S.J. seeing return of goods output | Recordnet.comMANUFACTURING INDUSTRY
S.J. seeing return of goods output
Brookings report suggests new public policies
By Reed Fujii
Record Staff Writer
February 26, 2012 12:00 AM
San Joaquin County's manufacturing sector has taken its licks in the past dozen years.
Employing nearly 25,000 workers in 2000, the sector shed about 4,000 jobs during the 2001-02 recession and only began to get some of that back - rising to an average of nearly 22,000 employees in 2007 - as the Great Recession took hold.
By 2010, the last full-year average available from the state Employment Development Department, there were 17,600 manufacturing workers in San Joaquin County. Most of the job losses were in durable goods production, with a portion certainly associated with the shutdown of the New United Motor Manufacturing Inc. auto assembly plant in Fremont that same year.
But goods production is vital to the regional as well as the national economy.
In a new report, the Metropolitan Policy Program at the Brookings Institution, a nonprofit public policy organization, says manufacturing provides above-average wages, promotes technological innovation, is a key to reducing the trade deficit and contributes to environmental sustainability.
It calls for the development of a wide mix of public policies to promote manufacturing, particularly growth in computers and electronics, chemicals and pharmaceuticals, transportation equipment and machinery. The report also sees growth in the U.S. food-processing sector.
"Public policy is needed to help strengthen manufacturing and promote a high-wage, innovative, export-intensive and environmentally sustainable manufacturing base," Brookings says.
Jeffrey Michael, director of the Business Forecasting Center at University of the Pacific, said having taken its lumps, the U.S. manufacturing sector may well be poised for a comeback.
"That's a situation that's stabilized and has a chance of reversing itself somewhat," he said.
The weak U.S. dollar making American goods relatively cheap, rising energy prices boosting transportation costs and the increasing costs of labor and raw materials in the developing world are helping set the stage, Michael said.
"I do agree, and I do believe the macro landscape is setting up to support some resurgence of manufacturing in the United States over the next decade," he said. "I don't necessarily expect that to occur evenly over the whole country. It remains to be seen how much of that roots itself here."
Local advantages
San Joaquin County has developed some advantages in recent years: housing and land costs are lower; government is more amenable to economic development; and, in particular, the area has continued to improve its transportation infrastructure, which now includes two major railroad intermodal centers, the two freeway systems, its seaport just now preparing to handle standard cargo containers and the metro airport.
"We are absolutely an international center of commerce in Northern California," said Michael S. Ammann, president and chief executive of the San Joaquin Partnership.
For manufacturers and others interested in reaching the Northern California market, there are 12.5 million people within 100 miles, including the San Francisco Bay and Sacramento metropolitan areas. And that populace is expected to double in 40 years.
The benefits for the local economy is that manufacturing takes lower-cost raw materials or semi-finished goods and produces higher-value products that bring outside dollars to the local economy, Ammann said
"Those revenues are then spent locally to buy labor, through wages, basic raw materials, ... and there's just a bevy of services that go to support manufacturing," he said, describing it as a "virtuous circle that really makes the economy go."
And the partnership, a public-private agency that helps attract new businesses to and encourages business expansion within San Joaquin County, is seeing a change in development trends.
"Right now, it's swung from logistics to manufacturing," Ammann said.
Still, more needs to be done.
For example, state officials did try to avoid the NUMMI closure, offering policy changes and incentives to Toyota Motor Corp., but it was too little, too late.
"The state really didn't have an auto type of strategy to attract and retain NUMMI or any other (automotive) plants," he said.
Sparking change
Now, a similar opportunity is arising in alternative-fuel and electric vehicle companies, such as Tesla Motors, which plans to build electric cars in a portion of the old NUMMI plant, and Electric Vehicles International, which is making electric delivery trucks in Stockton.
"We're hopeful that Tesla and some of these other car companies grow up and are the new auto industry in California," Ammann said.
Again, however, the state lacks a coherent policy toward that end.
"There's no direct alignment that says we want to create an alternative-fueled vehicle industry in the state of California," he said.
Hoping to change that, Ammann has joined the California Advanced Manufacturing Policy Academy, a National Governors Association program involving eight states drafting new economic development strategies.
Anthony McCracken, general manager at Scientific Specialties Inc. in Lodi, hopes those policies encourage more students to study robotics and automation.
"Automation is key. That is how America is going to keep its head above water," McCracken said.
Scientific Specialties makes plastic ware used in biological research labs. It relies on highly automated machines directed by relatively few but highly skilled employees.
"Our business here and the product we do is actually fine right now in California," McCracken said. "It is a very high-demand, high-quality, high-tech product."
"You can't take this kind of work today to China, Japan or even some of the other states because you don't have the work force, you don't have the technology," he said.
McCracken lamented the U.S. losing its place as the world's leading manufacturer of just about everything, as in the 1950s, '60s and '70s it churned out everything from shirts to shovels, toasters to television sets, coat hangers to cast iron.
"However, there's niche manufacturing that we're very good at," he said. That includes Brookings' "high-road" industries.
"Those kinds of products we can be very competitive (with), because ... they're not labor-intensive," McCracken said. "You need clever employees."
Contact reporter Reed Fujii at (209) 546-8253 or rfujii@recordnet.com.
