Canada’s Prime Minister, Stephen Harper, made it very clear after the Keystone XL pipeline was rejected by the U.S. that Canada would be seeking other markets for its natural resources. Indeed, he has wasted no time pursuing that goal, and is currently in China, hammering out deals for the country’s natural resources.

The prime minister insists that it is in Canada’s national interest to send oil and gas to Asia and he is therefore looking to sew stronger economic ties with the world’s fastest-growing economy. Harper has repeatedly said that building pipelines such as the proposed Northern Gateway oilsands pipeline to the West Coast is a national priority as Canada looks to ship its energy resources to Asia.

Harper’s trip comes just a few days after the announcement that PetroChina has agreed to take a 20% stake in a Canadian shale gas project in British Columbia owned by Royal Dutch Shell. This is just the latest investment that China has been making in U.S. and Canadian unconventional gas reserves as it seeks to reduce its reliance on dirty coal and oil imports.

What does this mean for America’s energy requirements and for valve and other manufacturers in the Americas? Will there be any mention of China’s notorious rejection of intellectual property and copyrights in Mr. Harper’s negotiations?

Speculation is rampant about the direction the talks will take, as Harper is in China to sell more than oil. He has indicated in the past that he is anxious to work out a much wider trade scenario that follows a global pattern by government and business to lower barriers to trade world-wide, insisting that expanding Canada’s trade horizons means more markets for Canadian goods and services.

But just as the dream of opening up markets for goods made in America resulted in jobs lost south of the 49th parallel, the lowering of trade barriers has enabled the export of many Canadian jobs to low-wage jurisdictions. North American based valve manufacturers have certainly seen their own fortunes affected by the low cost goods coming from offshore.

Harper seems almost obsessed to direct a good deal of Canada’s energy infrastructure away from the United States, something that has inspired him to call those Canadians who want environmental protection equal to economic opportunity enemies of the state. He is intent on taking advantage of China’s obsession with energy security by adding an oil pipeline to the natural gas line slated for exports to Asia by 2015. While it is true that domestic environmental and social roadblocks have slowed down his aspirations and the Chinese have been impatient about the delays in many pipelines, Harper remains undeterred.

While short term economic gains are possible for North American manufacturers and laborers who would supply and build pipelines to export the oil and gas offshore, long term consequences of increased Canadian energy trade with China are largely unknown. Certainly it will be an economic boon to Canadian producers, but what effect will it have on future energy security for the U.S.?

In the deal with Royal Dutch Shell, Chinese companies will undoubtedly gather much-needed knowledge and experience which can be used to develop the shale gas market in China, where there are huge reserves. What does this exchange of technology mean for valve manufacturers here in North America? What effect will that have on long term employment growth and quality?

While the exploits of Canadian politicians are rarely of interest in the U.S., Stephen Harper’s trip to China is one which should be followed closely.

On Jan. 18, 2012, President Obama notified Canada’s Prime Minister Stephen Harper that he was rejecting the Keystone Pipeline. While he did say that he was not closing the door on the project, political hay has nevertheless been made by his opposition because the rejection of the pipeline means thousands of lost jobs for Americans.

Trans Canada contends that Keystone XL could yield 20,000 new jobs, 7,000 of those in manufacturing. No doubt many of those would be in the manufacture of valves and related materials, definitely a boon to the valve industry in the Americas. In the past, Trans Canada has also cited a 2010 study that found the project would have supported nearly 99,000 induced and indirect jobs, but in September 2011, one of the unions supporting the project predicted that, over four years, Keystone XL would create nearly three times the direct and indirect jobs that TransCanada claims.

In an economy where good manufacturing jobs are hard to come by, the decision to squash the pipeline does seem to be counterproductive to the stated goal of jobs creation.

However, a week later, in his State of the Union address, the President laid out what he is calling a “Blueprint for an America Built to Last,” encouraging companies to create manufacturing jobs in the United States while removing deductions for shipping jobs overseas and encouraging insourcing. He is offering a domestic production incentive for manufacturers who create jobs in the U.S. and doubling the deduction for advanced manufacturing. He is proposing to reform the current deduction for domestic production by more narrowly focusing it on manufacturing activities—for example, it would no longer cover oil production.

In that address, Obama indicated there would no longer be incentives to oil companies, but he did say the administration would take every possible action to safely develop the energy from natural gas, production of which could support more than 600,000 jobs by the end of the decade. In this instance, of course, many of those jobs would be in the manufacture and distribution of valves and related materials.

So the government giveth and the government taketh away. Hydraulic fracturing and production of unconventional natural gas requires the use of up to 2,000 valves for each wellhead, so the President’s statement that he would encourage responsible natural gas production is good news for manufacturers, but pipelines also utilize hundreds of valves, and at least for now, the Keystone Pipeline will not be using any. Tax breaks were announced that give U.S. valve manufacturers even more incentive to bring their production back onshore, but if oil companies would no longer receive subsidies and incentives, will there be repercussions to the industry?

With mixed messages coming from the White House, it is more important than ever to be vigilant. A lengthier report on how the 2012 State of the Union address impacts the valve industry will be the Web Feature on the ValveMagazine.com website later this week. Share your news and opinions on this and any other stories you feel should be covered by responding to this blog or sending an e-mail to kkunkel@vma.org.

The new year seems to be off to a fairy solid, if not exciting, start, and now is the time that predictions of what lies ahead begin to appear. Here are a few, plus a warning of some scary stuff.

Forecasts

Manufacturers Alliance for Productivity and Innovation (MAPI) chief economist and director of research Dan Meckstroth, Ph.D., predicts GDP growth of 2.1% in 2012 and 2.4% in 2013, but sees a 40% chance of a recession, caused by the problems in the Eurozone and U.S. and European political gridlock leading to increased austerity measures, and vulnerability to the next major shock. He sees general uptrends in manufacturing, particularly in aerospace. Aluminum, paper and HVAC equipment are weaker, and will probably remain flat, he predicts, while household appliances, pharmaceuticals and public works construction will decline. Overall, he predicts, manufacturing production will increase 3% this year and 4% in 2013. He adds, however, that “the manufacturing sector is only half recovered from the 2008-2009 recession,” and manufacturing production will not reach its previous cyclical peak until 2Q 20144.

The National Association of Manufacturers has weighed in, saying that current regulations — the EPA’s revised Boiler MACT rules in particular — “will do significant harm to job growth and investment at a critical time in our recovery,” according to a statement by NAM president and CEO Jay Timmons. “This is yet another example of the EPA pursuing an aggressive agenda that is putting jobs at risk and creating uncertainty throughout the economy. Factoring in regulatory costs currently in place, it is already 20 percent more expensive to manufacture in the United States compared to our major trade partners.”

The market research firm Stratfor has released its Annual Forecast for 2012. Here are a few highlights:

Europe, according to the Forecast, will stabilize for a while but will continue to slide slowly and painfully into a deepening recession. At the same time Germany, assisted by France, will work to try to develop more political integration in the eurozone, an effort that will stretch into 2013 and beyond.

