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Here’s why manufacturing will, or won’t, prosper in 2018

Article by Bart Taylor January 3, 2018, 07:49 am MST

U.S. manufacturing enters 2018 with momentum and considerable promise. For starters, in this golden age of corporatism, America's blue-chip manufacturing brands are prospering.

More than that, manufacturers have a once-in-a-generation chance to improve their own fortunes by investing the windfall of tax reform into new companies and a more capable domestic supply chain.

Whether American OEMs choose to do so may define the fortunes of the sector for the next decade. It's why this moment holds both promise and peril.

Here's why manufacturing will, or won't, prosper in 2018.

Will:

1. There are fewer big companies in the U.S. as influence and power consolidate into a new corporate oligarchy, but those at the top are thriving. Confidence within the membership of the National Association of Manufacturers has never been higher.

2. Lower corporate tax rates will provide a short-term financial boost for companies large and small, and a long-term benefit for those that reinvest in new factories and equipment.

3. Powerful trends point to sustained employment growth in multiple manufacturing industries even as robotics and automation put downward pressure on job growth in others.

4. Today, communities seek out manufacturing companies when, a decade ago, light industrial employers were less attractive than technology and service companies.

5. Higher education doesn't deserve much of the self-serving attacks from its critics, but trends redirecting young people into trade and away from four-year degrees serve the economy, and manufacturing, well. There's good reason to believe we're on our way to solving manufacturing's long-term labor challenge. The battleship has been turned.

6. Ask most anyone if it's important that we make more stuff in America, and they'll likely say yes. As obvious as this may sound, it's a cultural sea change. We value manufacturing again.

Won't:

1. Large manufacturers are prospering, but many small and middle-market manufacturers operate on a knife's edge. Incentives, access to capital, labor, technology, new markets, and OEM supply chains tilt to a shrinking cadre of large companies and away from smaller operators. It's also unclear whether blue-chip OEMs are committed to a more capable domestic supply chain; whether a newfound tax windfall, pressure from the White House, or new tariffs will compel big companies to make more in America.

Harold Meyerson, writing in The American Prospect notes that Steve Jobs once remarked to President Obama that "Apple had 700,000 factory workers employed in China." What if Apple had invested in U.S. labor and infrastructure? "If those 700,000 were employed directly by Apple, of course, then Apple would be the world's largest manufacturer. "Instead," Meyerson says, "Apple conceals its factories -- and responsibility for the working conditions there -- behind two Chinese walls."

Have things changed? We'll find out. President Trump and the GOP Congress have provided U.S. corporations the means to invest in a new domestic supply chain; they've also provided us a measuring stick. If OEMs shift their gaze onshore, we'll know.

2. Public sector support for manufacturing can be spotty. There's no uniform manufacturing 'playbook' for developers, a challenge to begin with as manufacturing spans mulitple industries. 

Meyerson's Apple example underscores why this is important. Is a company that designs or engineers a consumer product locally, but is forced to push production offshore because of a lackluster domestic supply chain, a tech or design firm or a manufacturing company?

What if we'd celebrated our community of contract manufacturers the past decade as we do tech firms, and made it easy for our fictional design company to locate domestic production here?

Manufacturing's future lies in the supply chain. 2018 included.

Bart Taylor is publisher of CompanyWeek. Contact him at btaylor@companyweek.com.

Related: Five reasons why manufacturing jobs are coming back to stay

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