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April 24, 2009


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Tom: Thanks for your comments - they add some experienced texture. Unfortunately for us out here, California represents the leading edge of the negative factors which you mention in your last paragraph.

Bill - manufacturing will always be with us here in the U.S. Your friends who think lower wage rates are the main determinant are smoking too much California weed. Let's not forget Adam Smith: land (space) labor, capital and entrepreneurial ability. I've spent the better part of my adult life recruiting industry from other states to North Carolina, and it's been fun and easy. (One from Chatsworth California, by the way. Almost got Berger Boats from Wisconsin, as well).

Some products are too large and bulky to be made overseas and labor cost is relatively unimportant. Some decisions are also related to the availability of raw materials such as corn or phosphate ore. There are also quality control problems, as we have seen only too painfully this past year re China. An finally, there is the trade off between labor and freight. The formula is simple: if the shipping cost of a 40' container from China is greater than the U.S. labor cost, the product will be made here. That's why small, labor intensive products such as TVs are imported.

Manufacturing is following closely in the economic tradition of farming, which, in 1900, employed 90% of the work force. Manufacturing employed 40% of the workforce in 1940; today it's probably around 10%. In both case, productivity improvements allowed the workforce to increase overall productivity, producing more and better food and more and better products. The high tech manufacturing labor force is actually growing very well; it's up about 37% in ten years.

The growth of the service industry is actually function of manufacturing. Blue Cross was (and I think still is) the largest supplier to GM, not the steel industry. The service industry itself would most likely die if manufacturing disappeared because, as you well know from your career, sourcing, distribution and financing and many other service sector vocations depend on a physical product of some sort to service. Manufacturing also pays well above average wages and is the source of a large part of our health care provision.

The biggest threat to manufacturing in the U.S. is the Federal Government which seems to think that excessive environmental regulation, high tax rates, imposed social costs, and higher and higher taxes are the road to prosperity.

That last paragraph describes the Obama administration perfectly. We all need to pray for our country.

Mary: There are lots of excellent small manufacturers like Trek in Wisconsin; I tried to limit myself to the "best of the best".

WOW! Thanks for having us swim with the big fish! I'm flattered and we're trying to deserve it! I will point out another WI company that deserves mention: Trek Bicycle Corporation out in Waterloo, WI. Since I am a Trek ambassador for "Women Who Ride" this year I would be remiss not to mention Trek with nearly 1,000 employees and probably 80MM in sales (but that figure is a only meager guess)! Mary Strupp, CEO Bardes Plastics, Inc.

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