Challenges facing China will continue, the forecast goes on, but will not stop the country from working hard to increase its regional influence and access to resources. An internal economic slowdown will requires some difficult steps that may contribute to stability in the short term but cause increased problems down the road.

The report goes on to cover the rest of the world, but not the U.S. It includes many fascinating insights, and I recommend reading it.

A dire warning

Stratfor recently suffered a terrible blow: their Web site was hacked repeatedly, four of their servers destroyed, and both internal emails and credit card information from clients and subscribers stolen, apparently by the hactivist group Anonymous. They’re rebuilding, but have taken a lot of damage.

Which brings up (again) the subject of cybersecurity. If you haven’t seen the January issue of Popular Mechanics I recommend you take a look at it. The cover story, “The Secret War,” provides some alarming information on how extensive foreign (mostly Chinese) cyber espionage against both government and industry has become, and how little is being done — or apparently can be done — to stop it. One especially frightening quote comes from John Brenner, former head of U.S. counterintelligence: “’Perimeter defense if finished,’ Brenner says. ‘If you want to talk about really confidential stuff in email you’ve got to understand that if you’ve got a real sophisticated adversary, they’re reading it.’” Sort of gives you pause as to what you put in emails, doesn’t it?

In this, my first entry for the Valve Magazine.com blog, I’d like to take a quick moment to say “hello.” With my background as an editor of magazines covering the energy and heavy industrial sector, I’m delighted to be able to stay in this challenging and ever-changing world of valves by working with the Valve Manufacturers Association and the Valve Magazine family.

This is an exciting time in the oil and gas industry, and news is breaking daily on potential new oil and natural gas pipelines throughout North America.

Today, Jan. 18, Canada’s Prime Minister, Stephen Harper, received a phone call from Barack Obama, President of the United States, informing him that his administration had decided to turn down TransCanada’s application to build and operate the Keystone XL pipeline. According to Obama, the decision was not a decision on the merits of the project and that it was without prejudice, meaning that TransCanada is free to re-apply. TransCanada’s CEO, Russ Girling, said that his company will re-apply for a presidential permit to build the Keystone XL pipeline, and will continue its work with officials in Nebraska on an alternative route that avoids the ecologically sensitive Sand Hills region.

In this same week, hearings have commenced in Canada on the proposed dual pipeline Northern Gateway project by Enbridge. Here’s hoping that this 728 mile (1172 kilometer) project will not be plagued by as much political play as Keystone XL.

While environmentalists are quick to point out the potential dangers of pipelines, they are largely unable to show how they propose to meet the energy needs of North Americans if oil and gas were not readily available. While there are indeed many alternative forms of energy, the bottom line is, oil and natural gas are the most economical and most readily available.

As manufacturers, distributors and consumers of valves and actuators, I believe it serves the U.S. and Canadian valve industry—both manufacturers and end-users—well to keep a close eye on the progress of the various pipelines and approvals, so I invite you to stay tuned to Valve Magazine.com this week for a report on the current state of affairs.

I would also invite our readers and members to share their news and opinions on this and any other stories you feel should be covered by responding to this blog or sending an e-mail to kkunkel@vma.org.

Welcome to 2012. How do things look for the new year? Pretty much like last year, with improvements in some areas, like manufacturing, and continued stagnation in others.

The real estate market has shown a slight improvement, with total construction spending for November 2011 totaling $807.1 billion, up 1.2% from October’s $797.4 billion, according to the Census Bureau, although, as the graph shows, it still has a long way to go.

On the other hand, the S&P/Case-Shiller Home Price Indexes of U.S. home prices continued to decline in October for the sixth month in a row despite, says CNN Money, recent reports of increases in new and existing home sales and in home building. Much of the decline has been driven by foreclosures, says Forbes, noting that not much else will recover until home prices recover. The biggest drag on the home-building market is the backlog of homes that are in default but not yet foreclosed; banks are reluctant to foreclose all such houses because it would drive the market down even more. Recent reports suggest that the situation may not begin to improve until late 2012 or even 2013, while others suggest that, with all those underwater mortgages, recovery may take a decade or more.

The Baker Hughes U.S. rig count was little changed in the past week at 2700 (313 above last year’s number), although the count in Canada seems to be declining, down 185 in the past week to 221 and down 25 from last year at this time. And the increase in supply of natural gas is depressing coal production, as power utilities, faced with stricter limits on mercury and other emissions, look to either shut down older coal-fired power plants or convert them to run on natural gas. Bad news for the coal folks, but good news for the gas folks.

We probably shouldn’t expect much help from the government; the American Water Works Association reports that “Congress has cut the U.S. Environmental Protection Agency's FY2012 budget by $233 million compared to this year and by $524 million compared to the amount requested by the White House. Under a single spending bill covering all federal agencies, lawmakers also reduced funding for State Revolving Funds, providing $919 million for the Drinking Water SRF and $1.4 billion for the Clean Water SRF.” So much for infrastructure.

On January 3 the Federal Reserve’s Open Market Committee reported the results of its December 13 meeting showing little change from the previous month, and no discernable change in policy.

What about Europe? It is bracing, The Times reports, for further economic contraction as austerity measures are put in place. One result of these austerity programs, according to a column by Nelson Schwartz in The New York Times, has been a decline in the value of the Euro relative to the yen and the dollar. This makes European exports more competitive, which is not so good for U.S.-based manufacturers selling into that market.

But there are hopeful signs. The 2011 Manufacturing ISM Report On Business improved in December, with the PMI increasing by 1.2 percentage points to 53.9%. The Conference Board Consumer Confidence Index has continued to increase, reaching 64.5 in December after increasing in November, and is at the level of April 2011.

On December 12 the Association for Manufacturing Technology and the American Machine Tool Distributors’ Association reported that October U.S. machine tool orders were $463.32 million. This was down 22.4% from September but up 20.3% when compared with the total of $385.21 million reported for October 2010. With a year-to-date total of $4,529.11 million, 2011 is up 80.5% compared with 2010.

While the U.S. economy is accelerating a little (the Federal Reserve prefers to call it “a moderate pace of economic growth,”) China is also showing moderate growth, with the Chinese purchasing managers’ index rising to 50.3 in December from 49 the previous month, according to Reuters and The New York Times.

“Onshoring” seems to be continuing, with U.S. manufacturing employment increasing as reduced wages for new hires (and increasing transportation costs) make American workers more competitive against those overseas. While no one likes to see wages decline, lower wages are better than no wages.

In sum, there seems to be no overwhelming force driving the economy up or down. But if we stick with our knitting and seize opportunities as they present themselves, we should do okay in the long run.

