Newark, Calif.--U.S. companies have downplayed manufacturing for years, and it's been a mistake, according to Pierre Devaux, director of business development for Manex Consulting.
The manufacturing jobs lost in California over the past ten years sported an average salary of $69,000, he noted. The service jobs that replaced some of them paid an average of $43,200.
"That should settle it right there," he said. "We can replace all those manufacturing jobs with mortgage brokers or financial services jobs. Sounds good, right?"
Green and manufacturing are inextricably intertwined, according to panelists at a one day symposium held by the U.S. Department of Commerce taking place in Newark, California today. Many green products -- algae fuel, solar panels, energy-efficient building products -- are physical items that come off of production lines. But manufacturers also want to locate facilities close to their customer base to reduce transportation. Serious Materials, for instance, has put a small window manufacturing factory in the Empire State Building as part of the iconic building's retrofit, said Foundation Capital partner Steve Vassallo.
Thus, anyone getting into green should become a lot more familiar with facilities management and forklifts.
President Obama's goal is to double exports over the next five years, said Ro Khanna, Deputy Assistant Secretary for the U.S. Commercial Service in the Department of Commerce, who added that the attitude toward outsourcing among U.S. companies is changing. Although overseas labor still costs less, many companies now worry more about intellectual property control, quality control and transportation than they did in the past. Job growth is also an urgent topic among voters and consumers. Thus, momentum is building for increasing domestic manufacturing.
"Made in America still means something," Khanna said.
Manufacturing accounts for 11 percent of California's employment, but manufacturing accounts for 21 percent of green employment in the state, said Carla Din, director of the East Bay Economic Development Alliance. Governor Arnold Schwarzenegger has also passed policies to reduce taxation and give benefits to employers for retraining.
Historically, of course, the U.S. and California are in a manufacturing dip. Between January 2001 and October 2009, manufacturing employment in California dropped from 1.9 million to 1.3 million, a 32 percent decline, said Devaux.
Part of the reason has been improvements in productivity. "You've seen improvements in efficiency in manufacturing grow twice as fast as the rest of the economy," he said. The U.S. is actually still the world's largest manufacturers if you add food products.
But U.S. manufacturers have also not sought out enough ways to differentiate their products to maintain margins or expand exports. 23 percent of manufacturers invested less than 1 percent of sales into new product development, he said, and 66 percent invested less than five percent of sales into new products. Most U.S. firms do not even export. (Solyndra's solar modules cost substantially more than conventional ones, but for reasons other than the labor costs of its Fremont, California workforce.)
Still, success stories exist for squeezing profits out of made goods. Foamy hand soap? It sells for about the same as regular hand soap, but it costs manufacturers 25 to 40 percent less to make. Sales, meanwhile, have nearly doubled since 2004. Manex is currently working with an awning manufacturer that has come up with a way to keep building interiors cooler without much additional cost.
"The 'Made in the USA' label is very strong," Devaux said. "People all over the world like California wines."