Officials respond to manufacturing rebound talk

story by Michael Tilley
mtilley@thecitywire.com

News on Thursday (Dec. 6) that Apple plans to shift $100 million in spending to build Mac computers in the U.S. added energy to a nascent belief that American manufacturing is set for a rebound.

But the reality is it would likely take more than $100 billion in manufacturing investment to make a dent in the almost 9 million manufacturing jobs lost in the U.S. since the late 1970s when almost 20 million were employed in blue-collar jobs that bolstered the middle class.

In Arkansas, roughly 62,000 jobs would have to return to the manufacturing sector just to recover the jobs lost between October 2002 and October 2012. To put that in perspective, it would require 40% growth in manufacturing jobs from the 155,700 employed in October 2012 to return to 2002 levels.

In the Fort Smith region, once hailed as the manufacturing center of Arkansas, there were 19,200 manufacturing jobs in October, well below the 28,600 in October 2002. The October 2012 number is just 600 jobs higher than the all-time low set in March.

In Northwest Arkansas, 27,900 were employed in manufacturing, down from 35,000 in October 2002. The October 2012 figure was up 700 jobs from the all-time low set in February.

THE APPLE PLAY
“We are looking at doing more manufacturing in the U.S. because, in general, customers want more to be done there,” Louis Woo, a Foxconn spokesman, said in a phone interview with Bloomberg News. He declined to comment on individual clients or specific plans.

Foxconn, which makes components for Apple, Hewlett-Packard and other electronics companies, said in a Bloomberg story published Wednesday it would expand its North American manufacturing operations. The company employs 1.6 million globally, with all but an estimated 100,000, employed in China.

Apple CEO Tim Cook confirmed the shift of some production to the U.S.

“Next year we’re going to bring some production to the U.S.,” Cook said in the Bloomberg interview.. “This doesn’t mean that Apple will do it ourselves, but we’ll be working with people and we’ll be investing our money.”

PURSUING POSSIBILITIES
Joe Holmes, a spokesman for the Arkansas Economic Development Commission, said Thursday the agency does not comment on specific recruitment targets. He did say the agency pursues all possibilities.

“We do actively try to contact and try to get in a discussion where we can ... to talk about that very thing,” Holmes said when asked if Arkansas officials are seeking ways to take advantage of a manufacturing rebound.

As to the Foxconn news, Holmes said not enough is known about how the $100 million investment will play out.

“No one really knows what that means, but we’re trying to find out what that means,” Holmes said, adding that the agency looks into all reports of possible expansion, including targeting the suppliers to new manufacturing operations.

“That’s something we do every day. We research the heck out of this stuff,” he explained.

The Bloomberg report also noted that Caterpillar and General Electric are other companies that have committed to returning manufacturing to the U.S.

GE SHIFT
The return of manufacturing jobs by GE was the focus of a December article by Charles Fishman that was published in Atlantic Monthly.

Fishman, a noted business author who is also considered an expert on Wal-Mart history, documented how GE is slowing returning jobs to Appliance Park, an industrial park built in Louisville, Ky., by General Electric in 1951.

The site was almost closed in by 2011 with just 1,863 employees. It had employed 23,000 in 1973. But in the past year, GE has returned appliance production to the area.

“What has happened? Just five years ago, not to mention 10 or 20 years ago, the unchallenged logic of the global economy was that you couldn’t manufacture much besides a fast-food hamburger in the United States,” Fishman noted in the article. “Now the CEO of America’s leading industrial manufacturing company says it’s not Appliance Park that’s obsolete — it’s offshoring that is.”

Fishman’s conclusion is that cheap labor is no longer the primary motivator for where to locate a manufacturing operation. Proximity to market, collaboration with suppliers and public perception are growing in importance.

Fishman noted: “Many offshoring decisions were based on a single preoccupation—cheap labor. The labor was so cheap, in fact, that it covered a multitude of sins in other areas. The approach to bringing jobs back has been much more thoughtful. Jobs are coming back not for a single, simple reason, but for many intertwined reasons—which means they won’t slip away again when one element of the business, or the economy, changes.”

MAKING STUFF IN FORT SMITH
Tim Allen, chief operating officer for the Fort Smith Regional Chamber of Commerce, has seen first-hand the last decade of manufacturing job declines in the U.S. and Arkansas.

Allen, hired in September 2011 by the chamber, was with the AEDC prior to that for more than 11 years helping with economic development projects in the Fort Smith region and Northwest Arkansas. Part of that work has included helping with projects in the Fort Smith area, to include the location of Experian in Van Buren, and expansion of the Gerber and Hiram Walker plants in Fort Smith.

“I hope it is. We want to believe that and hope it is true,” Allen said when asked if he thought manufacturing jobs might return to the U.S.

Allen has already worked in various sectors where jobs returned. For example, he noted, the call center industry. During his time at AEDC, he worked several projects in which call centers were relocated to the U.S. from overseas.

He cautioned that Arkansas and Fort Smith are competing against thousands of communities and states with better incentive packages, to include better deals on property and buildings. But Allen contends Fort Smith has an advantage in that the region has a “proven” manufacturing workforce.

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“But there is only a small percentage of those that have the workforce for that (manufacturing). ... And that’s something Fort Smith has. I keep preaching that and it is true. We know how to make stuff,” Allen explained.

MANUFACTURING BALANCE
But if manufacturing does rebound, is it smart for Fort Smith to put its eggs in that basket again? Or, what’s the smart long-term move for a community that saw Whirlpool Corp. pull out more than 4,500 manufacturing jobs between 2006 and 2012?

“To that I would say that 95 percent of the projects we get from the commission (AEDC), and that come into the state are related to that (manufacturing). We can’t ignore that. But eventually we’re going to have to start thinking differently and acting differently,” Allen said. “We really have to start focusing on more white collar and service-type projects.”

Allen cited Umarex and Walther Arms as an example of bringing white collar jobs to the Fort Smith area.

Officials with Umarex and Walther Arms, Inc., the maker of the world famous Walther PPK handgun used by fictional character James Bond, announced Nov. 29 they would co-locate at 7700 Chad Colley Blvd. in the city's Chaffee Crossing development. The location will be the North American headquarters to Walther, and the operation could see up to 120 new jobs added in the next five years. The operation now employs 71.

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