Archive for January, 2011

Despite China’s might, US factories maintain edge

Monday, January 31st, 2011 | Finance News

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WASHINGTON – U.S. factories are closing. American manufacturing jobs are reappearing overseas. China's industrial might is growing each year.

And it might seem as if the United States doesn't make world-class goods as well as some other nations.

"There's no reason Europe or China should have the fastest trains, or the new factories that manufacture clean energy products," President Barack Obama said in his State of the Union policy address last week.

Yet America remains by far the No. 1 manufacturing country. It out-produces No. 2 China by more than 40 percent. U.S. manufacturers cranked out nearly $1.7 trillion in goods in 2009, according to the United Nations.

The story of American factories essentially boils down to this: They've managed to make more goods with fewer workers.

The United States has lost nearly 8 million factory jobs since manufacturing employment peaked at 19.6 million in mid-1979. U.S. manufacturers have placed near the top of world rankings in productivity gains over the past three decades.

That higher productivity has meant a leaner manufacturing force that's capitalized on efficiency.

"You can add more capability, but it doesn't mean you necessarily have to hire hundreds of people," says James Vitak, a spokesman for specialty chemical maker Ashland Inc.

The industry's fortunes are brightening enough that U.S. factories are finally adding jobs after years of shrinking their payrolls. Not a lot. But even a slight increase shows manufacturers are growing more confident. They added 136,000 workers last year — the first net increase since 1997.

What's changed is that U.S. manufacturers have abandoned products with thin profit margins, like consumer electronics, toys and shoes. They've ceded that sector to China, Indonesia and other emerging nations with low labor costs.

Instead, American factories have seized upon complex and expensive goods requiring specialized labor: industrial lathes, computer chips, fighter jets, health care products.

Consider Greatbatch Inc., which makes orthopedics and other medical goods. The company is expanding its manufacturing operations near Fort Wayne, Indiana. Greatbatch wanted to take advantage of a specialized work force in northeastern Indiana, a hub of medical research and manufacturing.

"When you're talking about medical devices, failure is not an option," CEO Thomas Hook says. "It's a zero-mistake environment. These products are customized and high-tech. They go into patients to keep them alive."

Hook says the United States offers advantages over poorer, low-wage countries: reliable supplies of electricity and water, decent roads. And some localities support businesses by providing infrastructure and vocational training for potential hires.

Centerline Machining & Grinding in Hobart, Wisconsin, which makes custom parts for manufacturers in the paper industry, plans to add to its staff of 26. But it's struggling to find the skilled tradesmen it needs for jobs paying $18 to $25 an hour.

CEO Sara Dietzen laments that local vocational schools cut back training courses in recent years, having concluded that the future for manufacturing was dim. Not from her view it isn't. For her company, output is all about speed.

"Our average customer wants a turnaround in less than three weeks," Dietzen says. "You're not going to get that in China."

Still, economist Cliff Waldman of the industry research group Manufacturers Alliance/MAPI doubts that U.S. factories will continue to expand their payrolls in the long run. Manufacturing, he says, is "not a job creator for the U.S., basically."

Global competition will always force factory managers to try to replace expensive workers with machines or with low-wage labor overseas, Waldman says.

Mark Perry, a visiting scholar at the conservative American Enterprise Institute, likens the loss of manufacturing jobs to the exodus of workers from farms between the 19th and 20th centuries. If that migration hadn't happened, Perry says, "we'd still have millions of people working in agriculture. Now, we can employ fewer people in factories."

But the transition can be painful, he concedes.

The U.S. remains No. 1 in global manufacturing, accounting for 18 percent of global manufacturing output in 2008. But China is catching up. Its share of manufacturing output jumped from about 6 percent in 1998 to 15 percent in 2008.

Critics have a ready explanation for that: unfair competition.

Robert Scott of the left-leaning Economic Policy Institute says China is cheating in world markets — keeping its currency artificially low to make Chinese products less expensive overseas and unfairly subsidizing its exporters.

Scott and other critics want to see the Obama administration support U.S. manufacturers by pressuring Beijing to drop the subsidies and let its currency rise freely. A higher-valued Chinese currency would make U.S. exports cheaper for Chinese consumers.

Centerline CEO Dietzen says she isn't fazed by Chinese manufacturing. Some of her customers have placed orders with Chinese companies, she says, only to return, frustrated, to her company.

Chinese factories want mainly big orders. And they demand lots of time to fill them.

Dietzen says her clients are "finding when they get their parts back from China, they're not always what they want. So we end up doing the work anyway."

"A common misperception," Greatbatch CEO Hook says, is that the United States doesn't make anything anymore.

The reality is rather different.

"We need a highly skilled work force," Hook says. "So it's very advantageous to be in a country like the United States where people are educated and ready to be hired."

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For bayou Indians, spill threatens a way of life

Monday, January 31st, 2011 | Finance News

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MONTEGUT, La. – Even before oil began spewing into the Gulf of Mexico last spring, Louisiana's American-Indian fishing villages were on the brink of collapse because of social change and the dramatic loss of coastal wetlands.

