced to negotiate things we would have preferred not to negotiate," said Richard Krause, president of the Paper, Allied-Industrial, Chemical and Energy Workers local here, who was laid off himself for nearly five years in the early 1980's. "We've changed work rules, and we've reduced job classifications considerably. But we are involved in running the business, and that means accepting changes that keep the company competitive."

Management, on the other hand, cannot transfer "core production" overseas without union consent. Nor can it lay off workers unilaterally. Adhering to this restriction, the company retrained and reassigned more than 60 workers who were displaced when Harley went to robotic welding of motorcycle frames at the Kansas City plant. "Most companies would have put those people out," said Harold A. Scott, vice president for human resources.

But maintaining job security while shaving labor content keeps Harley on a difficult treadmill. Production has to rise continuously - and sales, too, of course - as automation reduces the labor required to make each motorcycle. Enough additional motorcycles must be manufactured to absorb workers who are idled by the automation, thus keeping the number of workers constant.

Production and sales have indeed risen every year for more than a decade, and the work force, now at just over 9,700, even grew by 80 last year. Production will rise again this year, Mr. Ziemer said, although not quite to the original target of 339,000 motorcycles. Two-thirds of the customers are Americans ages 35 to 54, and perhaps because the baby boomers are aging, this demographic group is no longer buying at quite the old pace.

That means selling more Harleys abroad, particularly in China, where the company has yet to sell its first motorcycle. While other companies often set up production in China, Harley will export motorcycles there, Mr. Ziemer says, once it has a distribution network in place.

"Folks are driving BMW's and Lexuses and Lamborghinis and everything else, and they are exported to China," he said, "so why not a Harley, which is a $20,000 product compared to those others that are much greater than that? There's just no pressure to make Harleys there."

Haas Automation

How Labor Costs

Are Kept in Check

For all its anonymity, Haas Automation is a significant player in a very important industry. Without machine tools, manufacturing would be primitive. Every piece of merchandise with metal in it requires a machine tool to shape that metal, and to accomplish this task, American manufacturers channel 70 percent of their spending on machine tools to the Japanese and the Europeans.

What makes Haas stand out in this relentlessly competitive field is the niche that the company dominates. Nine hundred machine tools a month are shipped from a vast, still-expanding off-white factory set among strawberry fields and new industrial parks about 60 miles up the coast from Los Angeles. Haas machine tools are smaller than most foreign models; when Mr. Haas was getting started in the 1980's, quotas discouraged the Japanese from entering the smaller machine-tool market. "The Japanese elected to sell the big, expensive stuff, which is what they still do today," he said.

His own factory floor uses Japanese machine tools costing $2 million or $3 million each, which is five times as much as the most expensive Haas product. The Japanese machines are large enough to run unattended overnight, cutting and grinding one chunk of metal after another into the pieces that become the framework of a Haas machine tool. That sort of automation has reduced labor to about 10 percent of production costs, Mr. Haas said, perhaps low enough to stave off the Chinese when they finally get into the midsize machine tool market as a direct competitor.

"We basically produce one machine tool a month per person," he explained. "If you were to go over to China, their labor cost is probably 50 people per machine tool per month." Even at $1 or $2 an hour, that adds up to considerably more than Haas's labor cost, given its wage scale of $10 to $25 an hour.

Haas cites other tactics that keep it competitive while rooted in America. Breaking with the practice of most machine tool manufacturers, Haas maintains at its own expense an inventory of parts at each of its distributors. Because machine tools are complex mechanisms, they can break down, no matter who makes them. And a new part, specially ordered, can take weeks to arrive. In Haas's case, a distributor delivers one quickly out of inventory. "It's a way to stay in business," Mr. Zierhut said.

Haas makes most of its machine-tool components in-house, giving the company an edge in quality, its executives say. And the cost is not that much more, Mr. Zierhut said. His department, for example, makes the computer system that controls the machine tools, assigning 45 people to the task. Others buy computer controls from suppliers, mainly the Japanese. "When we looked at a company doing that," Mr. Zierhut said, "they still had 30 people whose job it was to adopt the purchased controls to their product."

STILL, the pressure to go abroad for components does not let up. Each month, Haas buys 300 tons of iron castings that it grinds and shapes to build its machine tools. Until recently, all of these castings came from foundries in the United States, but as those foundries have gone out of business, Haas has started to buy castings in Canada. "We talked about, actually, having our own foundry, maybe in Mexico," Mr. Haas said.

