Economy and Environment and Manufacturing & Technology

ECONOMIC ANALYSIS: Amid carnage, state still a force in manufacturing

December 18, 2006

What puts Indiana on the map in the world's eyes? From an image point of view, it might be race cars, basketball or even David Letterman. But in terms of economic footprint, it is our manufactured products and our goods-making and goods-moving expertise that stand out.

We are a world-class manufacturer of everything from rolled steel to artificial limbs, and we employ more people and produce more output in manufacturing, proportionately speaking, than any other state in the nation.

If you don't believe that, consider these facts. Our state produced $67.2 billion worth of manufactured goods last year. Not only is that 39 percent higher than what we produced in 1997, it is a mere $2 billion less than what the state of Michigan-whose overall economy is 60 percent larger than ours-produced last year.

Even after a painful recession that hit goods producers especially hard, the manufacturing share of Indiana's overall output today remains almost exactly what it was eight years ago.

It's a story of success that has largely stayed off the front page, and not without reason. Indiana manufacturers have continued to produce a globally competitive product because, for the last decade and a half, they've had no choice. Odds are that the manufacturing plant you drive by every day is bidding against plants in Asia, Europe and everywhere in between for every bit of its business. And it's getting tougher all the time.

Perhaps that's why manufacturing's success tastes like failure to many communities and workers. There's no way to sugarcoat it-the price of manufacturing's success has been high for communities whose facilities have become uncompetitive, often through no fault of their own. Being successful has meant walking away from activities and products that in many cases have roots in Indiana communities that are half a century or more deep.

That is what I call the enigma of manufacturing in our state. Raising productivity, remaining cost-competitive-in short, doing all the things companies need to do to stay afloat and viable in a fiercely competitive environment-has led many in the state to come to the opposite conclusion. We've decided that the industry is dying before our eyes.

And there is no question that many parts of the overall industry, and many ways of doing business, are fading away. Nine months ago, I said that within two or three years, the era of the highly paid automobile production worker would come to an end. For the sake of countless communities and families who have enjoyed the benefits of those jobs, there is no joy in this prediction. Yet it is coming true before our eyes.

Most recently, Ford, once the secondlargest seller of vehicles in the nation, announced it would buy out half of its production work force, following similar action by GM. In the words of Cindy Niekamp, a Borg Warner executive who recently addressed the business community in Muncie, the rules that once governed success are changing, and companies have no choice but to change with them.

But if traditions are dying in manufacturing, the industry itself is still rolling along. Perhaps that's why the Central Indiana Corporate Partnership has rolled out a new initiative to get us collectively thinking about what we can do to keep this vitally important segment of Indiana's economy in our thoughts when we make plans for our economic future.

The group calls it advanced manufacturing, but in the words of Indiana Manufacturers Association President Pat Kiely, that's what you call any manufacturer that's still in business today.

It's specialized, it's flexible, and it's high-tech. And even in the face of competition from abroad, it remains viable for our state for the foreseeable future. We need to learn what it's all about if we want to understand what that future has in store for us.



Barkey is an economist and director of economic and policy study at the College of Business, Ball State University. His column appears weekly. He can be reached by e-mail at pbarkey@ibj.com.
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