For those who believe that the U.S. should be a nation that makes things, recent news should be encouraging.
Motorola Mobility is hiring thousands of workers to produce a new line of smartphones slated to be assembled in the U.S. for the first time. Starbucks is sourcing a line of coffee mugs to a ceramics facility in East Liverpool, Ohio, a once-thriving ceramic manufacturing center. U.S. automakers are continuing to insource jobs, are producing more cars domestically and otherwise are prospering in a stagnant economy.
What do these developments mean in the larger picture? According to the Boston Consulting Group, the U.S. could capture up to 5 percent of total exports from nations including Germany, Japan, France, Italy, and the U.K. by the end of the decade because manufacturing costs in those nations will be 8-18 percent higher by 2015.
Mark Twain once famously quipped, “rumors of my demise are greatly exaggerated.” The same could be said of manufacturing in the U.S. as well as the Chicago region. One of our region’s great, unsung assets is a large network of nimble manufacturing suppliers. Based predominately throughout northern Illinois, the supplier network has complementary competencies and the ability to handle complex projects. One such project comes in the form of a state-of-the-art military aircraft — the F-35 Lightning II — which promises to be the most sophisticated jet fighter in the world. The work being done on this project in particular tells a good story about the supplier network.
More than 40 manufacturing, research and high-tech companies of the broader network work on the F-35. Northrop Grumman in Rolling Meadows contributes; United Technologies in Rockford; 16 suppliers in suburban Cook; seven in DuPage and seven in Lake Counties support the F-35 project. Cumulatively, these suppliers provide approximately 2,000 jobs and have an economic impact of approximately $525 million — and this is just one aerospace project. Beyond economic impact, the advanced technologies used by the F-35 also are impressive.
The supplier network has developed or contributed to innovations including radar-evading stealth design; touch screen and voice command capabilities and lightweight materials that allow the F-35 to travel at supersonic speeds and carry the largest weapons payload in the fleet. The supplier network has even contributed to a specialized flight helmet which gives the pilot a 360 degree visibility including right through the cockpit floor.
With a manufacturing program this prominent however, challenges exist. Some critics say the radar-evading jet fighter is too expensive. Other critics say the entire program is unnecessary. Military need and cost containment are real issues, but the work of the supplier network speaks for itself.
While cost overruns have occurred with the F-35 — and would with any complicated manufacturing program — the supplier network has stepped up to reduce cost and realize economies of scale. Total cost of production was reduced last year by $4.5 billion.
More recently, the Pentagon announced it would acquire 71 new jets; this purchase is at a 55 percent cost reduction since the first group of planes was contracted. The truest commitment to produce a high quality product for less is seen in the suppliers’ commitment to pay 100 percent of any cost overrun in the fourth lot of production and beyond. Over time, the F-35 will show its value, as it stands to replace as many as seven aircraft and will be four times less expensive to maintain than the existing legacy fleet.
Most importantly, the technologies being developed and the cost reductions achieved could not have been possible if region was not blessed with a highly capable network of manufacturing suppliers. If anything, the F-35 project is an example of the kind of manufacturing work the Chicago region can excel at and, in the process, show its mettle.
For decades, people have bemoaned the loss of jobs going overseas. But now that trend is reversing. The U.S. once again is becoming a nation that makes things. Locally, smaller manufacturing companies that you may not have heard of are helping lead the way, and having a truly global impact.
• John Greuling is chairman of the Metro Economic Growth Alliance of Chicago, an association of the economic development agencies of the counties which comprise Metropolitan Chicago.