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The challenge of saving our jobs and industries.

Are you worried about losing your job? Do you feel that your company could soon be going down the tubes despite your best efforts, and that this could leave you locked out of your livelihood?

We're betting you are worried, or at the very least, concerned. That's why we're dedicating this series of articles to the single most important word for us all--survival.

In Survive-85, we will be examining the survival prospects of our basic industries, our manufacturing technology, and our jobs. But first, in this prologue, we want to discuss the major issues, and then get your input. After all, this story is about you and the first thing we want to know is how you feel about it all. Please help us by completing the survey at the end of this article and sending it in.

The future of manufacturing is your future. It's also ours. You're holding our product in your hands. If US manufacturing gets shipped abroad, this country won't be needing either of us much longer. Since we're in this together, let's work together. What can a metalworking magazine do? Well, we can make little voices into big ones. We can help you get heard in the right places by the people who can do something about manufacturing's basic crisis. But first, we need your best thinking.

War on the floor

The world has changed. 1985 marks the midpoint of a decade that will end far more differently than it began. The shock of this transition will be comparable to what we went through in the '40s--from prewar innocence to postwar rebuilding and rapid change. The mobilization we achieved then to "win the war on the homefront" was truly miraculous. We flexed our manufacturing muscle almost to the breaking point, and we also strained a lot of relationships both here and abroad that remain troublesome today.

Unlike the hot war then, today there's a new cold war being fought--a trade war. The issues today are not ideological, but economic.

While our government struggles to buy time at the trade negotiating table, the battle continues, and the toll mounts. We invent new euphemisms for the war dead--the "Structurally Unemployed." The basic issue is which nations will produce the bulk of the world's capital goods. The battlefield is very close to home--your manufacturing floor. The armies are production workers. The weapons are manufacturing technology. The spoils are jobs and the standard of living they support.

Just in the past few years, there have been casualties on my street, on yours, and on nearly every street in America. No family has been unaffected. All our major industries are threatened, directly or indirectly. Who can feel that his or her job will be secure in the long term? Mine certainly isn't. Is yours?

Thus, the basic isue to be addressed in this series of special articles is survival. We want to examine the situation in our key industries: what the score is what the options are, and what can be done to save each vertical segment of our manufacturing base from being exported and lost forever. We also want to look horizontally at all of our nation's manufacturing technology and manpower to see how they could be mobilized into an effective, integrated force--a world-class competitive weapon.

This will not be an exercise in flag waving. While we will be mostly concerned about ourselves--Americans--we will fully acknowledge the rights of all others to compete and survive in our markets. We need each other. Trade barriers must ultimately be removed so all free-world markets can grow and expand. What fantastic growth potential lies ahead for all of us in the developed world if we could only help the undeveloped catch up to our standard of living!

In 15 years, we enter a new millenium. Because change is accelerating so rapidly, the manufacturing world of 2001 will be as different from today as today's tools are from those we used to win World War II. That brand new CNC machine you just installed will be obsolete and scrapped by then. Your shop floor then will either have all new technology or it won't survive. And if you--the manufacturing engineer--survive, it will be because you have become a new, highly skilled person--the vital thinking link between the product you produce and the automation that produces it.

How bad is it?

In their 1985 Industry Outlook, Business Week said, "The decline of manufacturing America during the 1970s and early 1980s has been one of the most important economic developments in this century." They expect manufacturing output to drop sharply next year as the economy settles into a slower, more stable growth path, only normal in the third year of an economic expansion.

"But three features of this expansion--high real interest rates, a strong dollar, and low inflation--will make life more difficult than usual at this stage of the business cycle for many manufacturers. Makers of consumer durables could suffer badly." They also cited predictions that general industrial machinery will suffer a dramatic setback, as buyers with little need to expand capacity merely replace obsolete equipment.

And we won't be able to hide behind high tech much longer, BW editorialized. "Nobody will be surprised to learn that many traditional industries in the US are facing a tough 1985. But a lot of people may be surprised to find that similar troubles are starting to gnaw away at the high-technology industries that are often hailed as the best hope for shoring up the US manufacturing base. Further, when US manufacturers move operations abroad, US suppliers also lose customers. It adds up to an alarming threat to US industry, one that will become increasingly damaging if it is allowed to go on much longer."

