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Not so long ago, American manufacturing was considered a moribund sector whose glory was fading with the rise China and other cheap labor markets. But look today. According to a new report from the New America Foundation titled Value Added: America’s Manufacturing Future, the sector is motoring through a robust renaissance fueled by new technologies, software, innovation, and lower energy costs. “U.S. manufacturing remains an important, leading sector in both American and global economies,” write the report’s authors Michael Lind and Joshua Freedman. “If American manufacturing were a separate nation, it would have eighth largest economy in the world.”
The authors found that manufacturing has led America’s current economic recovery and added over 342,000 jobs over the last two years, the most since the boom years of the late 1990s. Manufactured goods now account for 53 percent of all American exports. The sector is also responsible for 70 percent of all R&D spending by private companies and creates nearly seven million jobs in other industries. “The combination of increased labor costs in China and elsewhere with U.S. manufacturing productivity growth, which compensates for higher wages, has made it more competitive to invest in American manufacturing,” Lind and Freedman say.
GE is a good example of how innovation and manufacturing open jobs and build value. As recently as 2008, the company was considering selling its appliances business based in Louisville, Kentucky. Instead, the company doubled down on the business, rolled out a lean manufacturing strategy, and trained workers in new production methods. This winter, it opened two new plants at GE’s Appliance Park in Louisville. GE workers there make innovative hybrid water heaters and refrigerators that used to be manufactured abroad. “We took the gloves off and did what it would require to be competitive,” GE product manager Tom Zimmer says.
The company also started tapping the power of software and data to create new value. GE’s 5,000 software engineers have developed applications like MyEngines, which lets airlines monitor engine maintenance and repair cycles, or the Movement Planner, which allows railroads track traffic, scheduling, train speed and location. The company’s annual software revenues reached $2.5 billion. GE expects a double-digit growth in software from now until 2015.
Platforms like MyEngines echo another of the report’s findings, that the boundaries between manufacturing and services are eroding and that companies are “building relational, as opposed to strictly transactional” partnerships with customers.
Lind and Freedman say that American manufacturing will continue to play “a central role” in American economy. “But it will be a manufacturing sector radically different from the one to which we have been accustomed.”