Manufacturing's trillion-dollar question
Shanton Wilcox, US manufacturing lead at PA Consulting, discusses the future of American manufacturing with Andy Medici from the Business Journals.
The article notes that Ford Motor Co. is planning a $700 million investment in a manufacturing plant in Louisville, Kentucky – and another $11.4 billion investment in two separate nearby battery plants. In October, Micron announced it would invest up to $100 billion in upstate New York to build the largest semiconductor fabrication facility in the United States. President Joe Biden touted $300 billion in announced investments in American manufacturing facilities over the next few years in his annual State of the Union Address to Congress – and promised a bright future for American manufacturing in general.
But even as politicians argue about whether American manufacturing is poised for a comeback – or if it ever really left at all – hundreds of billions of dollars in federal incentives, state governments and local investments are poised to potentially transform the manufacturing landscape, the thousands of business owners that a part of that supply chain and the tens of millions of workers it represents.
Are American manufacturing jobs coming back?
Shanton said that the new manufacturing push into semiconductors, electric vehicles and batteries isn’t so much about adding workers as it is transforming the workforce to compete in these highly automated industries.
“It's not a net new increase but a new shift in the skills and in the wages relative to those skills. It's a transformation of the manufacturing sector but not a comeback form a volume point of view.”
He continues to say that the assembly line for an electric vehicle is far different from a traditional vehicle and the addition of robots and automation means less need for the same workers as older vehicles. But the manufacturing industry – like most American industries right now – still suffers from a shortage of workers.
The CHIPS Act, Infrastructure Act and the Inflation Reduction Act – and the future of American manufacturing
Experts agree the future of American manufacturing is closely tied to national security and hundreds of billions of dollars of government investment.
Shanton said the subsidies are great for temporarily lowering the cost of producing goods made in America and boosting manufacturers' decisions to produce those products – such as the next generation of computer chips.
The national security implications of homemade production of computer chips also made ramping of domestic production a more bipartisan issue.
He says: “The political competition of us versus China and the disruption in supply of those chips – you add that political national security tag – and you have more bipartisan support for [this] legislation" adding there are even calls to limit other products produced by China.
The Covid-19 pandemic also played a role in showcasing how important domestic manufacturing and the global supply chain was – nobody seemed to enjoy hunting for toilet paper or waiting months for a car. But efforts to transform manufacturing processes or pivot to new technologies won’t be a quick process.
Shanton said that but efforts to transform manufacturing processes or pivot to new technologies won’t be a quick process. New factories take years to fire up and workers need to be trained. Thousands of smaller manufacturing suppliers need to find a way to make the jump from old products and services, such as the ones needed for traditional gas vehicles, to the ones needed for electric vehicles or other products. And, as demand for new products increase, there will be secondary impacts. For example, increased demand for electric vehicles will require stronger electric grids.
Shanton continues: “It will be a retooling and re-skilling of existing manufacturing resources. All of that is going to take time. Five, 10, 15 years those are the types of intervals we need to be looking at.”