TOPICS > Economy

Midwest Manufacturers Bid to Stay Competitive amid Globalization

November 28, 2007 at 6:20 PM EDT
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The American Midwest, traditionally a base for manufacturing, has been hit hard by globalization in recent years. Economic correspondent Paul Solman reports on efforts aimed at strengthening the region's competitive edge.
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JIM LEHRER: Next tonight, Paul Solman begins an occasional series of special reports on America’s competitive response to globalization. Tonight, he looks at manufacturing’s bid for a comeback in the Midwest.

PAUL SOLMAN, NewsHour Economics Correspondent: Another rust belt factory bites the dust. The demolition site is Milwaukee, Wisconsin, poster town for the death of manufacturing in the upper Midwest, a tannery, a brewery, an auto parts plant.

Rhandi Berth of the Wisconsin Regional Training Partnership.

RHANDI BERTH, Wisconsin Regional Training Partnership: They built truck frames mostly, thousands and thousands of jobs in the central city.

PAUL SOLMAN: All gone.

RHANDI BERTH: All gone.

PAUL SOLMAN: Yet just 16 miles from this lot, where Tower Automotive once stretched for acres, multibillion-dollar manufacturer Bucyrus is booming.

TIM SULLIVAN, President and CEO, Bucyrus: This is an 85-cubic-yard dipper for an electric mining shovel.

PAUL SOLMAN: A mining equipment maker in Milwaukee for so long its shovels were shipped to Panama to dig the canal, Bucyrus is now investing $150 million in a new plant here, after going the way of all business, manufacturing in China for years.

TIM SULLIVAN: We finally said, “We’re crazy. Let’s move this work back into Milwaukee. Let’s bring the workers back in. Let’s try to rejuvenate what we can do.”

PAUL SOLMAN: So Bucyrus has brought work back from China, and another Milwaukee manufacturer, Harley-Davidson, has just kept growing, still makes its iconic bikes here, despite the siren songs from abroad.

So which is it, Milwaukee manufacturing doomed or something less expected? Manufacturing on the rebound, and in the rust belt of all places, making someone’s dreams, as the song says, come true.

LAVERNE AND SHIRLEY: Schlemiel! Schlemazl! Hasenpfeffer Incorporated!

PAUL SOLMAN: TV’s “Laverne and Shirley” from the ’70s, already nostalgic back then for the sudsy job-fest that once was Milwaukee. Now, while it’s easy to idealize manufacturing jobs, the Mrs. De Fazio and Feeney were not exactly living high off the hops.

ACTRESS: And this is where the unskilled workers take their break.

CINDY WILLIAMS, Actress, “Shirley”: Don’t push her, Karen.

ACTRESS: You don’t even need a high school diploma.

PENNY MARSHALL, Actress, “Laverne”: I have a diploma, and the punctuality pin.

PAUL SOLMAN: As you’ve heard before, though, for Americans with no college degree — the vast majority back then — “Laverne and Shirley” jobs weren’t bad. And if you had a union behind you and were in a boom industry like autos, you could make real money.

WAYNE POOLE, General Motors Worker: Where else are you going to get out of high school and make, back then, $18,000 a year or $4.25 an hour and everybody else was making $2?

PAUL SOLMAN: But two familiar forces were driving down the pay for such jobs, if not snuffing them out: productivity, ever more mechanized plants, and globalization, competition from abroad.

DAN LURIA, Michigan Manufacturing Technology Center: Just in the last 10 years, the U.S. has lost 5.5 million manufacturing jobs.

PAUL SOLMAN: Dan Luria of the Michigan Manufacturing Technology Center.

DAN LURIA: For the states of Wisconsin, Illinois, Indiana, Ohio and Michigan, if you look at that region, what it has in common is that it produces and makes the parts for automobiles, construction equipment, and industrial machinery.

And in those industries, what we find is we have increasingly a difficulty supplying ourselves. More and more of the components that go into those products are coming in from outside. And that’s, not surprisingly, why we’re only one-fifth of manufacturing and one-fifth of the national economy, but we have lost almost 40 percent of the jobs since the late 1990s.

