REB Blog

Globalization ups and downs

2012-02-07T14:21:00Z

Caterpillar Inc. is a solid company: last month it reported an annual corporate profit of $4.9 billion. Its products are much in demand around the world because its agricultural, construction, and mining equipment are critical to providing the most basic needs of humanity: food, fuel, shelter.

Cat succeeds by giving people what they need, but it cannot give everyone everything they may want. Between needs and desires, a lot of lines are crossed. Feelings and facts get interchanged, and confused. Workers in London, Ont., want job security and benefits, and are furious that Caterpillar is closing a diesel locomotive plant there, a decision it announced with the sort of flat efficiency that is typical of successful companies: “The cost structure of the operation was not sustainable and efforts to negotiate a new, competitive collective agreement were not successful.”

Reporters and commentators quickly interpreted Caterpillar’s decision as another blow to prosperity inflicted by a heartless business: “The relentless push by global corporations to slash costs has eliminated the jobs of about 450 people,” was the opening line of a report in The Globe and Mail.

Certainly, “globalization” is part of this story, but it’s hard to see how this clash might have been avoided: Caterpillar is not setting the cost structure; it’s trying to bring the Ontario plant in line with one that is determined by a variety of factors involved with building diesel locomotives.

Furthermore, if this is a case of a “relentless push” for lower costs then the supposition that Caterpillar will relocate the locomotive work to a Muncie, IN, plant it opened more recently is proof that globalization can be rewarding, too. It’s not incidental to this story that Indiana recently adopted so-called “right to work” legislation that shields workers from the obligation to pay union dues—meaning Caterpillar can anticipate better labor relations and lower labor costs there than in Ontario. This is close to what I had in mind when I wrote three years ago:

To encourage new businesses the states should cut their corporate income and sales tax rates. To encourage more manufacturing … they’ll have to be more realistic about their environmental regulations and labor laws, too. To make their states more desirable places for everyone to live, they should do what they can to decrease the burden for living there.

There is a lot more to “globalization” than greed and cruelty. It does lead to losses – and generally the loss is borne by those who do not respond rationally to market conditions. For others, the prospects are much stronger.

Cast steel does something seemingly impossible

2012-01-30T20:12:00Z

The title is drawn from the observation of a structural engineer explaining the secret to a novel building design: essentially, it's one, mid-sized office building in Toronto that's being designed, in part, as an insert to an existing structure that has historic-preservation status (and thus, cannot be removed or visibly altered.)

A critical point to the design is the use of 35,000-lb, cast steel nodes to link together a structural steel frame.

There are a few more interesting illustrations here.

"Supporting the tower on conventional columns wasn’t an option because of the large size and number of columns that would have been required," according to the report. "What consulting engineer Stephenson Engineering Ltd. and Sweeny Sterling Finlayson & Co. Architects Inc. decided on instead was a series of 70-foot-tall 'delta frames,' each comprised of 1-meter-diameter, tubular steel columns shooting up through the new development’s atrium (within the four-story structure) to support the new tower."

The report quotes Carlos de Oliveira, president and principal structural engineer for Cast Connex Corporation, which designed and will supply the cast steel nodes for the project, which he observed "provide for a more rational means of meeting all the structural and architectural requirements.”

“With steel castings, you put the steel where it needs to be for the flow of forces on the structure," de Oliveira said. "You are not confined to having to build up elements from plate.” He also said the castings provide "architectural elegance."

The proliferation of steel castings in very large dimensions for applications like turbines has been well reported. Similar products undoubtedly have a place in infrastructure development and replacement, too (e.g., bridges.) Count this as another boon for steel foundries.

Short cited-ness

2012-01-24T13:49:00Z

"Reshoring" continues to be a hot topic among manufacturers. I wrote about the man many people recognize as the leading authority on the subject, but the trend has been observed for several years now. (NADCA is planning a panel discussion on the topic at its 2012 Die Casting Executive Conference, by the way.)