Haas Automation sells its machine tools mostly within the United States, to small and midsize manufacturers engaged not in mass production of standardized products, which are vulnerable to offshoring, but in the making of specialty products that low-cost foreign competitors cannot easily match. But the mix is changing. Forty percent of the $550 million that the company expects in revenue this year is from exports, mostly to Europe, and Mr. Haas says he wants to raise that figure to 60 percent very soon. He expects much of the growth to come from building up exports to Asia - particularly to China, already the company's fastest-growing market.

Like Harley's executives, those at Haas count on rising sales to absorb workers idled by automation. Shrinking the work force, they say, would be a last resort. "I did one mass layoff in '98-'99 and it really harmed the culture," said Robert Murray, general manager of the Oxnard factory.

All Haas machine tools share a basic design, and that commonality helps to hold down production costs. More than 200 engineers and software experts, out of a total work force of nearly 1,100, configure the basic design into 100 models and variants to suit specific customers' needs. So much tinkering could not happen if production was shifted to China, Mr. Murray said. Keeping the whole process in the United States still leaves a profit margin of more than 5 percent of revenue, according to Haas executives.

Mr. Haas himself is not specific. As the sole owner of a company free of debt, he does not have to answer to Wall Street - a constraint that contributes to the pressure on other manufacturers to move production offshore in search of lower cost. He marches to a different tune.

"One of the secrets to manufacturing in the United States is that you have a lot of alternatives," he said. "If something gets to be too costly, there's always a way of substituting something else. If your labor costs get to be too expensive, then automate."

Hiwasse Manufacturing

A Reluctant Step

Into Mexico

J. Richard Derickson, chief executive of Hiwasse Manufacturing, a family-owned concern started by his father, feels the pressure to go overseas in a different way.

Mr. Derickson and his 70 employees in Jacksonville, Ark., manufacture steel strips used in control panels for stoves, refrigerators and other appliances. General Electric, Whirlpool, Maytag, Electrolux and other appliance makers buy thousands of them for $5 to $10 apiece; Hiwasse had revenue of $8.5 million last year and will have more this year, Mr. Derickson said.

G.E. is a big customer, and Hiwasse ships not only to its plants in this country but also to those in northern Mexico. No company in Mexico makes the panels, and now G.E. wants Mr. Derickson to put a factory near its Mexican operations. Mr. Derickson says he is setting up shop in Mexico, but reluctantly. Given the efficiencies of his Arkansas plant, he says, he cannot make the control panels less expensively in Mexico, even allowing for shipping costs and lower-wage Mexican labor.

"The happiest scenario," he said, "is a sister plant that allows us to work back and forth - maybe do part of the finishing in Arkansas and send the panels to Mexico for the rest of the work."

Given his druthers, Mr. Derickson would probably dispense with the sister plant and stay in America.

http://graphics8.nytimes.com/images/2005/09/04/business/04manu1.184.jpg
Harley-Davidson is among the manufacturers that have largely resisted globalization. Above, Naomi Weaver works on a bike at a plant in York, Pa.

http://graphics8.nytimes.com/images/2005/09/04/business/04manu2.184.jpg
Gene Haas is president of Haas Automation, which manufactures machine tools at a plant, top, in Oxnard, Calif.

http://graphics8.nytimes.com/images/2005/09/03/business/04manu3.184.jpg
Mike Gasperi, a supervisor, prepares a machine for a test cut.

[Thinker]

This was a Business Week article from back in the spring, written as an analysis of some industrial stats that had just come out a few days prior . . .

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http://www.businessweek.com/magazine/content/05_19/b3932051_mz011.htm

Business Week
MAY 9, 2005
The Midwest Isn't Feeling Motor City's Pain
Many factories are on a tear, with business they haven't seen since 2000

At first glance, America's industrial heartland is looking rusty again. General Motors Corp. (GM ) and its Motown rivals are slashing production, hurting suppliers and anyone else that depends on the car industry to pay the bills (page 84). Parts-maker Meridian Automotive Systems Inc. filed for bankruptcy protection on Apr. 26. Tower Automotive (TWR ) Tower's ticker is TWRAQ Inc., which declared Chapter 11 in February, will shut three plants by July, shedding 800 workers. Michigan's jobless rate is now the second-highest in the land, at 6.9%, with Ohio not far behind at 6.3%.

