American manufacturers face greater challenges than ever before, both domestically and internationally. In the past five years, roughly 3 million jobs in manufacturing have been lost, many of them never to return, as some companies moved their operations overseas. Yet manufacturing has consistently been the engine that has driven the U.S. economy. And now this engine appears to be losing steam. It's a problem that many political leaders aren't addressing, and elected officials don't seem to fully appreciate the threat—not just to U.S. employment and national security, but to future prosperity.

That is the consensus of a special white paper published by the Bearing Specialists Assn., which represents more than 70 companies distributing factory-warranted ball, roller and anti-friction bearings. The paper, entitled, "The Effects on the U.S. Bearing Industry and Homeland Security of Manufacturers Moving Overseas," identifies the critical challenges facing manufacturers and recommends steps to help deal with those problems.

In the paper, BSA points out the importance of manufacturing by noting that the manufacturing process leads to increased economic activity in other sectors. For every $1 of goods produced, an additional $1.43 worth of additional economic activity is generated—much more than any other economic sector.

In his book, Securing America's Future: the Case for a Strong U.S. Manufacturing Base, author Joel Popkin points out that, "U.S. manufacturing is the heart of a significant process that generates economic growth and has produced the highest standards in history. But today, this complex process faces serious domestic and international challenges which, if not overcome, will lead to reduced economic growth and, ultimately, a decline in living standards for future generations of Americans."

The white paper adds that it's not just manufactured products that make Americans prosperous; it's the manufacturing process. This process starts with an idea that leads to new jobs and equipment and then to increased productivity, new products and processes.

"Prices fall and quality rises. Soon other parts of the economy are benefiting and, ultimately, living standards rise," BSA notes.

Jim Berges, president of Emerson Electric, provides an eye-opening look at manufacturing's economic impact.

"If the long-term health of this economy is threatened, then so are we. Economies whose manufacturing sectors are not vibrant and not growing are doomed to low overall growth," he says. "Those who call for a conversion to a service-based economy need only to look at Japan and Germany to get a glimpse of the consequences of manufacturing's decline—not a pretty picture and not one we want to see in this country."

He went on to say, "U.S. manufacturing has demonstrated the ability to overcome pure wage differentials with trading partners through innovation, capital investment and productivity. But when the structural cost multipliers are piled on, the task becomes unmanageable for best-in-class companies. Concerted effort to get our state and federal legislators to focus on addressing and removing these penalties will yield positive results for the economy."

Though American manufacturing creates higher living standards, domestic and international challenges threaten its sustainability because of:

• Lost jobs: Since July 2000, manufacturing has lost almost 3 million jobs, many of which have gone overseas. Output has shown little growth since the official end of the recession.
• Dramatically rising costs: The cost of doing business in the United States is rising dramatically, in large measure because of significant costs related to health care, litigation, regulation and energy. As a result, many U.S. manufacturers have shut down or moved production overseas.
• Loss of export potential: Manufacturing exports, as a share of GDP, have contracted since 1997, reflecting increased global competition, an overvalued dollar and difficult times overseas. Increased purchases of foreign-made goods have pushed the U.S. trade deficit to historic highs.
• Investments going elsewhere: U.S. manufacturing's share of capital investment and research and development expenditures, once a dominant feature of our nation's commitment to progress, are diminishing.
• A shortage of skilled workers: The National Assn. of Manufacturers recently reported that, "Despite the loss of almost 3 million jobs, manufacturing is facing a potential shortfall of highly qualified employees with specific educational backgrounds and skills, especially those specific skills needed to produce manufactured goods."

BSA's white paper also describes the effects manufacturing challenges are having on the U.S. bearing industry and homeland security.

"Bearings are a critical component in production equipment and products that are necessary to ensure our security," said Joseph D. Swann, president of Rockwell Automation Power Systems. "They are a necessary component in electric motors that drive the industrial complex, [and] on conveyors that are associated with airport security systems—[in] mining, steel production, with fans that move and exhaust air, and with automobiles and the equipment used to manufacture them."

Swann added that, "It is impossible to imagine a secure America, cities or small towns, without a reliable domestic source for bearings. Clearly, we need U.S. manufacturers and distributors who are self sufficient."

The United States is the world's largest economy, but the industrial U.S. market is shrinking. That means, according to BSA, that the future state of business for distributors and their manufacturing counterparts will be about market share battles.

"Our customer base is still large, but is growing ever smaller," the association notes.

Consolidation is taking its toll on distributors as well as bearing manufacturers. Although the major bearing manufacturers are already global companies, BSA asks: What will happen if we lost the manufacturing base of the U.S. economy? Global manufacturers based in the United States will move their manufacturing to where the volume demand is located. And U.S. distributors and manufacturers will have a smaller market to serve.

Homeland security will be affected, BSA says, because the United States will have an unavoidable global dependency for bearings. Bearings are critical mechanical components in major weapons systems. The U.S. Air Force attack on the German bearing industry during WWII indicates the importance of bearings. And dependence on foreign bearings brings into question U.S. capabilities during an emergency, in addition to foreign political scrutiny if they do not agree with U.S. policy.

The National Assn. of Manufacturers recommends the following to help the manufacturing sector and the American economy:

• Level the international playing field, such as ensuring that exchange rates are determined by markets, and ensuring that countries such as China comply with international trade rules.
• Reduce the cost of producing in the United States, including containing health care costs, enacting legal reforms, ensuring plentiful and inexpensive energy supplies, and reforming the regulatory system to ensure cost-benefit analysis.
• Promote innovation and investment through increased R&D support, a tax system that encourages research and development, and incentives to attract scientists and engineers to this country.

In addition to NAM's recommendations, BSA is recommending that its members and others who support U.S. manufacturing become involved in a range of activities at the local level. These suggestions include:

• Education: Take the time to teach your staff about U.S. economics. Work to relate events in your area to relevant economic principles, so your employees truly understand the impact of world events on their own paychecks. Similarly, support local colleges in their economic education by serving as a guest speaker at school events.
• Local support: Become active in your local chamber of commerce, community development board, and coalitions to nurture new business. These organizations, BSA notes, support healthy economic development in your area and connect you with other business people. Volunteer to work on committees or to serve in leadership capacities where you can help strengthen local economic development.
• Government: Develop strong relationships with your local and political officials. Your personal advocacy about the important role manufacturing plays in your area is important for them to hear.
• Media: Work with local and regional newspaper reporters to ensure that business issues and concerns are being accurately reported. Become a source for the reporters so that you can comment on local economic issues. And develop an active media relations program that includes news releases, interviews and letters to the editor to ensure that important business issues get reported.

BSA emphasizes that a healthy manufacturing base is vital to the nation's economy.

"To protect it, we must be willing to get involved at many different levels, and BSA members are encouraged to add their voices," the paper points out.