Industry Insight
December 2008
We Saw Who You Voted for on November 4th...
Just Kidding. Don't worry - your ballot was secret and your vote was private. But imagine if there was no secret ballot. What would it be like if you had to cast your vote with everybody looking? Not just strangers - but your boss and your co-workers?
Sound undemocratic? That's because it is. Unfortunately, labor unions are pushing the misnamed “Employee Free Choice Act” (EFCA), a bill in Congress that would kill the secret ballot in union organizing elections, and it's shaping up to look like this will be one of the first bills introduced when Congress reconvenes in January.
With no secret ballot, small businesses could find themselves overrun by union organizers before they even knew a campaign was underway.
So, what can you do?
Recently, the State Chamber/AIA announced the formation of the coalition: Arkansans for the Secret Ballot. To date, the coalition consists of nearly 500 members from various sectors — all united by their desire to persuade members of Arkansas’s Congressional Delegation to vote against this undemocratic measure when it resurfaces in early 2009.
State Chamber President and CEO Randy Zook continues to speak to groups around the state to educate Arkansans about EFCA and rally those in the business community to oppose it.
“The bill represents an unfair shift towards union interests,” Zook said, “For the sake of Arkansas workers and Arkansas business, we must do everything we can to persuade Senators (Mark) Pryor and (Blanche) Lincoln to vote against it.”
If you are unable to attend one of these meetings but would like to learn more about EFCA, you may visit the Web site www.yoursecretballot.com. There you will find resources for joining the coalition, as well as tips and instructions on contacting members of the Arkansas Congressional Delegation and encouraging them to vote “no” on this harmful legislation. You may also call Arkansans for the Secret Ballot at 501-975-8344.
Labor Optimistic About Card Check Under Obama
The Washington Times reported on November 20th that William Samuel, government-affairs director of the AFL-CIO, expressed confidence to Washington Times reporters that the Employee Free Choice Act "will pass Congress and be signed by President Barack Obama.”
"In a wide-ranging interview, Samuel also said that the more than $300 million spent by labor unions to educate workers was crucial to the Democrats' success in key battleground states, such as Ohio and Michigan. ... The AFL-CIO's agenda includes not just the Free Choice Act, also known as 'card-check,' but also a substantial economic-stimulus bill, health care reform, expanded family and medical leave and paid sick leave." However, "business organizations strongly oppose card-check legislation and have made clear in post-election forums that they would fight it vigorously."
Fed Lays Out New Steps for Economic Relief
The Wall Street Journal reported that "Federal Reserve Chairman Ben Bernanke laid out new steps the Fed might take to lift the economy, as the panel that monitors the US business cycle said the nation has been in recession for a year."
Bernanke said that "more reductions in short-term interest rates are 'certainly feasible,' and other steps could include "an unusual attempt to bring down long-term interest rates by purchasing Treasury notes and bonds, something the Fed hasn't done since the early 1950s."
The Journal adds "the news is not all dire. The unemployment rate, at 6.5 percent, is rising but still well shy of its 7.8 percent level after the 1990-91 recession or the double-digit levels of the early 1980s. Mr. Bernanke also noted that falling oil prices have been a relief to households. But even that bright spot is related to the weak economy, since the global downturn is sapping demand for energy."
Automakers Prepare Bailout Proposals for Congress
The New York Times reported that Detroit's Big Three automakers are preparing to address Congress in hopes of persuading "lawmakers to give them $25 billion in federal aid."
The automakers plan to "deliver more detailed plans for how they would use that money not just to survive, but also to turn themselves around to be competitive in the long term." GM is "expected to propose a significant shrinking of its North American operations, including shutting more factories and streamlining its sprawling brand lineup."
Meanwhile, "Ford Motor Company...is not likely to propose more cuts, as it is further along than Chrysler and GM in shifting to a more fuel-efficient lineup of vehicles. It also has more cash to weather the downturn." Chrysler "has acknowledged it is running out of cash and may tell Congress that it needs a merger or alliance with another company to survive long term."
The Financial Times noted "GM executives worked through the weekend in Detroit on their plan" and "GM's board [was] due to meet in Detroit on Monday to finalize its document, which could run to about 80 pages and is likely to include financial projections based on various market scenarios. A second rebuff from lawmakers this week would be likely to postpone any financial aid until after Barack Obama's inauguration as president on January 20." The Times adds, "The three chief executives will make their case before the House financial services committee on Friday, hoping for a warmer reception than their last appearance 10 days ago when they were excoriated for their companies' past mistakes and for bringing their begging bowls to Washington in their corporate jets."
