Wal-Mart's Imports Soar; U.S. Exports Junk

Wal-Mart's imports via ocean container surged by 27.5 percent in 2004, according to the data compiled by the Journal of Commerce and its Port Import/Export Reporting Service (PIERS). Wal-Mart imported 576,000 20-foot equivalent container units (TEUs) in 2004, an increase from 417,600 TEUs in 2003 and up from 291,900 TEUs in 2002. Wal-Mart's imports via containers increased by 49.3 percent in only two years.

On the export side of the ledger, the largest U.S. exporter via container remained American Chung Nam, according to the Journal of Commerce research. The company exported 201,100 containers of scrap paper last year mostly to China, up from 187,500 containers in 2003. The second largest U.S. exporter was Weyerhaeuser, which also sold paper (154,900 containers).

Four of the top 10 U.S. exporters sold paper. Only two of the country's top 10 exporters via container could be classified as manufacturers of products: Procter & Gamble in the eighth spot (54,200 TEUs) and DaimlerChrysler in tenth place (with 50,100 TEUs).

Twenty-nine of the 100 largest U.S. exporters via containers sold paper or waste paper. Another 26 sold food, cattle feed or cotton. Combined, more than half of the United States's largest exporters sold something that was grown. The next largest exported product category via container - at 19 companies - was chemicals.

Imports continue to surge. The top 10 importers brought 1,885,400 TEUs into the United States last year, up 19.2 percent over 2003 (1,559,200 TEUs) and 35.6 percent more than in 2002 (1,214,500 TEUs).

Unlike exporters, the top 100 importers were concentrated in high-value-added finished manufactured goods, with few bringing raw materials, minerals, chemicals or bulk paper into the country. Seven of the top 10 importers were large box retailers: Wal-Mart, Home Depot, Target, Sears, Ikea, Lowes and Costco. At least one-third of the country's largest importers were retailers. At least 50 of the top 100 importers were classified as "manufacturers" of electronics, automobiles and parts, furniture and footwear, including companies such as Sony, Samsung Electronics, Matsushita, Whirlpool, Toyota, Mattel and Nike.

Of the top 100 U.S. exporters in 2004, 11 can be considered U.S. manufacturing companies - Procter & Gamble, General Electric, Ford, Kimberly Clark, Caterpillar, Goodyear, General Motors, USG, Honeywell, Alcoa and Kodak. Combined, these companies exported 269,600 containers. Their exports were less than half the number of containers (576,000) imported by Wal-Mart, and about one-quarter the total number of containers imported by the top three importers (at 1,080,000), which includes: Wal-Mart, Home Depot (301,200) and Target (202,700).

The Journal of Commerce data is unique in that it is gathered from many sources and provides non-aggregated statistics for individual companies involved in international trade. The data on the following pages is used with permission from the Journal of Commerce, http://www.joc.com.

Top 100 U.S. Importers Via Ocean Container Transport - 2004
As measured in 20-foot-equivalent container units or TEUs The first number listed for each company is the number of TEUs imported in 2004, followed by 2003 imported TEUs and 2002. NR means the company was not on the list for that year. SOURCE: Journal of Commerce and the Port Import/Export Reporting Service.

1. Wal-Mart Stores, retail, 576,000, 417,600, 291,900
2. The Home Depot, retail, 301,200, 267,100, 182,000
3. Target Corp., retail, 202,700, 208,400, 173,100
4. Sears (includes K-Mart), retail, 186,000, 106,300, 60,4000
5. Dole Food, food, 164,100, 171,300, 142,900
6. Chiquita Brands Intl., food, 115,600, 108,600, 103,200
7. Ikea Intl., retail, 100,000, 60,200, 44,700
7. Lowes Cos., retail, 100,000, 96,500, 82,900
9. Heineken USA, beverages, 83,400, 77,700, 75,000
10. Costco Wholesale, retail, 66,400, 23,200, 19,382
11. Ashley Furniture Inds., furniture, 69,800, 53,400, 45,200
12. Payless ShoeSource, retail, 54,200, 56,800, 55,000
13. Samsung, electronics, 52,800, 40,800, 46,200
14. Matsushita Electric, electronics, 52,100, 52,800, 41,500
15. Toyota Motor Sales, autos, 52,000, 49,050, 45,000
16. General Electric, conglomerate, 51,800, 49,300, 48,500
17. Williams Sonoma, retail, 50,000, 22,400, 19,200
18. Mattel, toys, 49,300, 41,000, 43,700
19. Pier 1 Imports, retail, 48,100, 47,300, 46,700
20. Nike, footwear & apparel, 47,900, 41,800, 38,700
21. Sony Corp., conglomerate, 47,100, 50,700, 40,000
22. Michelin, tires & rubber, 46,100, 35,100, 34,500
23 JC Penny Corp. 45,000, NA, NA
24. LG Group, conglomerate, 43,300, 44,700, 33,500
25. Bridgestone/Firestone, tires, 42,500, 40,000, 26,800
26. Limited Brands, retail, 41,300, 37,000, 35,000
27. Dollar General, retail, 40,000, NA, NA
28. Toys 'R' Us, retail, 39,300, 40,900, 40,000
29. Big Lots, liquidator-retail, 36,300, 46,000, 45,800
30. Fresh Del Monte Produce, food, 32,400, 29,000, 12,600
31. Ford Motor, autos, 29,700, 31,200, 31,100
32. Doral Industries, furniture, 28,700 16,000, NR
33. Nestle, food, 28,500, 21,700, 14,300
34. Nissan North America, autos, 27,700, 21,000, 16,500
35. Yamaha, transportation mfg., 27,300, 26,800, 24,600
36. Philips Electronics, electronics, 27,200, 26,600, 22,000
37. Michaels Stores, retail, 27,100, 24,800 14,600
38. Whirlpool, appliances, 26,800, 21,900, NR
39. Canon, computers, 26,200, 23,200, 20,000
40. Walgreen Co., retail, 25,500, 19,500, 17,200
41. Rooms to Go, retail, 24,200, 21,100, 19,800
42. Thomson, electronics, 24,200, 23,800, 21,400
43. Federated Dept. Stores, retail, 23,700, 15,000, 13,000
44. P&G, consumer products, 23,000, 19,400, 18,000
45. DuPont, chemicals, 22,800, 22,500, 20,000
46. Emerson Brands, conglomerate, 22,600, 20,200, 20,000
47. Marubeni America, chemicals, 21,800, NR, NR
47. Jarden Corp., appliances, 21,800, 22,600, 14,600
49. Stora Enso N.A., forest products, 21,700, 16,300, 16,300
50. Reebok Intl., footwear, 20,600, 19,000, 9,500
51. Red Bull, beverages, 20,400, NR, NR
51. Hankook Tire Americas, tires, 20,400, 13,100, NR
53. Dollar Tree Stores, retail, 19,300, NR, NR
54. Dow Chemical, chemicals, 19,900, 17,700, 15,000
55. Natuzzi Americas, furniture, 19,654, 21,900, 20,800
56. Goodyear, tires/rubber/retail, 19,400, 16,100, 14,200
57. Family Dollar Stores, retail, 19,300, 12,600, 10,000
58. Retail Ventures-Value City, retail, 18,800, 13,800 13,000
59. TJX, retail, 18,200, 15,700, 15,000
60. Sharp Electronics, electronics, 17,900, 17,400, 19,700
61. Conair, appliances & housewares, 17,800, 18,200, 15,100
62. Liz Claiborne, apparel, 17,500, 16,000, 14,000
63. Bayer Corp., chemicals, 17,400, 15,100, NA
64. Toyo Tire & Rubber, tires/auto parts, 16,900, 15,100, 12,900
65. Fonterra Corp, beverages, 16,700, 14,600, NA
66. Toyota, autos/parts, 16,000, NA, NA
67. JoAnn Stores, retail, 15,900, NA, NA
68. Foxconn Electronics, computers, 15,400, 15,500, NA
69. Caterpillar, machinery, 15,300, 13,600, 12,000
70. Arauco Wood Products, forest products, 15,000, NA, NA
71. Gap Stores, retail, 14,800, 13,200, 12,000
72. DaimlerChrysler, autos, 14,600, 14,400, 14,200
73. May Department Stores, retail, 14,500, 15,000, 13,000
73. TPV Intl., electronics, 14,500, NA, NA
75. Best Buy, retail, 14,400, NA, NA
76. Bombay Co., retail, 14,300, 15,600, NA
76. Fuji Photo Film, photo imaging, 14,300, 12,900, 10,500
78. Pacific Fruit, food, 14,200, 13,400, 14,100
78. BMW, autos, 14,200, 15,000, 14,000
78. Haier America Trading, appliances, 14,200, 16,600, 15,900
78. Hasbro, toys, 14,200, 16,700, 13,300
82. Salton, appliances, 14,100, 14,600, NA
83. Suzuki, auto & transport, 13,700, 13,400, 12,300
84. Linens & Things, retail, 13,600, NA, NA
85. Office Max, retail, 13,400, NA, NA
85. Epson America, computers, 13,400,11,900, 10,900
87. Coaster of America, furniture, 13,300, 13,300, NA, NA
88. Staples, retail, 13,200, 12,100, NA
89. Yazaka, auto parts, 12,900, NA, NA
90. Southern Wines & Spirits, beverages, 12,300, 11,700, NA
91. Ricoh Corp., electronics, 11,600, 12,700, NA
91. Norske Skog, forest products, 11,600, 19,700, 19,000
91. Brother Intl., electronics, 11,600, NA, NA
94. Applica Consumer Products, appliances, 11,100, NA, NA
98. American Honda Motor, autos, 10,300, 50,400, 46,200
98. Groupe Danone, food/beverages, 10,300 24,300, 22,300
100. CVS Corp., retail, 10,200, 11,800, 16,000

