Just In Time -- Manufacturing is not an Ideology

If you were hoping the government would pull us out of this recession, it's time for a new strategy.

If you believe the national media, the 2008 elections were a referendum on the economy, but as it's becoming increasingly clear, what really was being decided was what the role the government should play in dictating how business gets conducted in the United States. What worries me lately is that every announcement of major layoffs and triple-digit stock market plunges is accompanied by a "solution" that doesn't have any apparent relevance to the situation. The best way to describe the government's approach to overhauling the manufacturing industry is "chokes and balances": penalizing successful companies while offering a handout to businesses that don't deserve this largesse. Is this really the best time to choke off any hope of a recovery by burdening manufacturers with even more taxes and regulations?

The obvious phrase "we get the government that we deserve" keeps echoing in my head. We voted for these folks, so it shouldn't come as a big surprise when the government signals its intention to occupy an increasingly dominant role in how U.S. companies conduct their businesses. But here's the thing: Lost in the debate on how much pork and earmarks are in the various trillion-dollar budgets and stimulus efforts is the stark reality that government doesn't have the first clue in how manufacturers physically make their products, nor do they have any interest in learning. Taxes, they understand; regulations, they understand; basic manufacturing processes, they just don't get.

We recently conducted an IndustryWeek poll that asked:

"How has the recession affected your company's plans for capital spending in 2009?"

  • Significantly reduced (10% or more reduction) 62%
  • Slightly reduced (1%-9% reduction) 9%
  • No change 19%
  • Slightly increased (1%-9% increase) 1%
  • Significantly increased (10% or more increase) 9%

The surprise in these numbers, of course, isn't that 71% of manufacturers are reducing their spending this year (most by 10% or more), but that somehow, 9% of respondents actually plan to significantly increase their spending in 2009. That's a remarkable show of faith in an economy that's anything but robust.

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Looking at the latest NAM/IW Manufacturing Index numbers for the fourth quarter of 2008, the situation is similarly bleak. Over the next 12 months, large manufacturers expect their capital expenditures to decline by 4.2% while small manufacturers (those employing fewer than 1,000 employees) expect their capital investment to fall by 2% over the same period. Significantly, this represents the first time in the 10-year history of the survey that small manufacturers expect to reduce capital expenditures over the coming year. According to NAM's chief economist David Huether, "The fourth quarter survey suggests that investment spending by manufacturers will remain negative over the next several quarters."

Historically, the manufacturing industry has proven to be resilient enough to survive even the most lame brained attempts by politicians to cripple it, but these days, the one-two-three punch of tight credit, a bad economy and a manufacturing-unfriendly political climate casts the near-term vitality of industrial America in doubt. Let me suggest again, as I have in the past, that only by continuously improving their production processes and their workforces will U.S. manufacturers be able to stay in business and successfully compete. If your 2009 strategy was to wait for the government to pull you out of this recession, it's time for a new strategy.

This will be my final "Just In Time" column in these pages, as I've been promoted to the role of editorial director for Penton's Supply Chain group of magazines. I'll continue to contribute to IndustryWeek in an advisory capacity, but this issue marks the end of my three-year tenure as IW's editor-in-chief. Let me offer my thanks to an exceptionally talented staff, to all those companies who've supported IW over the years, and to you, the readers, who represent the best and brightest of U.S. manufacturing and who will develop and rebuild our country's industrial base through your ingenuity, dedication and perseverance.

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