American manufacturing is making another transition. But is it simply rebounding from recessionary lows or poised for a renaissance with new growth?.
President Barack Obama's administration wants to double exports by 2015 and create 1 million new manufacturing jobs. Last year, the administration funded a pilot manufacturing research institute in Youngstown, the first of 15 centers in a proposed $1 billion National Network for Manufacturing Innovation.
Obama’s State of the Union held out the prospect of launching “three more of these manufacturing hubs, where businesses will partner with the Department of Defense and Energy to turn regions left behind by globalization into global centers of high-tech jobs.”
But employment losses in the manufacturing sector have been so huge that domestic industry advocates say it’ll take more than talk, hope and R&D. They advocate for sweeping changes in tax law, trade policy, national priorities, and worker training to accomplish the goal.
Besides that, domestic industry advocates say, it’s not exports that translate to prosperity, it’s whether the nation continues to run a $600 billion annual trade deficit. That’s a better gauge of how well the U.S. does against industries located overseas that import into the American market, still the world’s largest.
In southwest Ohio, the manufacturing niche with the most action lately has been General Electric’s aviation research and manufacturing hub, the state’s largest single exporter at about $5 billion in goods and services annually.
GE has added hundreds of new jobs in recent years and hundreds more are coming, the company says. Estimates could be conservative if global aviation expands faster, Dayton wins out as a new location for European aircraft maker Airbus, and testing for civilian use of unmanned aerial vehicles comes here.
GE won big international orders for aircraft engines and parts in the past 18 months. Officials expect at least stable employment at local factories for 15 years.
That’s no small fact for the 9,000 GE employs in this corner of the state. Most work at Evendale’s jet engine assembly plant, Beavercreek’s Elano Corp., Dayton’s TDI Tech Development Inc., and Vandalia’s GE Aviation Systems, which makes aircraft electric power generators and related systems.
The two big engine orders are for the Boeing 737, one of the world’s best-selling airplanes, and the Boeing 777, one of the world’s best-selling large jumbo jets. Weeks ago, Boeing announced that it is pursuing customers for a new-generation 777, currently called the 777X.
GE Aviation has hired 400 employees in the Dayton area since 2008, spokesman Rick Kennedy said. One engine, made with French partner Snecma, is on backorder for 10,000 units.
Later this year, GE will open the $52 million Electrical Power Integrated Systems Research and Development Center, or EPISCenter, on the University of Dayton campus where UD researchers will collaborate on advanced computer modeling, simulation, and analysis of advanced aircraft electric power systems and controls. Employment there could hit 200 in five years.
GE Aviation has invested more than $20 million in other Dayton operations since 2010, including upgrades at the Beavercreek plant. The Evendale headquarters has gotten more than $100 million in new investment in the past three years – including tearing down old buildings, upgrading existing buildings, new equipment.
There are other local manufacturing success stories.
Abbott Laboratories is building a $270 million nutritional drinks manufacturing plant in Tipp City that will employ 240 and produce two Abbott brands, Ensure and Glucerna, starting late this year.
Process Equipment Co., which is in hiring mode and builds factory automation equipment, is making a $10 million move to a vacant 425,000-square-foot-factory in Dayton. Process said it expects to hire 250 new employees in five years.
Swedish high-tech food equipment manufacturer Avure Technologies Inc., said last week that Middletown will be the site its first manufacturing plant in the Americas, creating 30 new jobs.
Still, statewide, the claw back of a decade’s landslide in manufacturing losses has been meager and largely auto-related. In 2012, there were 656,200 manufacturing jobs in Ohio, up from 638,600 in 2011, but a world away from the 1.021 million jobs in Ohio in 2000.
Ned Hill, Dean of the Levin College of Urban Affairs at Cleveland State University, sees Ohio positioned to grow those jobs back because of wage inflation in China and higher costs for diesel fuel to get imports here.
Ohio’s increased shale drilling has interested European chemical and plastics manufacturers. Hill said he’d cut corporate taxes to something slightly above zero to combat foreign trade advantages like value added taxes, while toughening up tax collection at the upper end of the tax bracket. Technical education must be prioritized.
“We are in a period of slow recovery that has great promise for the future if we have the talent to win,” Hill said.
The Alliance for American Manufacturing, a business-labor coalition that advocates for domestic industry, said new data showing the manufacturing sector’s loss of 3,000 jobs in March are a setback for the 30,000 additional jobs needed monthly to meet Obama’s second term goal of 1 million new manufacturing jobs.
“I believe we can see a resurgence in manufacturing job growth, but only with the right public policies,” Scott Paul, president of the Alliance, said. Paul called for action to hold China accountable for continued violations of trade agreements and for Obama to follow through on campaign pledges to close tax loopholes that encourage outsourcing.
For Peter Morici, former chief economist at the U.S. International Trade Commission and now a professor at the
University of Maryland, it’s about keeping natural gas discoveries at home to fuel a manufacturing rebirth, not exporting the commodity. The trade deficit with China of about $300 billion a year continues to weigh against a renaissance. Morici says the continuing flood of manufactured products from China and elsewhere in Asia drain demand for U.S. goods and services. Absent U.S. policies to confront Asian governments about their “purposefully undervalued currencies,” the meek recovery continues.
“Our trade deficit with China keeps growing, and that keeps the best of what could happen from happening here,” Morici said.
Alan Tonelson, an economist with the U.S. Business and Industry Council, a group representing smaller and family-owned manufacturers, calls a manufacturing renaissance a myth.
Tonelson said the U.S. should impose a 40 percent tariff of Chinese imports to neutralize that nation’s currency manipulation and make the U.S. a more attractive location for industry. He said he’d also expand federal “Buy American” provisions and require the government to come up with a serious game plan to revive vital, but decimated, industries.
There’s no indication Obama accepts the skepticism about a manufacturing comeback.
“What’s happening here is happening all around the country,” the president told the Associated Press during a recent visit to an engine-part factory in Ashville, N.C. “Just as it’s becoming more and more expensive to do business in places like China, America is getting more competitive.”