Non-Environmental Cost-Benefit News

California manufacturers could save up to one million jobs if both they and the state government take concerted action, according to a report released today by the Bay Area Economic Forum, a public-private partnership of business, government, university, labor and community leaders.

"One million jobs are up for grabs unless we act now," said Sean Randolph, president and CEO of the Bay Area Economic Forum. "How California addresses the challenges to its manufacturing base is critical to the state's economic future."

So far, an estimated 200,000 manufacturing jobs have been lost in California due to economic conditions and improved productivity, while 90,000 have been lost due to falling exports and 20,000 due to jobs moving to other states. And California is at risk of losing many more as manufacturers seeking lower taxes, cheaper energy and less restrictive labor laws consider moving jobs overseas and to other states. But many companies tend to overrate the benefits of offshoring and would be much more likely to remain in California if regulatory burdens were reduced, according to the report, conducted by McKinsey & Company and co-sponsored by the California Manufacturers and Technology Association, Silicon Valley Manufacturing Group and Semiconductor Industry Association.

"We are under tremendous pressure to become more price competitive," said Kelley McKenzie, chief counsel of New United Motor Manufacturing (NUMMI), a Toyota and GM vehicle manufacturing plant with about 5,500 employees in Fremont, California. "The reforms listed in this report would certainly go a long way to help companies like NUMMI retain well-paying, high quality manufacturing jobs in California."

California has 1.5 million manufacturing jobs, far more than any state (70 percent more jobs than runner-up Texas), and the industry directly supports an additional three million jobs statewide. Manufacturing also contributes $150 billion annually to the state's economy. Because the sector is of critical importance to California, the Bay Area Economic Forum has proposed a partnership between government and manufacturers, including a pragmatic action plan and timetable, in an effort to preserve jobs and sustain a dynamic manufacturing base in the state.

What State Government Can Do to Enhance Competitiveness

The report recommends three primary actions that state government must take to save California's manufacturing sector from further erosion:

1. Level the Playing Field -- Improve regulations and laws to
make California manufacturers more competitive. California has
the nation's highest workers' compensation rates, its energy
costs are 61 percent above the national average and the
state's tax rate is higher than all other states except
Pennsylvania. California also imposes far more regulations
than other states. For instance, it determines overtime by an
eight-hour workday standard, so employers cannot use four
10-hour shifts as other states do.

2. Build Technical and Vocational Skills -- Create a smarter
workforce, one that can meet the changing needs of
manufacturers. Other states are actively working with
manufacturers to ensure curricula in schools mesh with local
needs and that training programs enjoy sufficient funding.

3. Promote California Manufacturing -- Launch a campaign to
highlight the importance of manufacturing to California, the
benefits of manufacturing in the state and the commitment of
both state government and private sector leaders to create an
environment that is supportive of manufacturing.
What Companies Can Do to Enhance Competitiveness

Many companies that assess the real costs and benefits of offshoring will find it's not a panacea, the report concludes. It recommends that manufacturers:

1. Focus On Delivering Customer Value -- Customers care about
more than cost. They also want rapid delivery, customization
and reliable quality assurance.

2. Accurately Measure Total Landed Costs -- Companies must assess labor savings within the context of their own cost and revenue structures. Moving offshore for cheaper labor has little
impact when labor is a small fraction of a company's costs.

3. Implement World Class Manufacturing Techniques -- By
implementing world class manufacturing techniques, such as
lean, companies can minimize the impact that wage rate
differentials have on overall cost structures. In addition,
they can shorten lead and cycle times to be more responsive to
customer needs.

"We urge the California legislature and Governor Schwarzenegger to tackle the issues outlined in this report," said Jack Stewart, president of the California Manufacturers and Technology Association. "Manufacturing has an enormous impact on California's prosperity and offers good paying jobs that are worth saving."

"Manufacturing in California should be a live issue," added Robert Sternfels, a partner with McKinsey & Company, an international management consulting firm. "Government and business have just a narrow window in time to create the right climate for long-term manufacturing."

The full report can be found at www.bayeconfor.org.

Established in 1988 by the Bay Area Council and Association of Bay Area Governments (ABAG), the Bay Area Economic Forum is a public-private partnership of business, government, university, labor and community leaders that develops analyses and implements programs to strengthen the region's competitive economy and quality of life. For more information, please visit www.bayeconfor.org.

Contact: Bay Area Economic Forum, Sean Randolph, 415-981-7117, sean@bayeconfor.org

Yahoo Finance http://biz.yahoo.com
http://biz.yahoo.com/bw/050301/15048_1.html