A new business strategy

PAUL SOLMAN: Luria and Joel Rogers of the Center on Wisconsin Strategy are leading proponents of what they call the "high-road strategy," high-pay, high-productivity jobs to reverse the rust belt's decline.

In the past year, manufacturing has held its own in Wisconsin and added more to the state's economy than health care, retail, and high-tech combined. At an industrial expo, Luria and Rogers contrasted the high road with the more familiar race to the bottom.

DAN LURIA: High-skilled, high-road manufacturing really is a profession and not just a job for lots of the people in it, and that's very different from the roughly two-thirds to three-quarters of manufacturers that we would say are on the low road, that are competing almost exclusively on cost, on price, trying to see if they can't make the same commodity products that others are making at slightly lower costs so that they can stay competitive.

PAUL SOLMAN: And even if you turn out a commodity much like everyone else's, says Rogers, you can distinguish yourself by making it more cleanly, intelligently, efficiently.

JOEL ROGERS, University of Wisconsin: It's important to distinguish between a commodity product, a simple product that's relatively standardized, and a commodity way of producing them.

PAUL SOLMAN: The high road is not to produce to the lowest common denominator, but to substitute mind and machinery for muscle, worker-management cooperation for conflict. That means workers and management both have to sign on.

Unions, for example, long resisted productivity because automation, as it used to be called, meant fewer jobs. But at Harley, for instance, where they're famously born to be wild, these days they sound more like management consultants.

RICHARD DOYLE, USW Local President, Kansas City: Ultimately, without the company, the union won't be here.

Getting unions on-board

PAUL SOLMAN: Richard Doyle is a local officer of the once-militant United Steelworkers.

RICHARD DOYLE: We have to find ways to stop fighting with each other, both on the company and the union side, and look for mutually beneficial decisions, which is something you didn't hear about 20 years ago.

PAUL SOLMAN: Jim Wheiland runs another Steelworkers local.

JIM WHEILAND, USW Local President, Kansas City: We're more flexible in the way we operate. We look at the bottom line. We work with the company on how to best achieve that bottom line end-goal.

RICHARD DOYLE: It's a tough sell every month at every union meeting at times to say that, you know what, the decisions we're making are the right ones, because they're securing our jobs here in America. It doesn't always feel that way; I'll be the first to admit it. Sometimes you're faced with a decision that is the evil of two lessers.

PAUL SOLMAN: The point is taking the high road means convincing labor that business is more bedfellow than bogeyman. It also means convincing business that if you treat workers well you buy something beyond brawn: partners in productivity. Bucyrus CEO Tim Sullivan.

PAUL SOLMAN: How much do you pay?

TIM SULLIVAN: Twenty-two dollars an hour.

PAUL SOLMAN: Twenty-two an hour?

TIM SULLIVAN: Straight pay, $22 an hour, all the overtime he wants.

PAUL SOLMAN: All the overtime...

TIM SULLIVAN: All he wants.

PAUL SOLMAN: At $22 or?

TIM SULLIVAN: No, overtime is time-and-a-half. Weekends, double time. And then, obviously, on holidays and that sort of thing, triple time. How would you like to make $66 bucks an hour?

PAUL SOLMAN: Many workers here make $100,000 a year or more. That's the high-road corporate strategy.

TIM SULLIVAN: The misconception really is that by paying a guy $22 bucks an hour, that's not cost-effective. That's the wrong way to look at it. You pay a guy $22 bucks an hour, you expect $22 bucks of good productivity out of him. If you pay a guy $10 bucks an hour, you're going to get $10 bucks an hour.

PAUL SOLMAN: Actually, given seniority and the like, the average worker here makes more like $30 bucks an hour before overtime. And this so-called "efficiency wage" -- a high wage to get efficient workers -- seems to be paying off.

In fact, Bucyrus is expanding right here in Milwaukee, increasing its manufacturing space by 50 percent, doubling its workforce, tripling its production.

TIM SULLIVAN: We used to build just three years ago only eight of these shovels a year. Next year, we're going to build 24.

