Industry Insight

Industry Insight

March 2009

 

Economic Update

 

Dave Huether, chief economist for the National Association of Manufacturers, reported that for the first time in a long while, a majority of the economic indicators that came out last week did not decline. Of the eight major economic reports, only three declined. However, the three indicators that did deteriorate were all measures of manufacturing activity.

 

The Federal Reserve reported that manufacturing production fell 0.8 percent in February, the fourth consecutive monthly decline. Due in part to a rebound in motor vehicle production, the March decline was milder than the prior three months. Last week's two Federal Reserve district manufacturing reports (New York Fed and Philadelphia Fed) showed that industrial output continued to remain weak in March. On the positive side, both surveys reported positive expectations for future business activity.

 

The positive news reported was on the housing situation. Following seven consecutive monthly declines, both building permits and housing starts rose in February. The rise in housing starts beat expectations and surged 22 percent, the biggest monthly gain in 19 years. In addition, the National Association of Homebuilders' Housing Market Index held steady in March and has remained essentially unchanged (albeit at a very low level) for five months. Together, these reports offer some hope that the housing market may finally be bottoming out. 

 

Last week, the Federal Reserve announced that it will buy as much as $300 billion in long-term U.S. Treasury securities in coming months as well as hundreds of billions of mortgage-backed securities and other debt in an effort to raise the supply of credit and reduce long-term interest rates paid by businesses and homeowners. While this move has long-term inflationary concerns, it increases the possibility that a recovery in the housing market could begin before the end of the year.

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Fate of Employee Free Choice Act Said To Depend On Four Senators

Logistics Management reported, "Four senators likely will decide the fate of "the Employee Free Choice Act (EFCA): Sens. Blanche Lincoln (D-AR), Mark Pryor (D-AR), Michael Bennet (D-CO), and Arlen Specter (R-PA). The U.S. Chamber of Commerce has begun a "multi-million-dollar campaign against EFCA. Thomas J. Donohue, president of the 3 million-member Chamber, calls it simply a 'union power grab.'" In addition, the board of NAM "recently unanimously passed a resolution against the bill." NAM President and Chief Executive Officer John Engler said "at a time when our economy is struggling to create and retain jobs, I am concerned that Congress would introduce the anti-democratic Employee Free Choice Act. If passed, EFCA would destroy jobs and place an even heavier burden on large and small companies. 

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Treasury Secretary Says Financial Regulatory System Failed Major Test

The AP reported, "Treasury Secretary Timothy Geithner said Monday that the severe banking crisis shows the U.S. financial regulatory system failed a major test and is in need of an overhaul." Geithner told a Washington conference that the Obama administration "plans to work with Congress to put in place a stronger, more stable system with a modernized government regulatory structure." The administration will "urge Congress to grant it the authority to take over major troubled institutions whose collapse is judged to pose a threat to the entire financial system." Geithner said "it was critical that the government make the needed reforms." The administration is "unveiling its proposals on regulatory reform a week before Obama goes to London for a meeting on April 2 of the Group of 20 major industrial and developing nations."

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Governor’s Quality Award Application Deadline Approaching

What happens when you combine a proven method of assessing how your organization is performing in the current economic environment with an opportunity for professional development and benchmarking with leading industries in our state? You have the Governor’s Quality Award Program and sponsors from across the state joining forces to present the 2009 Challenge Manufacturing and Healthcare Seminars. 

Both of these seminars will be excellent professional development opportunities for your company. Up to 10 members from your company can attend either seminar and gain valuable knowledge about human resources, training and survival in today’s economy.

The featured speaker for the Manufacturing Challenge Seminar is Randy Zook , President  & CEO of the Arkansas State Chamber of Commerce and Associated Industries of Arkansas. For 20 years Randy was the President/CEO of Atlantic Envelope Company based in Atlanta , a $250 million business with 1,500 employees in seven plant locations. Randy understands manufacturing. Arkansas Manufacturing Solutions will present “Training Within Industries.” A panel of experts in workforce development will be discussing generational differences and how to use those differences to your advantage, how to motivate and reward your workforce, and how creating teams of workers based on personality can improve productivity and morale in your workplace.

The Governor’s Quality Award Program and five major healthcare organizations are presenting the 2009 Challenge Healthcare Seminar. The Foundation for Medical Care, American Data Network, Arkansas Healthcare Association, Arkansas Hospital Association and Community Health Centers of Arkansas have all partnered to bring improvement and success in the healthcare field in the state.