Top 100 U.S. Exporters Via Ocean Container Transport - 2004

As measured in 20-foot-equivalent container units or TEUs. The first number is the number of TEUs exported in 2004, followed by TEUs exported in 2003 and 2002. NR means the company was not on the list for that year. SOURCE: Journal of Commerce and the Port Import/Export Reporting Service.

1. American Chung Nam, wastepaper, 201,100, 187,500, 156,500
2. Weyerhaeuser, forest products/paper, 154,900 102,200, 95,600
3. DuPont, chemicals, 123,000, 101,200, 104,000
4. Cargill, food, 80,600 76,800, 51,200
5. MeadWestvaco, paper, 66,800, 59,900, 59,000
6. Dow Chemical, chemicals, 64,700, 51,100, 52,400
7. Cellmark Group, paper, 56,700, 63,900, 45,100
8. P&G, consumer products, 54,200, 50,600, 48,000
9. BASF, chemicals, 50,200, 40,400, 38,500
10. DaimlerChrysler, autos, 50,100, 49,400, 47,000
11. General Electric, conglomerate, 50,000, 46,600, 44,400
12. Altria Group, food, tobacco, 47,500, 46,000, 44,700
13. Allenberg Cotton, cotton, 45,900, 34,400, 21,200
14. ExxonMobil Chemical, chemicals, 44,300, 30,100, 28,700
15. International Paper, paper, 42,700, 52,600, 50,100
16. Engelhard, chemicals & metals, 39,900, 37,700, 36,500
17. Allan Co., wastepaper, 38,600, 36,500, 21,000
18. Eastman Chemical, chemicals, 37,900, 22,600, 21,500
19. Georgia-Pacific, paper, 35,700, 60,800, 48,700
20. Canusu Hershman Recycling, paper, 35,200, NA, NA
21. Dunavant Enterprises, cotton, 32,600, 36,200, 22,700
22. Archer Daniels Midland, food, 32,300, 25,100, 17,700
23. Rayonier, paper & forest products, 31,700, 28,200, 26,900
24. Ford Motor, autos, 30,200, 33,900, 32,300
25. Yao Yang Enterprises, wastepaper, 29,400, 27,600, 20,600
26. Koch Industries, paper, 29,100, NA, NA
27. JC Horizon, waste paper, 28,700, 39,000, 25,400
28. Toyota Tsusho, autos/parts, 28,100, 12,900, 13,100
29. ConAgra Foods, food, 27,400, 44,300, 42,200
30. Anderson Hay & Grain, animal feed, 27,300, 30,000, 25,500
31. Itochu Specialty Chemicals, chemicals, 26,700, 20,200, NA
32. JM Huber, chemicals, 25,100, 20,400, 17,200
33. Mitsui, conglomerate, 24,300, 24,300, NA, NA
34. Sears Holdings, retail, 24,200, NA, NA
35. Kimberly Clark, consumer goods, 23,900, NA, NA
36. Caterpillar, machinery, 23,500, 19,900, 19,200
37. Buckeye Technologies, paper, 22,500, 24,200, 24,600
38. Potential Industries, wastepaper, 22,300, 12,100, 11,500
38. Shintech, chemicals, 22,300, 27,700, 29,500
40. Goodyear Tire & Rubber, tires, 21,600, 20,900, 19,000
41. Graphic Packaging, paper, 20,200, 19,000, 19,100
42. Ralison Intl., paper, 20,100, 25,200, NA
43. International Forest Products, paper, 20,000, 10,400, NA
44. Tzeng Long, paper, 19,900 15,400, NA
45. KC Intl., recycled paper, 19,600, 16,300, 9,100
45. Tyson Foods, food, 19,600, 48,400, 44,100
47. Abitibi Consolidated, paper, 18,900, 20,900, 9,300
47. Michelin N. America, tires/rubber, 18,900, 9,000, 12,100
49. Rio Tinto America, minerals, 18,500, NA, NA
50. General Motors, autos/parts, 17,900, 10,400, 8,900
50. Mills Brothers Intl., food/grain, 17,900, NA, NA
52. H. Muehlstein, chemicals, 17,200, 14,000, 12,500
53. AJC Intl., food, 16,900, NA, NA
53. Fruit of the Loom, textiles, 16,900, NA, NA
55. 3M, chemicals, 16,800, 15,700, 14,500
56. Bayer Corp., chemicals, 16,100, 17,000, 17,900
56. Calcot, cotton, 16,100, 16,100, 16,600
58. Genesis Resources, wastepaper, 15,900, 21,700, 9,500
59. Celanese Chemicals, chemicals, 15,500, 14,100, 12,100
60. Nestle USA, food/beverages, 15,400, 15,300, 12,000
60. T&T Group, recycled plastic, 15,400, NA, NA
62. World Food Program, food, 15,300, 14,000, 10,700
63. Dole Food, food, 15,200, 14,100, 12,800
64. Vinmar, chemicals, 14,900, 10,700, NA
65. American Honda Motor, autos, 14,600, 13,600, 13,100
66. Smurfit Stone Cont., wastepaper, 14,200, 15,800, 14,500
66. USG Corp., building materials, 14,200, 11,600, 10,900
68. Potlatch, paper/forest products, 14,000, 11,200, 11,000
69. Calaway Trading, animal feed/hay, 13,800, 12,900, 10,400
70. Colgate-Palmolive, consumer goods 13,400, 12,700, 10,300
70. BP, chemicals, 13,400, NA, NA
70. Newark Group, paper, 13,400, NA, NA
70. Sojitz Corp., conglomerate, 13,300, NA, NA
74. Chevron Texaco, chemicals, 13,300, 13,700, 13,000
75. Honeywell Intl., aerospace, 12,700, 8,500, 8,700
75. Pressa Agri, cattlefeed, 12,700, 14,800, 14,400
77. Solutia, chemicals, 12,500, 11,300, 12,400
77. Wilbur Ellis, animal feed, 12,500, 15,100, 14,400
79. Whirlpool, appliances, 12,300, 11,100, 12,500
80. Chiquita Brands Intl, food, 12,100, NA, NA
81. PG Industries, chemicals, 11,800, 10,300, 9,600
82. Zen Noh Unico, animal feed, 11,800, 11,100, 7,800
83. JR Simplot, food, 11,600, 11,600, 10,600
84. Baillie Lumber, forest products, 11,500, NA, NA
85. Georgia Paper Intl., paper, 11,300, NA, NA
86. Alcoa, metals/aluminum, 11,200, 11,200, 13,100
86. E.&J. Gallo Winery, beverages, 11,200, 14,300, 11,100
88. Anheuser Busch, beer/beverages, 11,000, 10,200, NA
89. Molson Coors, beverages, 10,800, 13,500, 13,500
89. Forest Fibers, paper, 10,600, NA, NA
91. Perez Trading, paper, 10,400, 9,100, 8,800
92. Eastman Kodak, photo imaging, 10,200, 10,100, NA
93. ACX Trading, animal feed, 10,100, 14,500, 14,500
93. Nissan, autos, 10,100, 8,800, 8,100
95. Marubeni America, conglomerate, 10,000, NA, NA
95. World Minerals, minerals, 10,000, NA, NA
97. Trident Seafoods, food, 9,900, 8,600, 8,100
98. PriceSmart, retail, 9,700, 8,300, NA
99. U.S. Postal Service, mail, 9,700, 10,200, 9,500
100. Zen Trading, animal feed, 9,600, 9,300, 10,000

