Violations On The Field
Manufacturers also need a level playing field with respect to the energy industry.
For example, in 2005 the top five oil companies averaged a return on capital employed of 26.2%, while a similar average for manufacturing was 7.1%. Are the oil companies four times as efficient as manufacturers? Or, is this proof that there is a tilted playing field, and that oil companies are not exposed to as much competitive pressure as manufacturers?
Unfortunately, we can expect electric utility returns to increase to similar non-competitive levels.
One reason is that electric utilities are beginning to use non-competitive "auctions" to obtain power from generating companies. In these auctions, the generators bid to supply electricity at varying prices. The distribution company then purchases as much as it needs from multiple generators, but pays all generators at a "market" price set by the highest priced generator.
If a manufacturer agreed to conduct such an auction, it would be a blatant anti-trust violation.
In addition, the electric utility industry deals in a product, which must be instantly generated, transmitted and used. An end user cannot use last year's electricity, cannot use any alternative product, cannot repair and keep using electricity, cannot shop for lower prices and cannot easily change suppliers. Electricity cannot be made overseas. Manufacturers benefit from none of these factors.
Thus, a huge part of the economy is being manipulated to the disadvantage of manufacturers.
Shouldn't manufacturers work together to attain a level playing field between our industry and the energy industry and to compensate for the absence of competitive free-market discipline in the energy industry?
No Best plants In New York?
I understand your comment "politics really isn't the issue here," but I wonder if it is really possible to totally separate politics from "Best Plants."
I see very few potential best plants in western New York state. Western New York also is void of anything remotely close to "Best Politics." This area is probably as far removed from being considered one of the "world's easiest places to do business" as is possible in this country.
It would be interesting to compare the world's easiest places to do business with the locations of the world's best plants. It is interesting to read your comments on keys to turning around U.S. manufacturing in the same issue as the article on "Rust Belt Rebound?" and not have the two connected in some way.
technical operations mgr.
Cherry Creek Woodcraft
South Dayton, N.Y.