Made in America Christmas

As the holiday season rapidly approaches, it is time to start thinking about gifts.    I, like many of my friends and relatives, will be limiting my holiday spend to less than last years’ level.   This is in line with many surveys that indicate consumers in general will be spending less this year.  If true, this holiday season will probably not bring much joy to a majority of retailers and out of work manufacturers.  The lower level of spend is why it is even more important to try to buy “Made in the USA” products.  Therefore, I ask people to do a “Made in America Christmas”.

I know it is unrealistic to ask people to go 100% “Made in America”, but it does not hurt to try.  I realize some families will want that iTouch, PS3, or some item that can only be imported.  I have a suggestion for those families; put off that purchase and switch to one of the many items that have domestic alternatives.   Whether you are buying socks, handbags, ties, jeans, a coffee maker, or a vacuum cleaner there are “Made in America” choices.  Even in electronics you can often find a domestic alternative.  If you have to have a product that is foreign made, then see if it is assembled here and/or the company does its R&D here.    Using the iPod, as discussed in my post “The Innovation Myth”, it is better that some of the money, more than just to the retailer and importer, stay in the United States then leave our economy.

Putting off that foreign purchase and focusing on domestic items helps our economy now, when we need it most.  When the economy gets better, then make that foreign purchase.  That way you help our economy now and also give holiday joy, to people you will never know, by creating a job for another American.  Also, please talk to your friends, neighbors and co-workers to do the same.   It is especially critical now because America, and most of the world, is purchasing less.  Each domestic purchase matters.

What Does “Made in the U.S.” mean?

I am starting a new feature called “Company Spotlight”.  This feature will bring attention to companies that either manufacture in the USA, or work to bring attention to the importance of American manufacturing.  The first company I am spotlighting is Made In USA Certified Inc. of Delray Beach Florida.

As the name implies, Made In USA Certified Inc. certifies that the content of products that are labeled as “Made in the U.S.” are truly “Made in the U.S.”.  As the company’s website points out, it is legal for a company to label a product “Made in America”  even when components are from other countries, this is because they can include Mexico and Canada in their calculation of domestic production.  Some Central American countries can also be counted.

Made In USA Certified Inc. also certifies other aspects of the business.   Some companies have their R&D in another country and/or outsource parts of their operations.  Where the majority of the “office” work is done does not affect whether a product can use the “Made in the U.S.A.” label.  This means that “Made in the U.S.A.” on a box does not always mean the same thing.

Julie Reiser, the President and Founder of Made In USA Certified Inc., is working to address this lack of a true standard with the “Made in U.S.” tag manufacturers put on their boxes.  Her company requires that a product “must be certified as having all or virtually all of their core components manufactured in the U.S.”  In addition, there is an added requirement that a products assembly be exclusively be done in the U.S.

Every week there are articles about product recalls due to inferior safety standards and controls in other countries.  These types of problems are less likely to happen with domestically.  From baby formula to dog food, other countries do not have the standards, and oversight, that we do.  That is why Made In USA Certified Inc. is even more stringent when it comes to consumables.  If something is to be ingested, whether by a human or an animal, Made In USA Certified requires that the core components are 100% U.S.A. made.  Being certified as virtually 100% U.S.A. made provides that additional level of comfort knowing that your products are truly safe.

Currently, the Made In USA Certified Inc. label can be found on packaging and websites of many companies.  There are two companies I want to identify.  The first is Tough Traveler. They design and manufacturer baby carriers, luggage, backpacks and more.  The other company is Franklin Clocks. Franklin Clocks offers a complete range of Clocks and Time Systems for Commercial, Educational, Government, Health Care and Industrial applications.

Most of my readers are already aware that manufacturing jobs are critical for our nation’s economy.  Having products certified to be fully “Made in the U.S.” ensures that more jobs are created domestically and that our economy benefits the most.  An added bonus is safety.

