July 2, 2006


Lean and unseen: Unlike General Motors and Delphi, most of America's manufacturers are thriving (The Economist, Jun 29th 2006)

Most [American manufacturers] have enjoyed roaring success of late. Net profits have risen by nearly 9% a year since the recession in 2001 and productivity has been growing even more rapidly than is usual during economic expansions (see chart). The country's various widget-makers, moreover, show no sign of losing their innovative edge. [...]

Capital equipment and durable goods-makers such as Caterpillar, General Electric, an industrial conglomerate, and Boeing, an aerospace giant, have always been the strongest bits of America's manufacturing base. Their position is the most secure, says James Womack of the Lean Enterprise Institute, a think-tank in Cambridge, Massachusetts, because there is so much knowledge embedded in what they make. Even when a company such as Boeing stumbles over its efficiency, as it did a few years ago, its intellectual property gives it room to recover. These days, however, American manufacturers of all sorts—not just the big durable-goods makers—are quickly improving their efficiency.

Take Littelfuse, a firm that makes fuses and other equipment to protect the electrical circuits in everything from cars and mobile phones to the machines in its customers' factories. It recently started three new production lines in an area of its plant in Des Plaines, Illinois. The sophistication of the equipment, the skills of the workers and the quality of the output are all admirable. But something else about the new 10,000 square foot (930 square metres) assembly area is even more impressive: it used to be a warehouse for the site. Littelfuse gained the space by drastically cutting back its need to store raw materials, unused scrap, unfinished goods and other sorts of wasteful material. After starting a new “lean manufacturing” drive three years ago, the plant took inches off its waistline. It now receives its raw materials—such as resins and high-grade zinc—“just-in-time” to pull them through its production line.

The same sort of thing is happening all over America. Manufacturers were already outpacing their rivals in rich countries during 1995 to 2000, when their productivity was growing by 4.0% a year. After 2000, the country's metal-bashers somehow managed to raise their productivity growth by another notch, to 5.1% a year, according to the Bureau of Labour Statistics. No serious economist thinks that America can maintain such a torrid rate of productivity growth over a longer period; indeed, the pace has already eased in the past year or two. But there are signs that America's productivity in manufacturing has been boosted by forces inherent in the structure of the economy, so that the sector should continue to thrive.

Posted by Orrin Judd at July 2, 2006 2:29 PM

Lower corporate taxes to be more competitive with the world and the world will be scared of us.

We've never really unleashed our potential.

Posted by: Sandy P at July 2, 2006 4:24 PM

Yes ma'am.

Posted by: erp at July 2, 2006 4:32 PM

Can we lump this with it's Bush's fault?

Posted by: ic at July 2, 2006 4:40 PM


Posted by: erp at July 2, 2006 5:28 PM