Our friends in the Peoples Republic of China have been throwing their weight around a little more than usual. The latest was a decision to impose increased tariffs on U.S.-made cars imported into China. The reasons given by the PRC government were immaterial — the action was in response to a report to Congress by the U.S. trade representative citing China’s unfair trade practices and was merely the latest in a series of tit-for-tat actions between the U.S. and China.

This comes on top of news that a great many, if not most, of the cases of cyber espionage and theft of intellectual property and trade secrets have been traced to about 12 groups in China, working with the encouragement and support of the government.

But there are more pressing matters to think about: Other news stories report that China has moved away from its anti-inflation policies and is concentrating on restoring its torrid pace of economic growth. Yet this might not help. A recent piece in The Telegraph suggests that China is experiencing the bursting of a credit bubble, with a 35% drop in new home prices in Beijing from the previous month, a 70% drop in property sales in some inland cities, a drop in steel production, a steady decline in stock prices (the Shanghai Composite stock index is down 29% from mid-April), the flight of foreign capital leading to a steady drop in foreign currency reserves, and heavy pressure on the banking system, all leading to “an epic deleveraging hangover.”

China depends on economic growth and the promise of better times ahead to maintain that most Chinese of goals, domestic tranquility and order (which is a value going back many centuries). And that tranquility has seen its latest challenge in the open revolt of a village in Guangdong after the suspicious death of a representative who had tried negotiating with the local government over illegal land grabs. The government will take whatever measures it feels it must to avoid economic turmoil. If the measures taken to spur economic growth and domestic demand lead to the Chinese increasing their imports from the U.S. that would be all to the good. But if they fail it could lead to severe internal inflation, an economic slowdown and a devaluation of the yuan (possibly causing a trade war) and a global economic slowdown. Not good.

One further Chinese note: There have been reports of large discoveries of shale gas in China that may significantly reduce its demand for imported gas — just when it was looking as if we might be able to make a few bucks exporting our own shale gas.

The U.S. Congress has once again shown that it is unable to do its job, as shown by its current 9% approval rate. If you or I had a 9% approval rating we’d — no, we’d never get to 9%; long before we reached that number we’d have been fired, and for good reason.

But how much does the government’s ineptitude matter? It sure has an effect on the stock markets, but what aside from that? Let’s compare what’s been happening on Wall Street in recent weeks to what’s been happening in the real world of making and selling actual products and services.

The National Association of Manufacturers said that the supercommittee failure represents a missed opportunity for economic recovery, and warned that the automatic spending cuts promised if the group could not reach consensus — which were to cut domestic and defense spending — “will have a massive ripple effect throughout the entire manufacturing economy, affecting large defense contractors, tens of thousands of small and medium-sized manufacturers in the defense supply chains and over 1 million workers.” But those cuts, if they get enacted at all, are more than a year away, and much can happen between now and then.

At the same the economic trend indicators continue to point up, however modestly, and in some cases are showing increasing optimism. The Conference Board’s Index of Leading U.S. Economic Indicators was up 0.9% in October, following a 0.1% increase in September, and a 0.3% increase in August. Conference Board economist Ataman Ozyildirim attributed much of the increase in October to a “sharp pick-up in housing permits” — an uptick that, he said, “suggests that the risk of an economic downturn has receded.”

On Nov. 15 the U.S. Census Bureau announced that the combined value of distributive trade sales and manufacturers’ shipments for September, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,209.7 billion, up 0.6% (±0.3%) from August 2011 and up 11.6% (±0.4%) from September 2010. At the same time the total business inventories/sales ratio based on seasonally adjusted data at the end of September was 1.27, down a bit from the year-earlier figure of 1.30.

The job situation hasn’t improved much, but it hasn’t gotten worse, according to the U.S. Bureau of Labor Statistics, which reported on Nov. 22 that “[r]egional and state unemployment rates were generally little changed or slightly lower in October. Thirty-six states and the District of Columbia recorded unemployment rate decreases, five states posted rate increases, and nine states had no rate change.”

Lastly, VMA’s “State of the Economy Survey – November 2011” reports that “Last month’s shipments were up for 66% of the participants. Eighty-eight percent expect November’s shipments to be greater or equal to the same month last year. An equal percent expect next quarter to be greater or equal to the same quarter last year. Last month’s orders were up for 68% of the participating manufacturers and only 4% of the participants expect a decline in November orders. More manufacturers are optimistic vs. pessimistic about the economy.”

So who are you going to believe: those jokers in Washington, or the people who do the actual work, and make the things that make our country and the world go?

Time for a statistical roundup. Black Friday sales were better than expected, and sales on Cyber Monday were up 22% over last year to $1.25 billion, according to Comscore. If the economy is so sluggish (more on this in a moment), why did this happen? According to the Federal Reserve, the household debt service ratio (DSR), defined as the percentage of personal income devoted to mortgage and consumer debt payments, had fallen by the second quarter of 2011 to 11.09, having declined fairly steadily from 13.96 in the third quarter of 2007, to its lowest since the fourth quarter of 1994. It has been suggested this may help explain the good sales numbers. Others, however, suggest the DSR is an incomplete number, and, all things considered, U.S. consumer demand cannot be expected to recover enough to get the economy moving again, and we should be prepared for “anemic to modest GDP growth, for many years to come.”

And slow growth seems to be the consensus. The Philadelphia Fed reported that its latest survey of manufacturers showed an increase in plant utilization to nearly 75% from 73% in November of 2010, while employment prospects picked up a little. Forward-looking sentiment was a bit better: “The broadest indicator of future,” said the report, “activity increased nearly 15 points and is now at its highest reading in eight months.”

The Conference Board’s Consumer Confidence Index improved in November to 56.0 after declining to 40.9 in October, while its Index of Leading Economic Indicators rose 0.9% in October to 117.4, after having risen just 0.1 in September and 0.3% in August.

Employment remained fairly static, with the Bureau of Labor Statistics reporting that regional and state unemployment rates were generally little changed or slightly lower in October, with nonfarm payroll employment up in 39 states and the District of Columbia, and down in 11 states. The greatest increases were in Illinois (+30,000) and California (+25,700). It may be worth noting that in California’s Silicon Valley rents have been increasing rapidly as the high-tech economy improves and more and more people move into the area.

Also on the employment front, the ADP National Employment Report showed an increase of 206,000 private-sector jobs in November, although just 7,000 were in the manufacturing industry, while 28,000 were in the goods-producing sector and 178,000 were in the service-providing sector. Regardless of sector, increased employment translates to increased demand.

Nonfarm business sector labor productivity also increased, according to the BLS, rising at a 2.3% annual rate during the third quarter, while output increased 3.2% and hours worked went up 0.8%. At the same time unit labor costs in fell 2.5% in the quarter due to a 2.3% increase in output per hour and a 0.2% decrease in hourly compensation.

The Federal Reserve’s Beige Book, released Nov. 30, reported similar figures, with overall economic activity increasing “at a slow to moderate pace” except in St. Louis, where it declined slightly.