Fortunately, there's more to Midwest manufacturing than Detroit. Just a four-hour drive south on I-75 is General Electric Co.'s (GE ) booming aircraft-engine plant. GE's factory in Evendale, Ohio, is gearing up to build 800 engines for narrowbody passenger planes for Boeing Co. (BA ) and Airbus this year -- up from 700 last year. And more than 1,000 are already on order for 2006. With demand for new aircraft surging in Asia and Europe, GE Chairman and Chief Executive Jeffrey R. Immelt says the division has now called back all of its hourly employees laid off after September 11 -- and has hired 200 more engineers. Most striking, for the first time in 20 years the plant is recruiting entry-level machinists. Says Immelt: "Our factories are full."

Indeed, much of the region's factory sector is racing along at its best clip since the economy's previous peak, in 2000. The Federal Reserve Bank of Chicago reported on Apr. 27 that its Midwest manufacturing index rose a respectable 1.7% in March from a year earlier, led by a 5.8% jump in machinery output. "The glass isn't half empty," says William A. Strauss, senior economist at the Chicago Fed. "It's more like three-quarters full."

Midwestern manufacturers owe much of their fortune to a spending spree by industrial, farm, freight, and mining customers who are enjoying their best markets in years. While sales of automobiles and light trucks have been slipping, orders are pouring in for bigger vehicles -- from trucks and tractors to trains and airplanes.

BIG RIGS
As a result, industrial heavyweights are hiking their 2005 forecasts for sales and profits, increasing capital spending to boost capacity, raising prices, and adding to their job rolls.

Cummins Inc. is a shining example of that other Midwest. The Columbus (Ind.) company has three shifts working around the clock to build engines for long-haul trucks. North American sales of big rigs are on target to hit 285,000 this year -- up 73% from a recent low of 166,000 in '03 -- as freight companies replace old trucks and add to their fleets to handle the growing flow of goods from the nation's ports and factories. With more growth expected in 2006, Cummins is investing $7 million on new equipment to expand engine output and is hiring more workers. "We are at capacity," says CEO Theodore M. Solso.

Cummins has a lot of company. Caterpillar Inc. (CAT ) recently bumped up its 2005 outlook, saying that profits will climb at least 35%, to a record $2.6 billion, thanks to increased sales of heavy-duty engines and earthmoving machines. Union Pacific Corp. (UPN ) is spending $700 million for 315 locomotives and 4,000 railcars, vs. $526 million in 2004. Electro-Motive Diesel Inc. in LaGrange, Ill., which is assembling 115 of those engines, has a backlog that will keep its factory workers busy well into 2006. At Deere & Co., in the meantime, employees in its Waterloo, Iowa, complex are logging overtime hours to meet the demand for tractors.

Of course, the heartland would be better off if the Big Three auto makers were expanding production, as the Japanese and European transplants are doing in the South. Nationally, the automobile sector grew 3.2% in March from a year earlier, while sinking 1.9% in the Midwest. Still, says Alexander M. Cutler, CEO of industrial-goods maker Eaton Corp. in Cleveland: "The industrial side of the economy is quite robust." Singing the Rust Belt blues may be appropriate for Detroit. But all around the rest of the Midwest, the tune they're singing is far more upbeat.

[Thinker]

An article from mid-summer of last year. Even spending on building new and expanded factories is rising . . .

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http://www.mailtribune.com/archive/2005/0705/biz/stories/02biz.htm

July 5, 2005
Manufacturers invest in growth
Construction spending in the manufacturing sector has risen $28 billion in the past year
By JESSICA E. VASCELLARO
The Wall Street Journal

American manufacturers are boosting spending on new plants at the fastest pace in several years, an indication that the sector is healthy enough to begin adding new capacity.

During the 12-month period that ended in May, spending on construction in the manufacturing sector rose $28.1 billion, or a seasonally adjusted annual rate of 24.3 percent. It was the largest increase for any category of construction, according to a Census Bureau report released Friday.

While spending on manufacturing construction is still far below the $40 billion annual record set in the mid-1990s, the recent spurt has returned construction spending in manufacturing back above levels last seen in 2001. The Census Bureau report showed that construction spending over all categories, including manufacturing, declined in May to a seasonally adjusted annual rate of $1.1 trillion, 0.9 percent below April. But economists discounted the monthly declines, which they said were distorted by quirks in the weather and seasonal factors. The year-over-year figures, they said, are more telling.