Economic consultant Peter L Bernstein sees beyond our present little burst of prosperity. "When viewed in light of the fast economic recovery, the gain in productivity, the astonishingly slow growth in labor and materials costs, and business' own intense cost-cutting efforts, the performance of key profit ratios is deeply disappointing. American business is caught in a 'virtuous circle.' Low inflation supports a strong currency, and a strong currency suppresses inflation." The results, he says, are profits 15 percent below what they would have been under similar conditions in the '70s and 40 percent below what they would have been in the '60s."

And the marketers aren't helping manufacturing much. We've always been at the mercy of the consumer--each other--and with the advent of instant electronic communication and its tendency to sensationalize minor economic zigs and zags, the consumer--you and I-tends to get whipsawed. One minute we're rushing to buy things before the price goes up, and the next, hoarding our resources because a new recession was announced last night on the six-o'clock news.

The result is marketing chaos. No one can build a new manufacturing facility on anything more than a hope and a prayer that his market will still be there when his play is ready to churn out new products.

Dollar daze

Will the US dollar fall soon and alleviate international trade pressures? Lester Thurow, prominent MIT economist thinks so. "No country can forever run a deficit in its balance of payments. Just do a little arithmetic. We borrowed $120 billion to finance the '84 trade deficit and this year we'll borrow $150 billion more, plus $12 billion to pay interest on the '84 deficit loan. Altogether, the US must borrow $490.2 billion in just three years. The rest of the world is not about to lend America that kind of money." Thurow sees a 30-percent drop in the dollar by the end of '85 and inflation coming back with "surprising force."

On the other hand, there are economists with the opposite viewpoint. Frederick Strobel, money and banking professor at Michigan's Kalamazoo College, has just returned from talks with 13 leading European economists. He feels the dollar's glory days could stretch into years. "Those events that caused the dollar to fall in the '70s and early '80s are now working in reverse. We are, in effect, importing deflation just as we imported inflation then. This feeds on itself. As inflation moderates, the dollar becomes more attractive, helping to moderate inflation even more."

Europeans see the US as a highly profitable place to do business. "They also admire the US's fluid labor market. Not only are workers willing to relocate, change jobs, and even change professions, but American labor unions are viewed as relatively weak. Union membership is under attack, its growth slowed, and union demands are restrained. Job security has become more important." Thus, the US labor situation helps draw in dollar investments. Strobel also notes that because the less developed countries need to obtain dollars to repay our loans, this adds to dollar demand, reducing its supply and increasing its price.

Battles abroad

Few discussions of international trade problems fail to include Japan, either as villain or scapegoat. Clearly, our futures are linked. Notes David Hale, chief economist for Kemper Financial Services, Chicago, "japan is a major supplier of capital to the US because of a chronic tendency toward excessive saving left over from the rapid industrialization of the early postwar years. The US and Japan now have such a symbiotic trade, military, and financial recycling relationship that the two increasingly resemble a married couple with complementary neuroses--one saves compulsively, the other can't stop spending."

Frank talks between President Reagan and Japanese Prime Minister Nakasone were prompted by Japan's record $33.1 billion trade surplus for 1984. Japan's promises to open markets and boost their own defense spending were met with skepticism here and cries for a 20-percent surcharge on Japanese imports until significant improvements in the US/Japan trade balance materialize. Steel officials (see following story) feel the voluntary trade agreements struck last fall have yet to have any effect on imports, and arguments continue on when and were any real restraint in steel imports will occur. Proponents for rigid quotas can be found almost everywhere.

Noting an increasing level of frustration all across the country, US Trade Representative William Brock says, "People don't think we're getting a fair shake abroad. They're coming to the conclusion that it's going to take a 2 x 4 to get other countries' attention."

Paula Stern, who heads the US International Trade Commission, reports her agency, which hears petitions for import relief, has been swamped with "a clamor for protection that has turned it into a veritable MASH unit for the battlefield victims of international competition."