Nucor Deploys Grass-Roots Approach To Changing Washington Trade Policies; Company Is Fed Up With Feds

Nucor Corp. the largest steel producer in the United States and perhaps the most respected (and efficient) steel company in the world, has found that the federal government has no interest in preserving the U.S. industrial base. The company says essential changes in trade and economic policies are not forthcoming from the Bush administration or Congress.

As a result, Nucor has initiated a series of town hall meetings throughout the country to educate voters on the need to elect a new breed of politician who has the best interest of the country at stake. "Manufacturing is pissed off and we're starting to do something about it," says Bob Johns, Nucor's director of marketing.

"We were beating our head against the wall" trying to get the Bush administration and Congress to address unfair trade issues with China, says Johns. "It wasn't working, so we had to get the message up from the grass roots through the states so that our federal legislators know that we understand that we mean it and we mean it with votes. The only way we're going to get a change in public policy is if the voters speak."

Nucor held a town-hall meeting recently at its steel plant in Nebraska that attracted 3,500 people. Nucor was expecting less than half that number. It has a similar meeting planned for November 1 at the Darlington Speedway in South Carolina, a venue that can hold considerably more people. It will be the last town hall type meeting until next year, when Nucor will start them again in preparation for the congressional mid-term elections.

"We have got to elevate these issues to legislators so they understand what is at stake," Johns told Manufacturing & Technology News. "Free trade as it is done around the globe today is science fiction because in our industry you have government involvement to the point that it is absurd and it is creeping down into every form of manufacturing to where you end up with China's mercantile approach to trade this is killing business in the United States. The only testimony to the current trade policy is the size of the deficit. When that is north of 5 percent of your GDP, you are in deep caca."

Legislators have been bought off by big multinationals that like the status quo of the U.S. government acquiescing to China, due to the investments they have made there. "If China was brought to task for manipulating its currency, how smart was their [the multinationals'] investment in China if China had to play by the rules?" Johns asks rhetorically. "Multinationals can give a lot of money to political parties but they don't vote. Voters put people in office and...an educated electorate is a politician's worst nightmare."

Nucor is committed to changing the dynamics of policymaking in Washington. "If you are familiar with Nucor, you know that we are a no-nonsense group and we stay focused. When we get on an issue, we get on it."

The company has a big stake in advocating policies to reverse the decline of U.S. manufacturing. Its customers are leaving. "We're doing this for a very selfish reason," says Johns. "We are a large company. We're well heeled. We can migrate offshore with everyone else, but we don't think that's a good answer for the United States."

Indirect steel imports into the United States are surging, as steel-consuming industries like metal benders and appliance makers leave. The metalworking component of the trade deficit was $175 billion last year, says Johns. The steel content of finished goods imported into the country reached 18 million tons.

There has been growth in the economy and in the U.S. population (to the tune of 3 million new residents per year). Per capita consumption of steel has held steady. Yet there has been no growth in the U.S. steel industry. "What is wrong with this picture?" Johns asks. "You find it is coming into the country in finished goods about as fast or faster than companies are moving out of the country."

Johns says it is unbelievable that the U.S. government has not stood up to the Chinese. On currency manipulation the Bush administration is addressing China "in precisely the wrong way," Johns argues. Congress is also punting on the issue, refusing to take up the Ryan/Hunter bill (HR-1498) that would make currency manipulation a form of trade subsidy that could be ruled illegal by the World Trade Organization. That bill has more than 150 co-sponsors, including more Republicans than Democrats and addresses an issue that is causing direct harm to U.S. industry and workers.

Yet congressional inaction "is absolutely absurd when you look at some of the bills and resolutions that hit the floor with 10 cosponsors," says Johns. House leaders blocking its consideration, particularly Rep. Bill Thomas (R-Calif.), chairman of the House Ways and Means Committee, are going to face the wrath of voters next year, Johns predicts. Thomas "is going to have problems in his own district," he says, due to agricultural interests that "are getting their ox gored by trade agreements."

Nucor also wants energy policies to change so that electric utilities are not encouraged to burn natural gas, thereby reducing supply and increasing its cost to the industrial community. A decatherm of gas in the U.S. costs between $14 and $15; in Trinidad, where Nucor runs a mill, the price is $1.50. Utilities should be encouraged to build clean-coal fired power plants and nuclear reactors.

