Listening to the president give his wish list for things to fix the country in his State of the Union address, I was reminded of what I asked from Santa this past Christmas: the return of one factory.
Ideally, it would be one of the General Electric Co. (NYSE: GE) plants, like the headquarters of its 115-year-old X-ray business in Waukesha, Wis., which someone decided to move to Beijing last July, costing us 120 jobs. Coincidentally, just a few months before that move, GE CEO Jeff Immelt was appointed the head of Barack Obama's highly touted 26-member Jobs and Competitveness Council.
It seemed like a lump of coal for Waukesha from the new job czar. As one observer noted, perhaps the president forgot to tell him in which country he was supposed to be creating jobs.
But I'm not choosy. It doesn't have to be the plant from Waukesha. Any manufacturing facility would be OK.
Almost everybody agrees that the decline of manufacturing has hurt the country. It's been especially painful in my neck of the woods. There were 14,000 family-owned factories in Newark, N.J., in 1951. By the height of the greener pastures movement (circa 1995), there was only one left. It made specialty mattresses for Bloomingdale's.
My goal is to make it two. And this is more than just a sugar plum fantasy. I have a plan.
For argument's sake, let's assume there might be one disgruntled factory owner abroad -- say, the owner of an American factory whose management succumbed to the allure of 36-cent-an-hour labor costs. The coolie labor age is over in China. Workers suffered for 25 years. Now they are demanding a living wage. There is a lot of inflation. Workers will want a 150% wage increase. They want to live a normal life, sharing in real prosperity -- not just for the guys on top, the commissars driving around in Mercedes. Soon they'll want real unions. The Chinese government will be lucky to avoid being overthrown by the workers again.
My plan is to appeal to expatriate American factory owners where they are most vulnerable -- by using patriotism. Uncle Sam needs them!
Yes, they were the equivalent of corporate terrorists destroying the towns they deserted. But it was all done for a good cause: increasing profits and shareholder dividends. Or so they claimed. Even though it's said that you can't go home again, the administration should say, "Yes, you can, if the price is right."
First of all, declare amnesty for all those rats who left the sinking ship. So what if they brought the country to its knees by diminishing the manufacturing base? Let bygones be bygones.
To make the repatriation offer more attractive, as Obama suggested in his State of the Union message, they should be welcomed back with more than open arms. Let's give them a treasure trove of special compensatory benefits, unfair tax breaks, land grants, all-expenses-paid relocation, and other reverse migration offers they can't refuse.
But the most important element in my plan is treating the returning factory owners as industrial war heroes. Give them ticker tape parades downtown -- the same superstar treatment tendered to World Series and Super Bowl immortals. The sight of CEOs and directors sitting in their convertibles waving to cheering crowds should warm the cockles of the coldest factory management PR people.
Imagine a Medal of Honor struck for the factory owners with the courage to return home. Statues of Industrial Revolutionary War heroes in the town square.
Well, I can dream. Isn't that what Santa Claus and the State of the Union are all about?
While there has been some resurgence of manufacturing, it's going to take a long time for reshoring to gain traction. But maybe as the economy of foreign production dips, then making things here (and creatiing the jobs that go with them) will climb.
What's interesting is that in the automobile industry, I believe that foreign automotive comanies -- driven by the likes of Nissan, BMW, Honda, and Toyota -- have created more jobs on American soil than U.S. Companies!
Also, somebody credible told me (haven't been able to fact check it yet) that there are more American-made parts in a Japanese car than there are in an American-made car.
What's the problem here? A lot of the problem is the bloated bureaucracy, pension liabilities, and union problems associated with the Big U.S. automakers.
The expectations of most Union workers(both Private Sector and Government) are highly unrealistic especially in todays highly competitive and recessionary environment.
Most of them behave as if they have their heads stuck in the sand and continue to insist on not making any changes in their compensation & pension plans.
I was reading an interesting article about Pension liabilities and expectations.Most Pensions have built-in portfolio expectation of annual rises of 7% + per annum.
However,Stocks,Property and Bonds(typical Pension fund portfolio) have failed to return that much (on an annual basis)for over a decade now in America.
So,plan liabilities & deficits have increased sharply,very soon.
Most Pension plan managers who were reared up during the Era of the Great Moderation(1983-2007) are completely unprepared for this period of volatility we are seeing since 2007 onwards.
But who is going to explain this to the Unions who still expect to retire with a Full Pension for life at 52???
We are already seeing some signs of that in Good ol' California.
The Unions who brought Obama to power are now pushing for a Trade War with China;just reminds me of Smoot-Hawley and how that turned out...
Wish Government just got out of the way and let business go about doing what it does best-Creating Jobs.Its too much to expect I know,but we can all Dream,Can't we?
Pensions are always a huge issue and I dont know why companies (and governments) make the same mistake over and over of overestimating the pension returns. Many are still in the range of 6-8% which is somewhat ridiculous considering the 10-year treasury bond is trading under 2%.
