Gaining a little perspective

April 14, 2005
We measure our economys strength on the outcome ? the results, which might be even better if we pay more attention to the policies that are its inputs.

I learn lots of things just working around my office, reading mostly, but I always feel I gain more insight when I’m away from it — and listening.

Every few weeks or so we get news that some metalcasting facility is closing. Sometimes it’s just the inevitable end of a business, and though it’s disappointing it’s generally understandable. More outrageous, typically, are the stories of an operation being transferred to a foreign location. Late last year we learned that Caterpillar is making plans to transfer production of small-engine castings to a Mexican joint-venture. More recently, Hayes Lemmerz has decided to close an aluminum wheel plant in California, amid a new strategy to focus its long-term growth efforts overseas.

I realize these and other similar developments are almost entirely driven by specific conditions in those organizations. If we believe this is a “trend” it’s partly a result of the way we receive the news: how many jobs will be discontinued, how much revenue will be lost to the community, and so on.

And, there are the obvious industry and market conditions that inform our understanding of this. When reminded of another’s misfortune, it’s difficult not to worry about our own security.

On this point I got an important new perspective from a recent address by General Motors chairman and CEO Rick Wagoner. He told listeners at the Economic Club of Chicago that GM analysts studying the comparative advantages of nine top automaking nations have concluded that overall manufacturing conditions in the U.S. create a competitive disadvantage for companies operating here.

Wagoner did not say all is lost for U.S. manufacturers. “The U.S. manufacturing sector needs to keep pushing, keep raising the bar, if we are to remain the leader, because the competition in manufacturing is increasingly global, and it gets a lot tougher every year,” he said.

He applauded manufacturers’ improvements in finished-product quality and productivity over recent years. But, because the manufacturing sector is so critical to the larger U.S. economy Wagoner urged industry and government leaders to address a series of issues that puts domestic manufacturing at a disadvantage to offshore competition. Issues he listed in need of resolution included the free-trade/fair-trade dichotomy, federal tort reform, and the U.S. health-care system.

Then, just warming up, he took on currency policy. “We should insist that the Asian countries stop intervening in currency markets immediately and permanently and allow the gradual depreciation of the dollar to continue,” Wagoner said. “The U.S. manufacturing base has suffered from an artificially strong dollar for too long. It’s time for the Asian economies to rely more on domestic demand and less on exports to the U.S.”

Wagoner is not an alarmist or reactionary. As head of GM, he understands that manufacturing is only one part of the economy, and he certainly doesn’t want more government regulation or intervention. We measure our economy’s strength on the outcome — i.e., consumer confidence — but Wagoner is arguing that we can have a stronger, and better, economy if we pay more attention to the policies that are inputs.

A lot of this change might be achieved just by changing our perspectives. Not long ago, on a visit to one of the most important developers and suppliers of metalcasting technology, I got a fascinating view of the future. Their research labs and workshops are impressive, but what really struck me was their long-range business plan.

Though they acknowledge all the obvious concerns shared by the U.S. metalcasting industry, they’re not deterred. They’ve got a plan to grow and succeed because they view the entire world as their market. And, because they’re determined to develop the best products and services, they’re confident they’ll be working with the best customers. That’s the sort of perspective, that would help all of us.