Washington: It seems like the country that used to make everything is on the brink of making nothing.
In January, 207,000 US manufacturing jobs vanished in the largest one-month drop since October 1982. Factory activity is hovering at a 28-year low. Even before the recession, plants were hemorrhaging work to foreign competitors with cheap labor. And some companies were moving production overseas.
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 car.
The United States by far remains the world’s leading manufacturer by value of goods produced. It hit a record $1.6 trillion in 2007 nearly double the $811 billion in 1987. For every $1 of value produced in China’s factories, America generates $2.50.
So what’s made in the USA these days?
The US sold more than $200 billion worth of aircraft, missiles and space-related equipment in 2007. And $80 billion worth of autos and auto parts. Deere & Co., best known for its bright green and yellow tractors, sold $16.5 billion worth of farming equipment last year, much of it to the rest of the world. Then there’s energy products like gas turbines for power plants made by General Electric, computer chips from Intel and fighter jets from Lockheed Martin. Household names like GE, General Motors, IBM, Boeing and Hewlett-Packard are among the largest manufacturers by revenue.
Several trends have emerged over the decades:
America makes things that other countries can’t. Today, “Made in USA” is more likely to be stamped on heavy equipment or the circuits that go inside other products than the TVs, toys, clothes and other items found on store shelves.
US companies have shifted toward high-end manufacturing as the production of low-value goods moves overseas. This has resulted in lower prices for shoppers and higher profits for companies.
When demand slumps, all types of manufacturing jobs are lost. Some higher-end jobs but not all return with good times. Workers who make goods more cheaply produced overseas suffer.
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 labour and other costs are cheaper. And manufacturers will focus on the most lucrative products.
Aircraft maker Boeing announced last month it was cutting about 10,000 jobs. At the same time, workers are streamlining the wing assembly for the 737, the company’s best-selling commercial plane, said Richard McCabe, a wing line mechanic for 10 years and former Machinists union shop steward.
He and his co-workers at the factory in suburban Renton, Washington, were asked about three years ago to figure out how to switch from building wings in massive stationary jigs mounted vertically, “the way things have been done here forever,” to “one-piece flow,” assembling them horizontally on a moving line similar to automobiles. The new process is set to begin by the end of the year.
“I won’t go to the wing. The wing will come to me,” McCabe said. “It’s going to save them millions in scrap and rework.”
McCabe said there was a lot of initial resistance on the shop floor, but Boeing’s increased outsourcing including wing production for the new 787 to Japan helped change workers’ minds.
About 12.7 million Americans, or 8% of the labour force, still held manufacturing jobs as of last month. Fifty years ago, 14.6 million people, or 28% of all workers, toiled in factories. The numbers though painful to those who lost jobs show how companies are making more with less.
Still, the perception of decline is likely to grow as factories and jobs vanish, and imports rise for most goods we buy at stores.
Thirty years ago, US producers made 80% of what the country consumed, according to the Manufacturers Alliance/MAPI, an industry trade group. Now it’s around 65%.
American factories still provide much of the processed food that Americans buy, everything from frozen fish sticks to cans of beer. And US companies make a considerable share of the personal hygiene products like soap and shampoo, cleaning supplies, and prescription drugs that are sold in pharmacies. But many other consumer goods now come from overseas.
In the 1960s, America made 98% of its shoes. It now imports more than 90% of its footwear. The iconic red Radio Flyer wagons for kids are now made in China. Even Apple Inc.’s iPod comes in box that says it was made in China but “designed in California.”
Other companies saddled with high labour costs sometimes called legacy costs that insured workers high wages, pensions and handsome benefits can struggle to survive.
In the early 1980s, the US steel industry faced such pressure. Today, it’s the auto industry, which is pressuring its unions to agree to deep reductions in pay and generous benefits. In fact, it’s a condition of the $17.4 billion in emergency loans from the government to keep the industry in business.