What? Is manufacturing supposed to expand EVERY month to satisfy the skeptics?
By Mike Randle, Editor
Some of you may recall, since I have reminded y’all too many times, that I proclaimed on international television in late 2008 that, "A manufacturing beachhead is being built in the American South and Mexico." It wasn't a smart observation on my part. I was just looking at the numbers that were coming out of Mexico and the South and comparing them with those from the other three U.S. regions and Canada. At the end of 2008, manufacturing in the South and Mexico was resurgent. Nothing was happening at that time elsewhere in North America.
Then, almost two years later, the cover story of our Summer 2010 issue asked the question, "The New Sustainable?" and the subhead read, "Manufacturing continues its deal surge in the American South." In 2010, manufacturing was on a roll, posting more projects of 200 jobs and/or $30 million or more in investment than any year since 1993 in the American South.
Few politicos, economic developers or economists in the region jumped on our bandwagon to support our beliefs that indeed a massive manufacturing beachhead was forming in the South and Mexico. But when the Boston Consulting Group's report, "Made in America, Again," came out in the summer of 2011, we were stoked. While we had observed the quick rise in manufacturing projects in the South and Mexico from 2008 to 2011, we were merely speculating on why it was occurring. When we read the BCG report last summer, we knew why the moon and the stars were aligned, signaling what we think is the largest and longest-running manufacturing wave to ever hit the South.
Again, few believed what we were writing. For example, after reading the BCG report last summer, I called a statewide economic developer and gave him my take. "Manufacturing?" was his reply. "We have been losing jobs in that sector for decades." True enough. But that developer didn't know that manufacturing was creating jobs in his state the very minute he made the statement. It was obvious he also did not know that nearby, in Atlanta, 70 percent of all new jobs created came from manufacturing that year. I make that point because even white-collar job juggernauts like Atlanta were seeing great activity in manufacturing in 2010 and 2011, and that was before Caterpillar and Baxter announced thousands of manufacturing jobs in the Atlanta region this year.
Then, on July 2 -- just a few weeks ago -- the Institute for Supply Management (ISM) came out with its monthly manufacturing report. It showed that the nation's manufacturing sector contracted in June for the first time since July 2009 (34 months). The report wasn't out but a few hours when I started fielding calls and emails. They came from economic developers, the media and others. In fact, my phone and keyboard didn't cool from the heat of my hands for about a week after the ISM report was released.
What. . .is manufacturing supposed to expand EVERY month to satisfy the skeptics? Puuuuuuuuleeeeeeeze. Get me the skeptic repellant. So, here are nine things for skeptics to think about:
1. Manufacturing contracted in the U.S. in June, but not in the South. In June, manufacturing expanded for the 38th straight month in the South.
2. Domestic and foreign manufacturers can't make a profit anymore on exporting most products to the U.S. for U.S. consumption. Off-shoring is dead and it's not coming back.
3. No. 2 is just one factor creating this re-shoring event that has been going on since 2008. Re-shoring is expected to double in 2014, again in 2016 and again in 2020. Today, manufacturers are doing everything they can to "make it where they sell it."
4. Back in 2008 when I made the "beachhead" claim, re-shoring had just started. Today, facts back up the claim and they come from Airbus, Caterpillar, GE, Continental, Bridgestone, Nissan and NCR, among many others in the South. In Mexico, it's Audi, Nissan, Volkswagen and Mercedes and there will be more there, too, for many years to come.
5. The recession has helped the South's workers become the most productive in the world. It takes eight Chinese workers to do the job of one worker in the South.
6. In terms of costs, Mexican factory workers in 2000 earned five times that of Chinese factory workers. Today, Mexican workers earn less.
7. The union vs. non-union experiment is complete. Fifteen years ago, it was unheard of for Boeing, Caterpillar and other traditional unionized companies to open non-union shops in the American South and in Mexico. Today, Boeing is in the enviable position of making critical comparisons on cost and quality of its signature product since it now assembles 787s in unionized Puget Sound, Wash., and at its non-union facilities in Charleston, S.C. There will be many more domestic manufacturers making similar moves and large foreign manufacturers have all but stopped placing any new facilities in North America outside of the South and Mexico.
8. In the annual SB&D 100 (see www.sb-d.com) the manufacturing sector set another record for the most projects announced in the South since 1993, the second consecutive year a record was set.
9. Finally, what is the only thing partisan Washington, D.C. can seem to agree on? Well, lately there's been two things: (1) the buy American chic is popular on both sides of the aisle, considering that leaders from both parties wanted to burn the Chinese-made USA Olympic uniforms and (2) expanding our ports to move more of that "Made in the USA" product out to the world.
Hello South. Hello Mexico. Hello beachhead.
Mike Randle is the editor and publisher of The Randle Report and Southern Business & Development (sb-d.com). You can contact Mike at email@example.com.