But Doug Priestley, president of Lovejoy Tool Co, Springfield, VT, says the real issue is competitiveness. "Whether you're talking steels, machines or cutting tools, it's not simply that the Japanese took over our markets, it's that we allowed them to do so by becoming non-competitive! No amount of protectionism is going to help if you're not doing what has to be done to stay competitive in your business."

Japan's plan

Robert Reich, in a November article in The New Republic, offered an excellent explanation of Japan's grand plan--how they intend to export our manufacturing back to Japan, leaving us with just R&D and marketing. (This was a key inspiration for this entire article series.)

"America's trade war with Japan is taking a dramatic new turn," Reich observes. "Not so long ago, the battle lines were clear. It was us against them. American companies and their workers trying valiantly to survive against an onslaught of cheaper and better Japanese goods. "Now the battle lines become blurred. In a trend that began two years ago, but has accelerated in recent months, American firms are linking up with their former rivals in a vast array of 'joint ventures' and 'purchase aggreements.' Japanese companies are buying up American companies or are building new plants in the US. employing American workers. American companies are building plants in Japan, hiring Japanese. As a result of this activity, the national interests underlying our trade policy with Japan--never terribly clear to begin with--have grown even foggier. Just who is us? And who's them?

"Look closely at these new joint ventures and transnational investments. There is a pattern to them. Basic research leading to initial product design is carried out in the US. Then, production of the most complex parts and sophisticated assemblies occurs in Japan. Back in America, workers put the final pieces together. And finally, a different group of American workers distributes, markets, and sells the products to other Americans. In other words, we take charge of the two ends of the production process--the innovations, and the final assembly and sales. The Japanese concentrate on the complex manufacturing process in between."

So what's the problem? We make money and they make money. But they learn how to transform raw ideas into world-class goods. "Such experience in making products generates more social wealth than does inventing them, or assembling and selling them. An entire nation benefits from having a large pool of workers with valuable production skills. By contrast, very few of us gain very much from the inventing--this doesn't raise the overall level of skills in a society. Nor does assembly, marketing, and sales. That's why the Japanese would rather invest in production experience."

Japan has problems too

As Japan grows more closely to resemble the US, it is developing new problems of its own. Its productivity, once the envy of the world, was up only 1.6 percent last year, the smallest annual increase since 1973, while wages rose 7 percent. Hitachi, Japan's top electric-equipment maker, cut 11,000 jobs from its 88,000 payroll (so much for lifetime employment). Japan is also reducing its steelmaking capacity.

Japan is feeling the same kind of competitive heat we are, reports Reich. "by 1980, Korea, Hong Kong, Singapore, Brazil, Spain, and Mexico had increased their production of complex products like automobiles, color TVs, tape recorders, CB transceivers, microwave ovens, small computers, and ships. These developing countries now supply 16 percent of the world shipbuilding tonnage. Korea already has the largest single shipyard in the world, and with its salary rates averaging only one-third those of major Japanese shipyards, Korea may surpass Japanese tonnage in five years. Brazil is becoming a net exporter of automobiles, commuter aircraft, and hydroturbine generators. Mexico is developing into a center for world automobile-engine production.

"Almost all of the world's production of small appliances (whether labeled Panasonic, Philips, GE, Sony, Zenith, or unrecognizable brands) is now centered in Hong Kong, Korea, and Singapore. Components and product designs are purchased from major companies; financing is arranged through Japanese, US, and European banks; and distribution is handled through large retailers, like Sears and K-Mart or through established distribution channels of large Japanese or American consumer electronics companies."

In fact, Japan's problems may portend problems we will encounter here once we more fully assess the full social costs of adjusting to world competition. This can be depressing. Dr Bruno O Weinschel, chairmand of the IEEE Task Force on Productivity and Innovation, has said, "I am less optimistic that the problem of US competitiveness will solve itself because the increasing social expenses in Japan will reduce Japan's ability to compete."