It wants the Commerce Department to change its rules that exempt non-market economies like China from countervailing duties. "If a U.S. business guy wants to keep his family fortune, this Commerce Department decision made years ago means that he rents a plant in China," says Johns. "These convoluted policies are killing industry in this country."

Nucor's grass-roots meetings are also aimed at educating state legislators and officials about how broken federal policies are adversely impacting local communities. The meetings are even spurring a debate about the efficacy of the 17th Amendment, which was adopted in 1913 and is viewed as having removed the ability of the states to influence the federal legislative process.

"It basically took any input on trade policy out of the hands of states," Johns says. "So now a number of states are talking about whether the 17th Amendment is appropriate today or whether it simply serves special interest groups. It gets that deep. The deeper you get into this thing, the more you find broken."

All of these issues and more are being discussed at the Nucor town meetings. "We're connecting the dots in our town hall for our employees, the communities that our plants are in in 16 states and the state legislators," he concludes. "We say we have some things that are broken in DC and we need to send people there who get it and will do something about it. Activism is going on and people aren't happy."

Europeans Issue An Industrial Policy To Bolster Manufacturing

The European Union has released a new "industrial policy" aimed at ensuring the continued health of its manufacturing sector. The EU says it needs to protect the viability of manufacturing because it accounts for 34 million jobs, three-quarters of all exports and 80 percent of private-sector R&D.

The EU's new 26-page "Policy Framework to Strengthen EU Manufacturing - Towards a More Integrated Approach for Industrial Policy" outlines seven "major cross-sector policy initiatives":

• An intellectual property rights and counterfeiting initiative that will "receive the state of progress in the whole area of IPR with a focus on competitiveness issues and come up with suggestions on how to improve the situation in 2006";
• Creation this year of a "High Level Group on Competitiveness, Energy and Environment" to "examine the links between industrial, energy and environmental legislation" and to ensure the "concrete implementation of better regulation principles";
• A revision of the EU's Market Access Strategy to make better use of the "Trade Barriers Regulation";
• A new "legislative simplification program," particularly with regard to waste regulation rules impacting the construction, motor vehicles, information technology, food and life sciences industries;
• Improving skills standards including the identification of current skills requirements and skill gaps;
• Managing structural change in old-line manufacturing industries such as textiles, leather, furniture footwear, ceramics, motor vehicles, shipbuilding, steel and parts of the food industries; and
• Implementing an integrated European approach to industrial research and innovation, including initiatives "to facilitate the granting of state aid that tackles market failures hampering innovation."

The plan also calls for sector-specific initiatives in pharmaceuticals and space; the creation of a life science and biotechnology strategy; creation of high level groups on chemicals and defense; a "mechanical engineering policy dialogue" that will "analyze the future strengths and weaknesses of the sectors and anticipate how any weaknesses could be addressed in the longer term"; and a series of studies on competitiveness for the food, fashion and design industries.

The full text of the industrial policy is located at http://europe.eu.int/comm/enterprise/enterprise_policy/industry/index_en.htm.

National Academies Panel Calls For The Creation Of An 'Energy-ARPA'

Creating within the Department of Energy (DOE) a "lean, effective, agile [and] largely independent" entity modeled on the Pentagon's Defense Advanced Research Projects Agency (DARPA) is among the actions being proposed by a National Academies panel to implement recommendations contained in its recently released report on U.S. competitiveness.

The new agency - for which the name ARPA-E is suggested - "would sponsor creative, out-of-the-box, transformational, generic energy research in those areas where industry by itself cannot or will not undertake such sponsorship," said the report, "Rising Above the Gathering Storm."

"Where risk and potential payoff are high, but where success could provide dramatic benefits for the nation," its authors assert, "ARPA-E would accelerate the process by which research is transformed to address economic, environmental and security issues."

Norman Augustine, chairman of the panel that produced the report, told the House Science Committee at an Oct. 20 hearing that the existence of an ARPA-E would enable the federal government "to spend more money" on the sort of "breakthrough, high-risk research" that the National Science Foundation (NSF) and Defense Department are "doing much less of because of their risk aversion."

Because ARPA-E would not carry out research itself but rather make awards on a competitive basis, "there would be a built-in involvement of industry and of universities that you don't have in the [DOE National] Labs themselves," something Augustine said would help "transfer" the fruits of the research "into industry, where it could produce products."

Rep. Vernon Ehlers (R-Mich.), chairman of the Science Subcommittee on Environment, Technology & Standards, said he "would heartily welcome" the advent of an ARPA-E but indicated he preferred it to emphasize the conduct of research over technology transfer.

"I think the Department of Energy badly needs this sort of thing if the goal is to have the Department of Energy address in a more direct way the national problems that we face," Ehlers told Augustine.

Ehlers urged the use of "specific mechanisms" for the transfer of technology, such as Cooperative Research and Development Agreements (CRADA) and the use of the Manufacturing Extension Partnership and Agricultural Extension centers.

Augustine noted that the ARPA-E proposal had elicited the sole objection from a member of his panel to any of the 20 "implementation actions" proposed to underpin the report's four recommendations. Exxon Mobil Chairman and CEO Lee Raymond took an "alternative point of view": that "there is no shortage of long-term research funding in energy, including that sponsored by the federal government," and that "an entity like ARPA-E would amount to the government's attempt to pick winning technologies instead of letting markets decide."

Former CEOs of Lockheed & Merck Call On U.S. to Rise Above 'Gathering Storm'

Two prominent retired CEOs, Norman Augustine of Lockheed Martin and Roy Vagelos of Merck, on Oct. 20 told the House Science Committee that they will back some form of tax hike if that is what it takes to boost federal investment in long-term basic research by 10 percent per year over the next seven years.

That goal, a path to doubling the current annual basic-research budget of around $8 billion, was set forth in support of one of four major recommendations contained in "Rising Above the Gathering Storm," a report on American competitiveness released earlier this month by the National Academies.

The report speaks delicately of meeting the target "through reallocation of existing funds or if necessary through the investment of new funds," but Augustine, who chaired the National Academies panel that issued it, got more specific under questioning from the committee.

While stressing that he was representing neither the Academies nor fellow CEOs, Augustine stated: "I feel so strongly that it's in the best interest of our companies that if it requires an additional tax of some kind to fix some of these problems, I personally would support [it]."

Relating he had been "told that our citizens lost $7 billion betting on the Super Bowl" last year, he remarked that the additional research funding urged in the report was "not a huge amount of money in the grand scheme of things."

The Science Committee's ranking minority member, Rep. Bart Gordon (D-Tenn.), suggested that "a lot of credibility and a lot of cover for folks" might derive from business-community support for a tax he described as "dedicated" and "as small as possible." Vagelos then affirmed that he also "certainly would support an increase in taxes" aimed at pumping up investment in basic research.

National Academy of Engineering President William Wulf, also testifying at the hearing, noted that "more than one CEO has said to [him] that they can't invest in research within their own company easily because that detracts from the bottom line and it's an optional cost [that] Wall Street [would] penalize them for." He added: "If they were taxed the same amount and that money was guaranteed to go into research, they would be happy."

"Rising Above the Gathering Storm," which exceeds 500 pages in length, was produced with uncharacteristic speed by the National Academies' Committee on Science, Engineering, and Public Policy (COSEPUP). It was prompted by bipartisan requests for a study on competitiveness issues that originated in the Senate and House on May 27 and June 30 of this year, respectively.