The Manufacturing ISM Report On Business purchasing managers index for November reached 52.7%, marking 28 straight months of increasing economic activity in the manufacturing sector.

So why were holiday sales so good? Pent-up demand? Hope for the future? Who knows, but let’s enjoy the good feelings while we can.

New York Times columnist Thomas Friedman has been writing and talking on TV about the skills gap in the United States. American workers, he has said, are under trained and overpaid; unless they increase their skill levels to exceed those of competitors in other countries international business pressures will reduce their wages to those of other countries. No American worker wants to see wages decline. And yet at the same time thousands of jobs in American manufacturing companies go begging because no workers with the skills to fill them can be found.

ValveMagazine.com’s news section recently included a link to an article entitled Decline in manual skills raises concerns for future work force. Originally in the Dayton Daily News, it reported that skills as simple as using the hands to do things, from making things to drawing, are declining as kids spend more and more time with computers.

Can the schools fix the problem?

Some public schools, strapped for funds, have been are eliminating industrial arts programs, although others are upgrading them.

What about the schools that advertise on TV? Some deliver good training as promised, but there is an unfortunate history of others paying more attention to extracting tuition from students than in actually teaching them. Last year an article in The New York Times discussed how some of these are recruiting students with exaggerated promises of future earnings while saddling them with debt for education loans, and another article in the Times advocated state action to correct some of the abuses. Other states are considering crackdowns as well.

What can be done?

Professional associations are doing what they can. The VMA’s Valve Ed program offers good training both in regional events and in the form of prepackaged course to be delivered on-site. The International Society of Automation (ISA) runs an extensive training program and the American Supply Association (ASA) has recently opened ASA University. In August of this year the President’s Council on Jobs and Competitiveness, in partnership with the National Association of Manufacturers (NAM) and other business groups, announced in August “that nearly 50 businesses have pledged to double or increase the number of science, technology, engineering and math (STEM) internships they offer to students.” NAM is also involved with the Manufacturing Institute.

How you can help

But all this is insufficient. Research programs, grants to schools and courses from VMA, ISA and ASA are all well and good, but more manufacturers must step up and provide training themselves. How about setting up employee training programs within your own company? Take advantage of the Valve Ed program, or set up your own, using your own people. Classes could be scheduled after work. The teachers could be skilled people already working for the company, or they could be hired from outside. It would cost some money to do it, but if you can’t find qualified CNC programmers, for example, you could train your own with exactly the skills your company needs. Just remember to reward graduates, or you may find that with training they are worth more than you are paying them, and leave for greener pastures.

There’s an expression — supposedly an old Chinese curse — that goes, “may you live in interesting times.” I wonder if these qualify. While industrial production and business profits continue to recover nicely, the threat of a European financial (and perhaps political) collapse hangs heavily overhead, while in the U.S. the Occupy movement seems to be spreading. Oakland, CA, across the Bay from San Francisco, has recently taken center stage in the latter. It started with a series of missteps by city government; first they drove the protesters out with tear gas, and then allowed them back, and now they can’t seem to decide what to do – or what to think – of the whole affair. The movement is calling for a general strike that they hope will shut down not just the schools and retail establishments but also the Port of Oakland. It’s not the anti-Vietnam war protests and the Burn Baby Burn riots of the 60s, but it makes for interesting reading in the newspapers. And, who knows, maybe something will come of it.

We’re also reminded of the ongoing threat posed by cyber warfare. A recent report from cyber security firm Symantec talks about attacks on 29 chemical companies and “another 19 in various other sectors, primarily the defense sector” that apparently originated in China. And the National Cybersecurity and Communications Integration Center recently published a bulletin that says that the hactivist group Anonymous has recently begun targeting industrial control systems; perhaps they were inspired by the Stuxnet attack on Iranian nuclear facilities, but it’s not a hopeful sign.

An October 25 story by AP technical writer Jordan Robertson has appeared in the news describing increases in the frequency of attacks on the programmable logic controllers (PLCs) that control so much of our factories and critical infrastructure.

Yet business seems to be picking up. The latest survey result from VMA, “State of the Economy Survey – October 2011,” shows general, if slow, improvement. The Federal Reserve Open market Committee release for November 2 showed a small improvement in outlook over the previous month. This followed an October 26 report from the Department of Commerce that orders for core capital goods rose 2.4% in September (excluding aircraft, which made the overall figure for manufactured durable goods a decrease of 0.8% in the same month), and real GDP rose at a 2.5% annual rate.

So progress is being made, despite it all. And we’ve certainly been through far worse times and recovered.

Genilee Parente’s article “It’s a Different World, Forecasters Proclaim” that discussed the August VMA Market Outlook Workshop quoted economist Alan Beaulieu, who predicted that recovery of employment from the current situation will be slow, while Sara Johnson, senior research director of IHS Global Insight, said that we face a period of stagnation caused by a lack of hiring and spending. The consensus, however, is that the outlook for the valve, actuator and pump industry remains optimistic through 2013.

Let’s hope that’s right.

Sociologist and professor of international relations at George Washington University Amitai Etzioni recently blogged on CNN.com that the U.S. faces at least a decade of tough times. Winding down personal and governmental debt will be painful and protracted. “That means,” he wrote, “for the next decade or even longer, Americans will have to do with less, from buying new clothes to going on vacations.”

But the American people are not known for their patience; the Occupy Wall Street movement spreading across the country is an example of what can happen; should that movement, while still inchoate, clarify its goals it is likely that jobs will be high on the list.

Some people may think the best we can hope for is something like what happened in Japan, which has not seen much civic unrest, despite two “lost decades” with little significant growth. One of the reasons for this may be that the average Japanese is not too poorly off; the most recent numbers put unemployment there at 4.3%. But I doubt the U.S. would settle for all those years of stagnation.

Small and mid-size companies may be ones to lead the U.S. out of its economic malaise, suggested Bernard Baumohl, Chief Global Economist, The Economic Outlook Group, speaking on Nightly Business Report on Oct. 10. “[T]he real job creators in this country are the 25 million small and mid-size businesses, who hire nearly three out of every four workers, but those firms have completely missed out on the huge opportunities in the foreign marketplace,” he said. “Incredibly, 99% of small- and mid-size businesses do not export at all because they lack the know-how or resources to do so. That has got to change, since 95% of the world's consumers reside outside the U.S. To revive job growth in this country, I believe Washington should move with greater urgency to bring together leaders from America's small business community with foreign buyers who seek out U.S. products. By gaining a foothold in the export market, which is where all the action is, small and midsize firms will be in a much better position to ramp up hiring and finally bring the jobless rate down.”

In the meantime, efforts to pass free trade agreements with Columbia, South Korea and Panama face significant opposition from organized labor, as shown by a recent op-ed piece in the San Francisco Chronicle by David Bacon, author of the 2004 book, The Children of NAFTA. And there is always the possibility that pressure from protectionists will lead to a repeat of the Smoot-Hawley Tariff Act, to be followed by retaliatory measures from other countries.

