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September 26th, 2011
Throughout his economic development trip to Asia, Michigan Gov. Rick Snyder has had an unlikely ally.
Detroit Tigers ace Justin Verlander.
The sure-fire Cy Young award winner isn’t actually traveling with the governor – he’s busy helping the Tigers contend for the American League pennant. But Snyder has been chatting about Verlander and his team’s success with his Japanese counterparts before meetings turn to the subject of bringing business investment to Michigan. He’s been giving gifts of Detroit Tigers hats.
“I presented several of them to different people today,” he tells MLive.com. “I gave one to the Japanese commissioner of baseball. And they love the Tigers. They know all about Verlander and how the season’s going.”
Will Snyder and his entourage find similar success on his overseas visit? The Detroit Free Press reports Wayne County officials are pitching a 1,000-acre site that straddles Plymouth and Northville ownships to battery suppliers in hopes of creating a “cluster of high-tech battery makers and suppliers” in western Wayne County.
“There’s a lot of emphasis this trip on battery development and energy,” Robert Ficano, the county’s CEO, told the newspaper.
Snyder sold the virtues of a revamped tax structure to his Japanese hosts on Sunday and Monday, saying it has made Michigan’s business climate friendlier to outside investment, and that a two-year balanced budget has increased the state’s fiscal stability.
“We have been busy reinventing Michigan, breaking some bad habits of the past and embracing new opportunities for our future,” he said in a written release. “We have come to open new doors for trade and business between our state and Japan. We see many great opportunities ahead for all of us to do more business together.”
His trip began Sunday, and includes stops in Japan, China and South Korea. On Monday morning, he said Japanese firms employ more than 32,000 Michiganders and that he’s intent on growing the relationships that create those jobs during the course of his visit.
This is his first official overseas visit as governor, but it’s hardly a new strategy in the Midwest. In June, Changing Gears reporter Dan Bobkoff examined Toledo, Ohio, and the efforts of the city’s leaders to court investments from China. Former Missouri Gov. Bob Holden is now chairman of the U.S. Midwest China Association, an advocacy group that believes in a regional approach to wooing Chinese business.
And under Ficaro, Wayne County, already operates four offices in China: Chonquing, Wohan, Nanjing and Beijing.
September 26th, 2011
Nathan Oostendorp is a successful open-source entrepreneur living in Ann Arbor, Mich. He is the founder of Ingenuitas, a company that uses Open Source software to improve quality control in manufacturing.
He shares his thoughts on why he thinks the future of manufacturing depends on factories working together to improve their industry.
As we soul-search for what manufacturing needs to reinvent itself, there is a light in the darkness. We can look to a sector that has drastically impacted the way we live and communicate.
Mobile devices, online social networks, and the Internet have changed the way we interact — but they also show us a new, more open, way to innovate in manufacturing.
Companies like Google, Apple, and Facebook created immense value for their shareholders and users. But one thing they have in common, is they have all used open innovation, often in the form of Open Source software, to bring products to market quickly and cheaply.
Open Source is software and code that’s freely distributed over the Internet. This lets people use it in their own way.
There would be a lot fewer web companies if it still cost $10,000 for a server and the software to run it, like it did in the early 90’s. Today it costs a few bucks, if you pay anything at all.
Walk in a factory today, there’s a lot of computers being used on the floor. But they’re usually expensive and you can’t upgrade them yourself. With an Open Source system, anyone could make improvements as they adapt them to their needs for safety, quality control and data management. The result would be something that’s low-cost and creates a lot of value.
If you want to see at what the future of manufacturing with open source could look like, go no further than the Maker Faire Detroit at the Henry Ford Museum.
The exhibitors, or “Makers”, figure out ways to manufacture their own designs, in a way that is very similar to Open Source: They publish designs for their prototypes. They use Open Source software and off-the-shelf hardware. They blog, and tweet every dead end and every small victory.
Sure, at the Maker Faire there’s dragon trucks, life-size games of mousetrap, and souped-up micro race cars – but they’ve also produced some pretty impressive machines – Open Source Computer Controlled Routers, Laser Cutters, and 3D Printers were all on display. All things used in manufacturing today.
Some are sold by as kits by profitable businesses, some are works in progress and many are merely extensively documented weekend projects. But these developers of “Open Hardware” and doing just what the Open Source Software hackers did, only with electronics and machines.
It may seem like a big leap from a few Open Source machines to a massive change in how things are made, but if you look automation’s history, big things can happen when entire industries decide to collaborate.
For 30 years Henry Ford’s automobile manufacturers association required automakers to share their patented innovations with each other, and the result was the golden age of Detroit.
Today, with our means of communication and the pace of global innovation, Open Source collaboration on automation technology represents a way for an entire sector to create much more value to their customers.
