Metals Service Center Institute Central States Chapter Town Hall Meeting

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Metals Service Center InstituteCentral States
ChapterTown Hall Meeting
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Bob WeidnerMetals Service Center Institute
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Capacity Utilization Durable Manufacturing
85.0 82.5 80.5 77.5 75.0 72.5 70.0 67.5
90 91 92 93 94 95 96
97 98 99 00 01 02 03
www.Economagic.com


August 19, 2003
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Economic Landscape

• Struggle continues for manufacturers
• Chicago Tribune 7-4-03
• Unemployment rate jumps to 9-year high
• Chicago Tribune 7-4-03

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Declining State of Manufacturing

• Over 2.7 million manufacturing jobs lost in
  past 3 years
• Manufacturing employment in the U.S., currently
  at approximately 14.8, has fallen below the
  level at which it was first officially
  announced
• The flight of labor-intensive goods-making
  tasks to low wage countries isnt the only
  reason for manufacturing unemployment anymore.
  Lately its been big companies tendency to
  order parts from foreign countries that has cost
  small to medium-sized U.S. family firms a lot of
  business. (Los Angeles Times 5/18/03)

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Metalworking Alliance to Save North American
Manufacturing

• Need for collaborative coalition of metals and
  manufacturing groups
• We need to elevate awareness level of the
  manufacturing crisis
• Large and small manufacturing businesses need
  to work together to insure fair and free trade
• Securing Americas Future The Case for a
  Strong Manufacturing Base
  Joel Popkin Study

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Donald R. McNeeley Ph.D.Chicago Tube and Iron Co.
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MANUFACTURINGMans Best Friend

• By
• Donald R. McNeeley Ph.D.
• Chicago Tube and Iron Co.

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The Good, the Bad, the Ugly
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The Good
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Relative Comparison
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SERVICE SECTOR
FARMS
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The Bad
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Manufacturingvs.Assembly
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Recessions

• Cyclical
• Vs.
• Structural

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Recovery Preconditions

• Low Interest Rates
• Improved Financial Market Conditions
• Tax Cuts
• Weaker Dollar

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However

• GDP Anemic
• Unemployment High
• Under-employment

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Jobless Recovery
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The Ugly
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Steel ProductionMan Hours Per Ton
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Steel Industry Employment
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However
Man Hours Per Ton
Steel Industry Employment
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Parable
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William M. HickeyLapham-Hickey Steel Corp.
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Currency Manipulation

• Market fundamentals have historically not set
  the value of the Japanese Yen, Taiwanese
  Dollar, Korean Won and Chinese Yuan
  Governments Have!
• Chinas growing trade surplus and huge foreign
  investment inflows would suggest one thing a
  stronger yuan reality is visa vie the U.S.
  dollar theres been no change
• Optimism that Treasury Secretary Snow
  understands the issue

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The U.S. Current Account Deficit
Q1
Source U.S. Department of Commerce August 19,
2003
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Factory Jobs in Decline
U.S. MANUFACTURING JOBS Seasonally Adjusted,
scale in millions
01
02
03
Source U.S. Bureau of Labor Statistics August
19, 2003
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Coalition for a Sound Dollar

• Coalition of over 80 trade associations focused
  on achieving a sound dollar policy
  www.sounddollar.org
• Growing momentum to utilize Section 301 of the
  Trade Law of 1974 to get the Administration and
  Congress to address currency manipulation
• IMF Article 4
• Various provisions of WTO regulations

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David L. LermanSteel Warehouse Company, Inc.
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The China ChallengeFrom Macro to Micro
Discussion

• Some Examples of Lost Business
• Health Care Patient Aides
• Outdoor Furniture
• Seating/Tables

• Dave Lerman
• Steel Warehouse
• Lock Joint Tube

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Patient Aides

• Products Made Include Walkers, Commodes, Bed
  Rails
• Our Two Largest Customers for Product Used Over
  3300 Tons of Steel Tubing

• Competition became imported product shipped into
  US, selling at lower cost.
• First customer shut domestic facility in 2002,
  imported product.
• Second customer looking at transferring work
  overseas late this year.
• One customer US facility closed, second customer
  will reduce workforce.

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Seating Tables

• Folding Chairs, Folding Tables
• Sales for Segment Over 1400 Tons

• Competition for customers became imported product
  shipping in at low prices.
• Customers chose to import themselves versus
  manufacturing here.
• Manufacturing facilities closed, several
  companies import or moved to different products.

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Outdoor Furniture

• Marketplace changed from hardware stores to large
  retailers.
• Price became major purchasing factor.
• Cost of domestic production could not compete
  with foreign sourcing.
• US factory virtually closed, all products
  purchased off shore.

• Residential Outdoor Furniture
• Annual Sales 1700 Tons of Steel

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Cost Advantages USA vs. China

• Raw Material USA
• Labor Productivity USA (USA OK at Direct
  Level)
• Labor Cost China
• Logistics (Freight) USA
• Indirect Costs
• ? Pension Health Care, Work Comp China
• ? Taxes (State, Local, Federal) China
• ? Subsidies (Capital, Export Other) China
• ? Regulation Costs (Government, Environmental)
  China
• ? Currency China

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Considering Foreign Sourcing- Comments from
Customers

• Need to stay competitive in marketplace.
• If foreign product is more competitive, they have
  to look at the option to insure their survival.
• Savings with foreign sourcing must be greater
  than 10-15 to cover inventory cost and
  potential problems.
• Many see savings in excess of 20 as possible
  given current business conditions.
• Savings on parts with overseas production without
  capital investment.

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What Is Next?

• Lost Jobs so far? - 2,700,000
• Going Forward??????
• Who Is Threatened?
• MANY MORE LOST JOBS, IF WE DONT DO SOMETHING!

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John M. LichtDuraco Products, Inc.
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Personal Commitment Participation

• Write your elected officials (federal, state
  local)
• Invite elected officials into your plants
• Hold elected officials accountable to take a
  stance on pro-manufacturing agenda
• Get engaged in championing manufacturing at
  home . . .

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Metals Service Center InstituteCentral States
ChapterTown Hall Meeting