GUEST OPINION
Barron’s article knocks the rust off state manufacturing outlook
By STEPHEN HEINS
Monday, December 22, 2003
In an interview, Jeff Gendell, a hedge-fund manager for the $1 billion Tontine Associates, states that the U.S. is about to enter “the strongest recovery in the last 25 years — my entire investing career — and it is all going to be centralized in the industrial sector of the economy.”
As readers of Barron’s know, the publication has a history of moving markets and identifying slowly emerging trends: It is known as the “Barron’s bounce.”
Gendell cites various economic reasons, chief among them shipping costs and “just in time” inventory practices.
With the cost of shipping natural resources and finished products rising 200% to 300% over the last year, foreign importers, including the Chinese, face the prospect of a lessening competitive advantage coupled with more uncertainty surrounding the scarcity of shipping at any cost.
The most direct comments about Wisconsin made by Gendell can be found when he says, “When people ask us if we are bullish, we say that given the outlook of Mishawaka (Ind.) and Milwaukee, we’re incredibly bullish.”
Gendell thinks Midwestern states will see their revenue “go through the roof” and that “there’s going to be unbelievable job growth” in the manufacturing sector.
Before Gov. Jim Doyle and the Republican-controlled Assembly and Senate get too self-congratulatory, let’s review the reasons for our problems and any forecast revival.
Here in Wisconsin, we have been going through a gut-wrenching process of industrial recession and self-doubt.
In fits and starts over the last three years, Wisconsin has tried to turn away from its manufacturing past by starting several “new economy” initiatives and forming high-tech support groups.
While I do not think Wisconsin can ignore technology and its impact on the economy, we should refocus on our past and our skill set.
Wisconsin has a proud manufacturing history. It is the 10th- biggest employer of manufacturing workers and ranks only behind Indiana in percentage of such workers. (The U.S. Bureau of Labor Statistics reported that 18.9% of Wisconsin’s work force was engaged in manufacturing; to 20.5% for Indiana.)
Not only that, Wisconsin has many medium and large industrial companies that are pioneering the concept of integration between manufacturing processes and technology. Names like Quad/Graphics, Rockwell Automation, Trane, Menasha, Kohler, Kimberly-Clark, Schneider Transportation, Oshkosh Truck and Johnson Controls come to mind.
These companies are not resting on their laurels and neither should any of us.
To thrive in the 21st century, the manufacturing sector in Wisconsin must continue the process of improved productivity and cost containment, without which no long-term growth will be possible.
It may seem counterintuitive, but we need to reduce jobs and other costs so we can create whole categories of jobs that add value to our products and ensure we remain globally competitive.
Harold Smethills, CEO of Menasha Corp., reminded an audience at a recent Economic Conference in Milwaukee that his company was “the largest manufacturer of wooden buckets in the world during the 1920s.” Needless to say, Menasha would not exist today had it continued to manufacture wooden buckets.
Finally, Wisconsin should stop blaming others for its problems.
Even though the Chinese are taking many minimum-wage jobs away from Europe, Asia and North America, they have had their own employment problems. China has lost some 15 million jobs recently because its state-owned businesses are not competitive.
We need to understand that trying to stop progress will never work.
Wisconsin has a world-class manufacturing sector that has continued to control costs, innovate and reinvent. Wisconsin needs to stop wringing its hands, stop whining about its temporary economic woes, and stop trying to protect its industry from global competition.
After all, Wisconsin is well-positioned to ride the next Barron’s bounce.
Stephen Heins is vice president of corporate communication for Orion Energy Systems in Plymouth.
