The world needs your stuff

A friend recently forwarded me a great I-told-you-so kind of video clip on the economy.

The basic problem with the U.S. economy is that we have too much consumption and borrowing, and not enough production and savings. The consumer is basically going to stop consuming and start rebuilding his savings, especially when he sees his home equity evaporate. And when you have the economy [consisting of] 70 percent consumption, you can"t address those imbalances without a recession.

Peter Schiff, head of Darien, Conn.-based brokerage Euro Pacific Capital, made that statement back in 2006. He was among a smattering of the doom-and-gloom economists who didn"t get much serious considerationuntil now, of course. His comment, however, wasn"t necessarily doom and gloom. He said simply that the U.S. economy will undergo a fundamental shift from one of consumption to one of production.

For manufacturers, that"s not necessarily bad news.

The problem is a lot of manufacturers have been part of the consumption culture supply chain. Automotive manufacturers flooded the market with vehicles that many wantedHummers, SUVs, and other gas-guzzling typesbut never really needed. Today dealers can"t give these things away.

The construction boom, and the manufacturers supplying it, again served those wants. People wanted bigger houses, even if they couldn"t afford them, so they ignored the fine print in those newfangled mortgages and signed on the dotted line. Sure, banks enabled such reckless borrowing by packaging the loans together and sending themand, supposedly, their risksto the free market. But consumers ultimately made the decision to buy houses they couldn"t afford.

According to recent reports, the epidemic even has spread to commercial real estate, and manufacturers serving the sector are just now feeling the pain. On Thursday, for instance, metal fabricator Greenheck Fan, a supplier of airflow products previously covered in this blog as a success story, announced layoffs.

I try putting the bad news in perspective by thinking back to a comment Jim Waters made at October"s FABTECH® International & AWS Welding Show, held in Las Vegas. In a phrase, he boiled down why pockets of manufacturing may not fare too badly, particularly as U.S. society shifts from consumption to production.

The world needs our stuff, he said.

Waters, Caterpillar"s vice president of production systemsand a self-described welder from Iowasaid a lot in those five words. The OEM giant hasn"t avoided layoffs, but according to reports, the company likely will stay profitable this year. The world"s markets need infrastructure, and the U.S."s is in dire disrepair, so Cat"s equipment stands at the ready.

At the other end of the corporate spectrum are small metal fabricators like Lebanon, Pa.-based E&E Metal Fab, a 29-employee firm we"ll be covering in a future print edition of The FABRICATOR. The company is about as far away as you can get from the automotive business, serving sectors such as wastewater treatment and others related to basic commodities and infrastructure. Company President Willie Erb went after sectors that, while not recessionproof, would give E&E steady work through tough times.

The strategy apparently is paying off. Last week Erb told me the company reached a milestone. Over five years, we"ve given a total of $118,896 worth of bonuses, he said. We just announced that at our Christmas party. Let me tell you, it was a real tearjerker for the guys.

During these days of layoffs, that"s refreshing news, and it may give some solace for times ahead.