The Challenge Healthcare Seminar scheduled for June 10 at the Statehouse Convention Center will be an excellent professional development opportunity for your staff. Up to 10 members of your staff can attend this seminar and gain valuable knowledge about not only improving the healthcare field as a whole but how they can apply those improvements to their individual organizations.

The featured speaker is Dr. Carl Couch, Senior Consultant for Clinical Excellence and Medical Director for HealthTexas Provider Network with Baylor Healthcare. Dr. Couch will provide strategies for improvement and professional development through organizational leadership, understanding who your customers are and how to best serve them, measurement and feedback, and employee partnerships at all levels. 

For more than 15 years, the Governor’s Quality Award Program has been serving Arkansas ’s organizations by identifying strengths and opportunities for improvement and creating a culture of quality using the Baldrige Criteria as a measurement tool. This year, in addition to industry-related challenge seminars, Benchmark tours will be offered in June to Baxter Healthcare in Mountain Home and Clearwater Paper in McGehee. Any organization that has been in the program previously may apply at the Challenge Level to participate in the seminar and benchmark tours.

If you’re interested in applying to the program and receiving the benefits of application, go to www.arkansas-quality.org for more information. Please contact Sue Weatter at sweatter@arkansasstatechamber.com or call 501-372-2222 with additional questions. If you would like to apply to the Governor’s Quality Award Program for 2009 and participate in the 2009 Challenge Manufacturing Seminar and Benchmark Tours, the deadline to show your intent to apply is Wednesday, April 1. 

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EPA Says Carbon Dioxide Is A Danger To Public Health

The Wall Street Journal reported the Environmental Protection Agency has submitted a proposed finding to the White House indicating that "carbon dioxide is a danger to public health, a step that could trigger a clampdown on emissions of greenhouse gases across a wide swath of the economy." Were the White House to approve the finding, the EPA could "use the Clean Air Act to control emissions of carbon dioxide and other greenhouse gases believed to contribute to climate change," and "raise pressure on Congress to enact a system that caps greenhouse gases." Business groups such as the U.S. Chamber of Commerce and the National Association of Manufacturers warn that if the EPA moves forward on regulation of CO2 under the Clean Air Act -- instead of a measured legislative approach -- it could hobble the already weak economy."

The AP reported the White House has indicated it will "move cautiously when it comes to actually regulating greenhouse gases, preferring to have Congress act on the matter." White House Press Secretary Robert Gibbs said, "I think this is just the step in [the] process" of determining whether emissions should be regulated under the Clean Air Act. Another White House official suggested it would be "'a long process' before any rules would be expected to be issued on heat-trapping emissions."

The Washington Post added on the front page that White House spokesman Ben LaBolt stressed, "The president has made clear that to combat climate change, his strong preference is for Congress to pass energy security legislation that includes a cap on greenhouse gas emissions."

The Detroit News reported California and a dozen other states "want to impose their own limits on carbon dioxide emissions under the Clean Air Act," but William Kovacs, vice president of Environment, Technology, and Regulatory Affairs at the U.S. Chamber of Commerce, has warned that granting a waiver to these states "could damage automakers." Kovacs said, "At a time when we need to jumpstart our economy, regulating CO2 in this manner would stop most of President Obama's stimulus proposal cold in its tracks and create a regulatory train wreck."

The New York Times reported in its Green Inc. column that Charles Territo, a spokesman for the Alliance of Automobile Manufacturers, indicated the auto industry would "submit comments during a public comment period before the rule is finalized." Territo stressed, "Regardless of whether or not an endangerment finding is made, manufacturers believe that fuel economy and greenhouse gas emissions standards should be set at the maximum feasible level," and should be "cost-effective."

In a separate article, the New York Times reported that "many doubt that legislation to cap emissions can pass this year, in the midst of a recession and at a time when carbon dioxide emissions are down because production is lower." It is believed that the White House would prefer to see Congress create regulation as "Congressional action is less subject to litigation and could not be easily overturned by a new administration," according to Paul Bledsoe of the National Commission on Energy Policy. 