In the US, the era of manufacturing turning massive amounts of unskilled labor into a production system is over. Technology can move manufacturing towards an industry where the best innovators, not the cheapest workers, will reap the rewards.
This story was informed by the Public Insight Network.
Pete Bigelow · Midwest Memo: Illinois Budget Deficit May Grow, Groupon IPO In Flux, Ohio’s Shale-Gas Boom
September 26th, 2011
Three stories making news across the Midwest today:
1. Illinois’ deficit may grow. Despite budget cuts and tax increases, the state of Illinois’ budget deficit will reach $5 billion next year, according to a report released today by a government watchdog group. The Civic Federation says added pension and debt costs are causing an increase from this year’s $4.6 billion figure. “In spite of a tax increase, we’re actually losing ground under this budget,” said Laurence Msall, president of the non-partisan budgetary think tank, tells the Chicago Sun-Times.
2. Groupon IPO still uncertain. U.S. regulators are scrutinizing documents related to Groupon’s upcoming IPO more thoroughly than expected, which is delaying the offering. The Wall Street Journal reported Sunday that the Chicago-based daily deals company remains committed to the offering, but the timing is still unclear. On Friday, Groupon amended its offering documents to report reduced revenue from 2010 to $312.9 million from $713.4 million, the newspaper reported.
3. Fracking fuels Ohio boom. State regulators and industry officials may be debating the practice of hydrofracking, but across Ohio, the shale-gas boom is already taking off. Energy company workers are clogging courthouse hallways across eastern Ohio to research documents that determine who owns property, according to The Columbus Dispatch. “I’m told that, even back in the coal days of the 1950s and 1960s, it was never as busy as this,” the Harrison County recorder tells the newspaper.
Pete Bigelow · Midwest Memo: Michigan Governor Off to Asia on Trade Mission, Wisconsin may Ease Mining Laws
September 23rd, 2011
Three stories making news across the Midwest today:
1. Michigan governor’s trade mission. Gov. Rick Snyder and an entourage of administration and business officials head to Asia this weekend as part of his first trade mission while in office. Snyder will spend two days in Tokyo, one day in Beijing, one day in China and one in Seoul, according to our partner station Michigan Radio. He will emphasize the state’s business tax structure and workforce in his attempts to entice overseas leaders to invest in Michigan, though downplays any expectation of immediate results. “I don’t have high expectations there,” he said. “This is more about starting the relationships and then looking six months, a year out.”
2. Manufacturing’s one key trait. In a short essay for Bloomberg Business Week, General Motors CEO Daniel Akerson writes the key to saving the American manufacturing industry is adaptability. In the wake of bankruptcy, he points toward an agreement the United Auto Workers made to lower wages at a plant in Lake Orion, Mich., as one that hailed the arrival of a more flexible cost structure. “If you don’t prize adaptability, whether it’s industrial relations or it’s in how you view, perceive, and react to your competition, you’re going to be a dinosaur,” he said.
3. Wisconsin could ease mining laws. A special legislative committee in Wisconsin will examine proposals to minimize state laws that regulate the mining industry, according to the Milwaukee Journal Sentinel. “We need to focus, one, on the environment and, two, on job creation,” Republican State Sen. Neal Kedzie told the newspaper. Regulation became an issue recently when Gogebic Taconite announced it would delay plans for an iron-ore mine near Hurley until state laws eased. Gogebic said the mine would employ 700 workers.
Pete Bigelow · Great Lakes Metropolitan Areas Enjoy Stronger Economic Recovery Than National Counterparts
September 22nd, 2011
Cities in the Great Lakes region are recovering from the Great Recession at a faster pace than their national counterparts, according to a recent report released from the Brookings Institution.
Akron, Grand Rapids, Toledo and Youngstown all ranked among the top-20 performing metropolitan areas in the country.
All but one of the Great Lakes’ 21 metro areas has gained jobs since reaching its unemployment trough. Grand Rapids has seen its unemployment rate decline by 4.3 percent since reaching its high in the third quarter of 2009.
Youngstown showed a 19 percent growth rate in manufacturing jobs from the second quarter of 2010 to second quarter 2011. The metropolitan area has regained 30 percent of the overall number of manufacturing jobs lost. The report noted Detroit’s recovery has been stronger than most other U.S. metropolitan areas.
While auto-producing metro areas in the Great Lakes are generally enjoying a recovery since the throes of the recession, they stumbled in the second quarter of 2011. Cleveland, Columbus, Detroit, Dayton and Toledo all saw output and employment drop in the quarter.
The Atlantic’s Nate Berg says the report’s up-and-down conclusions emphasize the need to avoid painting a potential economic recovery with a general brush.
“In some senses, the metropolitan areas of the Great Lakes appear to be persevering through the recession,” he writes, adding, “this mixed bag of increases and declines is an indication of the complexities of recovery. The process is clearly not over yet, but at least some gains in employment offer hope.”