The construction rebound "is a hopeful sign," says Donald A. Norman, an economist at the Manufacturers Alliance/MAPI, a public-policy group in Arlington, Va. "There is a lot of investment in companies abroad, but we are still alive and kicking" here in the U.S. David Huether, chief economist at the National Association of Manufacturers, says the spending on construction means "the recovery in manufacturing has gone on long enough for companies to start expanding capacity." He says the trend also means that manufacturers are "pretty confident that the economic recovery" is on track.

The list of companies that are building covers a wide range of industries. In Lima, Ohio, Procter & Gamble Co., is undergoing a multimillion-dollar expansion of its laundry-detergent factory, adding new assembly lines and hundreds of new jobs. Intel Corp. has begun a $2 billion project to gut and rebuild one of its Phoenix, Ariz., plants to accommodate new chip-making technology. In Empire, Colo., Phelps Dodge Corp. is investing more than $20 million to increase the capacity of a molybdenum mine, a chemical used in the processing of steel.

Growth in spending on factory construction comes as manufacturing is picking up momentum. The Institute for Supply Management, which polls purchasing agents at more than 400 industrial companies, said on Friday that its index of manufacturing activity climbed to 53.8 in June from 51.4 in May.

The latest reading was higher than economists had expected and represented a turn for the index, which had been declining in recent months. A reading in the index above 50 indicates that the manufacturing sector is expanding; a reading below 50 signals contraction.

[Thinker]

An analysis from The Economist last fall, continuing the explanation of why there are fewer manufacturing jobs even with rising output . . .

http://www.economist.com/opinion/displayStory.cfm?story_id=4458528

Sep 29th 2005
The great jobs switch
The fall in manufacturing employment in developed economies is a sign of economic progress, not decline

THAT employment in manufacturing, once the engine of growth, is in a long, slow decline in the rich world is a familiar notion. That it is on its way to being virtually wiped out is not. Yet calculations by The Economist suggest that manufacturing now accounts for less than 10% of total jobs in America. Other rich countries are moving in that direction, too, with Britain close behind America, followed by France and Japan, with Germany and Italy lagging behind.

Shrinking employment in any sector sounds like bad news. It isn't. Manufacturing jobs disappear because economies are healthy, not sick.

The decline of manufacturing in rich countries is a more complex story than the piles of Chinese-made goods in shops suggest. Manufacturing output continues to expand in most developed countries—in America, by almost 4% a year on average since 1991. Despite the rise in Chinese exports, America is still the world's biggest manufacturer, producing about twice as much, measured by value, as China.

The continued growth in manufacturing output shows that the fall in jobs has not been caused by mass substitution of Chinese goods for locally made ones. It has happened because rich-world companies have replaced workers with new technology to boost productivity and shifted production from labour-intensive products such as textiles to higher-tech, higher value-added, sectors such as pharmaceuticals. Within firms, low-skilled jobs have moved offshore. Higher-value R&D, design and marketing have stayed at home.

All that is good. Faster productivity growth means higher average incomes. Low rates of unemployment in the countries which have shifted furthest away from manufacturing suggest that most laid-off workers have found new jobs. And consumers have benefited from cheap Chinese imports.

Yet there is a residual belief that making things you can drop on your toe is superior to working in accounting or hairdressing. Manufacturing jobs, it is often said, are better than the Mcjobs typical in the service sector. Yet working conditions in services are often pleasanter and safer than on an assembly line, and average wages in the fastest-growing sectors, such as finance, professional and business services, education and health, are higher than in manufacturing.

A second worry is that services are harder to export, so if developed economies make fewer goods, how will they pay for imports? But rich countries already increasingly pay their way in the world by exporting services. America has a huge trade deficit not because it is not exporting enough, but because American consumers are spending too much.

A new concern is that it is no longer just dirty blue-collar jobs that are being sucked offshore. Poor countries now have easier access to first-world technology. Combined with low wages, it is argued, they can make everything—including high-tech goods—more cheaply. But that's only partly true. China's comparative advantage is in labour-intensive industries; and a basic principle of economics, proven time and again, is that even if a country can make everything more cheaply, it will still gain from specialising in goods in which it has a comparative advantage. Developed economies' comparative advantage is in knowledge-intensive activities, because they have so much skilled labour. For years to come, China will be more likely to assemble the best computers than to design them.