Either way, we have our work cut out for us. We may not have to suffer all of Winston Churchill’s prescription for national salvation (delivered on the floor of the House of Commons May 13, 1940, upon his selection as Prime Minister), but the toil and sweat seem pretty certain. Churchill was calling his nation to renewed dedication following years of administrative indecision. Will we, as did Britain, come together and prevail despite the odds?

As the election season approaches and campaigns get more and more frenzied we can expect to see more and more exaggerated claims, false inferences and just plain lies coming from candidates, their handlers and the advocates on all sides in the media. As an antidote I recommend getting hold of a copy of that 1954 classic, How to Lie with Statistics, by Darrel Huff. You can read it in an afternoon, and it’s well worth the time.

Huff explains a whole pile of tricks that advocates of all types, from political to commercial, use to make numbers seem to prove whatever they want them to prove. Tricks like use of the wrong base of comparison and use of the average when the median would be more appropriate (example: Ten families live on one street; the average annual income of all the families on the street is $103,000. In reality nine of the families have incomes of $30,000 per year and one has an income of $1,000,000 per year; the median is $30,000). Tricks like confusing (deliberately or not) correlation with causation; this is a real favorite in political campaigns: “When our guy was president such and such went very well; clearly our guy’s policies were responsible”) and many more. Satirist Stephen Colbert gave that sort of thing a name: Truthiness. Of course there are older terms for it: meretriciousness and mendacity, and the behavior to which they refer was common long before even those words appeared.

Closely related on the commercial side is specmanship, with which we’ve all had experience. Product performance is listed with no mention of the conditions under which it occurred. Years ago automobile horsepower was routinely reported by taking a single engine, removing all power-draining accessories like water pump, generator, etc., having it prepared by experts, then seeing how much power it could deliver to a dynamometer for a few seconds. It bore little relation to what a buyer could expect, but it was good for advertising. That method is no longer used, but the mindset that led to it still exists.

On another topic: On October 2 Andy Rooney gave his last presentation on 60 Minutes, concluding a career at CBS that began in 1949. Bob Shieffer gave him a short tribute that morning, and mentioned that it was Rooney who often used the phrase, “have you ever wondered …” Which leads me to a question: Have you ever wondered why the popular media allow people who obviously flunked, or never took, high school physics to report on technology? How often do you see things like some new electricity-generating scheme that the writer assures us “can create up to 200 megawatts of power per day”?

Or maybe I’m getting to be as much of a curmudgeon as Andy Rooney.

We hear it almost every day on the news: companies are sitting on piles of cash, but won’t use it to increase hiring or expand facilities unless and until demand justifies it, but until there is more employment consumers are restraining their spending, keeping demand low. How can employment rise under such conditions?

Adding to the problem is lack of credit. During the Great Depression bankers, mindful of what had happened in 1929, became overly-strict in making loans, which helped to strangle the economy. The same thing is happening today. Banks won’t lend, so people can’t get the money that might help clear some of the backlog of unsold real estate (and perhaps move to pursue employment opportunities). And entrepreneurs have a difficult time getting first-round financing, so fewer new businesses are started and fewer people get hired.

On September 18 CNN broadcast a special edition of Fareed Zakaria’s GPS entitled “American Dream: Getting Back to Work.” In it Byron Auguste of McKinsey & Company showed that in all the recessions from 1948 through the 1980s, employment recovered to pre-recession levels within about six months of GDP recovery. But following the recession of the early ‘90s employment did not recover for 15 months, and it took 39 months after the 2001 recession. And since GDP returned to pre-recession levels in December of 2010, “at current rates of job creation, it will take 60 months – that’s five years – to return to our prerecession level of jobs.” The reasons, said Auguste, are “[c]hanging employer behavior, mismatches in the labor market and declining entrepreneurship.” Technology has certainly accounted for a lot of job losses.

That’s the dark side of productivity. Simply stated, the United States could produce all the goods it needs, and most of the services, with a fraction of its available workforce. Automation allows a company to meet demand with a fraction the number of production workers that would have been required for the same output a few decades ago.

And not just production workers are affected: The ranks of middle management have been devastated by the spread of IT and MIS.

Yet technology need not be the villain, Auguste said, citing a McKinsey study that found that “the Internet created 2.6 new jobs for every one job that it destroyed. And in a decade like the 1990s where so much of our productivity growth came from innovation we saw both terrific productivity growth and great job growth.” But in the past decade, he continued, “it was more efficiency driven and not so much innovation.”

What can be done?

The McKinsey report makes four suggestions: improve worker skills, find ways for U.S. workers to compete globally, encourage innovation and lessen the regulatory burden. To that the CNN report adds increase spending on infrastructure, which would both employ people and, by improving transportation and other infrastructure, help make the U.S. a more attractive place to do business.

Better education and training can certainly help. According to the Bureau of Labor Statistics, the August, 2011 unemployment rate among those with a high school diploma was 9.6%; for those with a bachelors or higher was 4.3%, and for those with no high school it was 14.3%. If you do not have an education, or at least some sort of marketable skills, today’s economy has no place for you.

Education pays, but what would it take to get the entire population at least to the high school or GED level, let along college? Local and community colleges are generally a bargain, and more and more training is available on line, but there is a substantial fraction of the population that will never be educated, for any number of reasons. And some people who previously had jobs, sadly, may never work again. What can be done about them? And what are the implications for society of the presence of a huge number of people who will never work?

Some economists have suggested that the U.S. may have to reconcile itself to a permanently elevated unemployment rate — although the reported rate may not be all that high, the level of participation in the workforce may decline permanently.

The McKinsey report suggests that with modern communications part-time and contingent work may become the norm, which may enable “companies to bring back some services jobs from abroad.”

A story on The Daily Ticker by Daniel Gross reported that a study by Nobel-Prize winning economist Michael Spence classifies jobs as tradable (can be done anywhere) and non-tradable (those that can only be done here — “retail, health care, food service, government, and construction”). Gross says that from 1990 to 2008 “97 percent of the 27.3 million U.S. jobs created were in the non-tradable sector.” While that might be encouraging in some ways (non-tradable jobs can’t be offshored), this segment has its limits, because government and health care, the two leading components, can’t grow forever, while construction and retail depend upon domestic spending, and domestic spending is severely constrained by a massive deleveraging in the economy (faced with job uncertainty, would you be more likely to buy new goods or pay off your credit cards?).

The article goes on to say that there are some non-tradable areas that can benefit from global growth: tourism and foreign students attending U.S. colleges and universities.

This would inject money into the economy and thus increase aggregate demand, but, aside from some construction activity that these might spur, it does little or nothing for manufacturing. While hotels and tour operators may benefit, I don’t see how much hordes of foreign tourists flocking to our national parks and other attractions to buy Chinese-made souvenirs helps U.S. manufacturing employment. Manufacturing employment must be driven not simply by increased domestic demand, but by increased exports.

