Is This Move A Sign Of The Times?

By Mark Skaer
October 26, 2003
The fact that Carrier Corp. announced earlier this month that it will close its container refrigeration and compressor manufacturing operations in DeWitt, N.Y., eliminating 1,200 of 2,800 jobs in the process, prompted me to return to a recent study by Joel Popkin and Co., a highly respected economic consulting firm out of Washington.

In regard to its recent decision, Carrier Senior Vice President of Operations Ted Amyuni commented that it was essential to Carrier's competitiveness and growth. With more than 80 percent of container refrigeration products currently shipped to Asia, Carrier decided it needed to be located closer to its markets, he said. Carrier's container refrigeration needs will now be served by its existing manufacturing plant in Singapore, while its compressor needs will be handled by plants now operating in Georgia and China.

At first glance, it appears Carrier's move is the sign of the manufacturing times, as pointed out in "Securing America's Future: The Case for a Strong Manufacturing Base." This thorough study, prepared by Popkin for the National Association of Manufacturers (NAM) Council of Manufacturing Associations, tracks the impact of U.S. manufacturers moving their operations to locations outside the United States.

The study concludes in its executive summary: "If the U.S. manufacturing base continues to shrink at its present rate and the critical mass is lost, the manufacturing innovation process will shift to other global cultures. Once that happens, a decline in U.S. living standards in the future is virtually assured."

Pretty strong words.

Sad Statistics

According to the June 2003 report, the most serious challenges to the long-term viability of the U.S. manufacturing base and the innovation process that underlie it are:

  • The United States is losing jobs - "U.S. manufacturers historically lead the way in economic expansion, but are still struggling to recover from the recent recession. Since July 2000, manufacturing has lost 2.3 million jobs, many of which have been outsourced or relocated overseas. Manufacturing output has shown virtually no growth since December 2001."

  • U.S. export potential is suffering - "The U.S. trade deficit has ballooned to historic heights - reflecting an increase in purchases of foreign-made goods, especially from countries which do not freely float their currencies."

  • Investments are going elsewhere - "U.S. manufacturing's share of capital investment and research and development (R&D) expenditures, once a dominant feature of our nation's commitment to progress, is diminishing. While U.S. manufacturers conduct two-thirds of private R&D, their R&D spending between 2000 and 2002 grew at only one-half the pace of the previous decade."

  • There are needs for more skilled workers - "Despite losing 2.3 million jobs, manufacturing is facing a potential shortfall of highly qualified employees with specific educational backgrounds and skills, especially those specific skills needed to produce manufactured goods. If the skills and knowledge of the American workforce do not improve, it will be detrimental to manufacturing's competitive edge and to the prospect for economic growth."

  • Manufacturers face dramatically rising costs - "The cost of doing business in the United States is rising dramatically, in large measure because of significant costs related to health care, litigation, and regulation. As a result, many U.S. manufacturers shut down or move production overseas to countries where they do not face, to the same extent, those kinds of impediments to reducing productions."

    Contractors can certainly identify with those last two challenges. Like manufacturers, they seek more skilled workers and face rising costs. In the case of manufacturers, however, one could argue that the stakes might be higher. Or, so hints Popkin and Co.

    "The United States is losing ground in world merchandise trade, particularly vis-à-vis countries whose currency and other policies discourage imports," the report states. "Parts of the U.S. manufacturing sector, such as those that produce raw and primary products, are no longer building new facilities here. These are signs that dramatic change is underway. The question is whether the change is cyclical or will it become the long-term trend."

    That is the question.

    Mark Skaer is editor-in-chief. He can be reached at 248-244-6446, 248-362-0317 (fax), or markskaer@achrnews.com.

    Publication date: 10/27/2003

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    Mark Skaer Senior Editor. E-mail him at markskaer@achrnews.com.

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