Too Much Capacity

by Geoff Generalovic

I have been a maintenance electrician for 37 years, 15 of those in PdM, namely infrared inspections, motor testing off-line and on-line, ultrasonic testing and some basic vibration, I do have definite ideas on the maintenance world out there and what I see is not encouraging, but in spite of my doubts I am hopeful.

We live in a rapidly changing world; we have had one of the worst downturns in our history. I am appalled that we now have governments stepping in to bail out all the industries and financial institutions that have been affected by it, when I believe these very industries and our financial wizards, either through total stupidity or more frighteningly arrogance have probably caused it all to happen in the first place, all in the fevered pursuit of obscene profits and bonuses. Yet these “leaders” are not accountable for what they have done, they still believe they deserve their bonuses, the gall of these people. I read that the top one percent of our society has more wealth than the bottom ninety five percent combined, that is a sobering statistic. I know downturns have happened before, but not to the extent we are seeing today, where, via the media we are painfully aware of the consequences of what has happened, it is endlessly talked about, blogged about, videoed about and on and on.

I believe we are in for a rude awakening in the next few years, I know we hear things are turning around, so slightly and the whole thing is very weak, so weak the slightest problem could set off the spiral again. The recovery everyone is touting is not going to come, at least not to the level we used to have had in the past year. We the consumer have been burned, we are bruised, we are wondering what is going to happen to our jobs, our pensions, will we have anything at all, if we have saved are going to be able to enjoy our retirement. Where is our bailout?

I will rely here on an article I read recently, which applies to both of our countries, Canada and the United States; we are inexorably linked, via our economies and our borders.

“One of the biggest challenges facing the American economy is that we lack a domestic manufacturing base. Simply put we do not produce anything anymore. We buy tons of foreign goods and then wonder why we are lacking jobs. We import most of our goods which has resulted in a huge trade deficit and industrial job losses. Our economy has transitioned from an agricultural society to an industrial society to a service economy. The problem with being a service economy is that services are the first thing that consumers eliminate during difficult times. We need to become more of a mixed economy that combines industrial production with service.”

“In 2006 Warren Buffett said, “The U.S trade deficit is a bigger threat to the domestic economy than either the federal budget deficit or consumer debt and could lead to political turmoil… Right now, the rest of the world owns $3 trillion more of us than we own of them.” The US trade deficit severely hinders US economic growth. As Buffett puts it, “Our country’s net worth is now being transferred abroad at an alarming rate.”

Other factors persist such as concessions from industrial unions. Employers need to pay a fair and livable wage to unions but do need to get union workers to agree to some cost cutting measures.

Without a return to its manufacturing base the United States will struggle to attain any viable long term economic growth.” (From Seeking Alpha website.) How can we continue to allow this to happen, yet believe we will recover with the limited manufacturing base we have right now. Whirlpool is in the process of closing another manufacturing plant and sending the work to Mexico, why, how much profit do we need to make for each fridge sold, at the cost of North American jobs.

I believe we need to return to the competitive nations we once were, making the products everyone copied and still do, we have to return our manufacturing plants to within our countries borders, as part of the bailout manufacturers have to start to build plants in North America. As was already said we need to be nations who pay fair wages for a good days work, we need to be nations who regard our workers as the best in the world, our companies have to be relentless in the pursuit of productivity and reliability which are key to that productivity. We need to continue on the road to have the best equipment reliability we can muster, we need to remove every bit of waste in our production processes; we need to make our companies ones that run from shutdown to shutdown, flawlessly. By doing this we will be doing the right things to keep our workers safe, to saving energy and giving back a good return on the money invested in our plants and making the best products in the world, efficiently and reliably.

Why have we farmed out all of our manufacturing to countries with cheap labor forces, for what, more profits, yet I have not seen any reduction in product prices based on cheap labor costs. Nor have I seen better products than we ever made, because no one can do the quality work like we do. To be the best we can we have to embrace every PdM technology out there in our maintenance programs, we have to remove useless PM’s so every time work is done it is the right work based on information, not conjecture and “we have always done it this way” type of thinking. Every bit of work done needs to be done based on information gleaned from sound maintenance processes, with properly trained and engaged people.

The key here is engaged people, too many times trades people are relegated to the easily disposed of group, because we have to cut costs. This sends a bad message and leaves a bad taste in the mouth of those left behind. We are dealing with those feelings now, with those left in the workforce with their friends and co-workers relegated to the ranks of the unemployed, angry and bitter because they are working and others are not, also wondering if they are next. The tradesperson is one of the most important people on the plant floor, they are the people who believe good maintenance work pays off in huge dividends, reliable equipment from shutdown to shutdown, if it wasn’t for the hard work of these people keeping the plants running like they have would we have had the profit margins we have up until now.

If we are doing the right things, people will be accountable at all levels of the company, bonuses will come our way, earned bonuses, because we will be looked upon as the best and continuously prove it, every time someone sees us operate, they will see quality work. Based on that level of quality there has to be an equitable bonus system at all levels, based on performance, if it is good, good bonuses, bad performance everyone suffers, which does not seem to be the case today, bad performance is still rewarded, everyone in the bailout group still sees the need to get their bonuses even though they screwed up and ruined the world we live in.
Why have we stopped believing in ourselves?

The mess we are in was created by greed; let’s allow sensibility, fair wages, and good sense to prevail.

