Reality Check Revisited

Earlier this year in this space I took to task an Associated Press “analyst” who not only blithely wrote about the demise of American manufacturing but also opined that the U.S. didn’t really need such old-line industries going forward (“Reality Check,” February 2009).

Now comes another AP writer with a slightly different take on the current state of U.S. industry. The central premise of an article written earlier this year by Stephen Manning is that, despite the current economic woes, the U.S. remains the world’s manufacturing leader.

“It may seem like the country that used to make everything is on the brink of making nothing,” Manning writes. “But manufacturing in the United States isn’t dead or even dying. It’s moving upscale, following the biggest profits, and becoming more efficient, just like Henry Ford did when he created the assembly line to make the Model T.”

Manning acknowledges that things look pretty bleak right now. U.S. manufacturers have continued to bleed jobs at a rate not seen since the recession of 1981–82, and factory activity is hovering at low levels not seen since then.

But on the plus side, the U.S. remains far and away the global leader in value of goods produced—a record $1.6 trillion in 2007. According to Manning, that figure is not only nearly double the $811 billion in value generated in 1987, it also amounts to $2.50 for every $1 of value produced in China’s factories.

Topping the current list of “Made in the USA” items are aircraft and aerospace equipment (more than $200 billion worth in 2007) and—believe it or not—autos and auto parts ($80 billion in 2007). Other high-value products from U.S. manufacturers that are exported to countries around the globe range from gas turbines for power generation to computer chips.

In short, American manufacturers today make things that companies in other countries can’t. “U.S. companies have shifted toward high-end manufacturing as the production of low-value goods moves overseas,” Manning writes.

According to Manning, the result of this shift is lower prices for consumers and higher profits for U.S. manufacturers—a trend that should continue as the U.S. and world economies emerge from the current downturn. “Once this recession runs its course, surviving manufacturers will emerge more efficient and profitable, economists say. More valuable products will be made using fewer people. Products will be made where labor and other costs are cheaper. And manufacturers will focus on the most lucrative products,” he writes.

The trick for U.S. finishers will be to have themselves prepared to take advantage of the recovery when it comes. That means being in the right markets with the right processes and the right cost structure. Successful finishing shops, contract or captive, have managed this before, and they will do it again.