Exporting automation

Robert Reich's latest book, The Next American Frontier, provides important insight into how the competitive picture for world manufacturing is changing. "The trend is becoming clear. First, America's basic steel, textile, automobile, consumer electronics, rubber, and petrochemical industries (and dependent high-volume industries) are becoming uncompetitive in the world. Secondly, now that production can be fragmented into separate, globally scattered operations, whole segments of other American industries are becoming uncompetitive. Whatever the final product, those parts of US production requiring high-volume machinery and unsophisticated workers can be accomplished more cheaply in developing nations.

"Automation, far from halting this trend, has accelerated it. Sophisticated machinery is readily moved to low-wage countries. Robots and NC machines further reduce the need for semiskilled workers in high-volume production. For example, robots in the automobile industry are replacing more semiskilled jobs, like arc welding and spot welding, than unskilled jobs. In the ball-bearing industry, fully automated plants require only 30 percent fewer workers than standard plants of the same size. Most of this saving is in semiskilled workers. Meanwhile, automated inspection machines are reducing the cost of screening out poor-quality components, thereby encouraging firms in industrialized nations to farm out production of standardized parts to developing nations.

"Thus, automation has made developing nations still better suited to high-volume, standardized production. Not surprisingly, ball-bearing plants and automobile-manufacturing facilities are being established in several third-world nations. Some of the most automated clothing plants in the world are now found in Hong Kong; some of the most advanced steelworks, in South Korea.

"What began in the 1960s as a gradual shift became by the late 1970s a major structural change in the world economy. Assembly operations are being established in developing countries at a rapid clip, and America's manufacturing base is eroding precipitously."

Back home

Returning from a rambling 14-week cross-country tour of the US, author Henry Fairlie observed, "As my companion and I went from big city to small town and village, I realized how much grittiness and spice is given to life in places that manufacture and produce. Even in a northeastern town as chronically depressed as Wilkes-Barre, PA, people stay; and among the reasons is that manufacturing towns have strong and resilient characters. I've found Washington DC increasingly unbearable on my return, primarily because it makes absolutely nothing."

Old job patterns are wearing out and must be rethought, thinks writer James H Bready. "Today, the average American gets up and, however wearily, goes off to work. The average American also knows someone who would like a job but has none; or has a child or young relative who between now and the year 2000 will be seeking a job. The average American lacks assurance of still having a legitimate, paying job at the end of 1985.

"Americans forever tell themselves that communism is about to crumble. But communism, or state socialism, seems to spread. The reason has nothing to do with patriotism or dogma. It's jobs. The constitution of the USSR may be largely hogwash, but it recognizes 'the right to receive wages irrespective of the income of the enterprise concerned, the right to free vocational and advanced technical training.'

"A Russian may be a drone, his or her job a bore, but their kids don't go hungry; if they're bright, they get the good education. Today, the US is making it harder for the working class to rise above itself."

"The ideal glows as always," Bready observes. "A worker should want the job. For this, a mind change is needed from many an individual US worker. Typically, he or she knows, at most, one job; is incompetent for any other job category and, from having stopped learning upon school or college graduation long ago, is a poor prospect for retraining."

The president of a cutting-tool company in a small New England community relates a recent job-force experience. "We needed to hire a couple of people for our new CAD/CAM equipment, and thought that since two large machine-tool companies in town were laying people off that we could pick up some good local talent. When we let out the word, the resumes came flying in, but when we talked to these people about what we wanted them to do, the best they could say was 'Gee, I've got a friend who would really be interested in this job.'

"They were engineers who didn't have enough confidence in themselves--hadn't grown enough in their past positions--to take on this challenge. And neither did their friends."

Blue-collar blues

It hurts to lose your job. It's been shown that an unemployed person is more inclined to have intestinal problems, infections, and higher blood pressure, and that our death rate rises 1.9 percent for each 1-percent rise in unemployment.

It's especially tough for the blue-collar worker. A study by the Social Welfare Research Institute (Boston College) of laid-off auto workers who had found new full-time jobs in other industries found them earning an average of 30 percent less, plus 41 percent no longer had employer-paid health insurance, 56 percent no employer-paid pension, and 40 percent no employer-paid life insurance. Last summer, the average wage of a manufacturing worker was $370/wk, while the average for a service-industry worker was only $248/wk.