But if you take your business insights from the New York Times you'll probably conclude that there is no reshoring, and no possibility of it, because of the shortsightedness, greediness, and all-around inhumanity of manufacturing companies. This story from last weekend is being widely circulated and cited as evidence that the globalization game is over, and the U.S. manufacturing sector cannot catch up - ever.

In fact, it's a story about Apple Inc. and the particular manufacturing circumstances of its widely distributed and wildly popular consumer electronics devices. That's it. The article might have examined in more detail why Apple has made the decisions it has made to manufacture in China, rather than in California. It might have looked at other manufactured products - including, critically, some that are not consumer goods. It might also have considered that there probably is a middle ground between the high cost of excessive regulations and human rights violations.

In fact, this report is a sterling example of the tendency to see global economics as a contest for total control of the world's markets - which is probably how it appears in seminars and conferences - rather than a process of finding economic growth opportunities by developing products that customers will want and delivering them effectively, efficiently, and reliably — which is how it works for manufacturers now taking advantage of reshoring to improve their own businesses and the U.S. economy.

The riddle of recovery

2012-01-17T14:18:00Z

I've written several times that the ongoing economic recovery is so unsatisfying because we continue to see high levels of unemployment, but that unemployment is a feature of the economic recovery - not a defect. See this entry, for example. The point is that the Federal Reserve Bank's and federal government's economic policies are stoking economic stability and growth for businesses, but businesses will not hire more workers because their economic forecasts indicate they cannot afford to do so.

Why is that? Because there is no recovery for consumers, and thus a cloudy forecast on businesses' revenues. Here's more evidence of the conundrum.

Odds of recovery

2012-01-03T02:15:00Z

Economic predictions are still popular this week, but here’s an insightful analysis of recent economic trends that documents a simple and easy-to-miss point: “…most of the economy is (the results of) people doing normal stuff that they always just have to do.” More specifically, economic growth is the result of normal activity being done in greater volumes, and/or more efficiency. New products, technologies, and capabilities accelerate growth.

The analysis also points toward a conclusion that I find myself reaching over and over again: that a manufacturing-led recovery will not be much of a recovery at all if consumers don’t share in the prosperity. Manufacturers’ interests and goals are different than consumers’; in some critical ways (e.g., employment), they are frequently at odds with each other.

More practically, for all the financial benefits that a strong manufacturing base would provide, that sector of the economy simply will not expand fast enough to generate the volume of growth needed to drive an economic recovery.

The underlying fact of our financial dilemma is debt, and the way to achieve economic growth is to reduce debt and rebuild equity. Then, there will be cash available to things beyond the "normal stuff." Many manufacturers have made significant progress in this effort; consumers are still trying to accomplish it. Having one accomplish its goals at the expense of the other would be counterproductive.

Slow going

2011-12-20T15:03:00Z

“World growth will slow in 2012—the only question is by how much.” That is the abrupt and sober opening from IHS Global Insight’s chief economist Nariman Beravesh in his Top 10 Economic Predictions for 2012. We cannot blame bad news on him, but it’s still a pretty grim outlook even with its “moving in the right direction” theme:

The United States will probably avoid a recession.
The Eurozone is headed for a second dip.
Asia will continue to outpace the rest of the world.
Growth in other emerging markets will hold up, for the most part.
Commodity prices will (mostly) move sideways.
Inflation will diminish almost everywhere.
Monetary policy will either be on hold or ease further.
Fiscal policy is set to become even tighter in the United States and Europe.
With the exception of the Euro, the dollar will keep sliding.
Most of the risks to the outlook are on the downside.

Readers should follow the link to the full presentation, because Beravesh offers some brief and insightful narration to each point. If you’re like me, you’ll get the sense of someone trying to avoid acknowledging the full impact of all these trends.

If these are “trends,” then they are leading in the wrong direction. More accurately, they are not trends at all but lingering conditions, and they are generally the same conditions we have been trying to overcome since 2008.