Now, Indians who've known nothing but fishing all their lives find their futures tied to the man handing out checks for damages, paid from a multibillion-dollar fund started after the April 20 Gulf spill.

Kenneth Feinberg, the fast-talking East Coast lawyer in charge of BP PLC's $20 billion compensation fund, met with them for the first time Friday night on the back bayous of south Louisiana at a gymnasium in Montegut, about an hour and a half from New Orleans. Dozens of fishermen showed up in shrimp boots and work clothes, speaking a mixture of French and English.

They want Feinberg to compensate them not just for lost wages, but a way of life that relied on the bounty of the marshes and now is in jeopardy.

"The people have been independent for so long, a lot of them will go trawling, they'll bring an ice chest (of seafood) to maman, grandpa, auntie, the uncles and all that," said Thomas Dardar, the principal chief of the United Houma Nation, the largest Indian tribe with about 17,000 members.

"With the oil, how long will it last? Oil isn't like a hurricane," he said. "You can't just pick up after it's over. The Indians in Alaska after Exxon-Valdez tell us they've been dealing with the oil for 20 years."

Many tribes moved into the swamps to escape enslavement or forced banishment after Congress passed the 1830 Indian Removal Act.

Until the 1950s, most Indians lived in isolation, rarely interacting with whites. Old-timers recall barefoot children scampering into the woods to hide when the first cars rattled into their villages in the 1950s. Indian children were barred from schools until the 1960s and were called "sabines," a derogatory term.

There are about 20,000 American Indians in coastal Louisiana who trace their roots to Houma, Chitimacha, Choctaw and Biloxi tribes.

Tribal leaders say they're worried many members won't be compensated fairly, so they've brought on a New York City law firm to help the tribes navigate the difficult claims process.

All the paperwork and documentation isn't easy in these marshes, a place where some people can't read or write, where lawyers and taxes often are blurry concepts.

Take Price Billiot, 63, who runs a seafood dock in Pointe-Aux-Chenes, a dilapidated and water-bound town that stretches along a bayou in the tall marshes near Montegut.

He quit fourth grade to start working on a boat with his father, cleaning oysters. His wife has to help him with all the BP claims paperwork, he said — he can spell and read a bit, but not enough to handle it on his own.

"The white people didn't want me to go to school," he said. "We couldn't go to the school, we couldn't go to the bar up the bayou."

With hurricane damage still to fix and business slow from the spill, he was gloomy about the future.

"Every year it gets worse. You can't make a living," he said as a rooster and peacock crowed in the grasses across the road. A fishing boat abandoned long ago sat rotting into the mud across the bayou. "When I was young you could make a good living."

For now, he's surviving, in part thanks to $65,000 in emergency payments BP gave him in June for his business losses. But Billiot said his company was worth $1 million a year and that he needed much more from BP to keep it going. Feinberg is now calculating long-term damage claims like one Billiot might file for potential future losses.

Feinberg told those at his first meeting with Indian tribes Friday that he wanted to pay them claims for the value seafood and hunting plays in their everyday lives — so-called "subsistence claims."

"It's a claim that my lifestyle has been adversely impacted by my inability to any longer live off the resources that I hunt or catch," he said. "... What I could go hunt or fish I now have to go buy.

"Those claims should be paid."

Even if they're paid the spill has created even more uncertainty for people on the bayous, where life is a struggle. Families have been driven inland from their ancestral villages, battered by hurricanes and low seafood prices. And their coastal land is disappearing: About 2,300 square miles of marsh have converted to open water since the 1930s largely because of the Army Corps of Engineers' construction of levees in the Mississippi River delta and thousands of miles of canals dug by oil companies.

Now it's nearly impossible to turn a profit for any seafood caught by people like Anthony Dardar, a 28-year-old fisherman in Pointe-Aux-Chenes who's trying to get back to fishing. He'd just brought in a few sacks of oysters.

"We can't hardly move the oysters, we could hardly move the shrimp, it's hard to move the crabs," he said. "Now, they're finding all kind of freakin' dispersant in the water. Who knows about the future."

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Android becomes top smartphone platform

Monday, January 31st, 2011 | Finance News

HELSINKI (Reuters) – Google's Android dethroned Nokia's Symbian as the most popular smartphone platform in the last quarter of 2010, ending a reign that began with the birth of the industry 10 years ago.

Research firm Canalys said on Monday phone makers sold a total of 32.9 million Android-equipped phones in the last quarter, compared with Symbian's total sales of 31 million. The landmark piles pressure on Nokia as it struggles to reassert itself at the top end of the mobile handsets market.

Following Apple's 2007 entrance into smartphones, Google rolled out its open-source Android operating system, which has become the standard for smaller phone makers.

Hit models from Samsung Electronics, HTC and LG Electronics helped Android in the quarter, while Symbian suffered from troubles of its owner and main user, Nokia.

"We have seen some strong products from a number of vendors," said Canalys analyst Tim Shepherd.

(Reporting by Tarmo Virki; Editing by Andrew Callus)

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