I enjoy spending time with Jason Blessing, CEO of Plex. We share a passion for automation and other manufacturing technology and we enjoy sharing notes on outstanding plants and facilities we get to visit. With a new President about to move into the White House, I recently had a wide ranging conversation with Jason. Here is Part 1 of our 3 part series.
Jason, as the leader of a cloud company serving manufacturers you have a unique perspective on the state of multiple industries as well as the broader economy. I’d love to know what you’re thinking about and planning for as we head into 2017.
I think one of the first interesting things to talk about is our new president and the effect he could potentially have on the manufacturing economy. There are two things that we've been paying attention to where President-Elect Trump has has expressed pretty strong opinions. One is bringing manufacturing back to America, and the second is potentially backing out of NAFTA and getting more restrictive on our trade policies. I'll talk a little bit about each one.
The first one, bringing more manufacturing jobs back to America, I think if I listen to some of the messaging in the election, and even post-election, I don't know that I heard a lot of specifics. I think some of the infrastructure projects that he wants to accomplish are manufacturing intensive, requiring both equipment and materials that need to be produced, so I could definitely see that being a stimulus, but beyond that, I think we still need to wait and see.
And the incoming administration made a point of direct involvement in jobs through the recent announcement with Carrier, the HVAC company. They’re keeping a significant amount of jobs in Indiana instead of moving them to Mexico. My sense is we're going to see a few of those high profile things to allow the President-Elect to demonstrate some succes on manufacturing jobs in America, but I think absent any real specific programs on this it remains to be seen how successful they will be.
Reforming trade agreements, and specifically NAFTA, is a concept that sounds great to many people in principle, but I actually think it could be an absolute disaster, specifically for one of our constituents, the automotive industry. I think that a lot of people don't realize that many of the cars that are bought in the US are assembled here, but not necessarily all made in the US.
Take the European automobile brands sold in the U.S. as an example. A lot of the big, heavy parts of those cars—like the body and the axles—are very expensive to ship so they’re all made and even designed in the U.S. Some of the more deeply embedded parts, such as wiring harnesses and a lot of the little plastic pieces that go into cars, those are made in Mexico. A lot of the engines are actually still made in Germany, or elsewhere in Europe, and shipped over here, then final assembly happens in the United States. The supply chains are well evolved to efficiently support specific regional markets with a combination of local and imported parts.
There was actually an article on the front page of The Wall Street Journal a few weeks ago about how backing out of NAFTA and getting more restrictive on trade would actually be devastating to the auto industry, because of how the supply chain works, and where things are built and final assembly happens. It actually featured two Plex customers in the cover story. One is Batesville Tool and Die, and another one called Mursix Corp., and they both make parts and components that go into cars assembled in the U.S., and they also export a lot of parts that go into cars assembled in Mexico, as an example. Getting more restrictive could have pretty dramatic effects on their businesses.
Again, I think some of these headlines that people talk about are a little attention grabbing, but when you get under the covers the policies can actually be punitive to great small businesses that are producing jobs in the U.S. So I think it's going to be hard, frankly, to back out of NAFTA with the auto lobby weighing in heavily. I think that's one area where the new administration will have to find some ways to maintain a tough posture on fair trade and U.S. job creation, while backing off some of the things said in the campaign.
I would personally love, as a part of this discussion of manufacturing and jobs growth, for people to understand how much product is still built in the US. It's still the largest manufacturing economy in the world. I think a lot of people don't really realize that. Hopefully this focus that Trump is bringing on manufacturing will actually help educate people on all of the innovation and job creation that is happening.
Jason, as you mentioned, very few people realize we manufactured two trillion dollars worth of stuff in the US last year. The myth is that manufacturing has left the US. Between the auto industry that you talk about, chemicals, aerospace, we have some pretty strong industries. The narrative, the political narrative, is a little different from the reality.
While advanced manufacturing is not going to create a whole bunch of new jobs, if companies like Carrier continue to be successful they will create jobs in their ecosystem: the companies who come and install in our neighborhood new air conditioning and so on. Even if Carrier makes it in Mexico, those jobs stay here. You look at Ford. Look at the dealers. Look at all the jobs they create right here in that ecosystem.
The other interesting discussion topic, and I know you've touched on this in your most recent book, is the effect that technology has had on manufacturing, and the effect it's had on the labor force, and frankly the economy.
Automation has definitely eliminated some of the more menial, rote, manual tasks on a factory floor, but there have been at least two really positive outcomes, at least in my opinion.
The first is the fact that we’re creating great new jobs with long-term career potential. I get to visit a lot of factories, because they're Plex customers, and the jobs that they're hiring for are definitely more high-end jobs that require more computer skills; jobs that handle some of the automation and more technical aspects of their manufacturing operations. There are a lot of unfilled jobs out there and new opportunities. The fact that there aren't people to take on those opportunities is, I think, quite remarkable. There's just not the skill set out there.
I think the other important and positive impact of technology and some of the tasks that have been automated on the shop floor is that we’ve innovated our way into an era where our products are higher quality, safer and more affordable than they have ever been before.
Cars, for example, are safer and include modern safety features from the high-end all the way to entry level. Quality and reliability is unprecedented, and that frankly benefits every one of us. Features that started in very expensive automobiles are now standard in even basic models. I think, again, people kind of forget the depth and breadth of the benefits we get from more technologically advanced, higher quality manufacturing processes.
I grew up in a town of 1,200 people in the middle of nowhere in Michigan, and we had a lot of these family run businesses around us. 25 years later, when I go back, they are still absolutely thriving. They're using technology to be competitive on the global landscape. Their workers have a fantastic job. They've got great middle class, or above, lifestyles, with good housing, their kids go to good schools. They've got fun toys that they use in the great state of Michigan. To me, that is an inspiring, patriotic story, but it is not the story that people seem to gravitate towards on the national and global stage.
To be continued tomorrow.