US factories maintain an edge over China

Associated Press

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 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 ranked 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.

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, such as 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, Ind. 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. 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.