Viewing blog posts written by Gino DiCaro

Caterpillar CEO: pro growth policies and innovation will lead the MFG renaissance

Posted by Gino DiCaro, Vice President, Communications on Sept. 24, 2015

Caterpillar CEO, Doug Oberhelman, along with Honeywell CEO, Dave Cote, commented last week on CNBC's Squawk Box on the potential for a U.S. manufacturing renaissance.

At the core of their comments, were two drivers -- the tremendous innovation within their companies, like Caterpillar machines being interconnected by computers, and the pro-growth policies necessary to compete and win, like re-authorization of the U.S. Export-Import bank

California's own manufacturing sector boasts so much of the country's cutting edge innovation in R&D that it could translate into manufacturing for our middle class to lead the national manufacturing "scale-up". But like national policies, we need to make sure our state programs are inline with the competitive needs of our manufacturing base -- cost effective energy policies, flexible work laws, workforce training initiatives, more regulatory certainty, etc.  

With only two percent of the country's manufacturing investments last year, we have work to do. A powerful message of manufacturing growth is likely taking over the country, and now California needs to ensure its rightful place in that resurgence for its own economy.

Manufacturing executives in California should also follow the lead of CEO's like Oberhelman and Cote. If we see more of these public interviews and speeches from California manufacturing executives we can help give state lawmakers the support they need to pass pro-growth policies.




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High costs of climate change policies don’t help California manufacturing

Posted by Dorothy Rothrock, President on Sept. 11, 2015

Next 10 released an issue brief “California’s Manufacturing and Benefits of Energy Efficiency” (September 3, 2015) in which they engage in magical thinking to conclude that California manufacturers enjoy a competitive advantage and are prospering due to California’s ambitious energy and climate policies.  

They highlight four facts in support of this conclusion, repeated below with our explanation of where they went wrong: 

Next 10 Fact 1: California electricity and energy productivity in manufacturing is outpacing the rest of the nation.

CMTA: Manufacturers in California must be energy efficient to survive – in 2014 electricity costs were 70 percent higher than the national average.  Next 10 ignores the fact that companies not able or willing to pay high electricity rates either shrink or don’t grow production in California, so their energy use profile is not reflected in this “fact”.  Next 10 asserts  that “companies in California can spend less on energy and redirect cost savings to other areas to boost the company’s competitive edge.”  With such high rates, even energy efficient companies have nothing left over after paying the electric bill.

Next 10 Fact 2: Electricity bills are lower in California. 

CMTA: Each company’s size and electricity use profile will determine the size of their bill. Manufacturers use electricity for pumps, compressors, lighting, robotics, conveyor belts, clean rooms, and other process related purposes. Next 10 is silly to compare state-to-state average industrial bills without correcting for company sizes, energy use profiles, and number of firms in each state.  Companies certainly have an incentive to make energy efficiency investments to lower their bills when state policies raise electricity rates, but another option is to shift energy-intensive production out of state. 

Next 10 Fact 3: California manufacturers spend a smaller share of total operating costs on electricity.

CMTA: It should be no surprise that as California manufacturing shifts from energy-intensive production activities to more R&D activities that energy expenditures would decline as a share of total operating costs. In fact, the shift in the composition of California’s manufacturing sector in the past two decades has been striking - the contribution of electric and electronic manufacturing as a share of California’s value added mix grew from 7 percent in 1987 to 30 percent in 2008 while the share of many other sectors have declined. (See the industry chart below from the American Council for an Energy-Efficient Economy).

But even if the composition of industry in California were the same over the last decades, other key information is missing - spending a smaller share of operating costs on electricity could be the result of spending a larger share of operating costs on labor, taxes, and workers’ compensation, or other costs in California. 

NEXT 10 Fact 4:  California is still the top state for manufacturing in the US.

CMTA: It is not news that California is a big state with 39 million people and that we can still claim the largest number of manufacturing jobs and output of any state. But if we adjust the data to remove our size advantage, a more interesting story emerges. Since 2010, on a per capita basis, Indiana and Michigan are the “top states” for manufacturing job growth. In fact, since 2010 there are only 12 states with lower per capita manufacturing job growth than California. Next 10 notes there are many reasons California manufacturing GDP grew between 2004 and 2014, including our geographic location and talented workforce.  While Next 10 correctly notes that “low energy costs” are a competitive advantage to attract manufacturing back to the US from overseas, they don’t draw the flip side conclusion that high energy prices could be a problem in California.  If climate policies lead to higher energy prices it’s hard to conclude that they serve as a “competitive strength for manufacturers.”

