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Manufacturing Pain

Urgent action is necessary for the U.S. to maintain its muscle.

Gary Cowger, president of General Motors North America, argues that manufacturing is in trouble€¦and that’s bad for the overall economy. Here are excerpts from his remarks:

  • “For every dollar of manufactured goods, an additional $1.43 worth of economic activity is generated. The multiplier is pretty good. Manufacturers in this country pay a third of all the corporate taxes. They’re responsible for two-thirds of all the private R&D. Manufacturing’s compensation is about 20 percent higher than the average wage, which is a challenge because of, obviously, the growth and the capabilities of emerging markets.
  • “We lost 2.7 million manufacturing jobs just in the last recession. That is the largest decline since the Great Depression.
  • “Manufacturing really does matter. Without a strong manufacturing base, it’s hard to realize economic gain through technological innovation. In fact, if manufacturing leaves, it’s not long before research and development leaves.
  • “What can we do? There are two elements to focus on.

“Firstly, innovation. We need to remain the technological leader in the world. I’m talking about not just technologies for manufacturing per se on the factory floor. I’m also talking about product integration technologies as well. That includes wireless technologies, new sensor technologies, material technologies and nanotechnologies. We’re just starting to see the beginning of what these things can do.

“Secondly, policy reform. Health care, trade, taxes, tort reform, pension, human resources, R&D and infrastructure. All of that involves government.

“U.S. health care costs are rising 14 percent to 18 percent a year. Health care in the U.S. is 15 percent of the GDP now. That’s 50 percent higher than the next industrialized country. It is unsustainable. We are the only industrialized country that has a private payer health system. All the people we compete with have health care systems where the companies are not paying the cost.

“U.S. corporate taxes are among the highest in the world. We tax our companies on global operations. President Bush did recently sign a law repealing some of the tax barriers, but we do need to focus on a permanent R&D tax credit.

“Currency manipulation is a big problem for us. Since 9/11, the Japanese government has spent over a trillion dollars on weakening the yen.

“When you add it all up, there are a lot of tough issues, and many of them are structural, many are outside the purview of getting fixed by one company.”

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