The report presents four broad recommendations that, in addition to research funding levels ("Sowing the Seeds"), address K-12 science and math education ("10,000 Teachers, 10 Million Minds"); attraction and retention of top talent among science and engineering students and professionals worldwide ("Best and Brightest"); and legal and infrastructural features that contribute to a favorable business climate ("Incentives for Innovation").

Each of the recommendations is underpinned by a series of "implementation actions," and the report contains a set of tables in which a "Back of Envelope Annual Cost Estimate" for each of these actions is provided.

Science Committee members expressed their gratitude to the COSEPUP panel and their enthusiasm for the report, which, in the words of committee Chairman Sherwood Boehlert (R-N.Y.), was "helping to jump-start a national discussion on research and education and the nation's future." Of the committee's reaction, he said: "We couldn't be happier."

But even while calling the report "an important document" and one "that we all need to charge forward with," Gordon noted: "There's not a lot new here." And Rep. Vernon Ehlers (R-Mich.), chairman of the Science Subcommittee on Environment, Technology & Standards, observed that "virtually everything" in the report "is exactly what I've been advocating for 12 years."

Thanking Augustine for "mak[ing] the case well" and adding, "that's what this country needs," Ehlers concluded: "Now it's up to us as a Congress to implement that." Boehlert pledged to Augustine, both on his own behalf and that of Gordon, that his committee was "going to follow through, because some of the things that you mention here we're already doing, but we're nickel-and-diming the issue."

But the Science Committee chairman made abundantly clear that, in his view, the private sector cannot leave all the responsibility to Congress. "I'm sort of tired of appearing before business groups," he recounted, "and [having] some guy raise his hand, and I'll call on him, and he starts moaning and groaning about 'K-12 education,' and 'the high schools are graduating students that we can't hire because they can't function, and we have to start training them.'

"I listen to him moan and groan, and I acknowledge it's a serious problem we've got to address, and then I'll say to him and all the other representatives of business in the audience: 'All right, you hotshots in business, let me ask you a question: How many of your employees, Mr. President of this company, Mr. Manager of that company, serve on a local school board?' Usually the response is, 'Gee, we don't know.'

" 'Go back and check, will you please? And then in a couple weeks, let me know.' And I never hear back. You know why? They check, and they don't run. 'Gee, we're in business to make a profit, and it's too important, and why have them run for school boards?'

"How many letters do you think the average member of Congress gets from his or her constituents: 'We've got to invest more in basic research as a government' or 'We should do better by the National Science Foundation,' which is the primary funder of all university-based research? You know how many letters? Probably the average Congressperson gets zero."

"I'm giving you some of my pet theories," Boehlert acknowledged, addressing Augustine and Vagelos all the while. "But I want to work together, because I want to follow through on this and go forward on this."

"Rising Above the Gathering Storm: Energizing and Employing America for a Brighter Economic Future" can be read online at http://www.nap.edu/books/ 0309100399/ html. An archived webcast of the Oct. 20 Science Committee hearing can be accessed at http://www.house.gov/science /hearings/full05/oct%2020/index.htm.

EU Issues 'Action Plan' For R&D

The European Union has issued its first "action plan" aimed at increasing the amount of research conducted in Europe. "The Commission's motivation for producing the action plan is the worrying stagnation of research and development intensity in Europe, particularly within the private sector," says the EU. "The actions proposed are specifically designed to improve the conditions for business investment in R&D and innovation."

The EU had set a goal of having 3 percent of Europe's GDP being invested in R&D by 2010, but that requires a average growth rate of 8 percent per year in R&D. At current growth rates, the goal will fall short at 2.6 percent of GDP.

The plan, "More Research and Innovation - A Common Approach," approved on Oct. 12, would create a new European-wide "Industrial Research and Monitoring System" and a new "European Innovation Prize." It includes 16 other action items such as intensified university-industry partnerships, creation of industrial clusters, better regulation for new technology, a single market for researchers, and better and wider use of tax incentives to spur investment in R&D. To view the 22-page plan, go to: http://europa.eu.int/invest-in-research/.

British Manufacturing Is On The Ropes

British manufacturers are being pummeled by rising oil prices and export orders that are declining, according to the Confederation for British Industry. Manufacturers are struggling to pass on the increased cost of oil to their customers. Four out of 10 manufacturing firms in Britain say that orders are below normal, freight costs have increased by 33 percent in one month, and oil prices are up 58 percent over the same period last year.

Meanwhile, the manufacturing share of Britain's GDP has slipped below 15 percent for the first time in recorded history, reports Britain's Office of National Statistics. The manufacturing sector accounted for 20 percent of Britain's GDP in 1998, but has steadily declined since to 14.8 percent in 2003. The service sector has increased its share of GDP from 27.6 percent in 1998 to 31.7 percent in 2003. The creative sector of Britain's economy, which includes film, arts, publishing and advertising, accounted for 9.2 percent of total output and grew 115 percent over the past decade.

South Korean Manufacturing Is 'On The Brink'

The South Korean manufacturing sector is "on the brink," according to a survey of the nation's 523 largest manufacturing companies conducted by the nation's largest daily newspaper, the Chosun Ilbo. Operating profits for the group that includes the country's largest electronics, automotive and petrochemical companies, have fallen 28 percent during the first half of 2005, due to high oil prices, declining demand in Korea, the strengthening won and increased competition from China.

"The business environment is so stifling these days that businesspeople call it the worst in history," says the newspaper in a recent editorial. "If the situation does not improve, before long the base of Korea's manufacturing industry will crumble completely. The manufacturing industry is the only certain way available to boost the national income and create employment right away. We cannot afford to neglect the industry that feeds the country and the businessmen who manage it."

Manufacturing employment in Korea is on a downward trend. Manufacturing jobs declined by 1.2 percent over the past year in Korea, to 4.27 million out of total national workforce of 23 million, according to the National Statistical Office. The total workforce increased during the year by 1.2 percent.

"The depressed construction industry, still weak consumer spending and slower export growth this year appears to be exacerbating the employment situation in these sectors," the statistical office said.

Investment in manufacturing equipment is also sluggish. Machinery purchases increased by 3.2 percent last year, up from a 0.6-percent increase in 2003, but still far off the average yearly growth rate of 20 percent prior to 1997, according to Korea's Central Bank.

"As manufacturers shun investment due to the uncertain business outlook, the ratio of machinery equipment to their total assets continue to be on a downward track, raising concerns about the nation's growth potential and ability to generate employment," the central bank said.

Legacy Costs Overwhelm Excellence In Manufacturing: Delphi's Record Number Of Shingo Prizes Can't Save It From Bankruptcy

No other company has won more Shingo Prizes for Excellence in Manufacturing than Delphi Corp. Over the past four years, Delphi has won 19 Shingo Prizes for individual factories, accounting for 42 percent of the 45 total awards. But excellence in manufacturing was not enough to stave off bankruptcy for the world's largest maker of auto parts.

How is it possible for a company that has won so many Shingo Prizes - described by Business Week as the "Nobel Prize of manufacturing" - to experience such failure? "I've been asked that question for a month now," says Shingo Prize executive director Ross Robson.