One reason a lot of manufacturing jobs won't be coming back anytime soon is because we don't train our workforce for those jobs anymore. In fact, in many places, we're taking folks who were trained for those jobs, telling them said jobs aren't coming back, and training them for something else. Someone I know in upstate New York worked at a tool and die shop until said shop packed up and moved offshore. This person participated in a program that retrained workers for other jobs. Today, he's a nurse at a psychiatric hospital.
Further to your point... from Marc Faber's recent newsletter:
[[Following my ruminations about education in last month's report- I received an email from Appi Borgen, one of my readers who resides in the Netherlands. He writes: "I just want to give you a short picture about education and the labor market in the Netherlands. They are similar to what you described. I run a steelconstruction company, doing reasonably well, but we cannot find workers. The work we do is not very high-tech, but it needs skill (welding) and our workers need to know how to read architectural plans and they require the necessary experience.
Since the government decided 15 years ago that we were to become a knowledge-based economy, most education that had to do with manual labor was scrapped. Thanks God we can still find people from ex-communist countries, like Slovenia, Hungary etc. But even these people are getting older and their children learn other stuff. How we can still build, carry out maintenance work and renovate old structures in the future? No idea."]]
President Obama has now given 3 state of the union addresses.
When compared with addresses given by his predecessors, all three score near the lowest end on a standard test of readability. This continues a multi-decade decline - recent SOTU addresses are at about the 8th grade reading level. In the 40's and 50's, they were commonly at the 11th or 12th grade.
Interesting article in the New York Times last Sunday about why Apple has moved all of its factories to China.
It's not just pensions and labor unions, though those are BIG factors. It's that the United States worker isn't willing to live in a dorm, eat tea and biscuits, and get up in the middle of the night to work an emergency 12-hour shift for minimum wage.
Unemployment is devastating for vast numbers of people. But a percentage of the unemployed are too stubborn or narcissistic to work for any wage, even minimum wage. I don't get it, because I feel like no job is beneath you in a time of crisis.
I'd live in a dorm to survive @street smart
We can be roommates in the Chinese dorm, @Noreen, because I would roll up my sleeves in time of need or trouble without hesitation as well.
But come to think of it...I HAVE done so...and knowing your prodigious work ethic, I'll bet you have, too. So, that's the irony: The very fact that we never shied from hard or unglamourous work is EXACTLY what has given us other options!
Not just prodigious work ethic but also Flexibility and adaptability to new/changing market conditions.
The more we are willing to be flexible with respect to what we do and how we utilize our skills the better our chances of not just surviving but thriving in todays fast-changing world.
The cushy jobs of the Good ol' days where one was guaranteed job security(in one single job) & perks & promotions are history.
Its just that most of the over 40-45 crowd have failed to realise and accept this new reality.
Change is the only constant of life.Be prepared for change coz its inevitable.
Marvin, I love this column. You nailed it. America is still an industrial giant, although asleep. I challeng any nation to build product up to a standard and down to a price that America can achieve. Heck. Remember the Rolls-Royce Merlin aircraft engne that powwered the P-51 Mustang all the way to Poland from England? Packard build 55.000 of them in mass production. Rolls Royce built 5.500 by hand. The pilots could tell which plane had the Packard motor. The Packard had no oil puddle beneath it. You should send this to Jamie. -Ted
Marvin- one way to help is for Congress to pass a bill to allow a one time lower tax rate on multi-national companies who repatriate overseas earnings. Many teck companies have substantial amounts overseas that get reinvested there because it is too costly to bring the funds back to the US. Many fo these funds would be used to build and staff new facilities here because it would make sense.
Immelt has always seemed too close to the Obama White House. Even Neutron Jack Welch maintained at least the appearance of being an independent Captain of Industry.
Look on the bright side,you are me know about it-So Lets spread the word an explain the thought-process and philosophy behind the Jobs Czar to others around us.
GE, officially, hedges its bets when it come to elected officials.
Here are some numbers for you. In the last election, Immelt personally donated to the Democratic Party of Delaware, 10,000; Chris Dodd (D), $2,300 and Hillary Clinton (D), 2,300. He also gave $2,300 each to Mitch McConnell (R), John McCain (R), Rudy Giuliani (R), Mitt Romney (R) and the National Republican Congressional Cmte.
However, GE corp and all its employees gave a total of $6.03M to Barack Obama and his campaign -- and the identical amount to John McCain and his Campaign.
I was speaking more from the viewpoint of NBC/CNBC(GEs flagship channels)-They are highly biased towards Democrat viewpoints just like Fox is biased towards Republican Viewpoints.
Well I'm sure we have a long way to go to revive manufacturing in the US. However, the picture is slightly brighter, industry experts claim. Economic activity in the manufacturing sector expanded in January for the 30th consecutive month, and the overall economy grew for the 32nd consecutive month, say the nation's supply executives in the latest Manufacturing ISM Report On Business that was released this week.
Of the 18 manufacturing industries, nine are reporting growth in January, in the following order: Apparel, Leather & Allied Products; Petroleum & Coal Products; Machinery; Computer & Electronic Products; Transportation Equipment; Miscellaneous Manufacturing; Fabricated Metal Products; Paper Products; and Primary Metals. The seven industries reporting contraction in January — listed in order — are: Plastics & Rubber Products; Furniture & Related Products; Wood Products; Chemical Products; Food, Beverage & Tobacco Products; Electrical Equipment, Appliances & Components; and Textile Mills.