The AP added that "members of Congress remain deeply divided on the aid, with many in both parties wary of supporting another costly government rescue on the heels of the $700 billion Wall Street bailout. Sen. Lindsey O. Graham (R-S.C.) said he would not back the help for the U.S. auto industry." While "Sen. Claire McCaskill (D-Mo.) said she's willing to consider an auto bailout, but not before Congress gets a clear accounting of the companies' financial situation."
Department of Labor Announces Final FMLA Regulations
On November 17, the Department of Labor (DOL) issued the long-awaited final regulations for the Family and Medical Leave Act (FMLA). The new regulations take effect on January 16, 2009 and will provide additional leave for military families, and provide greater clarity and understanding of the law. For details on this on other FMLA issues, please click here .
Study Shows Costs Have Hurt Competitiveness of U.S. Manufacturers
The Chicago Tribune /AP reported "costs that hamper the competitiveness of U.S. manufacturers have fallen in recent years compared with those of foreign producers, but high corporate taxes and other expenses still put domestic products at a distinct disadvantage in global markets," according to the National Association of Manufacturers (NAM)."
"Manufacturers face continued, serious disadvantages compared to other producers,” according to John Engler, president of NAM. The organization "plans to lobby...Congress for corporate relief measures due to the ongoing financial crisis. Those include a push for more spending on infrastructure projects, delaying some funding requirements of a 2006 pension reform law, and tax breaks that would allow domestic companies to bring foreign earnings back to the United States."
"The drop comes as U.S. manufacturers contain costs, while expenses rise for overseas producers," the AP added. Manufacturers "say the U.S. corporate tax rate of 35 percent is still too high, third behind only Japan and Chad, and the trade group is pushing President-elect Barack Obama and Congress for changes, such as a reduction in the rate to 25 percent or lower."
In a related article in Reliable Plant Magazine , "Manufacturers Alliance/MAPI president and CEO Thomas Duesterberg said the main drivers of the narrowing cost gap are employee benefits and pollution abatement costs. ... The study also shows that growth in health insurance costs in the United States has slowed markedly in recent years." Engler added that "while progress has been made, we look forward to working with the new Administration and Congress to further reduce US manufacturing's structural costs and help get the economy back on track in 2009."
The Manufacturing Institute and the Manufacturers Alliance/MAPI’s 2008 update of the cost study, The Tide is Turning: An Update on Structural Cost Pressures Facing U.S. Manufacturers, is available here .
US Economy Contracted 0.5 Percent in Third Quarter
AFP reported, "Revising down its earlier estimate for gross domestic product (GDP), the U.S. economy contracted at a 0.5 percent pace in the third quarter, the government said on November 26. Last month, the Commerce Department in its first estimate had pegged the downturn at 0.3 percent."
Economists said that "the downturn in the fourth quarter could be much worse, reflecting a credit crunch and ongoing woes in housing and manufacturing." Housing "remained a big drag on the economy, with investment in property down 17.6 percent, even though that was slightly better than last month's estimate of a 19.1 percent drop," yet "the overall figure would have been weaker but for exports, which increased 3.4 percent in the third quarter, and government expenditures and investment, up 13.6 percent." In addition, "businesses built up inventories as well, which added 0.89 percentage points to the third-quarter GDP."
The AP reported that "consumer confidence rose in November amid receding gas prices, but Americans' views on the economy remained the gloomiest in decades as they grappled with layoffs, slumping home prices and dwindling retirement funds."
The Conference Board said "that its Consumer Confidence Index was 44.9, up from a revised 38.8 in October. Last month's reading was the lowest since the research group started tracking the index in 1967." Lynn Franco, director of the Conference Board Consumer Research Center, said "despite the improvement in the Expectations Index this month, consumers remain extremely pessimistic and the possibility that economic growth will improve in the first half of 2009 remains highly unlikely." The Times adds that "consumers are hunkering down amid job losses, tanking investment portfolios and sinking home values, which are making them nervous about spending."
OECD Warns That Advanced Economies Face Protracted Recession
The New York Times reported that "developed economies face a protracted recession and a sharp increase in unemployment, the Organization for Economic Cooperation and Development (OECD) warned Tuesday, and it called for aggressive economic stimulus measures." The OECD said in its twice-yearly economic outlook that "many advanced economies are in or nearing downturns of a magnitude not experienced since the early 1980s.
