U.S. Manufacturers Enjoy Momentum But Face Obstacles In Keeping It Going

The strong U.S. economy is encouraging American manufacturers to continue to invest in their operations and in growth, but trade winds, the labor crunch and other pressure offset some of CEOs’ optimism about their ability to keep the momentum going.

That was the message delivered by Emerson Electric CEO David Farr, who also is immediate past chair of the board of the National Association of Manufacturers, at the Chief Executive Smart Manufacturing Summit in Dallas last month.

“Tax reform has leveled the playing field [globally], and we can compete on a level field in taxation structures,” said Farr, referring to Republicans’ late-2017 corporate tax cuts and other business-friendly changes. “We can invest [more] in our communities and employees.” The positive environment “is encouraging capital investment, wage growth” and other strong signs for manufacturing.

“I believe U.S. manufacturers are globally very competitive right now, and there’s the chance to do more. We are strong, and winning, but there is more to be done.”

Some analysts, for instance, have been disquieted lately by signs that U.S. business investment has been slowing so far this year compared with last year’s pace. And of course the Trump administration’s continuing trade squabbles with China and now Mexico keep muddying the economic picture for all American manufacturers.

“There [must be] a more equal and fair and open manufacturing world,” Farr said. “There needs to be a resetting of the global trade world … and of tariffs from over the last 50 years. It’s not that easy to accomplish, but it must be done for all manufacturers.”

He asserted that China “peaked in its competitiveness” in manufacturing 10 years ago. An example: Emerson now uses about one-third the amount of labor in China that it did 15 or 20 years ago, Farr said.

At the same time, Farr said, the federal and state governments along with the private sector must face up to the continuing need for “a modern infrastructure that we need to be competitive in a global economy.” He said that Washington, D.C., has been moving “extremely slowly” on the issue.

Farr also cited the continuing labor crunch as hampering most American manufacturers. “This shortage is no small problem, and manufacturers aren’t the only ones concerned,” he said. Among the most acute aspects of the worker shortage is “the aging workforce,” he said. “People are retiring. We have to train that next generation. They aren’t going to be assembly workers, necessarily, but technicians on the [factory] floor. That’s where our thrust is.”

But American manufacturers “have to increase wages,” Farr said. “We have to figure this out. Over time can we bring in more automation to take some of the labor costs out? For now we are passing some price increases on. But clearly what we’re looking at is: How do we change …. What we produce to restructure it with less labor than in the past? That takes time.”

Nor is labor and its cost only an immediate concern. A recent survey by Emerson, a diversified supplier of automation and residential equipment and services, found that “40 percent of American adults believe STEM [education] is at a crisis stage in the United States, Farr said.

An $18-billion company, Emerson has been working hard “to raise awareness about STEM opportunities,” Farr said. Meanwhile, he said, manufacturer must work hard to boost the image of manufacturing generally among younger Americans who are seeking careers.

“Incredible things happen in the space between curiosity and inspiration,” he said. “That’s what it will take to keep innovating for the future in the manufacturing world. Technology already has fundamentally changed the way we do business. Manufacturing doesn’t get the credit it deserves as tech-forward industry.”

Read more: National Association of Manufacturers’ David Farr: Industry Is In A Trump-Boom Renaissance