Jobs, jobs, jobs! It is the battle cry for the turnaround in the nail-biting, downward economy. Yet, as manufacturers in the US re-tool to become more globally competitive, they are not necessarily adding more jobs. However, they are upgrading their factories.
Temporary tax breaks in 2011, which allowed companies to write off 100% of investments in the first year, and historically low short- and long-term interest rates have helped. So has the implementation of advanced manufacturing. Since advanced manufacturing employs more automated systems, it is now possible for companies to produce more innovative products, and develop new materials and processes to make products faster, cheaper and more efficient. The end result: lower prices and increased profits, which allows companies to expand and compete more keenly on a global scale.
Take car manufacturer Honda of America Manufacturing, for example. In February 2012, the company announced plans to invest $98m in advanced processes at its Anna, Ohio, engine plant to produce the company’s next-generation power train technologies, set to be deployed in the 2013 Honda Accord car model. The move is aligned with a $120m investment, announced in 2011, in the production of a new continuously variable transmission at Honda's Russells Point plant, also in Ohio.
Ron Lietzke, a spokesperson for Honda of America in Ohio, puts the company's developments in context. “There is great competition in the auto industry,” he says. “Advanced manufacturing allows Honda to improve its manufacturing characteristics to become more competitive.”
Companies across a wide gamut employ advanced manufacturing. They range from breweries to food processors to textile manufacturers and print shops, and include companies such as Chicago-headquartered Cummins Allison, a manufacturer that builds technologies that count, sort and authenticate currency. Executives at Cummins Allison see innovation as an inclusive process that begins with listening attentively to customers, then responding with research, design expertise and advanced manufacturing technologies.
“We utilise rigorous testing procedures and sophisticated testing equipment to ensure accuracy and consistent quality for every component,” says the company's president, Doug Mennie.
The biggest issue with advanced manufacturing in the US, however, is finding the appropriately skilled workers in engineering and mechanics, which is particularly difficult when compared to the situation in countries such as India and China. In fact, the chronic shortage of engineering students in the US has been cited by many as a factor impeding the country's economic recovery.
Kathy Mussio, managing partner at global consultancy Atlas Insight, describes a scenario where one medical device manufacturer had difficulties relocating because too few communities in the US offered the type of skilled workers that the company needed. “It is important for any company that is expanding to have a constant stream of highly skilled, available workers,” she says.
Dan Levine, principal with business strategy consultancy MetroCompare, maintains that as demand grows, manufacturers do hire more workers. “It is just that those workers tend to have fewer skills,” he says. “A lot depends on a company’s need to automate assembly lines. Some situations are more difficult than others and are simply more labour-intensive.”
In a bid to tackle the problem, US president Barack Obama has launched the Advanced Manufacturing Partnership (AMP), aimed at boosting manufacturing in the country and creating jobs. AMP is charged with building “a roadmap for advanced manufacturing technologies" over the next decade.
Spearheading AMP alongside Mr Obama are Susan Hockfield, the president of the Massachusetts Institute of Technology, and Dow Chemical Company CEO Andrew Liveris. Other partners include the presidents of Carnegie Mellon University, the University of California at Berkeley, Stanford University, the University of Michigan and the Georgia Institute of Technology. Ms Hockfield sees the longstanding relationships that make this innovation model run between universities and government, and universities and corporations, as being tremendously important.
Dow Chemical, for example, has implemented an advanced manufacturing plan that includes policy insights and actionable recommendations for government and policy stakeholders to re-invigorate economies, reform regulations, enable long-term trade policies, educate a 21st century workforce, create a cleaner energy future and cultivate a more competitive marketplace. “Through sound policymaking and commitment from both public and private sectors, the world’s leading manufacturing regions can begin a sustainable path to a more prosperous future – enabled by advanced manufacturing,” says Mr Liveris.
Efforts to promote and utilise advanced manufacturing in the US, however, may be too coming late. Atlas Insight's Ms Mussio says that overall the US is not doing as much as competing countries. “We have several companies in Singapore that rave about how easy it is to do business there,” she says. In fact, governments in countries such as Singapore, Japan, South Korea and Germany have established incentive programmes to attract advanced manufacturing.
Peter Sparding, programme officer with the economic policy programme of the German Marshall Fund in Washington, DC, suggests that Germany has obtained manufacturing success because of its strong focus on advanced technologies and a balanced mix of small, medium and large enterprises that operate across a multitude of industrial sectors. These, he says, have created regional innovation networks. “Additionally, there is a long-term emphasis on continued skills training for workers, strong apprenticeship programmes and other policies that specifically focus on employment,” says Mr Sparding.
Germany’s short-work policy – kurzarbeit – for example, allowed companies to keep their skilled workforce employed through the economic crisis by reducing hours while the government covered parts of lost salaries. “This enabled the German economy to kick-start as soon as global demand picked up,” says Mr Sparding. Of course, political changes within the eurozone could derail Germany’s progress.
Key to the US manufacturing industry is private and public collaboration between researchers, inventors, investors and manufacturers. One such collaboration was reported in March 2012 by global power systems company Rolls-Royce. It is considering building a 8400-square-metre advanced manufacturing facility at its Crosspointe campus in Prince George County, Virginia. The facility, employing up to 140 workers, would be an advanced blade manufacturing plant involving high-precision turbine blades for aircraft engines, and would be located adjacent to the company’s jet engine disc manufacturing facility, which opened in May 2011.
“Our vision for Crosspointe is to create a hub of advanced manufacturing innovation, one that is based on partnerships with major universities, government and business – partnerships critical to the future of US jobs and the economy,“ says James Guyette, chairman, president and CEO of Rolls-Royce North America. Key to this project is what is being built adjacent to the site, the Commonwealth Centre for Advanced Manufacturing, a collaborative research centre involving three universities and nine companies.