Interesting facts not mentioned by Next 10:

Since 2010 California manufacturing jobs have grown almost three percent, while U.S. manufacturing jobs grew by almost eight percent.

Since 2010 California attracted less than two percent of new and expanded manufacturing facilities each year. Since 2000, only one year saw investments exceed three percent. 

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Californians deserve better MFG information around SB 350

Posted by Gino DiCaro, Vice President, Communications on Aug. 31, 2015

The  "myths and facts" document created by the State Senate Democrats in support of SB 350, a bill that mandates 50 percent reduction in petroleum use, 50 percent use of renewable power and doubling energy efficiency in buildings by 2030, cherry picks data and chooses arbitrary timeframes to turn reality on its head. We can have a healthy debate about climate policy, but we must first put some perspective to these claims.

One "myth" the document claims to dispel is that “SB 350 will kill California’s manufacturing industry." To ‘prove’ this point, the document highlights the size of California’s manufacturing economy and picks statistics for jobs, output and exports to prove manufacturing is flourishing under current climate policies, such as AB 32, and would do even better with SB 350.

They claim the sheer size of the California manufacturing economy proves that these policies are a positive for the state. However, it should be no surprise that the most populated state in the nation also happens to have a large manufacturing employment, production and export base.  On a per capita basis, a more rational way to understand manufacturing’s role in our economy, the story is different.  “California has twice as many manufacturing companies as Texas,” might be factually true, but California has still has the same per capita manufacturing jobs as Texas – one for every 29 people.

Second, while we are still the country’s largest manufacturing state there has been a shift away from California in recent years. Since the end of the recession in 2010 manufacturing jobs have only increased in California by 2.8 percent while the U.S. has grown its manufacturing base by 7.8 percent – that’s more than 200 percent greater manufacturing growth outside California.

In that same time period, we attracted less than two percent of the country’s new manufacturing investments. The result of these disturbing trends is that since 2009 U.S. manufacturing output has grown by a healthy 22 percent while California’s output has been lagging with only 11 percent growth.

Finally, we wonder why the State Senate Democrats trust the Manufacturing News Index (MNI) to count jobs rather than the Bureau of Labor Statistics (BLS) that is relied on by California’s own employment agencies.  MNI uses outdated Standard Industrial Codes and includes more types of companies in their analysis (mining, extraction, among others) than does BLS.  According to BLS, we grew manufacturing jobs by 0.4 percent which is far behind the 1.6 percent US growth for the period March 2014 to March 2015.

Policies that increase energy and transportation costs on manufacturers will encourage further declines in employment, investments and manufacturing output.  We’re glad the State Senate cares about California manufacturing and we hope  these facts about manufacturing will lead to smart policies going forward to reduce burdens and maintain affordable energy supplies.   

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8 reasons MFG is great for America

Posted by Gino DiCaro, Vice President, Communications on Aug. 12, 2015

Drew Greenblatt of Marlin Steel (@steelwire) articulated in Inc. magazine this month why manufacturing is so great for America. It was an excellent rebuke to David Ledbetter who previously posited "What's so great about manufacturing?" in The New Yorker magazine.  Greenblatt's eight reasons were as follows. 

  1. Manufacturing creates strong middle-class jobs.
  2. Manufacturing jobs create dignity.
  3. Manufacturing creates wealth for a nation.
  4. Manufacturing is critical during wars.
  5. Factories are safer than ever before.
  6. U.S. factories are the clean ones.
  7. Workers with good jobs are more likely to be healthy.
  8. Manufacturing research is a creativity machine.

Don't miss the entire article explaining each reason HERE. It's must-read material for every California lawmaker and regulator working on policy that affects our state's ability to attract new manufacturing investment.

Remember, here's where we stand vs. the rest of the country in manufacturing job growth:

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CA workers' comp premiums rise while U.S. drops

Posted by Gino DiCaro, Vice President, Communications on July 23, 2015

A key cost component to manufacturing is the premium paid for workers' compensation insurance.  California reformed its system in 2012 with SB 863 to try to increase benefits for permanently injured workers, as well as reign in high costs. At the time, we had the fifth highest premiums in the country. According to workers' comp experts the SB 863 reforms would create approximately $1.50 in cost savings for every $1 in benefit increases. 

This week we took a look at the trend in premium rates for California versus the country from 2010 to 2014 to see if costs were becoming more competitive. It looks like California premiums continue to rise while the national average continues to drop. 


Work comp premium trend CA vs. U.S. since 2010

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