Respondents to FM&T's annual Business Outlook Survey registered a more generally positive outlook for their own organizations – suggesting that the excruciating process of regaining financial soundness is largely completed for metalcasters.

What remains effectively unrecovered is the consumer economy (encompassing retail and housing, and much of the financial sectors), and these consumers are unlikely to regain their vitality as long as federal and state governments squeeze us harder as a consequence of their excessive spending.

So, let’s appreciate the manufacturing recovery now, because if Beravesh is correct then the scarcity of buyers for manufactured goods may make it hard to remember that it happened at all.

We're not machines

2011-12-06T14:01:00Z

The U.S. Labor Dept.'s monthly employment report has become a ritual of the ongoing recession — “jobs” rather than GDP are the measure of our economic progress. As such, the November report from late last week was good news, revealing as it did that nationwide unemployment is down to 8.6%, the first drop below 9% since March 2009.

To be clear about my view, 8.6% is still unacceptably high, and there is reason to be concerned that the 8-9% range has become a baseline of normal unemployment. But, let's take the good with the bad.

While I don’t agree with the reasoning that “jobs” should determine our economic standing, if it must be so then we have to acknowledge that there is a growing, general despondency as a consequence of this: among the unemployed, obviously, but especially among those who have given up hope of working. From October to November, the U.S. Labor Dept. report showed, 315,000 people lost their jobs. Moreover, the “labor participation rate” now shows that just 64% of the entire population is employed, and that the rate of underemployment (part-timers who want to be full-time workers, or who have been relegated to positions below their income potential) is 15.6% of the workforce.

All of that is a prelude to my own point, which is inspired by comments to our 2012 Business Outlook Survey,: the employed are also discontented. I don’t mean that the employed have problems as serious as those of the unemployed, but they are bearing the strain of a stagnant economy, too — and not merely because the effort of 64% is needed to support 100% of the population. The totality of work is carried out by a declining number of individuals, who must increase their production in order to be rewarded, even as the resources and support (and rewards) available to them do not increase

The joy, if it ever was there, is gone from work. Increasingly, our workmates are computers and machines. Not only do they offer no company, they are intolerant of slowdowns and mistakes.

This is a blow to individualism and idealism, which for centuries have inspired people to work hard and gain their reward. Our survey showed that metalcasting executives have a very positive outlook about their business for 2012, but their candid comments show them to be anxious, frustrated, and a bit defiant about the demands that work and business place on them as individuals.

So, is it worse to be overworked than to be unemployed? Certainly not … Not yet. One obvious difference between humans and machines is that the former can hold two contradictory ideas — outlook, positive; personal expectations, grim — for a while, at least. The strain of that contradiction is great, however.

Time warp

2011-11-28T02:32:00Z

The National Labor Relations board was established in 1935, by way of the Wagner Act, as an independent panel assigned to adjudicate differences between employers and labor interests. Lately, however, the NLRB seems to operate from the assumption that there is something inherently unethical about private businesses, or essentially unjust about the arrangement between private companies and their employees. The NLRB’s challenge to Boeing Corp. over its new, non-union plant in South Carolina made it clear that the board is not interested in mediation; it’s going to pursue its own agenda. This week, we may see how it will do that.

On November 30 the NLRB plans to vote on a new series of rule governing procedures for initiating unionization votes at workplaces. It explains that the changes will “simplify procedures, make them more uniform across regional offices, and reduce unnecessary litigation.” Effectively, it will establish the Employee Free Choice Act (“card check”) without the difficulty of legislative endorsement.

Employers, of course, see things differently. These new rules would put significant restrictions on employers to keep them from arguing against unionization, while expanding the union organizers’ access to workers and speeding up the process of establishing unions — unions that by that very process would be hostile or obstructive to the employer’s plans. The Wall Street Journal called the new approach “Big Labor’s version of speed dating.”

