COMMENTARY | The economy and jobs are at the top of almost every political debate these days. Some say that the halcyon days of American manufacturing are over and that we are becoming a service-based economy. Has America lost its manufacturing edge forever?
When I think of the foundations of American industry, I think of creative innovators like Thomas Edison, titans of horizontal and vertical integration like Andrew Carnegie, and masters of efficiency like Henry Ford. Edison's light bulb, almost unchanged since he invented it, still lights our homes today. Carnegie's business practices are the model followed around the globe. Ford's assembly line is still synonymous with manufacturing efficiency.
It seemed like a natural choice to look to one of the companies founded by these giants for some insight into the state of American manufacturing today. I spoke this month with James Tetreault, the Vice President of North American Manufacturing for Ford Motor Company, the man personally responsible for carrying on the manufacturing legacy of Henry Ford in America.
"Is the United States competitive compared to the rest of the world for manufacturing?" I asked.
"I don't think there is any place where we're not competitive," Tetreault said. "I've worked in Europe for many years and we've got operations around the globe. Our American factories are as competitive as any in the world. We're as high tech. We're as efficient. I'd stack us up against anybody in the world as far as competitiveness."
Ford, like other U.S. automakers, was hit hard during the recession. Tetreault credit's Ford's partnership with the United Auto Workers' Union for helping Ford not only get through the crisis, but for helping Ford to actually bring jobs back into the United Stated from overseas during that time.
"We've in-sourced over 2,000 jobs back into the United States, including some of the high tech components like hybrid power trains, transmissions, battery packs. The UAW has partnered with us to make a multitude of changes that enabled us to be more competitive when compared with the non-UAW plants in the U.S. They've been very good partners for us to get through the recent economic times."
Tetreault said he sees more opportunity to in-source jobs to the United States: "The UAW enabled a lot of our in-sourcing with changes in the contract with regard to efficiencies, work rules, and entry-level wage positions. So as long as we stay on that track, there's always going to be opportunity to partner with the UAW to bring jobs back."
Of course, as with any business, much rides on overall economic conditions. Ford's sales numbers rose 14 percent in February based on prior year's totals. Although Tetreault attributed this to Ford's product portfolio of highly fuel efficient automobiles, rather than a general upturn in the economy, I would point out that while fuel-efficient cars did lead the pack, virtually every other major automaker showed a similar upturn in U.S. sales numbers for the same period, with the industry as a whole up 27 percent, according to numbers compiled by Reuters.
Although Ford also produces cars overseas for many foreign markets, U.S.-built cars are exported to at least 90 countries around the world. Tetreault told me that the bulk of those exports are sent to America's NAFTA partners, Mexico and Canada. As an expert in American manufacturing, Tetreault, for one, doesn't believe that America is at any disadvantage when it comes to producing goods for domestic or international consumption. Yet American manufacturing jobs have indeed declined substantially from a peak of nearly 20 million in 1979 to roughly 12 million in 2009, according to Federal Reserve Bureau of Labor statistics.
Veronique de Rugy of the Mercatus Center at George Mason University plotted this decline in manufacturing jobs against the dollar value of American manufacturing output over the same period to reveal an interesting relationship between the two variables. Even as the number of Americans employed in the manufacturing sector fell, U.S. manufacturing output has grown from about $1.8 trillion in 1979 to a peak of $3.5 trillion before the start of the recession in 2007. In other words, American factories are producing more goods than ever, but they are managing to do it with fewer workers.
Perhaps, then, outsourcing isn't the biggest threat to American manufacturing jobs after all. The numbers suggest that it may be that the very efficiency that helped make America the global leader in manufacturing now means that even when American manufacturing is doing well and our output is growing as it has over the last three decades, the demand for increased labor is being met by more efficient practices and technology rather than by adding more bodies to the assembly line.
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