Employment in rich countries will have to shift towards higher skilled jobs to maintain economic growth. Countries that prevent this shift taking place risk being left behind. Rather than block it, governments need to try to ameliorate the pains which change inflicts by, for example, retraining or temporarily helping those workers who lose their jobs.

People always resist change, yet sustained growth relies on a continuous shift in resources to more efficient use. In 1820, for example, 70% of American workers were in agriculture; today 2% are. If all those workers had remained tilling the land, America would now be a lot poorer.

[Thinker]

This was a Reuters analysis done last spring after some other manufacturing stats had come out. Much of the industrial expansion, and the recovery at large, is actually being fueled by growth in China and elsewhere in Asia. This article is about corporate profits rather than output, but it does show you who's doing well - and why.

Probably one reason why the jobs haven't recovered as much as other measures of the economy is because the manufacture of all these capital goods is more, well, capital-intensive than labor-intensive. In other words, United Technologies doesn't need to double its employment to double its output of elevators: They probably only need to increase employment by a very small amount to do so, if at all.

----------------------------------------------------------------------------

http://news.yahoo.com/news?tmpl=story&u=/nm/20050420/bs_nm/manufacturing_earns_dc

US Manufacturing Picks Up on Asian Demand
Wednesday, April 20, 2005
Business - Reuters

By Edward Tobin

NEW YORK (Reuters) - Major U.S. manufacturers posted sharply higher profits on Wednesday, fueled by robust demand in Asia and elsewhere for everything from heavy machinery to elevators and a resurgent market for aerospace parts and services.

United Technologies Corp. (NYSE:UTX - news) and Honeywell International Inc. (NYSE:HON - news), along with construction and mining machinery maker Caterpillar Inc. (NYSE:CAT - news), also issued strong profit forecasts for the year, a sign that the manufacturing sector is firing on all cylinders

"They're lean; they're mean and we still think they have plenty of operating leverage," said Richard Steinberg, president of Steinberg Global Asset Management, referring to Wednesday's manufacturing earnings trifecta.

The results provided relief for the U.S. stock market, which has been buffeted by weak global sales from 3M Co. (NYSE:MMM - news) and weaker-than-expected earnings from IBM (NYSE:IBM - news). The Dow Jones industrial average was up slightly in early afternoon trading.

China, which reported earlier Wednesday that its economy expanded by 9.5 percent in the year through the first quarter, and its thirst for construction and mining equipment is a key driver for the U.S. industrial sector.

At the same time, a resurgent aerospace market with new orders for planes is fueling growth at Honeywell, the world's largest maker of cockpit electronics, and United Technologies' engines, parts and services business. A relatively weak dollar, which makes U.S. products cheaper overseas, has buoyed demand.

"The sector remains strong on a couple of fronts. The top line demand remains strong and they're able to flow those revenues through to earnings," said Tim Ghriskey, chief investment officer at Solaris Asset Management.

Honeywell Chief Executive David Cote, echoed that sentiment on a conference call with analysts earlier in the day.

"Things feel pretty darn good right now and I'm excited by how we started the year," Cote said, after the company reported a 22 percent rise in first-quarter profit to $359 million, or 42 cents per share -- two cents higher than Wall Street expected.

AEROSPACE AND CONSTRUCTION

Honeywell, with products ranging from anti-freeze to thermostats, said sales rose 4.4 percent to $6.45 billion on strong results at its aerospace business as well as robust sales of in Europe and Asia for turbo chargers, which improve the fuel efficiency of diesel engines.

Honeywell continues to thrive in its mainstay aerospace business, thanks to a rebound in passenger flying miles, orders for new planes and growth in "aftermarket" demand for parts and services.

Analysts expect aerospace will continue to do well through the year and see growth at its turbo charger business. Earnings at its auto-parts business has cashed in on strong European demand for fuel-efficient turbo chargers used in diesel car engines.

Industrial and aerospace conglomerate United Technologies Corp. (UTX.N) said quarterly earnings jumped 18 percent to $651 million, or $1.28 a share -- three cents higher than expected.

The company posted a better-than-expected rise in quarterly revenue to $9.4 billion and also raised its full-year earnings forecast to a range by about a nickel.

Profit and sales rose at all six of United Technologies' business units, with Otis, Pratt & Whitney jet engines, Sikorsky helicopters and UTC Fire & Security delivering profit growth of more than 10 percent.

