Observations

Some sectors of the economy and of the country are really depressed. This is particularly true in the Great Lakes region. The manufacturing sector seems in disarray.

“How can you compete with the Chinese?” This is the main theme of business owners. “You produce a piece for $10, and they come in and sell it for $2!”, they add. It is tough to compete and to survive.

“Manufacturing is finished in our area (NE Ohio). I had to prepare the financial statements for eight bankruptcies,” a consultant told me. “The fastest growth sector is healthcare. Probably because the young people are moving away,” he added.

Michigan is not different. The auto sector is flat and the odds favor more weakness ahead. Suppliers are strapped. Sales are down and costs must be kept down.

General manufacturing is failing. Employment is cut with a vengeance. And these are high paying jobs. The cost structure is not competitive. One needs to have a very special niche of the market. Otherwise the Chinese come in and take it away from you. Business needs to innovate, re-invent itself.

The small manufacturer has also the competition of the international entrepreneurs who go to China to produce. Or Thailand. Or South Korea. Or Indonesia. It is a different world from the early 1980s. What to do? Innovate. There is no other way. Technology. Education. New delivery of the product.

I do not believe we can survive without manufacturing. This is where we apply the knowledge to control and improve complex human and technological processes changing raw materials into unique products. This is where the wealth is. This is where the financial compensation and reward for our work really lie.

If we fail to compete we will become, as a former Chairman of a major corporation once told me, a country of hamburger flippers. And he is right! Will global wages converge? This is the challenge posed by globalization and free trade.

(This Observations appeared in the 8/11/2003 issue of The Peter Dag Portfolio).

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
2009 Market Timer of the Year by Timer Digest

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