There is no reconciling these two points of view. Employers see unions as a drain on their competitiveness; they easily cite the ordeals of Boeing or the domestic automakers, and they take every opportunity to avoid hiring union workers, notably by locating their operations in places that do not stipulate union representation as a requirement for employment. Unions and their supporters see employers, like Boeing, as the reason that union membership is down from historic highs. They interpret any financial success by these companies as income generated at their own expense, and they want regulations to restore their former influence in the private sector.

Rather than stand between these two points of view, the NLRB is trying to regulate employers into a new reality, or rather an old one – one in which resources, information, finances, competition, and consumers, are not globally relevant. No, their outlook, just as in 1935, is that all these variables are within the power of the employer to optimize. By stipulating how employers may select and maintain their workforces, the NLRB assumes all the other market inequities will be stabilized. If everyone just played by the rules it will set, the board seems to assume, then workers would be treated fairly and employers can continue to operate, sharing their successes more equitably.

The world has changed since 1935 – and even since 1995. It will be different next year than it is now. The NLRB may succeed this week, but its new regulations won’t turn the clock back on global competition. Rather, the proposals seem likely to accelerate job relocations and raise the cost of doing business for those employers caught in NLRB’s time warp.

Stick to the message

2011-11-08T14:16:00Z

Speaking only for myself, I have never much like trade shows, conferences, seminars, etc. I realize they are important routines for conducting business - and that a lot of people appreciate the opportunity to socialize and recreate with colleagues they don't meet with regularly. I see a lot of waste in the cost structures, but that's generally someone else's problem, not mine. To me, the big objection involves my time: The routines of travel, meetings, and events are just too much extra crowding my schedule.

My objections don't matter much, except: A friend writes to tell me that AFS allowed Morgan Molten Metal Systems to record two presentations given last month at the Aluminum Conference & Workshop in Dayton, Ohio, by that company's regional account manager Ted Kostilnik. "To the best of my knowledge, these are the first complete videos of individual presentations shot at AFS conferences," he told me, and they are available now for viewing on YouTube. They are informative, not commercial in nature, and filled with practical advice for crucible operators.

Well done all around. This is the way to conduct a meeting. Give the audience what they need. Let them set the time. It may not be "marketing," but it is highly effective communication.

Video marketing has gone through waves of development and popularity in the past 10 years, and much of what has been offered has been ineffective, or worse. Generally, it's too static or it's too slick. In serious business like metalcasting, Morgan MMS has taken the only sensible approach: be informative. There's too little time for all the rest.

If you're interested in video marketing, you should check Creative Videographers' Eyes, a blog maintained by videographers and video producers who comment on best-practice commercial videos that they have found effective or "inspirational." Visitors are invited to submit their own videos for comment, evaluation, or advice. Amy Munice, creator of the Global B2B Communications web site that hosts “Creative Videographers’ Eyes,” said there were two reasons for launching the blog:

"One, we hope to create a shortcut to help global companies that go to some lengths to create quality videos gain a wider worldwide audience whose industry information might otherwise be too narrow in focus, or too technical, to easily become the type of global viral video that can be so important to driving traffic to web sites and assisting in search engine optimization," she said.

The second goal is to show the talent and ideas available for this type of communication among videographers, corporate video producers, and video production companies. If you have a message to deliver and you think video is the way to do it, you may find some insights among all that talent. Remember, there has to be more to the message than just the medium.

Is it working for you?

2011-11-01T03:14:00Z

It’s hard to study robotics — as I did recently — without examining the human aspect of it all, meaning how the availability of robots (and advanced technology more broadly understood) intersects with the humans that install them. Most of us realize now that robots can be programmed to do specific tasks more reliably and cost-effectively than humans, but is the availability of automation on the plant floor and on the desktop making humanity less insightful about the work they do (or, formerly did)? I don’t mean that the people programming or overseeing the robots are not informed and aware of the work at hand. I’m wondering if it’s a good thing that there are fewer and fewer human minds focused on these critical manufacturing processes.