The answer, in two words, is "legacy costs," Robson responds. "The senior executives and [recently retired CEO] J.T. Battenberg were overly optimistic about the legacy problems they carried with them from General Motors and were not realistic in understanding the yoke around their neck of pensions, the UAW contract and carrying health care for both current workers and their retired workforce."

Delphi is said to have retirees who worked for the company for 34 years and have been receiving retirement benefits for 35 years. The legacy costs were just too great a burden to overcome, no matter how efficient the company's plants had become.

It's a burden borne by virtually the entire American-owned automotive industry and does not bode well in its competition against international rivals that have no such costs strangling them. "The U.S. has to compete with a cost structure that's now global, and there are vast differences," Delphi vice chairman David Wohleen told Manufacturing & Technology News shortly before the company filed for bankruptcy protection on October 8. "What's happened to us is we became an independent company with a cost structure of an auto maker. The strategy was that over time we could grow away from that cost structure by growing our non-GM business and growing more internationally. That strategy was working. But then several things came about, one of which is a loss of volume at a rapid rate from our North American customers, which impacted most of our cost base; and then commodity pricing fluctuations, like steel, other metals and now petroleum-based products. Those things overwhelmed the effectiveness of that strategy."

Does Delphi's bankruptcy mean that even the best companies with the best plants in North America can no longer compete in the global economy? "Your point is well taken and that is why lean is so absolutely critical and important," Robson responds. "Without lean they would have been in a big hurt much earlier than this." Wohleen says that it will be impossible for Delphi or any other U.S. manufacturing company "to compete product to product [on cost] with the rest of the world."

Many of Delphi's plants winning the Shingo Prize were profitable and had achieved some of the highest Shingo ratings of any plants evaluated. One Delphi plant had a customer parts-per-million (ppm) return rate of zero for one year. Delphi has seven or eight plants with ppm customer return rates of one. Its average customer ppm return rate for its approximately 150 plants around the world is 25.

"I just read a report yesterday about a company in North Carolina whose ppm rate from their customers was running at 90,000," says Robson. "There are still a ton of companies out there performing at that level." They are able to survive because they are in niche markets and continue to make money.

The Delphi plants that applied for the Shingo Prize were so good that Robson had difficulty getting Shingo Prize examiners to assess them. "If they've been to one or two they say, 'They're all alike. They're all doing outstanding work and I don't learn anything.' Their manufacturing facilities are boring kind of like Toyota is boring to Wall Street."

Shingo Prize criteria include profitability of a plant. Almost all of the Delphi facilities that have won the award were ranked by examiners as being profitable. But like a majority of plants run by large corporations, they are also considered to be cost centers, not profit centers, so they operate on a budget. "If you look at the price that they receive for their products and their costs, every [Delphi] plant [winning the Shingo award] save for perhaps one has been profitable," says Robson. "I have not found anyone who has been into Delphi and seen their manufacturing system in place that has not acknowledged that they are one of the best in class in the world today."

For now, the Shingo Prize directors do not expect to change the criteria to weigh a company's financial position more heavily in their evaluation. The Baldrige National Quality Award changed its criteria after one of its winners (Wallace & Co.) went bankrupt. "I think Baldrige reacted wrong," says Robson. "They've taken their criteria now and made it so heavy on financial results that they have lost sight of what is being evaluated. You may as well fill out your results and the [manufacturing] process doesn't make any difference."

Robson concludes: "I've said for years that at the point in time when somebody writes a negative article about the Shingo Prize, I guess I know that I have arrived."

Stanford Opens New $50-Million Design Institute

Stanford University has received a $35-million private donation to create an institute aimed at helping companies design better products. "If your decade-old VCR is still blinking 12:00, welcome to the club," says the new Hasso-Plattner Institute of Design. "The VCR is just one of the scores of poorly designed gadgets and gizmos cluttering up the consumer market."

The new design institute will bring together students, faculty and corporations to work on interdisciplinary teams. "The lack of a shared language or methodology between biologists, engineers, educators and businesspeople creates a stumbling block," says David Kelley, the design school's founder. "Design thinking will be the glue that binds all these people together."

Kelley is founder and chairman of the industrial design firm IDEO in Palo Alto. His company designed the original Apple mouse, the Palm V handheld device and rubber toothbrush grips. He is teaming up with Hasso Plattner, a co-founder of SAP who donated more than half of the estimated $50 million needed for the institute. The new institute will encourage the enrollment of an eclectic mix of graduate students spanning the breadth of disciplines and reward them with Certificate of Design Thinking.

Congress Wants To Know What Happened To Commerce Department Report On Outsourcing Of IT Jobs

Pointed questions regarding the content, length and timing of a Technology Administration (TA) report on the offshoring by U.S. companies of professional-level jobs in high-tech sectors have been put to Commerce Secretary Carlos Gutierrez in a letter signed by three Democratic members of the House Science Committee.

The report, made public in response to a Freedom of Information Act request by Manufacturing & Technology News (MTN, Oct. 12, p. 1), "reads more like an editorial in a popular magazine than an analytical report, and it resembles in no fashion the normal work product that we have come to expect from the Technology Administration at Commerce," charged the Democrats' letter, dated October 11, 2005.

Its signatories - Rep. Bart Gordon of Tennessee, the committee's ranking minority member; Rep. David Wu of Oregon, the ranking minority member of Science Subcommittee on Environment, Technology & Standards; and Rep. Jerry Costello of Illinois - raised questions about the "vetting process" the report went through, alleging that the document represented by Commerce as the "final report" had been "scrubbed of all information or analysis that might be useful for sound decision-making by Congress."

They characterized the version of the report provided to them, "Six-Month Assessment of Workforce Globalization in Certain Knowledge-based Industries," as having "almost no substantive analysis or data" while noting that it was "just 12 pages in length" and had arrived "overdue."

The congressmen stated that although the report "was due to Congress by June 30, 2004," and "carries a date of June 2004" - and although they had written to Gutierrez on August 3, 2005, requesting its release - they were not supplied a copy before the Commerce Secretary responded, in a "letter dated September 15," to their August letter.

"It took more than an additional year, and our letter, to shake this report out of the Department," they told Gutierrez, adding: "We do not understand your reticence to make this report public."

But a letter signed by Commerce Department CFO Otto Wolff and obtained by Manufacturing & Technology News indicates that the TA assessment had already been sent to Rep. Frank Wolf (R-Va.), chairman of the House Appropriations subcommittee that funds the Commerce Department, on September 1, 2005, and had been "shared" before that date with a team from the National Academy of Public Administration now studying the impact of offshoring on the U.S. economy and workforce. The TA report was released to MTN on September 8.

The three Science Committee Democrats told Gutierrez in their October 11 letter that their review of the TA report had led them to request additional information as follows:

1. "What were the number of employee hours involved in preparing the report and its subsequent review?

2. "Please identify the Technology Administration personnel who prepared the report.

3. "What was the vetting process for this report? Please provide specific names and offices of those involved in the review and editing of this report and a timeline for when each office signed off on the report through the final clearance of the report for release. This list should include any offices or individuals outside the [Commerce] Department that may have received the report as part of the broader vetting process or to seek outside advice on the report....

