10 Dec Wisconsin Manufacturing Poised For a “Barron’s Bounce”
“given the outlook of … Milwaukee, we’re incredibly bullish”
Plymouth, Wis. – After years of discouraging words about the manufacturing prairie and pejorative phrases like “Rust Belt,” Wisconsin got a much needed boost from a Barron’s Magazine story entitled “Rust Removal” in its December 8, 2003 edition. In an interview with Jeff Gendell, a hedge-fund manager for the $1 Billion Tontine Associates, he 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 weekly Dow Jones publication has a history of moving markets and identifying slowly emerging trends: In financial news circles, it is know as the “Barron’s bounce.”
Mr. Gendell cites various economic reasons, and chief among them, are shipping costs and prevalent “just in time” inventory practices. First, with the cost of shipping natural resources and finished products rising between 200% and 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. In particular, coal is cited because “it costs more to ship the ton of iron ore than is does for the iron ore itself.” As for “just in time” inventory or JIT, a friend of mine refers to JIT as “just isn’t there.” This is another way of saying that companies are finally going to have to start putting inventory back into their “inventory.”
Perhaps the most direct comments about Wisconsin made by Mr. Gendell can be found when he says, “when people ask us if we are bullish, we say that given the outlook of Mishawaka [Indiana} and Milwaukee, we’re incredibly bullish.” Among the other slightly “off the wall” predictions, Mr. Gendell thinks that Midwestern states will see their revenues “go through the roof “ and that “there’s going to be unbelievable job growth” in the manufacturing sector.
But, before Governor Doyle and the Republican controlled Assembly and Senate get too self-congratulatory, I think it is time to review the reasons for our problems and any forecasted revival.
Here in Wisconsin, we have been going through a gut-wrenching process of industrial recession and self-doubt. How else can anyone explain the Wisconsin inferiority complex found in our public discourse and political climate. 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 certainly do not think Wisconsin can afford to ignore technology and its impact on Wisconsin’s economy, I do think we should refocus on our past and our skill set. Wisconsin has a proud manufacturing history and remains among the top two or three largest manufacturing employers in the U.S. Not only that, Wisconsin has many medium and large industrial companies who are pioneering the whole concept of integration between manufacturing processes and technology. Names like Quad/Graphics, Rockwell Automation, the Trane Company, the Menasha Corporation, Kohler, Kimberly-Clark, Schneider Transportation, and Johnson Controls come to mind. Wisconsin can avoid the devastation of technology bubbles and the depression of minimum wage jobs for failing industries.
These companies are not resting on their laurels and neither should any of us. To thrive in the Twenty-first 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 counter-intuitive, but we need to reduce jobs and other costs so that we can create whole categories of jobs that add value to our products and ensure we remain globally competitive. Harold Smethills, CEO of the Menasha Corporation, told an interesting story about his company at a recent Economic Conference in Milwaukee. He reminded the audience that his company was “the largest manufacturer of wooden buckets in the world during the 1920’s.” Needless to say, Menasha would not exist today if it had continued to manufacture wooden buckets.
Finally, Wisconsin should stop blaming others for its problems. Even though China is now taking many minimum wage jobs away from Europe, Asia, and North America, they have had their own employment problems. In fact, China has lost something like 15 million jobs recently thanks to the failure of their state-owned businesses that 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 re-invent. 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.
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Stephen Heins, “the word merchant,” is Vice President of Corporate Communication at Orion Energy Systems. He can be contacted at
sheins@orionlighting.com.