The organization includes European countries, the United States, Canada, Japan and Australia." The OECD "projected that the economies of its 30 members would decline in 2009 by 0.4 percent overall, after growth of 1.4 percent this year. It forecast that growth would return in 2010, with advanced economies growing a combined 1.5 percent." The OECD specifically said the "American economy would decline 0.9 percent next year, after posting growth of 1.8 percent this year."
Survey Finds Innovation Gives Manufacturers More Profit Advantage
Control Engineering reported that "innovation may cost more but it pays off in the long run. Profitability gaps between companies competing on the basis of innovative products or processes and those firms competing with a low-price advantage more than doubled over the past three years," the 2008 Georgia Manufacturing Survey indicated.
"Companies competing on the basis of innovation had a three-year average return on sales of 14.5 percent, nearly twice the 7.6 percent for companies competing with low prices." But even so, "fewer than 10 percent" of manufacturers surveyed "use innovation as a competitive edge." Instead, "quality products or services," as well as "quick delivery, adding value, and adapting to customer needs" are used to create a competitive edge. In terms of "top concerns," the manufacturers listed energy, "educational needs," and the "adoption of lean manufacturing principles."
Manufacturing Industry Faces Employee Shortage as Baby-Boomers Retire
Manufacturing Business Technology reported that "the manufacturing industry has long been a cornerstone of the American economy. According to a study conducted by The Industrial College of the Armed Forces, it is the fourth-largest contributor to the country's economic growth, accounting for 22 percent of the gross domestic product growth at the time of the study." And "as baby-boomers begin to retire, the manufacturing industry is faced with the fact that its knowledge base is about to walk out the door."
The National Association of Manufacturers says that "approximately 20 percent of small to medium-size manufacturing companies -- with 2,000 workers or fewer -- reported that retaining or training employees is their No. 1 concern." The article adds that "the impending retirement boom is not a problem that will go away. Ensuring the proper knowledge hand-over is one of the most important steps manufacturing executives can take to preserve the health of their companies, the industry and the economy as a whole."
Federal Appeals Court Blocks Shell from Drilling Off Alaska's North Slope
The New York Times reported that "a federal appeals court in November blocked Royal Dutch Shell from drilling oil wells off Alaska's North Slope after finding that the Interior Department had failed to conduct an environmental study before issuing the company's drilling permit.
In a long-awaited ruling, the court said that the Minerals Management Service, the federal agency in charge of offshore leasing, had violated the 1970 National Environmental Policy Act by failing to take a 'hard look' at the impact that offshore drilling would have on bowhead whales in the Beaufort Sea as well as indigenous communities on the North Slope."
Environmental groups had "sued to stop Shell from drilling, claiming that the company's plans to send icebreakers, drill ships and vessels to conduct seismic surveys might harm bowheads." The Times adds that "the decision is a costly setback for Shell, which had waged a vigorous campaign to expand offshore exploration in Alaska."
Manufacturers Seeking More Flexible Factories, Shorter Product Lifecycles
IndustryWeek reports that "today's automation solution providers are working closely with their customers, helping manufacturers achieve their goals of more flexible factories with shorter product lifecycles." Furthermore, "machine tool builders are...developing a strategic direction to facilitate the factory of the future."
Brian Papke, president of Mazak Corp., advised: "First of all consider the growing challenges inherent in future product evolution. As manufacturing proceeds into the future, we anticipate the growing rate of product change to continue, even accelerate." Papke "expects to see more and more production work coming back to the U.S." as a result of "new developments in factory automation." He "sees product design continually moving products toward a new approach to simplicity -- fewer, but more complicated parts."
During "planning and projecting a new facility's product mix, don't overlook the most basic question -- concerning where the proposed factory of the future will be located, says Papke. His advice: Know your production costs. Before selecting an offshore site, be sure to factor in the logistical costs and supply delays in chasing lower labor rates. Also, determine the cost reduction potential of part redesign."
In an article about "the factory of the future," IndustryWeek reported that "at the highest level, three essential trends are the driving forces behind tomorrow's factories, says Georgia Tech's Leon McGinnis, associate director of the university's Manufacturing Research Center." First, "globalization of the supply chain" is greatly "increasing the number of 'non-transparent' interfaces and presents the challenge of integration between functions that are dispersed across many corporate entities."
Another trend is "technology that simultaneously de-materializes the product while vastly increasing complexity." For example, "electrical actuation is replacing the bulky physical presence of cumbersome hydraulics in automobile power steering and aircraft landing gear." Lastly, "demographics and the impact on demand patterns. In the factories of the future, McGinnis predicts shorter product lifecycles, more 'nameplates' per unit sold and faster transitions between products."