Blue-collar unemployment can mean giving back everything your generation has gained. David Halle interviewed 121 blue-collar workers for his book, American's Working Man. On the job, these people are 'working men', but outside the job, they identify themselves as middle class, largely because of their incomes. Their life styles match their middle-class white-collar neighbors. They do not feel a common bond with the unemployed, welfare recipients, or blacks and Hispanics.

Halle's group derived no deep satisfaction from religion or ethnicity, 40 percent were unhappily married, 92 percent believed all politicians are corrupt, and 83 percent are convinced that big business runs the country. The vast majority believe they are wasting their lives in dull, repetitive jobs. Yet all believe in the American dream.

Hence, the seeds for potential labor revolt are planted. The trauma of unemployment can be more severe for the middle-class blue-collar workers. They have absolutely everything to lose--job, family, and their status in society.

White-collar woes

Which is not to say that white-collars don't also bleed. As a Business Week report on white-collar unemployment ('Suddenly, the world doesn't care if you live or die') summarized in February, "For a significant minority of white-collar workers, losing jobs in declining industries turned out to be liberating, opening up brighter vistas in growing fields. Many more, however, lost not only their jobs, but the assumptions that had defined their lives. A substantial number of the more than 1-million displaced white-collar workers had taken pride in working for such important, Rock-of-Gibraltar companies as US Steel, John Deere, or Firestone Tire. 'These people were so damn loyal they couldn't see what was happening,' says Ronald A Graf, who directs Bethlehem Steel's outplacement center in Lackawanna, NY. 'They couldn't take their lives into their own hands.'

"Ultimately, the vast majority will find new positions or retire. But in many cases, disillusionment will accompany the new paycheck--the result of abandoning former career goals, preferred hometowns, and the seren reliance on job security. These people are finding that things aren't necessarily getting better year after year. For members of the US middle class, that is tantamount to the death of the American Dream."

So what do we do?

So far, we've touched on the macrocosm and microcosm of the problem. On the national scene, our industrial crisis is ultimately a political problem, and thus, in our democratic republic, one that each one of us must eventually help decide. On the personal level, the problem is what to do to hang on to our own jobs and our way of life.

Clearly, things are not taking care of themselves like they once seemed to. We can't continue to let George or some other jerk do everything; it's obvious that they've already screwed things up badly. We must all now get involved.

The governmental process doesn't help much, unfortunately. Our form of democracy isn't working like it used to. There are too many voices, too many ways to halt attempts at progress, too few ways to build a concensus. As automation author John Diebold complains, "The strengths of federalism, in preventing the concentration of power, have become a weakness, inefficiently dividing and checking power."

Greedy self interest doesn't solve the problems of trade imbalances, exported jobs, or spiralling deficits. Besides our political system, our economic system of supply and demand isn't working, our trade agreements aren't working, and our schools are producing a lot of kids who aren't working.

Manufacturing was once our strong suit, the glue that held our economy together. Now it's the big question mark. The Third World has learned all our tricks of mass production. Cheap marketing tricks cannot recreate markets lost to competitors with superiority in price, quality, and innovation. We must rebuild our manufacturing machine into a world-class competitive weapon.

I'm an engineer and you're an engineer. We're problem solvers by profession. We're firm believers that if we can just fully define the problem, we can find the solution. Naive maybe, but that's exactly what we intend to do.

In adversity there's opportunity. As Dickens said, "It was the best of times; it was the worst of times." But even when you or I come up with the big answer, the problem is that it takes so damned long to build a consensus.

We must first take stock of ourselves, then our jobs, our companies, and our industries. We must weigh strengths against weaknesses, we must review our options, and reach agreement before we can act.

Join with us in this assessment. Complete the survey at lefT. Send it in to us so we can develop a significant data-base for constructive action. We need your collective judgement. Do it now.
COPYRIGHT 1985 Nelson Publishing
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1985 Gale, Cengage Learning. All rights reserved.

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Author:Sprow, Eugene E.
Publication:Tooling & Production
Date:Apr 1, 1985
Words:4181
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