"This is an exceptional start to 2005 and gives us confidence to raise our full-year earnings outlook accordingly," Chief Executive George David said in a statement.

Demand for equipment for mining and construction projects around the world buoyed results at Caterpillar, which posted a 38 percent rise in quarterly income to $581 million, or $1.63 a share.

The strong results, and higher profit outlook, on the back of strong sales volume and price increases come in the face of surging costs for steel and other raw materials needed to make its construction and earth moving machinery.

"It looks like they're really gaining some traction in their battle against rising raw material costs and that's dropping to the bottom line," said Scott Burns, an analyst with Morningstar. "It's pretty astonishing, the volumes are up just about everywhere."

Caterpillar said it expects mining companies to continue adding capacity, and sees global demand for energy, large infrastructure projects, commercial construction and housing continuing to spark demand for Caterpillar's equipment.

The strong showing from the sector shows the economy is strong globally and these companies have maintained some pricing power, according to David Joy, vice president of capital markets strategy for American Express Financial Advisors in Minneapolis.

"While their cost inputs have been rising, they have been able to pass them along and maintain their margins. That seems to bode well for the back-end of the economy."

Shares of Caterpillar rose $4.42 to $89.37 on Wednesday afternoon on the New York Stock Exchange, and boosted rivals such as Terex Corp. (NYSE:TEX - news) , JLG Industries (NYSE:JLG - news) and CNH Global (NYSE:CNH - news). United Technologies shares were up $2.15 to $100.42 Wednesday while shares of Honeywell were off 37 cents at $36.13.

[Thinker]

And some news just out today. Durable goods orders to US factories rose 8.2% this year to an all-time high of $2.51 trillion.

http://news.yahoo.com/s/ap/20060126/ap_on_bi_go_ec_fi/economy;_ylt=AmemDodu5HjUVOBitXwREnOyBhIF;_ylu=X3oDMTA5aHJvMDdwBHNlYwN5bmNhdA--

http://msnbcmedia.msn.com/i/msnbc/Components/Art/BUSINESS/060126/AP_DURABLE_GOODSX.jpg

Orders for Big-Ticket Factory Goods Rise
By MARTIN CRUTSINGER, AP Economics Writer 2 hours, 30 minutes ago

WASHINGTON - Orders to American factories for big-ticket goods posted a solid gain in December, propelled by strong demand for autos and machinery, as manufacturers closed out a record year.

The Commerce Department reported Thursday that orders for durable goods rose by 1.3 percent in December, the third straight monthly increase, to a monthly record of $228.1 billion.

For all of 2005, orders increased by 8.2 percent to an all-time high of $2.51 trillion. Orders for durable goods had risen by 10 percent in 2004 and 4.2 percent in 2003 after declines in 2002 and 2001, when the country was in recession.

Analysts predicted the strength of recent months would continue into 2006 as businesses increase investment spending to expand and modernize.

"The manufacturing sector ended the year with some decent momentum that should carry it through the first part of the year," said Joel Naroff, chief economist at Naroff Economic Advisors.

The better-than-expected increase in durable goods orders for December helped lift spirits on Wall Street on a day when General Motors Corp. reported it lost $8.6 billion for all of 2005, its worst annual loss since 1992.

The Dow Jones industrial average rose 99.73 points to close at 10,809.47.

With an expected slowing in consumer spending and housing sales this year, analysts said a pickup in business investment will be important.

"For the economy to stay on track, businesses must step up to the plate and increase capital spending," said Patrick Newport, an economist at Global Insight, a private forecasting firm.

He said the December performance was encouraging because it showed that non-defense capital spending excluding aircraft shot up by 3.5 percent. Much of that strength came from a sharp 6.5 percent rise in demand for machinery.

Machine orders have now been up for five straight months, the longest string in two years.

"This should be welcome news for California, Texas and Illinois, which together make up fully a quarter of domestic machinery production," said David Huether, chief economist for the National Association of Manufacturers.

In other economic news, the Labor Department reported that the number of people filing new claims for unemployment benefits rose to 283,000. That was up 11,000 from the previous week but below the increase economists expected.

Showing the underlying strength in the labor market, the four-week moving average for claims dropped to 288,750, the lowest level in 5 1/2 years.