President Obama and others tout the need for the government to spend heavily on infrastructure in order to put people to work And the infrastructure certainly needs rebuilding. But that’s funded by government money, and the government is already deep in a financial hole. Keynesian economists like Robert Reich and Paul Krugman argue that it’s more important to get the unemployment rate down quickly than to worry about the growth of pubic debt, but we’re close to the limit of what the government can borrow, despite some economists saying that increased economic activity from governmental spending will diminish the deficit as a percentage of GDP. But when the economy recovers how likely is the government to take the measures needed to go from deficit to surplus?

Another thing that the CNN presentation suggested was that the U.S. should adopt an industrial policy that would identify promising areas and steer investment to them, as Germany and Singapore already have. But the words “industrial policy” are anathema to those who see such a policy as a step towards “picking winners and losers” and “governmental control of the means of production” (which has been used as the definition, variously, of a planned economy, socialism and Marxism). And even if you don’t subscribe to the ideology behind that it is impossible to ignore government’s record in this area. The most recent example is the solar panel company Solyndra, which went bankrupt despite $535 million in government loan guarantees. Failures are a normal part of the creation of new businesses, but we tend to resent it when a business failure hurts not just private investors but taxpayers. And who says that government bureaucrats will be better at finding the winning industries or companies than the entrepreneurs themselves, directed by the discipline of the market? And if the politicians get involved, what then?

There are also suggestions that the unemployed go into business for themselves. Magazine articles tell stories of people who lost their jobs and went on to start successful businesses, but what percentage of the unemployed can reasonably expect to do that? Most new businesses fail. And how many new businesses do we need or can we create? The McKinsey report notes that the rate of new business creation fell 23% between 2007 and 2010, and the report continues, “[e]ven before that, the number of employees per new business had been falling, from eight in the 1990s to fewer than six in recent years.”

There are some hopeful signs. The Zakaria program brought out that labor as a percentage of manufacturing cost has declined significantly — 8% at Dow Chemical, according to Dow President, CEO and Chairman Andrew Liveris. Wage costs in China are increasing, and, said Immelt, “The productivity of the U.S. worker … is three times higher,” which is a good argument for brining manufacturing back home — onshoring, which more and more U.S. companies are doing. And, said Dan Akerson, Chairman and CEO of General Motors, GM is among them, building the new subcompact Chevy Sonic at a renovated plant in Lake Orion, MI instead of in a low-wage foreign country, a move made possible by a combination of better automation and wage concessions by the UAW.

The Great Depression was finally cured not by the myriad federal recovery projects put in place by the Roosevelt administration, but by the buildup to the second world war. Let’s hope nobody decides to try something similar as an employment measure.

While the economy has enough gloom to satisfy anybody looking for discouragement, and unemployment remains stubbornly high, the United States manufacturing sector, despite having taken some severe hits, continues to recover, albeit more slowly than we’d like. You want proof? Take a look:

As reported in Valve Magazine online on Sept. 14, a report from the Association for Manufacturing Technology finds that manufacturing technology (machine tool) orders for July were up significantly: “July U.S. manufacturing technology orders totaled $506.97 million according to AMTDA, the American Machine Tool Distributors’ Association, and AMT - The Association For Manufacturing Technology. This total, as reported by companies participating in the USMTO program, was up 7.3% from June and up 92.7% when compared with the total of $263.14 million reported for July 2010. With a year-to-date total of $2,975.10 million, 2011 is up 102.9% compared with 2010.”

Also on the plus side (somewhat) is a report from Georgetown University that, although the Midwest was hit the hardest by the recession in term of employment — 610,000 jobs lost in manufacturing — two million job openings will be available in manufacturing nationally through 2018, mostly due to baby boomer retirement. And 20% of those, or 10.2 million, will be in the Midwest through 2018.

Want more? The August 2011 Manufacturing ISM Report On Business put the PMI at 50.6% (slightly positive), and said that economic activity in the manufacturing sector expanded in August for the 25th consecutive month, and the overall economy grew for the 27th consecutive month.

Still more: The Federal Reserve’s estimate of industrial production and capacity utilization showed that Industrial production advanced 0.9% in July, with manufacturing output rising 0.6% in July. Total industrial production for July was 3.7% above its year-earlier level, while capacity utilization rate for total industry climbed to 77.5%, a rate 2.2%s above the rate from a year earlier but 2.9% below its long-run (1972--2010) average.

In my next post, I’ll write about employment.

The National Transportation Safety Board has released the report of its findings on the pipeline explosion a year ago (Sept. 9, 2010) that killed eight people, destroyed 38 homes and damaged 70 in San Bruno, CA, a few miles south of San Francisco. It blasts gas utility PG&E for a long list of failings, including “poor record keeping, inadequate inspection programs and an integrity management program without integrity,” exacerbated by poor federal and local oversight and regulations. For those who have not been following it, the report, as well as the San Francisco Chronicle’s article on it, make for sobering reading.

We can, perhaps, take comfort in two ways: PG&E has already instituted a program of hydrostatic testing of gas mains in its service territory, and, if enough of the report’s long list of recommendations for the U.S. Pipeline and Hazardous Materials Safety Administration, the governor of California, the California Public Utilities Commission and PG&E itself are followed, we may not see such an explosion again soon. Yet one wonders how many gas utilities around the country are in as bad shape as PG&E, and whether they are taking action on their own.

And finally, while it may be unseemly to see profit in the misfortune of others, the recommendation that manual shutoff valves on gas pipelines be replaced with automatic or remotely-operated ones may mean a little more business for the manufacturers of those valves. And if long-deferred maintenance is accelerated, perhaps a bit more employment for the people who will do the work.

Did you read the op-ed piece by Carlos M. Cardoso, CEO of Kennametal Inc., entitled “Manufacturing at the Crossroads?” This Industry Week article stressed that U.S. manufacturing is a bright spot in our economy, and that it’s leading the recovery. Cardoso went on to say that educational outreach programs are critical to the continuing success of manufacturing, and that his company was not only providing education and training but was embarking on an initiative called the Young Engineers Program “intended to attract high school students into engineering careers in manufacturing.”

This leads to the question: How many other companies are doing this? In February Judy Tibbs mentioned VMA’s Valve Ed program, along with The Manufacturing Institute’s work with the University of Phoenix, and in July I quoted Bob Schukai, the global head of mobile technology at Thomson-Reuters about the need for trained people.

If we do more manufacturing here we can help with the U.S. trade deficit, which reached $53.1 billion in June and included a $2.0 billion decrease in exports of industrial supplies and materials. I doubt that July will look any better.

But other countries are taking steps that may short-circuit our efforts. Newsweek, in an article entitled “India turns to Manufacturing to Boost Job Creation,” reports that India is set to unveil a policy that aims to increase manufacturing from the present 15% of the economy to 25%, and put hundreds of millions of young people to work. This will, in all likelihood, increase competition for U.S. manufacturers (as if we didn’t have enough already). Or will it be an incentive for U.S. companies to shift even more manufacturing overseas?