Companies like Made In USA Certified help raise the awareness of the importance of U.S. manufacturing, something we should all be working towards.  So now, if I have a choice between a “Made in the USA” product and a “Made In USA Certified” product I can make a more informed decision.  That way I can be sure that my purchase does the most possible good for our economy.

CARS

Who would have guessed that CARS, the Car Allowance Rebate System, program would be such a success? Well, to tell you the truth, I did. I was thinking about doing a post about the program before it started, but decided that since I did not have much to say, other then it would be a big success, it would be a useless post.

I previously posted about pent up demand for automobiles and my belief that Americans want to start buying again. With the recession reaching the bottom, the CARS program was the little nudge needed to get many potential car buyers to buy. From a domestic manufacturing perspective, the CARS program is a great success. My only major issues with the program are that the individual rebates are too large and there was no additional incentive to buy hybrids.

The CARS program is needed for many reasons. The most important reasons are to get the automobile selling, in significant numbers, again and to incent buyers to buy more fuel efficient vehicles. People did buy, as shown by the fact that the program “sold out” in only a couple of weeks. As for improving fuel efficiency, the Transportation Department reported that for the first 80,000 rebate application the average fuel efficiency of the new vehicles was about 61% better than the average for the vehicles they were replacing.

A big plus for domestic companies is that out of the above applications, 47% were for GM, Ford or Chrysler. This is great since it is better than the 45% those companies had over the past few months. The real good news is that 60% of the new vehicles were cars, which the imports tended have an even larger share. In any case, over 50% of the vehicles sold for this program were manufactured in the United States.

Did the government give too big of an incentive? Yes. Although this is not really a domestic manufacturing issue, should the incentive be scaled to provide more of an incentive to hybrids? Yes. I can live with these flaws? Yes. The vehicles are selling again and the incentive goes to individual families. Overall the program stimulates the economy, reduces the need for imported oil by about 85,000 barrels a month, and the vehicles are safer for the driver and occupants. Finally, there is a useful program that helps more than just Wall Street.

Cap and Trade Needs Quality Green Manufacturing Jobs

So we know that there are already “green” jobs and more and more of these jobs are being created everyday.  The problem is that I am not really sure what a green job is.  I read one internet story where livable wage “green” jobs were being created in Washington State.  I was surprised to learn that the jobs being created were to weatherize houses.  According to the Apollo Alliance, these jobs would be “green collar” jobs.

Weatherizing a house is a green thing to do, but I would not call doing it a “green collar” job.  Would anyone ever say that the gas station mechanic who gave their car a tune-up and then checked the air pressure in the tires was a “green collar” worker?  I surely would hope not.

Maybe I am a purist, but when people talk about “green collar” jobs I think about someone manufacturing or installing solar panels, or a worker at a wind turbine tower manufacturer, or even a worker at a materials company that creates that high-tech materials used for the solar panels.  I definitely don’t see auto mechanics and replacement window installers as “green collar” jobs.  The real issue is that when advocacy groups, like the Apollo Alliance, tout the number of “green collar” jobs that will be created do they count these jobs?

A study by the Rand Corporation and the University of Tennessee claims that if America were to produce 25% of its energy from renewable sources it would create 5 million new green jobs by 2025.  Does this number count the gas station attendant that is pumping the bio-fuel into the car?  How many of these jobs are lasting manufacturing jobs?

I think it important to understand what type of jobs will be created for two important reasons: First, a great many jobs were lost in the current recession, second, the chance of their being cap and trade legislation enacted.

In this current economic downturn the U.S. shed over 5 million jobs.  Many of those lost jobs were good manufacturing jobs.  I just want to get a handle on whether the “green” economy created jobs have the same economic impact as the jobs they replaced.

Cap and trade is more of an issue.   If you believe the numbers from the conservative organizations, such as The Heritage Foundation, cap and trade will mean a loss of jobs. The Heritage Foundation report “The Economic Cost of the Lieberman-Warner Climate Change Legislation” projects that the “annual job losses exceed 500,000 before 2030 and could approach 1,000,000.”

