March 4, 2021

Is Manufacturing Falling Off the U.S. Radar Screen?

JUST outside this prairie town, seven vast buildings, each painted brick red, are lined up along a highway bordered by grain fields. These single-story structures have no smokestacks or any other indication that they are, in fact, very busy factories.

Three shifts of workers produce machines that bale hay, dig trenches, reduce tree branches to wood chips, grind stumps into sawdust, and drill tunnels to run electric wires and pipes underground. Most were the creations of Gary Vermeer, a farmer, tinkerer and inventor who died two years ago, at the age of 91.

The company he founded bears his name, but for all its American roots, the Vermeer Corporation put its newest factory — and the wealth that goes with it — not here but in the capital of China. And Mr. Vermeer’s daughter, Mary Vermeer Andringa, the chief executive, presides over a manufacturing operation that relies increasingly on government support.

As President Obama urges Congress to enact a package of tax cuts and new government spending intended to revive growth and create jobs, one crucial corner of the American economy — manufacturing — has largely fallen off Washington’s radar screen.

Vermeer earns nearly one-third of its annual revenue from exports — counting on the United States government for trade agreements, favorable currency arrangements and even white-knuckle diplomacy to make exports happen. In China, that wasn’t enough. For several years, it had been running into competition from Chinese manufacturers of horizontal drills, supported by their government in the form of free land, tax breaks, cheap credit and other subsidies. With its share of the market falling precipitously, Vermeer in 2008 opened a plant in Beijing, taking a Chinese partner and drawing help for the venture from the Chinese. “I am a very big proponent of making the United States a great place from which to export,” said Ms. Andringa, 61, who is also chairwoman of the National Association of Manufacturers. But she added: “If we wanted to stay in the Chinese market, we needed to be there. That was the reality.”

Manufacturing is not simply a market activity, especially not in the 21st century: manufacturers rely increasingly on governments, here and abroad, to prosper and expand. Vermeer, family owned, thrives with such help, as do big multinationals like Dow Chemical. In each region of the world, multinationals produce much of what they sell locally. European and Asian governments support this strategy, and the American government is cautiously getting into this game. The president, in his speech on Thursday, nodded in this direction.

“We’re going to make sure the next generation of manufacturing takes root not in China or Europe, but right here, in the United States of America,” he told a joint session of Congress.

Vermeer tries to march to that edict, employing 140 engineers, 7 percent of its staff, in a constant effort to upgrade the various machines it exports. But it runs into an obstacle. For all the desire to make things in America, manufacturers increasingly rely on imported components, diluting the label “Made in America,” and Vermeer is no exception.

“We would prefer to buy everything in the United States, but some of our transmissions come from Europe,” Ms. Andringa says. “They are not made here in the sizes and capacities that we need.”

In Dow Chemical’s case, thanks to a $141 million federal grant, roof shingles that generate solar power are rolling out of a pilot plant near Dow’s headquarters in Midland, Mich., and a full-scale factory is under construction nearby. The government is also paying nearly half the cost of building a $362 million Dow plant in the Midland area, whose “clean” rooms will soon produce batteries for electric cars.

“An advanced manufacturing policy is what this country must have,” says Andrew N. Liveris, the chairman and chief executive of Dow Chemical, arguing, in effect, that manufacturing needs government support to expand its dwindling share of the nation’s economy. That is particularly so when demand for new products like solar shingles and batteries is not yet enough to justify the investment. (Three solar companies recently filed for bankruptcy.)

Mr. Liveris, 57, himself a chemical engineer and co-chairman of President Obama’s newly formed Advanced Manufacturing Partnership, a group of outside advisers, would even “pick winners” — that is, select some manufacturers for continuing support. “I would not let free markets rule without also addressing what I want manufacturing to be 20 or 30 years from now,” he says.

The Obama administration hasn’t tried to formulate policy that far into the future. But, last year, the president called for a doubling of exports by 2015 — which would require total factory output in America to rise several times faster than it has in recent years. One way to accomplish that would be to have multinationals repatriate some of their overseas production — which Mr. Liveris, for one, is not planning to do.

Despite its goals for manufacturing, the administration lacks an explicit plan for achieving them. “The United States today is alone among industrial powers in not having a strategy or even a procedure for thinking through what must be done when it comes to manufacturing,” says Thomas A. Kochan, an industrial economist at the Massachusetts Institute of Technology.

MANUFACTURING’S muscle helped make the United States a world power, but its contribution to national income is dwindling. And while corporate leaders like Mr. Liveris and Jeffrey R. Immelt of General Electric — who is chairman of the President’s Council on Jobs and Competitiveness — are beginning to express concern over manufacturing’s relative decline, the multinationals they command have contributed to the problem by gradually shifting production abroad. About half of Dow Chemical’s $58 billion in revenue last year came from overseas operations.

Article source:

Speak Your Mind