Pete Bigelow · Midwest Memo: UAW Talks Continue, Ohio Eyes Energy Jobs, Wisconsin Median Income Plummets
September 22nd, 2011
Three stories making news across the Midwest today:
1. Ohio eyes energy jobs. Ohio Gov. John Kasich hosted an energy summit Wednesday on the Ohio State University campus that brought together members of the oil and gas industries, utilities officials and environmentalists. The Plain Dealer reports there was widespread enthusiasm over the prospect of Chesapeake Energy Corp. investing $200 billion in Ohio that could bring more than 200,000 jobs. Kasich held some skepticism. “I want to make sure we are steady in this,” he told the newspaper. “I don’t want to get ahead of the curve.”
2. Ford next in UAW talks. While United Auto Workers began to vote today on a four-year deal reached last week with General Motors, the UAW has shifted its focus to negotiations with Ford. The only U.S. automakers that avoided bankruptcy in 2009, Ford workers will likely expect more lucrative terms than the ones reached in the GM deal. Reuters reports there’s some resentment among UAW Ford workers over the $26.5 million compensation package Chief Executive Alan Mulally received, one that UAW president Bob King called “morally wrong.”
3. Wisconsin median income plummets. Adjusted for inflation, median household income in Wisconsin plunged 14.5 percent between 1999 and 2010, according to U.S. Census Bureau Data released today. The Milwaukee Journal Sentinel reports the median household income dropped, when adjusted, from $57,316 to $49,001 last year. “The middle class is taking a beating,” Timothy Smeeding, director of the Institute for Research on Poverty at the University of Wisconsin-Madison, tells the newspaper. “We were manufacturing our pants off. But times are changing.”
September 22nd, 2011
In 2006, Moshe Davis thought he found the right site to expand the Orthodox Jewish elementary school he ran in Chicago. An abandoned building that formerly housed an audio electronics company in Evanston seemed like the perfect new home.
He bought the building knowing the property was zoned for industrial use, but assumed the community would change that. It didn’t. Four years later, a lawsuit the school filed against Evanston is ongoing.
At the heart of the conflict is a dilemma that municipalities all across the Midwest have confronted throughout the recession: Do communities jump at the first chance – any chance – to fill vacant buildings or do they wait for the return of a tax-yielding business?
In Evanston, the answer is clear. The city’s attorney tells our partner station WBEZ the city must “consider the tax ramifications for land-use applications.” And while some neighbors concerned about property values want to see an empty building filled, others in the town prefer to hold out hope that manufacturing will someday return.
“Just because it’s vacant doesn’t mean it doesn’t have the potential to become a viable commercial property at some point,” says Michelle Hays, a resident who lives 1.5 moles away from the property.
Five years later, Davis wonders how long he must wait.
He has searched for a buyer. But he purchased the building just before the real-estate crash. He has sunk millions into the building and maintenance, tens of thousands on property taxes. And his students still attend classes in their overcrowded Chicago facility.
Pete Bigelow · Midwest Memo: Ohio Home Sales Rise, Changing Face of Chicago Office Space, Construction Activity Upswing
September 21st, 2011
Three stories making news across the Midwest today:
1. Changing face of office space. Sixty-six acres of land with 1 million square feet of office space located close to O’Hare Airport traditionally shouldn’t have trouble selling in Cook County, Illinois. The fact the former United Air Lines corporate site has lingered on the market for two years not only reflects a stalled real estate market, but the changing needs of corporate office environments. Our partner station WBEZ examines the changing corporate campus culture, as well as the move of several suburban headquarters toward downtown Chicago.
2. Ohio home sales rise. Home sales rose throughout Ohio in August, according to data from the Ohio Association of Realtors. Sales increased 22 percent year over year, and 10 percent from July. “Throughout the state, we experienced a significant uptick in activity in August for the second consecutive month,” the president of the association tells The Columbus Dispatch. In the Columbus area, sales were up more than 15 percent from the previous August.
3. Construction activity on upswing? Following four consecutive months of declines, the Architectural Billings Index surged upward in August. The ABI score rose to 51.4 in August after posting a 45.1 in July, a gain that caught some analysts by surprise. “It’s possible we’ve reached the bottom of the down cycle,” AIA chief economist Kermit Baker said. The ABI is an economic indicator of construction activity. The Midwest regional average was 49.0, highest of the four regions covered in the data.
Navistar builds all kinds of trucks across North America: at nonunion factories in the South and Mexico, as well as union shops in the Midwest. But the United Auto Workers at its Springfield, Ohio plant say a year of changes has made them competitive with those nonunion plants. And, they say they’re hopeful for the future of their jobs in the Midwest.
In the final assembly department at Navistar’s Springfield, Ohio, plant, Veronica Smith is helping her team put the finishing touches on a truck. The cab is being mounted to its frame.
