Survey Gauges Manufacturer Outlook and Key Challenges

Forty-four percent of U.S.
manufacturers expect manufacturing to trail the overall economy in 2006,
according to the 2006 National Manufacturing Week survey of

On the brighter side, National
Association of Manufacturers President John Engler said that more than half of
the respondents expect to increase capital spending in 2006 and to increase
employment, and that almost three-fourths of them now report they are exporting
to other countries. “These are all positive signs,” he said.

Engler said the biggest challenges
are rising external costs associated with health care, materials and energy,
which manufacturers are unable to transfer to product pricing. “External cost
burdens are having the biggest impact on manufacturers ‘ lowering their
profitability and tying up more funds that would otherwise be spent on
investment, research and development, and new product lines. These costs are a
significant and long-term problem for our nation’s manufacturers and our

Tony Raimondo, chairman and CEO of
Behlen Manufacturing Company in Columbus, NE, and a member of the NAM Board of
Directors, said that energy was looming ever larger as a serious cost factor in
his industry. “The government encourages us to rely more and more on
natural gas for energy, and then makes it virtually impossible to access more
supplies of natural gas. The result is the highest natural gas prices in
the world.”

“We have also got to get a handle
on health care costs,” Raimondo said. “We’re looking at double-digit cost
increases every year on what is already a major cost item. This survey shows
that the cost of non-wage compensation’ is having the greatest negative impact
on manufacturers today, and by far the biggest item in that category is health

Engler noted that as the
manufacturing sector continues to expand, manufacturers are more reliant on a
high-performance workforce, and that qualified workers are getting harder to
find. “We began seeing this issue a few years ago and it is becoming more
pronounced in subsequent surveys,” Engler said.

“Half of the respondents currently
have unfilled positions because they cannot find qualified workers, and 70
percent of the new jobs that survey respondents anticipate creating will be for
either skilled production workers or highly educated professionals. The need for
highly-educated professionals specifically has nearly doubled from 2005 and we
anticipate it will continue to grow in the future.

“If the U.S. is to preserve its
position as a major economic power in the 21st century it must stay out in front
of the innovation curve, and it will need a much better-prepared workforce to do
so,” Engler continued. “Like every modern nation, the United States is deeply
involved in globalization. Technology and competition will only increase
America’s need to have access to highly skilled professionals. But our schools
and training programs just aren’t doing the job.”

Ronald D. Bullock, CEO of Bison
Gear & Engineering Corporation in St. Charles, IL, underscored Engler’s
comments with a personal comment on his quest for qualified manufacturing
employees. “I recently filled an engineer’s position that had been open for
18 months,” Bullock said. “Right now, I have at least five empty slots,
some of which have been empty for months. I need more people to keep up with
demand, but I can’t just hire anyone off the street. This is complicated work.
We need people with strong backgrounds in math, science and

Engler noted that one way
manufacturers are competing more effectively with the rest of the globe is by
increasing their exports, with an “astounding 73 percent” selling abroad. More
information and survey results href=”″

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