Readers of this blog are well aware that unlike other blogs, I tend to limit specific rants to just a few; specifically issues or concerns that I feel may well be critical and important to industry and their supporting supply chains. One of those rants has been an ongoing concern relative to what I feel is a lack of awareness and concerted action by U.S. legislative and executive leaders on identifying and fostering a strategic manufacturing and supply chain strategy for U.S. based industry. This week, I have a bit more optimism that the Obama Administration has finally “got-it”, acknowledging the importance of a vibrant and competitive U.S. based supply chain network.
I was pleasantly surprised to read a Huffington Post featured commentary penned by Jared Bernstein, who serves as chief economist and economic policy advisor to Vice President Joseph Biden. Bernstein utilizes the Vice President’s recent trip to a Chrysler assembly plant in Toledo, Ohio to take note of how important a role supply chain plays in employment and value-chain strategy. Bernstein begins: “When it comes to auto companies, we often focus more on the lake than the streams and rivers. ..Much of the attention to how this critical is faring focuses on the end-of-the-line assembly plants, and less on the suppliers that provide the parts to be assembled… But in fact, for every worker in the assembly plant, there are three workers in the supply chain.”
He further notes that in the year before the Obama Administration took office, the U.S. auto industry shed 431,300 jobs, but in the 13 months since Chrysler and GM emerged from bankruptcy, auto industry employment has increased by 76,300 jobs, of which 40,000 is estimated to come from suppliers.
Since the beginning of the global recession, I have been penning my view that to save a key industry one needs to have focus on all the strategic elements of its value-chain. Contrary to some journalists and bloggers, I advocated for the financial rescue of both Chrysler and General Motors for the sole purpose of saving jobs and capabilities among the industry supplier base. Earlier this year, in the posting What Really Threatens the U.S. Auto Industry?, I further noted that while very uplifting news was coming out of Detroit’s Big Three, industry observers were noting that U.S. automotive suppliers were suffering from too much financial instability and too much capacity. The Obama Administration, specifically Ron Bloom, The President’s advisor for manufacturing made it clear that industry consolidation, as much as 30 percent, needed to happen. I suppose we should phrase that as a “thin the herd” strategy.
Eight months later, the picture among the automotive supplier community seems far more optimistic. Surviving suppliers are now expanding their presence within growth-oriented emerging markets, and many tier one suppliers are experiencing operating profitability. Some are branching out to other growth industry, and all together this is positive news.
Bernstein notes that the story is not over, that the auto industry is moving in the right direction, but there is still a ways to go. That’s stating the obvious. Beyond the political rhetoric, the effort has to addrss more than the automotive industry, to include alternative energy, aerospace, high technology and others. This also cannot be a political process, but rather a joint government and industry process.
The political system indicates that they “get-it”, supply chains do matter. If the Vice President and the President are inclined to take input from this blogger, here’s another suggestion on direction. Appoint more experienced operational and supply chain professionals to your advisory and policy teams addressing a world class manufacturing and supply chain strategy framework for the U.S., and include some of the country’s top manufacturing firms in that effort. My frustration has been that Wall Street related executives have had too large a voice in strategy thus far, and while thinning the herd might have been appropriate, supporting and fostering world-class capabilities are the real goal. The fact that GM’s largest shareholder, namely the U.S. government, seems content to have another former private equity and Wall Street executive now lead GM into its renewal and growth phase is a troubling sign. Let’s make the growth and renewal phrase about world class value-chain capabilities and operational excellence.