President Obama Champions Manufacturing In The SOTU
Jan25

President Obama Champions Manufacturing In The SOTU

During last night’s State of the Union address, the president spent roughly the first quarter of the speech talking about manufacturing. Does Obama have the right solutions? Time will tell. (It is an election year, so little will get done anyway.) But the Administration has certainly identified the right problem: the need to turn around manufacturing in the U.S. The speech began with the auto companies: On the day I took office, our auto industry was on the verge of collapse.  Some even said we should let it die.  With a million jobs at stake, I refused to let that happen.  In exchange for help, we demanded responsibility.  We got workers and automakers to settle their differences.  We got the industry to retool and restructure.  Today, General Motors is back on top as the world’s number-one automaker.  (Applause.)  Chrysler has grown faster in the U.S. than any major car company.  Ford is investing billions in U.S. plants and factories.  And together, the entire industry added nearly 160,000 jobs. We bet on American workers.  We bet on American ingenuity.  And tonight, the American auto industry is back.  (Applause.) What’s happening in Detroit can happen in other industries.  It can happen in Cleveland and Pittsburgh and Raleigh.  We can’t bring every job back that’s left our shore.  But right now, it’s getting more expensive to do business in places like China.  Meanwhile, America is more productive.  A few weeks ago, the CEO of Master Lock told me that it now makes business sense for him to bring jobs back home.  (Applause.)  Today, for the first time in 15 years, Master Lock’s unionized plant in Milwaukee is running at full capacity.  (Applause.) Let’s make one thing clear: “bankruptcy” isn’t the same thing as “going out of business”. The public seems to conflate those two things, perhaps for understandable reasons. Usually the 11 o’clock news stories about bankruptcy filings are discussing local retailers. Retailers are usually laden with a lot of working capital—namely inventory—and not a lot of fixed assets (Usually some readily sellable real estate and store infrastructure). Such retailers are easily liquidated and simply disappear. Big manufacturers have a lot of equipment that isn’t as easily transferrable to other firms. If there had been a normal bankruptcy procedure, GM and Chrysler, could very well have emerged as successful car companies. LyondellBasell went through bankruptcy around the same time. It emerged, and it is now making manufacturing investments again. However, it is also likely that the government-controlled procedure might have allowed for a more orderly process, especially in regards to a labor-management agreement. And the government likely offered the financing on more...

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Dow’s Liveris Calls For Manufacturing Renewal
Jun21

Dow’s Liveris Calls For Manufacturing Renewal

Dow CEO Andrew N. Liveris has an Op-Ed out in the USA Today on a topic that is dear to my heart: reversing the decline in the American manufacturing sector. This is a theme that Liveris often brings up in his speeches. “Manufacturing employs nearly 13 million people in the U.S. and 6 million in related fields. No other sector performs more R&D, drives more innovation, exports as much, or contributes more to our nation's economy,” he wrote in the Op-Ed. I couldn’t agree more. Whenever I see a factory razed and replaced with a Target store, I think of consumers’ money escaping the local economy and stopping briefly in Minneapolis en route to China. I could never accept the view that an economy based on consumerism and services is as strong as one based on manufacturing and production. Luckily, people seem to care more about manufacturing now than they did a decade ago. “Without manufacturers, who’s going to use all the services?” I overheard someone say last month at Pittsburgh Chemical Day. At that event, Greg Babe, CEO of Bayer Corp., had a message similar to Liveris’ about American manufacturing in his keynote address. My favorite of Liveris’ lines was this: “We should look beyond today's recession and recognize that stimulus should favor investment over transfer payments.” Liveris’ recommendations weren’t earth shattering, we have heard them all before. America needs better infrastructure, more R&D, better science and math education, a level playing field in international trade, an alternative energy strategy, fewer lawsuits, and lower corporate taxes. But these are points good enough to mention another time, especially with the gravitas of the CEO of the Dow Chemical Company behind them. I have one small amplification. Will someone please add economics to the often repeated litany of subjects in which American students need to be better versed? If Americans had a better understanding of economics, perhaps fewer of them would blow all their discretionary income on interest payments at Rent-A-Center, and instead, have the money to invest in American companies or even start their own businesses. Economics, on the other hand, is pretty popular among college students. On the energy and R&D front, Liveris’ example of smart R&D spending was his Dow-Kokam battery joint venture, which got $161 million from DOE to build a plant in Michigan. Unless consumers actually buy hybrid and electric cars—in large numbers and at a profit to automakers--such government largess will eventually be judged as just another transfer payment. On the other hand, no one will buy cars that don’t exist because there’s no local factory to build the batteries. Government money might be...

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