Has the stock market gotten you thoroughly confused yet? At my age I pay close attention to the condition of my IRA and 401(k), and the past week or so has been a real thrill show. Stomach-churning drops, followed by abrupt recoveries, followed by more drops. The most common metaphor is a roller coaster ride.

Yet how much of this volatility is based in fact? It has been suggested that many of the wild swings have been driven not by fundamental economic news, but by trading programs that buy and sell huge quantities of stock in milliseconds without human intervention (remember the Flash Crash). Much volatility is also caused by worry over European debt and concerns that French bank Societe Generale would be downgraded by S&P. Yet when S&P downgraded U.S. sovereign debt, the price of treasury debt promptly decreased. Industrial production has not collapsed: manufacturing technology orders were up 15% in June. The price of crude has dropped below $90/bbl, which will reduce expenses for the transportation industry and, by freeing up cash that consumers would otherwise spend fueling their cars, may help increase retail demand (or help pay off credit card debt).

On August 11 the Department of Labor reported that initial unemployment claims had decreased by 7000, to 395,000. Economists had predicted an increase. The ADP National Employment Report for July shows that “[e]mployment in the U.S. nonfarm private business sector rose 114,000 from June to July on a seasonally adjusted basis.”

A number of VMA member companies have just reported increases in quarterly earnings. The Chicago Fed reports that its “Midwest Manufacturing Index (CFMMI) was essentially unchanged in June, at a seasonally adjusted level of 84.0 (2007 = 100).”

The Baker Hughes Rig Count for August 5 shows increases in both the U.S. and Canada for the week, and much larger increases over the previous year. The Manufacturing ISM Report On Business reports the PMI at 50.9%, which is down 4% from the previous month but still in positive territory. New orders have decreased, but there are always fluctuations.

Perhaps I’m deluding myself, but I find it hard to believe that we’re looking at Great Recession II or even Depression II. If we ignore the screaming and pay attention to our work, we should get through this adventure with a few bruises, but still on our feet.

Business and economic news over the past few weeks has ranged from sort-of-hopeful to downright discouraging.

Personal income rose by 1% in June, while personal spending fell 0.2%, according to CNN Money. In July the U.S. Census Bureau’s Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for June said that new orders for manufactured durable goods in June decreased $4.0 billion or 2.1% to $192.0 billion, the second decrease in three months (May was up by 1.9%). Non-defense orders were down 1.8%. The largest decrease, $4.2 billion or 8.5% to $45.4 billion, was in transportation equipment.

Shipments of durable goods had been up 0.5% ($1 billion) in June, and had been up six out of the previous seven months. Unfilled orders for manufacturer goods were also up in June, having risen in six of the last seven months.

Federal Reserve Bank of Richmond’s “Fifth District Survey of Manufacturing Activity“ reported, “Manufacturing activity in the central Atlantic region stalled in July after firming somewhat in June,” with expectations for the next six months slightly less optimistic than the previous survey had found.

The Institute for Supply Management’s (ISM) Purchasing Managers Index (PMI) fell 4.4 points to 50.9%, “the worst reading since July 2009 and barely staying above the 50% no-change line,” according to MarketWatch. The announcement of the report put a positive spin on it, saying “Economic activity in the manufacturing sector expanded in July for the 24th consecutive month, and the overall economy grew for the 26th consecutive month,” which is true, but jut barely positive.

The VMA State of the Economy Survey for July 2011 showed that Valve Repair Facilities and Associates reported increased shipments in July, while manufactures showed a 10% decline. Outlooks showed some improvement, and no survey respondents planned layoffs.

So things seem to have at best leveled off after the increases of the past six month. But perhaps we’re demanding too much: most of the numbers were positive, if only by a little, which means we’re probably not sliding into another recession, just not recovering at the rate we would prefer.

Much of this can be attributed to the general state of the economy, but much, in all likelihood, is due to uncertainty about what Congress plans to do. The just-passed “deal” allowing the federal debt ceiling to be increased was notably short on specifics, and puts the heavy lifting onto the backs of a committee that has not yet been named and whose findings will probably be the cause of more wrangling. This is by no means a recipe for business (or anybody else’s) confidence.

But given the alternative, I guess we should feel at least a little relieved. Long term problems? We’ll think about that tomorrow, to borrow a line from Ms. O’Hara.

The state of U.S. public infrastructure is a disgrace. Bridges are falling apart. Roads are filled with potholes. Water lines burst. Sewer systems leak or overflow. Levees fail. None of this is news, and we know what’s causing it. Governments are broke. The recession has greatly reduced the amount of money available for public works projects, and only the most urgent get any attention. And even in good times politicians prefer new projects that create jobs (votes) to unglamorous repairs. OK, we understand all that.

But what about private infrastructure? What about things like oil pipelines, for example? In recent weeks there have been leaks in a BP pipeline in Alaska, an Exxon Mobil pipeline under the Yellowstone River, TransCanada’s Keystone pipeline in North Dakota and the Plains All American LP Rainbow Pipeline in Alberta. And let’s not forget last year’s explosion in a PG&E gas line in San Bruno, CA. The companies that own these pipelines cannot plead poverty, so why aren’t they paying more attention to their condition? Cleanups are expensive. Does the bad publicity from a spill cost a company more than the price of maintaining the equipment? Maybe not directly, but what will public resistance to the next pipeline project add to the cost of that? The money may not come out of the maintenance budget, but it’s still corporate money.

There’s already simmering public resentment about big corporate earnings with few jobs; perhaps putting crews to work checking and repairing pipelines (and publicizing that you’re doing it) would do some good for everybody. And perhaps it would be worthwhile for a lot of folks from the oil patch to make plans to attend the Pipeline Leak Detection Technology Conference scheduled for Sept. 13-14 in Anchorage, AK... and to start paying more attention to our deteriorating industrial infrastructure.

There has been a steady stream of reports of companies bringing production back to the U.S. from overseas. Increasing transportation costs, complaints of poor quality from foreign manufacturers, the need for quick responses to changes in market conditions, and intellectual property problems are cited as reasons for this; at the same time the cost differential in labor rates has been decreasing. All this is good news — who doesn’t want more employment here at home? — but is the U.S. labor force ready to take these jobs? In an interview posted on June 30, HP Fellow and Director Chandrakant Patel made the point that the need to reduce energy use will move manufacturing back to the United States, but that move may be slowed down by a lack of trade skills.

Patel was interviewed at the Aspen Ideas Festival by Bob Schukai, the global head of mobile technology at Thomson-Reuters. He was talking about sustainability, but that led to a comment on American education. “As a sustainability person,” said Patel, “… I use joules of available energy as the currency.” The cost of a product, from this point of view, includes all the energy used to produce it, ship it, use it and eventually dispose of it — a perspective that can lead to some significant changes in the way we do things, including manufacturing. “In a world where joules is the currency,” he continued, “don’t you think someday we will see manufacturing in the U.S.? And if the manufacturing has to come back, in a joules-currency-based world, we need people trained in old school engineering.” But U.S. junior colleges have dropped courses in machine technology. These should be reinstated, he said, and we should bring back apprenticeship schools.

