U.S. manufacturers have witnessed an uptick in demand and output over the past few years, with the sector as a whole helping to drive the nascent – though now sputtering – economic rebound. However, some analysts fear that a confluence of factors is contributing to the steady decline of manufacturing in the U.S.The U.S. manufacturing sector expanded in August, registering its 25th consecutive month of growth, according to the Institute for Supply Management's August Report on Business.
The Vermeer Corporation is representative of the shift in domestic manufacturing that has occurred over the past three decades. Founded by Gary Vermeer, the company produces farm equipment, but unlike in the past, when the company opened all of its manufacturing facilities in the U.S., the firm's latest production center was recently unveiled thousands of miles away from rural Iowa – in China.
Now headed by Mary Vermeer Andringa, the founder's daughter, the Vermeer Corp. has increasingly relied on government support to keep its operations churning, according to The New York Times.
Nevertheless, industry analysts contend the president's job creation bill, unveiled last week during a speech to a joint-session of Congress, does not include any provisions geared toward U.S. manufacturers. That is worrying economists and some government officials, who are concerned an ever-growing number of such companies will continue to shift their production operations to Asian and South American countries.
The Vermeer Corp's shift toward China was the result of market forces, rather than a strategic initiative to benefit from the precipitous rise in consumer spending and economic growth that the world's second-biggest economy has witnessed over the past 30 years.
"I am a very big proponent of making the United States a great place from which to export," Mary Vermeer Andringa said during an interview, noting that roughly 33 percent of the company's revenue is derived from exports. "If we wanted to stay in the Chinese market, we needed to be there. That was the reality."
The recession fundamentally altered the global economic landscape, with the metaphoric economic momentum pendulum swinging decidedly toward China, where labor is incongruously cheap. To achieve procurement cost reductions, many companies have moved manufacturing plants abroad, though others contend improved spend management operations can help spur growth.
As firms have worked to improve their strategic sourcing operations and achieve manufacturing cost reductions amid tepid demand, officials from such firms assert there is ostensibly no way U.S. companies can compete with China in terms of labor and raw materials costs.
Other countries have aggressively subsidized their domestic manufacturing companies for the better part of the 21st century, and analysts assert the U.S. is stepping, albeit carefully, in that direction.
Still, though President Obama alluded to such a step in his job creation bill, critics argue he has failed to unveil any sort of policy that would have meaningful effects on job growth in the U.S. manufacturing sector, even if his overall plan could stimulate GDP growth by as much as 2 percent, Bloomberg reports.
U.S.-based Dow Chemical has benefited, however, from generous federal incentives, with the company currently erecting a $363 million U.S. plant, half of whose cost the federal government is footing. Such policies, manufacturing executives affirm, are necessary should the U.S. continue to keep its manufacturing sector thriving over the coming years.
New technologies such as lithium-ion batteries and solar cells currently require federal assistance, experts say, as demand is simply not yet high enough for U.S. companies to devote considerable resources to their production. With the backing of the government, manufacturing companies can ratchet up their production capacity, create new jobs and prepare themselves for when demand picks up in a few years.
"An advanced manufacturing policy is what this country must have," Dow Chemical chief executive Andrew Liveris asserted.
To achieve such a policy in which the federal government aggressively funded domestic manufacturing companies would prove exceedingly difficult, as the U.S. political climate is largely anti-government, and hard-line conservatives in Congress generally view government-backed capital infusions – regardless of their intent –as inimical to future economic growth.
Still, manufacturing experts contend such a system is necessary should the U.S. hope to prevent future layoffs at its manufacturing companies, and set itself up for a sustained expansion of its manufacturing sector.
"I would not let free markets rule without also addressing what I want manufacturing to be 20 or 30 years from now," Liveris warned.
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