Smith has been building trucks in Springfield for 17 years. She’s been laid off and brought back to work here more than a few times. But, she says this past year has given her hope for the future.
“We feel like we’re moving forward,” said Smith. “It’s a good feeling. It’s not a feeling we’ve had a lot in the past.”
A few years ago, Veronica and the other workers at this plant focused on building one truck: the Durastar. It was Navistar’s “focused factory” philosophy.
That dedicated scale concept works well when business is booming, said James Conley, a professor at Northwestern University’s Kellogg School Center for Research and Technology and Innovation.
“Scale works really well in the early life cycle of a product,” he explained. “When things mature and other competitors get in, you have to be thinking beyond scale – the dedicated scale model doesn’t work.”
Unions were also behind the dedicated scale model, thinking the exclusive producing on one model meant job security.
But the truck making business is what analysts call “extremely cyclical” – which basically means its fortune can easily depend on the larger economy.
But when the bottom fell out, the industry saw its worst year of sales since it began keeping records.
Navistar “built a strategy around that changing environment,” said David Beebe, the company’s vice president of manufacturing.
That meant solidifying a strategy of diversification that had previously started at its plant in Garland, Texas, where they build more than one type of truck at the same facility.
But the company had to convince the United Auto Workers at its Ohio plant to adopt the plan.
UAW Local 402 President Jason Barlow says the pay cuts in particular have not been easy to stomach, but it’s all been about securing work.
“We’ve had members that have been laid off for five years, and they’ve come back in with a completely different state of mind,” he said. “It’s a tough world out there and they want to build the best truck here, and the culture has changed dramatically.”
Workers accepted a pay structure that means new hires will start at $14.39 a hour and get little in way of benefits compared to more senior workers – who also make $25 an hour.
Barlow said that pay makes Ohio in some cases even cheaper than the nonunion shop in Texas. The local says they know that’s what it takes to keep these jobs in the Midwest.
“We’re definitely very vocal in spreading that message of earning our share and getting fair product,” said Todd Scott, the local’s bargaining chairman.
Retraining started in January as the factory itself was physically reconfigured. Union workers from each department volunteered to become group leaders on the retraining – and they, in turn, taught their coworkers how to build three other models.
Fast forward nine months later, and all 700 plus workers at the plant have been recalled. Production is up 25 percent over the past year – Navistar says partially because of how slow it was last year, but also because of adding the other models.
Just near the front entrance to the factory, workers are attaching batteries to engines as half-built trucks trundle along the conveyor line.
Plant manager Jim Rumpf explains how he can tell what kind of vehicle is coming down the line:
“Looking at the front end of the vehicle, you see the radiators facing us as the vehicles come down the line,” he said. “You can see just by looking at the radiator and the size of the radiator is a good indicator of the size of the truck.
The current contract guarantees that at least 50 trucks will be built each day in Springfield.
On another side of the factory, Victoria Smith is directing the final stages of the truck assembly. Airbags are being filled, last minute checks are being made. The goal is for every truck to be started up and driven off the line, she said.
“We’ve got a lot of exciting things going on here,” she said. “I’m glad to be a part of it.”
Nearby where the trucks are driven off the line, there’s a banner hanging that acknowledges the plant’s 100-year anniversary in 2002.
The current UAW contract goes for another three years – and both Navistar and the workers say they’re hopeful for a future beyond that.
Are you a union worker? Do you think these workers did what needs to happen to keep these jobs in the Midwest? Please weigh in the comments section below.
September 20th, 2011
UAW President Bob King has followed through on his vow to win a raise for entry level auto workers. Details of the new contract between the union and General Motors, released today, show some of them will be earning nearly $20 an hour by the end of the contract.
The Cleveland Plain Dealer has a story that includes both the summary sheet of the contract, and the actual contract language.
Workers begin voting on the new four-year contract this weekend. The union will now negotiate deals with Ford and Chrysler.
Changing Gears has reported on the situation facing entry level auto workers, known as “two-tiers.” These workers, hired after 2007, earn sharply lower wages and less generous benefits than veteran workers. At GM, about 4% of workers fall under the entry level category.
They’re in line to get raises of about $3 an hour through 2015. That would put the top wage for these workers to $19.28 per hour.
There also are bonuses for all GM workers that are tied to the company’s profitability. Said the Plain Dealer,
“,,, the biggest benefit could be a change to GM’s profit-sharing formula with workers. Under the new deal, employees would get $1 in bonuses for each $1 million in GM North American profits — starting at $1.25 billion in profits. Workers would not get bonuses if GM loses money or earns less than $1.25 billion in North America.
UAW President Bob King estimated that workers could get $20,000 over the next four years if GM remains as profitable as it has been this year.
“There’s nowhere else in America in manufacturing that’s creating good, middle-class jobs like the auto industry,” King said”
You can find more on the new contract at the UAW’s web site.