The general theme of the short feature I wrote is that robots are getting much more effective at completing metalcasting work, and coordinating process flow in foundries and diecasting operations. Unquestionably, that is a good thing.

But, neither to I think there is any question but that one of the underemphasized factors behind the current unemployment problem is the availability of robots and other technological resources to execute tasks that are too physically demanding, too time consuming, or too expensive for humans to do. There is some concern about this sort of thing among those focused on skills development for young people. I share that concern - but I'm not thinking about the economic impact as much as I am wondering about the progress of human intelligence.

As machines get smarter, do we get less insightful, less informed, less creative, and less adaptive? The authors of this book seem to think it’s so, and they see it as part of the chronic unemployment plaguing the manufacturing sector. I admit I’m not informed well enough to make that conclusion, but I will offer the truism that it’s always better to have more minds focused on solving a problem – and exempting individuals from manufacturing process also does away with their insights. The increasing emphasis on productivity over recent decades (a good thing) may be depleting our creative resources.

Another gap in the system

2011-10-18T14:09:00Z

I attended an event in Canada about two years ago – a competition of vocational skills (machining, welding, carpentry, and much more) among young people (16 to 22 years old, I recall), from all over the developed world. Notably, there were very few Americans in the competition.

It was at the time an eye-opening event. I was surprised at the accomplishment and the industriousness of these craftsmen and women, competing mostly for the satisfaction of demonstrating their abilities. The award monies were attractive, but not overwhelming. I wondered why there were not more Americans in the competition, and though I never doubted that there are equally impressive skills among our own citizens, there is apparently not enough in our educational establishment to compare with the training and development programs other developed nations have for young craftsmen, tradesmen, and technicians.

Now, there is a study documenting – more or less — this situation. “The survey shows that 67% of manufacturers have a moderate to severe shortage of available, qualified workers,” said Craig Giffi, vice chairman and consumer & industrial products industry leader, Deloitte LLP, which conducted the study. “Moreover, 56% anticipate the shortage to increase in the next three to five years.”

My first reaction is probably not helpful: the findings of this study are not news, at least not to most manufacturers with whom I have discussed the matter. There is also a related problem, not fully explored: the cost of employing skilled workers. That is not a matter of training, but of regulation – and yet it must be addressed if the “skills gap” is going to be resolved.

We’ll present a column on this subject in the forthcoming issue of FM&T, from a leader of education establishment. In essence, her point is that manufacturers need to support efforts by schools, colleges, and universities to establish the importance of career and technical education to a thriving economy.

It’s a reasonable point, and I won’t undercut it before readers have a chance to consider it.

My own opinion on the “skills” gap is that it is an organizational problem – in which a rigid and unreformed educational infrastructure does not properly evaluate students according to the range of potential opportunities, leaving them undertrained, unappreciated, or unrewarded. The gap is made somewhat worse by a regulatory structure that limits the choices of manufacturers and other employers to find enough skilled workers.

Manufacturers are generally pretty effective at solving their problems, but they can only work with what is available to them. The solution to the skills gap involves more than “working together”: It may require a fundamental review of educational and regulatory programs.

You think you've got it bad?

2011-10-11T13:43:00Z

I screen all sorts of links related to metalcasting, but this is a novel one: first-hand accounts of the survival of foundries in an oppressed and depressed country. Most of us probably don't think much about the misery of life in Cuba since 1959, where the goods and resources — like coffee pots — can be scarce or impossible to find. Or, where engaging in an activity that is an extension of one's own skill or ingenuity — like metalcasting — can be restricted or regulated out of existence.

I've never thought about metalcasting in Cuba 'til now, but it's obvious on reflection that such a fundamental industry would survive, one way or another. As our own economy stumbles along, as our technologies grow more refined and more mechanized, it's still impressive to note the endurance of these people and these processes.