4. "In December 2004, two TA analysts made a presentation to the Association for Computing Machinery based on their work [that] is significantly more detailed and comprehensive than the final report you provided to us. Indeed, the December 2004 presentation comes much closer to addressing the mandate originally proposed by Congress [emphasis in original]. That presentation is also consistent with the type of analytical work typically done by the Technology Administration. We would like copies of the original report produced by the Technology Administration analysts as well as all subsequent revisions made by the Department and other Federal officials so that we can understand how the final report came to be scrubbed of all information or analysis that might be useful for sound decision-making by Congress."

Letters to the Editor

The story in the last issue of Manufacturing & Technology News about the Commerce Department's report on offshore outsourcing, "Political Appointees Re-Write Commerce Department Report on Offshore Outsourcing," generated a flurry of e-mails and letters. Here is a sampling of correspondence received.

This is a classic example of how some in the current administration believe they can tell their citizens anything and get away it. Americans need get over their apathetic approach to government and start standing up for themselves. The sham report this administration released is a total disgrace and everyone should write their congressman and let them know they are watching.
-- Ron Lilly

Does anyone have any idea when our economy might start to rebuild? Does anyone have any idea when the leaders of our country will begin to care again?
-- Paulette Bakos

Terrific reporting on the outsourcing report...which we're following on.
-- Lou Dobbs, CNN

Here in the San Francisco Bay Area, if you are a degreed computer professional over 40 years of age and have not worked for at least 18 months you've fallen off of the unemployment rolls. I would like to ask the Commerce Department to use summarized IRS data to determine unemployment rates, since the 18-month limit hides legitimate non-workers who are living off their investments or their spouses or eating down the equity in our homes. Thank you for your reporting.
-- Bernard L Hayes

Thanks for the article on the Bush administration's political censoring of the outsourcing study. It's important for citizens to know that these kinds of things are happening.
-- Chris Struble

Please tell me that you have submitted the article "Political Appointees Re-Write Commerce Department Report On Offshore Outsourcing" to all national news media and Congress, which SHOULD have been providing oversight to this travesty. The prevalence of liars and criminals and traitors at ALL levels of the Bush administration is just mind boggling. This both saddens and angers me. While most other countries are examining how to accommodate workers in the shift in world trade from goods to services, the U.S. government cavalierly lies to Americans while throwing them out of work.
-- Kathy Stone

I think I'll go into business as a consultant for the Commerce Dept. The next time they need a report without any original content, that looks like it's done by a high-schooler, they can contact me. I'd be happy to Google out 12 pages (at probably higher quality) for about $299,080 less than what they paid for this one. Thanks again for publicizing this latest example of the Bush administration lying and hiding the truth from us taxpayers and citizens.
-- Mike Stuart

Prepare For Major Oil Disruptions, Says Stanford University Modeling Center

"Your odds of drawing a club, diamond or heart from a shuffled deck of playing cards are three out of four," says a new Stanford University research report. "The odds of a foreign oil disruption happening over the next 10 years are slightly higher."

The university's Energy Modeling Forum has developed a risk assessment that predicts an 80 percent chance of a "surprise" disruption of oil due to geopolitical, military or terrorist turmoil. Such an event would reduce global supplies of oil by at least two million barrels per day.

"Foreign disruptions of this magnitude will have more serious effect on oil prices and the economy than we have seen with Katrina and Rita," says Hillard Huntington, executive director of the Energy Modeling Forum. "Oil prices will rise more and for longer than a few months or a heating season."

With funding from the Department of Energy, the Energy Modeling Forum found that rapid increases in oil prices have "considerably large" economic consequences. "Sudden oil price changes surprise households and firms and cause widespread uncertainty, unemployment and idle industrial capacity," says Huntington. "The results support reducing the country's future dependence on oil and improving the procedures for releasing the Strategic Petroleum Reserve during an emergency."

The modeling report is located at http://www.stanformd.edu/group/EMF/publications/doc/EMFSR8.pdf. A report on the economic consequences of price hikes is located at http://www.stanford.edu/group /EMF/publications/doc/EMFSR9.pdf.

U.S. Companies Can't Tell The Difference Between Their Own Products And Chinese Fakes

Manufacturers need to make sure their products aren't being counterfeited illegally by Chinese producers, but that might be difficult because counterfeits can be hard to detect even by companies that made the original product.

"The counterfeits are so good they carry our name, address, our inspector's initials on them and a CE label of ours," says Dave Blackburn, president of Thomas G. Faria Corp. in Uncasville, Conn. "If it came into our warranty department most of my people would not recognize it as a counterfeited gauge," he told a recent hearing of the House Small Business Committee. "We would pay warranty costs and replace the instrument and suffer from our reputation in the field."

Blackburn's company is the nation's largest supplier of components to the $30-billion U.S. marine industry and it is the sole supplier or every instrument panel installed in all combat-ready Humvees in Iraq. The company makes engine monitoring instruments, tachometers, speedometers and fuel gauges, among other things.

Blackburn's company first became aware of Chinese counterfeits in the early 1990s in Brazil. "It was a small part of our overall business, so we did not pursue it aggressively," he told the Small Business Committee's subcommittee on rural enterprises, agriculture and technology. But recently, a Chinese company illegally producing Faria's knockoffs directly approached one of the company's large U.S. boat building customers and offered to provide an identical counterfeit at one-third the price "This is the first time that I have had a situation where they have actually approached one of my larger domestic customers in an attempt to sell a product," Blackburn noted. "In fact, that customer was in [the counterfeiter's] factory [in China] and hand carried the sample back to me, so there was no doubt about the authenticity of it as a counterfeit. I saw one counterfeit where foreign material had created a nick in the case mold itself, and they had even duplicated the nick."

The customer who was in the Chinese plant told Blackburn that the managing director of the factory was the head of the local Chinese Communist Party, and that the facility was government owned. "I have been told this is not an unusual set of circumstances and is more the rule than the exception," Blackburn said. "Some might question why the Chinese government seems to be complacent or often illogical in their determinations [regarding counterfeiting]. Perhaps some of the reason for this lies in the fact that the government has a vested interest in the economic gain to be realized through unethical behavior."

The problem is not confined to the United States. Al Lubrano, president of Technical Materials Inc. of Lincoln, R.I., visited one of his customers in Italy, a maker of relays called Fender. The director of purchasing handed Lubrano two relays. "I looked at them and I said, 'Okay. What is your point?' His point was, one of them was not his; it was a counterfeit product from China that was selling at about two-thirds of what he could sell the product for," Lubrano recalls. "He told me his company had spent over $300,000 on lawyers. The lawyers were promised a meeting [in China]. The Chinese government was going to take these people to task. The lawyers got there and they could not find the company."

Even the largest companies are having problems. Pfizer Inc. last year received a complaint from one of its customers that her recent prescription drug tasted strange, Blackburn told members of Congress. "After laboratory analysis, it was determined that the pills were counterfeited," he said. "This revelation led to the removal of over 16 million doses of the drug from pharmacy shelves around the country. Virtually any popular medication is a target. If any of you take prescription drugs, you are a potential victim."

Recently, the Chinese government disallowed Pfizer's patent for Viagra in China. "One of the requirements for gaining trademark registration in China is that you must have a 'well known mark,' " said Blackburn. "China recently determined that Toyota was not a well-known mark. An individual named Ma Zhongbo in China is attempting to register a trademark [for Toyota] as we sit here."