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Energy Secretary Advocates Establishment of Carbon Tariffs

The Wall Street Journal reported last week, "Energy Secretary Steven Chu on Tuesday advocated adjusting trade duties as a 'weapon' to protect U.S. manufacturing, just a day after one of China's top climate envoys warned of a trade war if developed countries impose tariffs on carbon-intensive imports." Mr. Chu said "establishing a carbon tariff would help 'level the playing field' if other countries haven't imposed greenhouse-gas-reduction mandates similar to the one President Barack Obama plans to implement over the next couple of years." Mr. Chu's comments came "amid other signs of concern among U.S. trading partners about protectionist rhetoric and legislation from Washington ." The carbon tax issue is "important to energy-intensive U.S. industries -- including paper, cement, fertilizer, steel and glass manufacturers -- that worry that costs imposed by climate-change laws will put them at a disadvantage to rivals in nations that aren't bound by similar requirements."

The Washington Times reported, "President Obama's climate plan could cost industry close to $2 trillion, nearly three times the White House's initial estimate of the so-called 'cap-and-trade' legislation, according to Senate staffers who were briefed by the White House." The Times added, "At the meeting, Jason Furman, a top Obama staffer, estimated that the president's cap-and-trade program could cost up to three times as much as the administration's early estimate of $646 billion over eight years. ... A White House official did not confirm the large estimate, saying only that Obama aides previously had noted that the $646 billion estimate was 'conservative.'"

On its website, the Wall Street Journal added that "a White House official...said excess revenues from any cap and trade bill that passes Congress will be used to compensate vulnerable families, communities and businesses."

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U.S. Manufacturers Brace for Higher Export Costs to Mexico

The AP reported, " U.S. manufacturers, already struggling under a global recession, braced [last] Thursday for more layoffs plus higher costs to export to Mexico , the nation's second-largest trading partner, after its government slapped tariffs on 89 products in a trade dispute." The new tariffs "apply to 36 agricultural and 53 industrial products, including onions, strawberries, shampoo, toothpaste, pet food, books, pencils and dishwashers. The only item facing a 45 percent tax is fresh grapes. Some 55 other products will be taxed at 20 percent, and the remaining 33 items at 10 to 15 percent." Meanwhile, the National Association of Manufacturers (NAM) "warned that as many as 17,000 more U.S. workers could face unemployment because of the ' U.S. refusal to honor' cross-border trucking provisions in NAFTA." Frank Vargo, the NAM 's vice president for international economic affairs, commented, "This comes at a time when U.S. industry can least afford lost sales and competitiveness in important global markets."

Bloomberg News noted, "Potato growers alone could lose an annual market of $80 million, said John Keeling, chief executive of the National Potato Council in Washington ." Mexico acted after Congress "inserted in a budget bill a provision to halt funding for a program that let a limited number of Mexican trucks deliver goods throughout the U.S. " Mexico left "untouched the largest exports, those of auto parts and machinery, which could have hurt companies such as automaker Ford and appliance manufacturer Whirlpool Corp." The tariffs also "spared the largest agriculture commodities such as chicken, pork and beef from Tyson."

For a list of products covered by the new tariffs, click here. 

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Statement from SBA on Recovery Efforts Announced by President Obama 

Earlier this month, U.S. Small Business Administration (SBA) Acting Administrator Darryl K. Hairston outlined steps being taken by the SBA and the U.S. Department of Treasury to address the economic challenges facing small businesses and entrepreneurs across the country. According to Hairston, “SBA is implementing two key provisions laid out in the Recovery Act – we are temporarily eliminating certain loan fees and raising guarantees on some 7(a) loans up to 90 percent. With these critical steps by SBA, and the Treasury Department’s commitment of up to $15 billion aimed at getting lending markets flowing again, we are standing up with small business owners across this country and telling them how we are going to put much-needed capital in their hands.

Specifically, the SBA will:

·          Temporarilyraise guarantees to up to 90 percent on SBA’s 7(a) loan program, through calendar year 2009, or until the funds are exhausted. This increase in guarantee levels will help provide banks with the greater confidence they need to extend credit during the current recession, will mean more capital available to small business owners around the country.

·          Temporarilyeliminate fees for borrowers on SBA 7(a) loans and for both borrowers and lenders on 504 Certified Development Company loans, through calendar year 2009, or until the funds are exhausted. This will mean more capital available to small businesses at a lower cost. The fee elimination is retroactive to February 17, the day the Recovery Act was signed. SBA is developing a mechanism for refunding fees paid on loans since then.

For more information on the SBA and Treasury initiatives visit the SBA Web site at www.sba.gov.

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