A more middle of the road analysis was given by Howard Gruenspecht, Deputy Administrator Energy Information Administration U.S. Department of Energy before the Committee on Energy and Natural Resources United States Senate on September 20, 2005.  In the testimony, Mr. Gruenspecht stated that “the average petroleum price to all users (including the price of emissions permits) is 2.2 percent higher in 2015 and 1.4 percent higher in 2025”.  He goes on to state that the projected affect of the cap and trade policy on the projected level of real gross domestic product (GDP) by 2025 ‘…will be 0.13 percent ($27 billion dollars) below the reference case levels. These changes do not materially affect average economic growth rates for the 2003 to 2025 period.”  This does not mean that the overall GDP will be negative, only that there will be a slight drag on the economy.

Although I am for “green” energy and I support cap and trade on an environmental level, I am not sure I can support it on an economic level.  As I have mentioned in a previous post, dollar for dollar manufacturing jobs do more to stimulate the economy then other sector jobs.  I would feel much better if I had a better understanding of what the “green collar” jobs really are.   

It is going to be hard enough to get back the manufacturing jobs lost due to the recession.  I am not sure that the economy can recover if cap and trade causes any significant loss of manufacturing jobs.  We need more manufacturing jobs in this country not less.

So Where Are The Jobs Going?

The other morning I was watching MSNBC when a very disturbing graphic flashed onto the screen. The graphic was about domestic production percentages at GM. It seems that GM intends to shift some production of vehicles, which are intended for the domestic market, to low labor cost countries. A quick search online produced a great deal of information about this issue. One particular search result was a Washington Post article, Under Restructuring, GM To Build More Cars Overseas, which is a fair discussion of the issue. Even so, the shifting of production just does not sit well with me since the GM bailout was to save American jobs.

As a business, I could understand why a company would want to reduce costs. Why pay a U.S. autoworker $54 an hour, with benefits, when you can pay a South Korean worker $22 an hour, or a Mexican worker $10 an hour, or even a Chinese worker $3 an hour. Businesses need to remain competitive and to a consumer saving several thousand dollars might just be too attractive to pass up.

The fact that bothers me the most about the movement of production is that the rate change of foreign production increases at an alarming rate. GM expects that in 2010, the percentage of domestic production (U.S. and Canada) is 83.3%. In 2011, that percentage drops to 83.1%. This is only a .2% change, which is not so bad, but that rate of change jumps to 1.1% between 2011 and 2012. The rate then increases to 2.5% for 2012 to 2013 with a further increase to 3.0% for the 2013 to 2014 period. This means that the overall change in (U.S. and Canada) production goes from 83.3% in 2010 to 76.5% in 2014.

GM does indicate that although the percentage of U.S. sales of cars that are built in the U.S. will drop from 67% currently to about 61% in 2012 it will rebound to 66 percent by 2014. The difference between the two sets of numbers comes from a 23% reduction of production in Canada.

I am not sure what will happen in 2015. Does GM intend to stop shifting manufacturing overseas after 2014? Will they continue to shift production from Canada to the U.S.? For every 1% of U.S production moved overseas, GM would have to shift approximately 3.4% of the Canadian production to the U.S. to keep the U.S. production percentage at 66%. At some point it will not be practical to shift production from Canada to the U.S. in order to compensate for the production shift overseas. What will happen then?

Many things can, and will, affect what will eventually happen. The UAW might make significant concessions in contract negotiations. Healthcare reform could be enacted that reduces the overall benefit package cost of U.S. workers. The Canadian government might get involved with incentives to keep production in Canada.

The shifting of production just makes it more important for people to truly understand where vehicles are manufactured. Just because a vehicle was manufacture in the U.S. this year there is a chance that it will not be next year. This is even truer for Canada.