I am this week attending a conference in Stuttgart, Germany, on -- wait for this -- manufacturing. The World Manufacturing Forum, as the name suggests, is an international event, but the organizers aren't shy at all about one of its key goals, which is to actively promote and encourage a manufacturing industry in the heart of Europe.
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The event is heavily sponsored and championed by Germany's Greater Stuttgart Region, and one of the welcome addresses will be delivered on Tuesday by Thomas Bopp, chairman of the regional assembly. The first address will be delivered by Fred-Holger GŁnther, chairman of the World Manufacturing Forum. In a statement on its Website, the Forum elucidated its goals:
This year's World Manufacturing Forum aims to facilitate an effective dialogue between business and government leaders and explore challenges for manufacturing innovation in the context of policy makers' options. Speakers will talk about global business concerns, the management of strategic resources and how governments can support global manufacturing innovation by increasing the sustainability of business operations and by lowering the risk of conflicts through effective dialogue and international S&T cooperation.
That sounds clear enough, but there's another stream of concern flowing beneath the lofty goals of aligning global corporate and government strategies in manufacturing. In my opinion, the forum is also meant to help boost the position of the Western world in global manufacturing as China and Southeast Asian nations continue to pull in foreign factories in droves, resulting in the hollowing of many previous producer nations' industrial heartlands.
Stuttgart's location and its economic history intertwine with the fortunes of Germany. The city is right on the Neckar River and is home to some of the world's better known manufacturers, including Porsche and Daimler AG. The region is a manufacturing powerhouse for the automotive industry, but concerns have risen in recent months as the global economy, and especially sections of the European Union, have continued to reel under fiscal and debt burdens.
A visit to any hardware or retail outlet in the United States and many major European cities will drive home the often unpleasant reality facing factory workers in the West. Most of the items on display at stores like Wal-Mart, Best Buy, and Macy's carry the "Made in China" tag, a nagging phenomenon that sometimes bothers customers who realize the outsourcing of jobs has immediate local impact but who themselves are drawn by the lower prices afforded through the transfer of factories overseas.
Few other Western nations have demonstrated fiercer willingness than Germany to fight for manufacturing marketshare. It is the world's fifth largest economy and its third-biggest exporter, boosted by manufacturing that has earned it the status of the continent's economic powerhouse. This position has been hard won, though. Like other Western economies, German companies are facing pressure from lower-cost manufacturers, and this has forced companies in the country to move up the value chain to focus on products that require a higher level of expertise.
I don't think there's any such thing as "completely cornered the manufacturing economy," as if this were a static, one-time event. I think we're dealing with a dynamic mechanism, very simply fueled in the west by the need to minimize production costs.
Companies do not deal with macroeconomics -- governments do. Companies deal in microeconomics only. If company A can make that wigit for less than company B, by offshoring, then it will do so. And that will force company B to do likewise.
The fact that in the macro sense, these two companies are going to reduce demand for their products, by helping to create job loss among their customers, never even figures in their thinking. It can't, really, if they want to stay in business until next month.
What do these conferences even accomplish? Nice words about manufacturing at home won't change the way the CEOs balance their books.
Would be nice to focus these conferences on real things. Such as, can manufacturing automation better be employed to compete against offshore labor? How, or to what extent? Also, what are wages and the standard of living doing in the Asian manufacturing countries? When is the flow of manufacturing to Asia likely to slow down?
It seems like the smarter we get, the more we talk about issues and the less we do about them. Manufacturing will not bring back the number of good-paying jobs that we used to enjoy. In order to compete in this country the total cost will need to be less, which means more automation and a few good-paying jobs. Besides, where will the manufacturing expertise come from? Academia, business, maybe we will send our best people to China to be trained. This unemployment and economic malaise is not just a normal business cycle. Unemployment will continue because we are able to produce more than we need with fewer people. Besides, manufacturing would seem to be a controllable part of the business enterprise, but there are so many ways for things to go wrong. In Toyota's case, how hard is it to design an accelerator? My point is, companies don't like things that they don't understand and are suprised by.
A hundred years ago many of the headlines coming out of China / Foxconn and the like would have been coming out of the United States. Someday in the not too distant future such headlines will be coming out of some other part of the world.
We may not like what all of this economic evolution is doing. It's pretty nasty for a lot of the people involved, but like it or not, we really don't have much choice. We either find a way to adapt or we watch the world move on from the sidelines.
The west has not given up on manufacturing and can still be competitive in many industries. In fact I thought that I had read somewhere not too long ago that Germany has a positive balance of trade with China?
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