Article Submitted by Geoff Generalovic who invites your comments and feedback below.

Comments (5)

This ia a nice article, but ignores the basic economic principal of supply and demand and globalization. Right now, China, India and other developing nations have an over supply of labor. Since demand is finite, the principal says that the price of that labor will be lower. At some point, equilibrium will be reached. What this means is western labor will have to be paid a lower price, and the developing nations labor will be paid a higher price, eventually. No doubt this will involve pain for western economies and workers. We have been lucky to have advantages that allowed us to develop more quickly and live with a higher standard of living for many years. Absent a trade war, which would not benefit anybody in the long run, this will run its course for the next 10 or 20 years.

More even wealth distribution will be the end result. Good for some, not so good for others. We still have many advantages, but in a competitive world, we must fight every day to keep ahead and build in areas we lag behind. More productivity and efficiency are keys to short term success. Long term investments in labor capital and more R & D will help.
1) Posted 8:46 am, 23 September 2009 by Bill Kilbey
This is a very well written article by Mr. Geoff Generalovic. Most smart people would probably agree with it and are most likely aware of these things happening. Our country was sold out because of greed and the freedoms that were abused. Unfortunately our systems of checks and balances has become severely unbalanced and no one has really blown the whistle. Because of unethical business practices being encouraged, along with the lack of regulation enforcement and accountability, they have set the stage for government intervention. These business practices seem to be a self filled prophecy since it was a known recipe for disaster. I'm not convinced that the country will heal itself any time soon, since I don't see many efforts or incentives designed to bring business back to this country. I also have not seen banking executives penalized for poor performance, since the boys club is alive and well in Wall Street. How long will it take before lessons learned are put into practice, where will our country be in the future?
2) Posted 12:09 pm, 24 September 2009 by Charles kropewnicki
Geoff makes some important points. He has observed marked differences in management styles in the steel industry during his tenure at Dofasco, now ArcelorMittal Dofasco. In the early 1990's Dofasco Board of Directors made the decision to meet and beat what appeared to be unbeatable competition from foreign producers of imported steel. Dofasco began investing in their people, processes and facilities to make them more productive. They became a company where all employees shared a portion of the profits. As employees streamlined their processes and became more effective at their jobs, it allowed a reduction of personnel overall, almost exclusively through normal and voluntary early retirements or "buyouts." While overall direct employee count was reduced, the remaining personnel got better control over their destiny by developing and constantly improving procedures and supporting documents that ensured, even when outside personnel were hired for specific short term tasks that the quality of their work was excellent.

At the same time, Dofasco improved product quality to meet International Standards Organization (ISO), Ford Q1 and Toyota requirements so as to become preferred suppliers to the most demanding customers. During the ten-plus years that Dofasco was moving in the direction opposite others in North America, more than 60 other steel producers on the continent were forced into bankruptcy or merged into organizations with little prospect of long term survival in the face of overseas competition. Ultimately the Wall Street journal declared Dofasco the most profitable integrated steel producer in the world. The company invested in new plants in Kentucky and in Mexico as well as in expanded capabilities in its own facility at Hamilton, ON. This in part prompted a months-long acquisition bidding war between two European steel conglomerates, ultimately won by Arcelor which was in turn acquired by Mittal of India.

Yes, ArcelorMittal Dofasco profits are down as a result of the current recession, but the company has a far better chance of surviving than many of its competitors and other steel makers who make different products in North America. I attribute this to a far-seeing Board of Directors representing the best interests of the share-holders, enlightened management and employees who when given the opportunity to become better trained and educated seized the day and brought back to their place of employment the expertise to compete successfully against anyone in their business from anywhere in the world. People like Geoff and his co-workers have proven that, with the right incentives at all levels of an organization, manufacturing can thrive when based in the USA and Canada
3) Posted 4:21 pm, 24 September 2009 by Jack Nicholas
It is an interesting and simplistic statistic as much as it is disturbing one... "the top 1% of the nation has more wealth than the bottom 95% combined." If, and when, as Bill Kilbey suggests, the western labour pool accepts lower wages, it is the bottom 95% that will also need to accept the coinciding lower standard of living that results.

So while he is right that equillibrium will result amongst the global labour pools, it doesn't change the fact that the global distribution of wealth is lopsided and promises to get worse.

The difference between the "have's" and the "have nots" in emerging countries like China and India is vast. As companies are deemed "too big to fail" and the greedy few (the 1%) who benefit are left to carry on unpunished, what fate does that seal for our the remaining 95%?
4) Posted 2:29 pm, 25 September 2009 by Allan Rienstra
All very true and interesting but I think we need face reality.

We will not come out of this the way we went in industrially.

As to who's to blame - talk to all of those shoppers who visit Walmart every day because they have the lowest prices.

How do they have the lowest prices - they buy from and sometimes force suppliers who prduce off-shore.

The world is changing and if we don't change with it then we will stay where we are.

Apart from Dofasco what other Canadian steel plants are making money - what happened to the American Steel Industry.

Toyota is only being challenged by Ford, because Ford changed their approach.

Again the credit crisi was also caused by people who couldn't afford to buy houses etc doing so anyway - helped by the banks.

Sorry guys not a pessimist but grew up in the UK that went through this over 20 years ago - and sad to say there waqs almost a generation that lived with very high unemployment.
5) Posted 7:23 pm, 07 October 2009 by cliff williams