The Chinese steal not only the product, but the process as well. "I have heard so many horror stories about people setting up facilities there and before they are even in production, there is another factory half a mile away producing the same product that has got all of the drawings, all of the process," says Lubrano. One company, High Technology Ovens of Minnesota, "never even got to produce anything. They just packed it up and left after investing millions of dollars."

The Chinese government is even willing to build a factory for U.S. companies. The president of a large buying association in the marine products industry who imports goods from China got involved in serious discussions about building a fiberglass plant in China. "He wanted to know about the facility and how long it would take to build and they said 'Oh, not long,'" Blackburn recounted. "He went back there three months later, and there was a 250,000-square-foot building erected sitting ready for operation, and he had not even made any promises yet!"

Manufacturing Becomes A Riskier Business

Manufacturing CEOs are being forced to make higher risk decisions due to the accelerating pace of change, according to a study by Grant Thornton. "American CEOs are faced with daunting challenges, ranging from intensified competition to a higher level of shareholder and regulatory scrutiny," says Cal Hackeman, partner in charge of the Grant Thornton Business Leaders Council.

In its annual survey of business leaders, the company asked 300 executives from 100 manufacturing companies how they are dealing with these issues. Eighty-nine percent said they plan to increase their investments in technology within the next year, "a decision that 77 percent of them view as highly or moderately risky," says Grant Thornton. "Eighty percent of them plan to expand into new domestic markets, while 59 percent plan to expand internationally. Three quarters of the executives believe this is a moderate to high risk strategy." Seventy-three percent say they are going to restructure their pricing policies "a move 79 percent of manufacturing CEOs see as risky," says the firm.

Spending Crazy Congress

Congress is going spending crazy, says the Committee for a Responsible Federal Budget. Four bills that have recently passed and signed into law by President Bush - the Iraq supplemental, the energy and highway bills and the emergency supplemental for veterans healthcare - will increase the deficit by nearly $33 billion next year. The Katrina Hurricane relief measure is not included in the tally.

"The cumulative effect of these four bills through the end of the decade will increase the deficit by nearly $95 billion, not counting increased debt service," says the group. The debt service costs will raise the deficit for the four bills to $115 billion. The analysis is located at http://crfb.org/ documents/BudgetUpdate August2005_001.pdf.

Manufacturing Profits Are Slow To Recover

Profits for manufacturing companies remain weak, despite strong economic growth in the country, reports the National Association of Manufacturers and the Manufacturers Alliance/MAPI in a joint report. An "unprecedented" drop in profits by 67 percent from 2000 to 2003 "has only partially been erased," say Jerry Jasinowski, president of NAM's Manufacturing Institute and Thomas Duesterberg, president of MAPI. "Profit growth is so sluggish that manufacturing profits have risen only to what was the previous low point for profits in the past 40 years. This is not a positive trend for either industry or for the nation's overall economic health."

With profits remaining so low, industrial companies are not investing much in new plants and equipment, research and development and products and processes. They are not hiring new workers. "In the absence of healthy profits, companies that wish to expand must turn to issuing new stock or borrowing and incurring debt," say Jasinowski and Duesterberg.

The five sectors hurt most by the low profits are industrial machinery, computer and electronic equipment, electrical equipment, motor vehicles and chemicals. "The highest import penetration rates are concentrated precisely in the industries that have seen their profits fall most dramatically in recent years," says the report. "For three of the five industries, the effect of foreign competition and exchange rates on pricing power is the single largest contributor to the profit squeeze."

Other factors impacting profits are employee benefit costs, materials and energy costs, business cycle effects, taxes and regulatory compliance and litigation costs.

"For anyone who cares about the future of manufacturing in the United States, this concise report is essential reading," say Jasinowski and Duesterberg. For a copy of "The Profit Squeeze for U.S. Manufacturers," go to http://www.nam.org/s_nam /bin.asp?CID=201715&DID=235347&DOC=FILE.PDF. The charts below are in cents per dollar of sales.

Of The 14 Million Jobs In Manufacturing, The Pay Is Pretty Good

It pays to work for a manufacturing company, according to the latest "Annual Survey of Compensation in Manufacturing." Most jobs in the manufacturing sector pay substantially higher wages than the same jobs in the rest of the economy. Even janitors average $23,000 in the manufacturing sector. But wages for most jobs vary significantly by firm size, industry and location, according to the survey of 314 companies and 53,000 employees working in 188 "benchmark" jobs. For instance, company presidents in charge of companies with more than 500 employees and revenue of $50 million or more can be paid anywhere between $165,000 (if they have no financial interest in the firm) to well over $1 million. "It would be an exercise in futility to attempt more than a superficial overview of the results in this summary," says Abbott Langer & Associates, which conducted the survey for the National Association of Manufacturers. The results of the survey are for sale at http://www.abbott-langer.com/download. Here is the median total cash compensation nationally for selected jobs in the manufacturing sector:

• Chief Legal Officer: $202,663
• Vice President of Manufacturing/ Production: $144,000
• Chief of Marketing or Sales: $140,488
• Chief Financial Officer: $125,955
• Vice President of Mfg./Production Engineering: $111,431
• Research and Development Manager: $98,371
• Product and Brand Manager: $92,975
• Plant Manager: $90,000
• Chief of Human Resource: $86,591
• Design Manager: $83,029
• Engineering Department Manager: $80,124
• Production Manager: $75,000
• Quality Control Manager: $69,632
• Facilities Manager: $68,775
• Purchasing Manager: $68,123
• Cost Accounting Manager: $67,874
• Sales Engineer: $62,932
• Manufacturing Engineer: $60,581
• Computer Programmer: $60,250
• Product Designer: $53,170
• Warehouse Manager: $50,075
• Maintenance Supervisor: $46,000
• Senior Drafter: $44,614
• General Production Supervisor: $44,134
• Shipping & Receiving Supervisor: $43,534
• Secretary to the CEO: $42,857
• Production Scheduler: $42,546
• General Accountant: $41,002
• Junior Buyer: $38,300
• Machine Repair & Maintenance: $38,145
• Injection Molding Machine Set Up Operator: $36,016
• Customer Service Representative: $34,700
• Chemical Production Machine Operator: $34,677
• Maintenance Worker: $34,590
• Milling Machine Operator: $32,847
• Automatic Screw Machine Operator: $32,364
• Quality Assurance/Control Technician: $32,014
• Carpenters/Maintenance: $31,595
• Lathe Operators, Engine or Turret: $31,200
• Machine Set Up Worker: $30,947
• Numerical Controlled Machine Operator: $30,654
• Payroll Clerk: $30,650
• Secretary: $30,035
• Senior Account Clerk: $28,240
• Fork Lift Operator: $27,882
• Production Machinist: $27,862
• Shipping Clerk: $27,566
• Assembler: $27,140
• Material Handler: $26,942
• Junior Account Clerk: $26,250
• Finisher: $25,900
• Receptionist: $24,960
• Warehouse Laborer: $24,180
• Drill Press Operator, Single: $24,042
• Janitor: $23,136
• Inspection Molding Machine Operator: $22,818
• Packer, Light: $22,475
• Wirers and Solderer: $22,044