7,000 engineers

2011-10-10T02:57:00Z

Last week’s arrival of the U.S. Labor Dept.’s September employment report didn’t reveal much: there was some increase in hiring and economists feel the threat of a new recession has been averted. But, the unemployment rate is still 9.1% of the workforce, higher if you subscribe to the “underemployment” analysis, a number that is beginning to look like a new baseline.

If so, then it seems to me an even stronger case that federal government’s standard techniques for spurring employment (tax incentives, targeted loans) need to be replaced with something more innovative. The past week also brought news of Steve Jobs’ death, with appropriate paeans to his ability to convert technology into a marketable products; along with more frustrating details of the federal funding of a failed producer of unproven photovoltaic cells.

Innovation doesn’t have to be “next generation” in order to be an effective business strategy; it’s enough to be proficient and reliable at producing something already much in demand. That would be the lesson from last week’s news that Cummins Inc., which already employs 17,000 people in the U.S. and 40,000 worldwide, hopes to hire 7,000 engineers in the next five years.

Most readers probably know Cummins, which manufactures a range of high-value automotive engines, power-generation products, and component parts. Surely there is a lot of advanced technology in those products (that’s what engineers are for), but the more important point is that Cummins is manufacturing products that the global market wants and needs, and it is being rewarded for it. And it expects to invest to keep that process growing.

Cummins and its 7,000-engineer plan are encouraging reminders that we don’t to waste a lot more federal funds and we don’t have to settle for an unemployment rate fixed at 9%. Other companies have the means to produce valuable, useful products, too, and the global market has the demand. We need to identify what it is that’s keeping producers and consumers from coming together.

One of the greats

2011-09-12T03:20:00Z

Having written recently about the importance of recognizing the good works of people around us, I'm glad to be able to point readers to this article about one of the recent greats of the metalcasting industry. It happens that he's a member of the FM&T Hall of Honor, too. The article is a revelation to me, and another reminder of the hard work and determination that fill a person's life.

It causes me to realize, too, how in the present time we are too casual to ascribe a judgment to people - and very often it's one based on a particular merit or demerit that we find important. We don't pause for reflection; we don't wait for further developments. It takes so much more, and so much more time, to know the truth about someone.

Worth noting, too, is that be valuing hard work and sacrifice we not only credit worthy people, we encourage more of the actions and achievements that make all of our lives better.

Where the jobs are

2011-09-06T13:47:00Z

The anxiety over employment totals continues to drive most discussions about the state of the U.S. economy, and so last week’s report indicating that August ended with no net improvement in the jobless rate is bad news indeed. However, headlines suggesting there is “no change” in employment are just untrue. Jobs are being created, and some of these are in metalcasting operations.

In only the past week there have been reports of hiring from Decatur Foundry in Illinois, Gibbs Die Casting in Indiana, and Empire Die Casting in Ohio. None of these is a huge development, except at the locations where they are happening, because those companies obviously are growing. Hiring new workers is what growing companies do.

Employers hire new workers when they have the means to do so, and the confidence that their business activity will expand to cover the additional expense that workers add to cost of doing business.

Unfortunately, for the economic policy makers seeking to understand the “no new jobs” story, job creation happens incrementally, not in waves that would signal some sudden economic revival.

So, if the August employment report indicates there has been no change in employment totals, it means that every new job is being offset by a job being discontinued. Thus, if metalcasters are expanding their production activity, other sectors are cutting back.

What the August employment report means is nothing different than what many businesses and some economists have been describing for the past three years as “uncertainty.” Businesses cannot find the means to grow, so they are not making any plans to do what growing companies do.

Another conclusion from the August employment report is that the economic policy makers are failing at the responsibility they claim for themselves, because they are not fostering the circumstances that will allow employers to take confidence in future conditions. It’s likely that the reason they are failing is that they continue to treat job creation as their objective, when they ought to see economic expansion as their goal. Jobs are not a commodity that can be “created”; they are an indicator of growth.