PAUL SOLMAN: Now, these aren't Mike Mulligan steam shovels. They're mega-machines that weigh 4.5 million pounds, lift 100 tons a scoop, and cannot fail. That's why Bucyrus has invested so much time and money in its workforce, to make sure they get it right.

TIM SULLIVAN: Welding is not just welding. You've got, you know, small-gauge welding that you and I could probably do with a little bit of training. This welding takes a special skill. It's layer on top of layer on top of layer of welding. If it's not done properly, obviously, you get crack propagation when the machine goes into work.

Employee shortage

PAUL SOLMAN: But when you look closely, you see a blue-collar job paying good money that almost anyone with enough motivation and training could do. And yet get this: CEO Sullivan's biggest problem? Not enough workers.

TIM SULLIVAN: We've got a fairly old workforce right now. We're spending a lot of money bringing young guys in, but there's such a little pipeline. People went into the service industries. "Manufacturing, oh, all those jobs are going overseas." So we lost that installed base of people. We should have on this floor today fourth-generation people coming in here to weld and to machine. They're not here.

PAUL SOLMAN: Indeed, the average age on the first shift at Bucyrus is 58. Why no young folks? On their break, no camera around, these guys told us kids today are too soft.

Your generation, younger generation, younger people are too soft for this job.

STUDENT: Too smart.

PAUL SOLMAN: What do you mean you're too smart?

STUDENT: We got the computers now.

PAUL SOLMAN: This is the hope, places like Bradley Technical High School, which local businesses like Bucyrus supply with cutting-edge equipment, hoping to lure and train the next generation of Milwaukee manufacturing workers.

STUDENT: I'm practicing how to weld for the first time. It's new, and I like the fire.

PAUL SOLMAN: Do you also like the fire?

STUDENT: I like the sparks.

Luring a younger generation

PAUL SOLMAN: Now, you might not think to look for hope in a Milwaukee school. The system graduates only about half its students. Moreover, Bradley Tech is so tough that even a security guard wouldn't show his face when demoing gang signs. It's dangerous to wear your hat wrong here. Yet, when you get to the classrooms...

TEACHER: So what the Cartesian coordinate system is, x, y, and z. It's the engineering...

PAUL SOLMAN: What is it?

STUDENT: The engineering gang sign.

PAUL SOLMAN: Which are what?

STUDENT: The x, y, and z.

TEACHER: Gang hand signs. You've got your x, your y, and your z.

PAUL SOLMAN: X, width; y, height; z, depth.

TEACHER: Would that be a 10th, a 100th or a 1,000th?

STUDENT: That would be a 10th.

PAUL SOLMAN: These kids were engaged, learning, and not just how to weld, but, perhaps most important, they were getting past the conventional wisdom of the past couple of decades, that blue-collar work has no future in America.

How many people when you were younger thought, "Gee, maybe I could have a career in manufacturing"? Any of you? Not a one?

By contrast, a basic premise of the high-road strategy is that manufacturing can still provide good jobs at good pay. CEO Sullivan thinks part of the problem has been manufacturing's bad P.R.

TIM SULLIVAN: We're kind of like sheep in some respects. I mean, when somebody says, "Go overseas," or, "The rust belt can't compete anymore," people start believing the press.

PAUL SOLMAN: But at this high-road business-labor partnership, former union activist Rhandi Berth funnels young people from places like Bradley Tech into high-road jobs at companies like Bucyrus.

RHANDI BERTH: Last year, we placed about 450 people, and we're on target to place about 500 people this year. If they're an employer that thinks their workers are the most valuable asset that they have and they're willing to invest in them, that's the kind of employer we're looking for.

PAUL SOLMAN: We end with one last image from the industrial expo. The message here: Reports of the death of manufacturing have been greatly exaggerated.

STUDENT: That's the coolest thing I ever saw...

PAUL SOLMAN: The hope is that it could be the high road to a good living in Wisconsin and the rest of the upper Midwest for quite a while.

JIM LEHRER: Paul's second report from the rust belt looks at companies' efforts to make it cheaper to buy American.