Has the West Given Up on Manufacturing?

I am this week attending a conference in Stuttgart, Germany, on — wait for this — manufacturing. The World Manufacturing Forum, as the name suggests, is an international event, but the organizers aren't shy at all about one of its key goals, which is to actively promote and encourage a manufacturing industry in the heart of Europe.

The event is heavily sponsored and championed by Germany's Greater Stuttgart Region, and one of the welcome addresses will be delivered on Tuesday by Thomas Bopp, chairman of the regional assembly. The first address will be delivered by Fred-Holger Günther, chairman of the World Manufacturing Forum. In a statement on its Website, the Forum elucidated its goals:

    This year's World Manufacturing Forum aims to facilitate an effective dialogue between business and government leaders and explore challenges for manufacturing innovation in the context of policy makers' options. Speakers will talk about global business concerns, the management of strategic resources and how governments can support global manufacturing innovation by increasing the sustainability of business operations and by lowering the risk of conflicts through effective dialogue and international S&T cooperation.

That sounds clear enough, but there's another stream of concern flowing beneath the lofty goals of aligning global corporate and government strategies in manufacturing. In my opinion, the forum is also meant to help boost the position of the Western world in global manufacturing as China and Southeast Asian nations continue to pull in foreign factories in droves, resulting in the hollowing of many previous producer nations' industrial heartlands.

Stuttgart's location and its economic history intertwine with the fortunes of Germany. The city is right on the Neckar River and is home to some of the world's better known manufacturers, including Porsche and Daimler AG. The region is a manufacturing powerhouse for the automotive industry, but concerns have risen in recent months as the global economy, and especially sections of the European Union, have continued to reel under fiscal and debt burdens.

A visit to any hardware or retail outlet in the United States and many major European cities will drive home the often unpleasant reality facing factory workers in the West. Most of the items on display at stores like Wal-Mart, Best Buy, and Macy's carry the “Made in China” tag, a nagging phenomenon that sometimes bothers customers who realize the outsourcing of jobs has immediate local impact but who themselves are drawn by the lower prices afforded through the transfer of factories overseas.

Few other Western nations have demonstrated fiercer willingness than Germany to fight for manufacturing marketshare. It is the world's fifth largest economy and its third-biggest exporter, boosted by manufacturing that has earned it the status of the continent's economic powerhouse. This position has been hard won, though. Like other Western economies, German companies are facing pressure from lower-cost manufacturers, and this has forced companies in the country to move up the value chain to focus on products that require a higher level of expertise.

Fiscal and debt problems in the euro-zone — Germany's biggest export market — are crimping the country's growth. A recent Bloomberg News report noted Germany's exports have been falling as demand has dwindled in neighboring countries. One of the reasons Germany has been active in helping to bail out crisis-prone European Union partners Greece, Spain, and Italy, is because of fears the economic contagion in those nations could spill across its own borders.

I see the efforts to promote manufacturing in Germany as part of the country's response to the transfer of production to lower-cost countries. Local politicians and companies are teaming up to boost manufacturing in the country because of concerns about the possible negative consequences of rising unemployment if manufacturing continues to migrate outside the West. This goal is reflected in the agenda for the World Manufacturing Forum. Here are some of the topics scheduled for consideration. You may draw your own conclusion from these:

  • Manufacturing — a solution to the economic crisis?
  • Why manufacturing is important — a European view
  • Living and working in an urban environment
  • How can policies ensure resource use efficiency?
  • What does industry expect from policy makers?
  • Technological solutions supporting resource use efficiency
  • Are current policies able to guarantee a sustainable use of resources?

Speakers on the various panels are drawn both from government and the private sector and include Herbert Von Bose from the European Commission; Ingo Rust, State Secretary, Ministry for Finance and Economy, Baden-Württemberg; Carlos Costa, Governor of the Central Bank of Portugal; and Göran Ottoson, CEO, LKAB Schwedenerz GmbH.

If Europe is to have a viable future in manufacturing, all these folks will have to join forces. I wonder, though, if they are swimming against the current here. Has China completely cornered the manufacturing economy, meaning the rest of the world must scramble for leftovers? Or is there still a role for high-cost countries like Germany and the United States? I am open to be convinced and will share insight from the World Manufacturing Forum with EBN readers over the next few days. Let me know your particular concerns by leaving comments on this page.

8 comments on “Has the West Given Up on Manufacturing?

  1. Ariella
    October 15, 2012

    @Bolaji It's an interesting topic. I do hope that there is room for other countries to contribute a piece to the marketing pie. It would offer job opportunities there and more choice for sourcing elsewhere. 

  2. bolaji ojo
    October 15, 2012

    The challenges involved here are numerous and I believe that is one reason why this particular event is especially important for Europe. I will focus on these issues in subsequent blogs but each nation needs to have a dialogue on what roles it expects its companies and government to play in manufacturing. Letting the market sort it out might seem to be a good idea but the inherent inefficiencies and lack of clarity in how the market works haven't helped. Please take the poll we just posted on this subject and let me know what you think.

  3. Barbara Jorgensen
    October 15, 2012

    Another reason that Germany has retained some of its manufacturing prowess, specifically in automotive, is its refusal to compromise on quality. There's a spillover effect on “German engineering”. I just did a quick search on Keurig coffeemakers, which sound German to me. They are made in Reading, Mass. Haagen-Dazs is also made in the US, but the name was made up to sound European. Perception still matters.

  4. Ariella
    October 15, 2012

    @Barbara but those misleadingly European brands then actually signify American jobs, not really a bad thing for those of us in the USA.

  5. _hm
    October 15, 2012

    This is a very encouraging news. I find many made in Germany products. I did see laundry pair at Costco with Made in Germany tag and I was very happy and purchase same. I like made in USA and Germany and will spend more money.


  6. dalexander
    October 16, 2012

    @Bolaji, this almost sounds like Germany could be integral in policy leadership across all business sectors where government support could help not just in manufacturing but also the acceleration of the entire supply chain. The amount and nature of European policy will depend upon how economical, implement able, and enforceable it isthroughout all member states. I cannot believe how many policy innovations are already being partially or completely funded by the EU Commission. Does this conference have EU Commission members in attendance or is this more of a grass roots movement towards getting the government's attention on behalf of business interests?

  7. dalexander
    October 16, 2012

    Bolaji, In my previous post I asked if the EU commission was participating? I read the blog again and saw that indeed there is a representative on board. Could you ask this question of the EU Commission rep during Q&A? Please ask how the funding required to enact more policy will impact the REACH funding requirements which are already over the EU's budget? Thanks.

  8. ahdand
    October 16, 2012

    Yes me too for any quality product. You can see the quality by checking the name of which it was made from.

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