I have three questions for you regarding these numbers.
1)How much of thise growth is going to just inventory stuffing aka Channel stuffing at GM?
2)Where is this growth coming from?
Europe is in a recession,China,India(& rest of Asia is slowing down),Latin America is also seeing a slowdown(primarily China related),Australia is seeing a sharp slowdown(Currency related) and America continues to have double Digit unemployment (consumer is in the tank-unless attracted by humungous discounts)and most State& City level governments in America are retrenching.
The data is from the Institute for Supply Management, a trade group, based on data compiled from purchasing and supply executives nationwide. However, that said, I'm sure the responses are influenced by US Dept of Commerce data. So do I trust it? I trust it more for the trends it shows than the precise results.
Where is the growth coming from? The nine industries reporting growth in new export orders in January — listed in order — are: Apparel, Leather & Allied Products; Paper Products; Printing & Related Support Activities; Nonmetallic Mineral Products; Furniture & Related Products; Fabricated Metal Products; Computer & Electronic Products; Machinery; and Transportation Equipment. The survey doesn't indicate where the exports are going,
The seven industries reporting increased order backlogs in January — listed in order — are: Apparel, Leather & Allied Products; Printing & Related Support Activities; Petroleum & Coal Products; Transportation Equipment; Computer & Electronic Products; Miscellaneous Manufacturing; and Machinery.
My speculation is that some manufacturing growth is related to the steel and other materials required by the voracious appetites of the energy companies involved in domestic shale oil and gas exploration. In fact, I hear that a $650 million mill is coming to life again in Youngstown -- heart of the former US steel industry-- because of natural-gas drilling boom. How long the boom lasts depends largely on US policies involving fracking and related energy E&P.
Yes the Shale Gas boom makes the most sense(as a Driver for Growth)- Problem there is with Natural Gas prices continuing to make fresh lows everyday,what is the need/rationale to expand production aka how can we expect this boom to continue??
A lot of Shale Gas players like Apache are considering cutting production(because Prices are below economically viable levels currently).
For sure,it would help these producers a lot if we had good LNG Export terminals(on both coasts) and better infrastructure for Natural Gas powered autos all over America.
But these things take time.
In the mean time,expect a slight slowdown in the Shale Gas boom,atleast while Natural Gas prices stay so low.
I know a lot of those fields also yield a lot of Crude Oil ,Condensate and NGLs which are way more valuable economically-but it all comes down to Cost Benefit Analysis today.
ANd on that metric alone,a lot of fields will be shut very soon.
North Dakota is an interesting because it's an oil play with abundant associated natural gas (as well as a few strictly gas-producing horizons). That associated gas is generating both interest and job-producing projects, including construction of gathering facilities, processing facilities, and pipelines, and because of the oil, keeps it economically viable.
Hess Corp. is more than doubling the size of the Tioga (N.D.) Gas Plant, which it bought from a competitor in 1988. The expansion will transform a lean oil plant -- which was the industry standard when it was built a half century ago - to a more efficient cryogenic facility. (A cryogenic processing plant is a facility where natural gas flowing from wells is cooled to sub-zero temperatures in order to condense liquids or NGLs (natural gas liquids) to produce such things as butane, ethane, and propane.
Well I'm hopeful and bullish on N.D. ... hoping all those oil magnates come to buy ski/vacation homes in SouthWestern Montana, boosting our economy and home values.
By the way my trailer magnate and his partners are doing very well on the trailer camps I wrote about on this site a while back. The second large parcel is up and running and apparently the oil companies lease them as soon as they are ready.
The man camps are booming in ND, Two of the big players are Target Logistics and Capital Oilfield Services. Capital just opened a 2,500-person camp in Tioga, across the highway from Target Logistics 1,200-person camp.
Keep in mind that the population of Tioga in the 2010 census was 1,230. The man-camps have increased population 300%!
I have been to these things, and trust me, it sounds a lot more interesting if you are an investor or writing about it from thousands of miles a way... I'd prefer not to live in one!
These man camps are going to have all sorts of issues in the future -- the most glaring ones were already becoming apparent -- sewage and water.
Target Logistics just installed a wastewater treatment facility at its Tioga Lodge, which is capable of handling not only the waste from the 1200 room facility but others in the area as well. The treated water is suitable for fracking, But oddly enough the state of ND prefers the companies to use municipal water rather than the recycled water. I suspect it has to do with leveraging the use of the water to get the energy companies to fund improvements at the municipal water plants -- improvements that will remain when the boom is over.
Let's hope that's the goal. This all looks much better on paper than it smells like in real life. I've seen the wastewater pools of the man camps North Dakota! scary stuff!
This is related. Analysts see evidence of recovery for the office sector in many markets. They expect technology and energy companies to boost office real estate the most.
Part of the issue is that it's speculative, based on the opinions (feelings?) of those surveyed. That's why I think it's more realistic to use it as a way to monitor trends than precise numbers.
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