Even though Mississippi manufacturers are diverse and resilient, a series of issues impacting manufacturing — unregulated foreign competition, rising energy and health care costs, civil justice reform and workforce needs — must be addressed to avoid the loss of additional manufacturing jobs.
“Our manufacturers are doing a variety of things to stay competitive and keep the doors open in this tight economic environment,” said Jay Moon, president of the Mississippi Manufacturers Association. “Many have simply tightened their belts and are cutting costs in every area possible.”
Jim Finley, president of Craft-Co Enterprises, an automotive supplier and manufacturer of electrical and electronic components in Morton, which exports nearly half of its products, admitted: “We’re running as fast as we can to stay even.”
“We’re focusing heavily on our process improvements, quality improvements and cost savings,” he said. “That’s helped us offset the loss of sales from the downturn in the economy.”
In June, Finley mirrored other manufacturers’ concerns when he said Craft-Co was operating below capacity. “We are operating at 65%, but it’s obvious we have a solid foundation for further growth,” he said.
Unregulated foreign competition is a primary issue for manufacturers nationwide. During a speech to the Detroit Economic Club on Sept. 15, Commerce Secretary Don Evans said: “During our round tables, no country raised more attention as a source of concern than China.”
“The artificial devaluation of currency has been one of the biggest problems,” said Moon. “Many people say the Chinese devaluate currency as much as 40% against the dollar, and that’s a substantial amount. The Chinese have indicated they might look into it, but there’s been no agreement on their part. It is a violation of the World Trade Organization, and we have been protesting it through the WTO and talking to our congressional delegation. The White House has picked it up and is moving forward with a great deal of effort. Our manufacturers say they can compete if there is a level playing field.”
Indirect costs — frivolous lawsuits, health care and energy — are compromising competitiveness, said Evans.
“Rising health care costs is a particularly troublesome area because it affects manufacturers’ ability to compete when one line item is increasing so rapidly,” said Moon. “Outside of government, manufacturing as a sector within our economy provides more health care benefits for its employees than any other. With substantial annual increases, you start adding co-pays and increasing deductibles to employees. Pretty soon, you start looking at whether or not you’re going to be able to retain health care coverage at all for your employees. Manufacturers are looking at establishing a baseline, cutting a check and letting individual workers secure their own health care insurance, which is obviously not as advantageous as a group plan.”
The U.S. tort liability system is the most expensive in the world, more than double the average cost of other industrialized nations, said Evans.
“Mississippi’s litigious environment continues to impact numerous factors,” said Moon. “A lot of things were left out on the medical side, and many items were not addressed nearly as completely as they should have been on the general side during last year’s 83-day special session. Manufacturers are looking at the climate of tort reform in the state as it relates to how secure they feel about the environment they’re working in.”
The rising cost of energy, notably natural gas, continues to affect manufacturers’ bottom line.
“Natural gas costs have escalated dramatically this past year,” said Moon. “Many people feel that if we have a particularly harsh winter, natural gas costs could go up even more. Many manufacturers depend on a steady supply of natural gas for the manufacturing process, both for operating machinery, and in fertilizer plants, using it in the production of the final product.”
Workforce needs must be met for Mississippi manufacturers to remain competitive, said Moon.
“Getting enough skilled labor, having resources to train and retrain the workforce so manufacturers can upgrade the quality of technology to improve productivity and be competitive, continues to be a real problem,” he said. “We’ve got to figure out ways to help them remain competitive against globally competitive countries that are adding new equipment and new technologies.”
Foreign trading partners
“Many people tend to talk about the impact of NAFTA, but I’ve found that when they talk about NAFTA, they’re talking about any type of foreign competition,” said Moon. “Even Mexicans are complaining about the Chinese stealing jobs.”
Even though there are more than 100 free trade agreements in the world, the U.S. is party to only three, said Evans.
“That stance had a major effect on our exports of manufactured goods,” he said.
Free trade agreements, by the very nature of their name, create opportunities and have created venues to sell more products, said Moon.
“For example, our number one trading partner is Canada, and number two is Mexico, the original two members of the NAFTA agreement,” he said. “Mississippi companies have taken advantage of opportunities to sell more products in those markets. Mississippi has operated a foreign office for many years in Singapore and Chile, the two new NAFTA members. We were the first in the U.S. to open an office in Chile, and I think we’ll see more opportunities to sell into those markets, which were previously restricted by tariffs and other trade barriers.”
Running the numbers
Last year, 101 manufacturing plants in Mississippi closed, affecting 10,198 jobs. In 2001, 73 plants closed, taking 9,100 jobs from the state.
“We’ve lost almost 27% of manufacturing jobs in Mississippi,” said University of Mississippi economics professor William Shughart. “Percentage-wise, we’ve led the nation in the loss of manufacturing jobs in the last three to five years.”
Even with the advent of Nissan, which built an automotive assembly plant in Canton that opened in May and will potentially employ 5,300 people and an undetermined number of indirectly related jobs, the outlook is still dismal, said Shughart.
“Having Nissan helps somewhat, but it’s not adding back nearly the number of jobs we lost,” he said. “And a lot of facilities that Mississippi manufacturers are occupying are old, sometimes 30 to 40 years old. When large organizations that own those facilities look to consolidate to cut costs, our plants become primary targets for closure because of the cost to upgrade them.”
The export market holds tremendous potential to offset negative trends, said Moon.
“Increasing exports will help make up for the loss of jobs, depending on the individual industry,” said Moon. “Anytime you can increase your market share, it gives you a greater ability to sell more products, hire more people, potentially expand market share and production facilities.”
J. Stephen Hale, executive director of the Mississippi Development Authority, said that overall, the state has made great progress creating quality, high-paying manufacturing jobs.
“In the face of the national recession and NAFTA, Mississippi has continued to focus on manufacturing,” he said. “That success can be seen in the jobs created at the new Nissan plant and their more than 30 suppliers, along with the expansions of Howard Industries and Northrop Grumman. We are also very proud of our work to keep manufacturing jobs
leaving our state. The result of those efforts have paid off with companies like Hol-Mac in Bay Springs and Alcoa in DeSoto County, who have not only decided to stay in Mississippi but to expand their manufacturing operations within our state.”
Contact MBJ contributing writer Lynne W. Jeter at <a href=”mailto: mbj@thewritingd