Ian Shepherdson, chief U.S. economist at High Frequency Economics, said if the weekly claims applications stay at this low level, it would mean monthly job gains approaching 300,000 in coming months, well above the increase of 108,000 new jobs in December.

The 1.3 percent increase in total orders for durable goods, items expected to last at least three years, followed even stronger gains of 5.4 percent in November, a month when demand for commercial aircraft soared, and 3.1 percent in October.

In December, the strength was led by the 6.5 percent jump in demand for machinery and a solid gain of 1.9 percent for transportation equipment. Demand for new cars and trucks shot up by 6.6 percent following declines in October and September as automakers struggled to trim an oversupply of unsold cars.

Orders for commercial aircraft, a very volatile category, fell by 8.1 percent in December, but that decline followed huge gains of 139.3 percent in November and 51.6 percent in October. Orders for military aircraft rose by 30.8 percent last month.

Excluding transportation, orders rose by 0.9 percent, compared with a 0.6 percent gain in November. It was the best showing in this category since a 5.1 percent jump last August.

[Thinker]

And some hard, cold stats on an important manufacturing sector . . .

http://www.bts.gov/publications/national_transportation_statistics/2005/html/table_01_15.html

US motor vehicle production, 1960-2003:
1960 - 7,905 thousand vehicles
1965 - 11,120
1970 - 8,284
1975 - 8,987
1980 - 8,010
1985 - 11,653
1990 - 9,783
1991 - 8,811
1992 - 9,702
1993 - 10,898
1994 - 12,263
1995 - 11,985
1996 - 11,833
1997 - 12,119
1998 - 12,003
1999 - 13,025
2000 - 12,774
2001 - 11,425
2002 - 12,280
2003 - 12,087
2004 - 11,960

[A. Radek]

LOL this is just spam. Some dusted off old articles from WSJ, BW, etc. Nothing to see here.

[A. Radek]

Hilarious stuff; 8 million cars in 1960, 2004 11 million ... not much of an 'increase' when adjusted for population growth and exports, is it ...

[Thinker]

LOL this is just spam. Some dusted off old articles from WSJ, BW, etc. Nothing to see here.
If you don't want to read these articles, you will never learn anything, and all your proclamations about dying American manufacturing will be made in ignorance.

[Thinker]

Hilarious stuff; 8 million cars in 1960, 2004 11 million ... not much of an 'increase' when adjusted for population growth and exports, is it ...
You also have to remember that cars are better-made these days and last longer. People don't replace their cars every 3 years as they used to - instead they replace them every 5 years or so. This decreases overall demand.

There's no doubt that imports have taken up a lot of what would otherwise be American-based production. But if this is what the consumer wants, this is what they'll get.

[Fade the Butcher]

Hilarious stuff; 8 million cars in 1960, 2004 11 million ... not much of an 'increase' when adjusted for population growth and exports, is it ...It looks like the profile of a stagnating and declining industry to me.

[Thinker]

Here's some stats on manufacturing output for a variety of industries in the US:
http://www.nam.org/s_nam/sec.asp?CID=202327&DID=234951

Some samples . . .

Cars and light trucks
http://www.nam.org/Docs/Images/policies/usip420_cars.gif

Machinery
http://www.nam.org/docs/images/policies/usip250_mach.gif

Semiconductors
http://www.nam.org/Docs/Images/policies/usip355_semi.gif

Heavy trucks
http://www.nam.org/Docs/Images/policies/usip430_truck.gif

[Thinker]

A few more . . .

Apparel has certainly gone down. But then it *is* a labor-intensive product
http://www.nam.org/Docs/Images/policies/usip540_app.gif

Textile products
http://www.nam.org/Docs/Images/policies/usip530_txtp.gif

Chemicals
http://www.nam.org/Docs/Images/policies/usip590_chem.gif

Pharmeceuticals
http://www.nam.org/Docs/Images/policies/usip610_phar.gif

[Thinker]

A few more, just for the heck of it . . .

Fabricated metals
http://www.nam.org/Docs/Images/Policies/usip200_fabm.gif

Electrical equipment and appliances
http://www.nam.org/Docs/Images/policies/usip370_elect.gif

Plastic and rubber products
http://www.nam.org/Docs/Images/policies/usip650_plas.gif

[Dan Dare]

I was wondering when and where Thinker would resurface with his "Non-looting of America" schtick.

If memory serves that became the longest single thread on MSF and only Thinker was allowed to post in it!