And trained people are essential. “My biggest fear is that the people who know how to do things are retiring,” he warned. “When we [at HP] want to hire an electrical engineer it’s very hard to hire somebody with an electrical engineering background.” These are the people who make it possible to not only make things, but also to maintain them. Connectivity, he said, should be not only to people but to things — electric motors, pumps, etc.— so that our infrastructure can continue to operate. “[D]ata mining of physical things … requires people with physical knowledge.” If we don’t do it the chance to bring manufacturing back, in a joules world, we will not realize.”

The last time I wrote about cyber security was in February, in the article Cyber War: Are Your Defenses Sufficient? and the blog, “A New Cyber Threat Emerges.” But there have been enough developments in recent weeks to warrant another look at the topic.

The precipitating events were the attacks by a new group of mischief-makers calling itself Lulz Security (LulzSec for short, their logo is shown on the right) that breached a number of government and business systems, including the U.S. Senate, the CIA and others. Announcing alternately that they did it to expose weaknesses in security and that they did it just for laughs, the group subsequently announced that it was disbanding, but the people involved are still out there. Other attacks stole millions from Citigroup, shut down the Sony game network, and figured out how to get past RSA Security’s SecureID.

More disturbing was the report in Computerworld by Jaikumar Vijayan of a survey that found that 90% of responding companies had been hacked in just the past year. The article suggested that it’s almost inevitable that any organization (this means your company) either has been breached or soon will be. Most companies do not have state-of-the-art cyber security in place, and even for those that do, the bad guys can still get around defenses, as shown by a recent Bloomberg article, “Human Errors Fuel Hacking as Test Shows Nothing Stops Idiocy.” In the test, says the article, “Staff secretly dropped computer discs and USB thumb drives in the parking lots of government buildings and private contractors. Of those who picked them up, 60 percent plugged the devices into office computers, curious to see what they contained. If the drive or CD case had an official logo, 90 percent were installed.” The CDs and thumb drives that the bad guys leave around silently download security-defeating malware. As the old saying goes, it’s impossible to make anything foolproof because fools are so ingenious.

The federal government is doing what it can. A recent AP story, “U.S. Rolls Out Plan to Protect Business Websites,” tells about efforts by the Department of Homeland Security and the Mitre Corp to help companies identify software weaknesses that make break-ins easier. There are plenty of good security companies available to help, and the measures outlined in my February article still apply. By all means institute and enforce up-to-date security measures, and monitor them constantly.

But the bad guys are clever enough and, as noted above, there are enough fools around, to defeat any security precautions, so it would probably be a good idea to give some thought to how your company can detect and recover from the apparently inevitable break-in. Remember, with all its weapons and armor, a warship’s defenses also include damage control.

A good case can be made that many of The United States’ long-term economic woes can be traced to our trade imbalance, so it is encouraging to hear that U.S. exports, which have been increasing steadily since the recent low in 2008, reached $175.6 billion in April, according to Department of Commerce figures released June 9. Of that number, $126.4 billion were goods, rather than services, of which industrial supplies accounted for $43.4 billion and capital goods $41.0 billion, both record numbers. At the same time, “U.S. imports of goods and services decreased 0.4% over this period to $219.2 billion, causing the U.S. trade deficit to decline 6.7% below March figures to $43.7 billion in April,” according to a DoC statement.

Exports had been only a little more than $120 billion in 2008, so this is good news indeed. But the question is, how can we continue this trend? A significant part of the increased exports was due to declines in the value of the dollar, and this cannot continue forever. So it is encouraging that the DoC has also posted helpful advice for companies wishing to increase their exports.

A nice introduction is a video entitled “Expert Advice on Exporting from Successful Companies” encouraging use of these programs; it’s on the Department’s website, here. But a more useful thing found on the site is a link to the National Export Initiative, at export.gov, which makes available market research and trade leads, with two paths laid out: one for companies beginning to export, and the other for those wishing to expand their exports. Following through the site step-by-step, visitors are asked to fill out an on-line questionnaire on their export readiness; that leads to specific answers and links to advice based on the answers given.

Penetrating foreign markets takes knowledge and persistence. As Jack Hollender, managing director of Metropolitan Air Technology, puts it in the video, “You gotta go to markets. You gotta meet the people. You gotta establish the relationships. And you gotta go again and again and again.”

So go take a look at what the DoC has to offer. It may lead to good things for all of us.

Germany, in response to the Fukushima disaster, is taking steps to get completely out of nuclear power over the next 11 years, shutting down all the 17 nuclear plants in the country by 2022. Italy did this earlier, following the 1986 Chernobyl disaster. And Switzerland has announced similar, if slower plans. Germany plans to replace the lost nuclear energy with renewables, which may or may not be feasible. Japan is struggling with power shortages now, due to the loss of output from Fukushima; these may be exacerbated in the future, as the Chubu Electric Power Co. has agreed to shut down its Hamaoka plant, hundreds of miles from Fukushima, until improved tsunami protection can be put in place.

Yet nuclear is not dead everywhere. In a May 29 CNN interview Tony Pietrangelo, vice president and chief nuclear officer of the Nuclear Energy Institute, pointed out that construction is still going on in the United States, China, India and elsewhere, and pointed out that in the U.S. renewables constitute just a small percentage of capacity and will not be suitable for base load any time soon — if ever. Yet a build-out in renewables may constitute an opportunity for U.S. manufacturers — valve makers included.

Meanwhile China is experiencing power shortages caused by steep increases in the price of coal and governmental restrictions on electricity prices — shortages that are beginning to affect manufacturing. Some of this may be reflected in recent Department of Commerce figures, which show U.S. exports climbing rapidly and reaching $175.6 billion in April.

It should be interesting, to say the least, to see how this also plays out.

Just-in-time (JIT) has been a guiding principle in manufacturing for some decades. Ideally, a company should have no (or as little as possible) in-process inventory, because inventory is waste. Prior to JIT many companies kept some inventory as a cushion against supply disruptions. The loss of this safety net, the theory went, would force all parts of the supply chain to adopt best practices, to the benefit of all. I once heard a management speaker say that JIT is not really about reduction in inventory costs, it’s about no place to hide.

All that is very nice, but many companies around the world that depend on a steady supply of critical goods from Japan have discovered that it’s difficult to apply modern production management techniques to earthquakes and tsunamis. Natural disasters have severely disrupted the supply of materials and parts available only from Japan, forcing production cutbacks for U.S. companies. An article in The Economist entitled “Broken Links” suggested that manufacturers may be reversing some of the JIT gospel and learning to keep some inventory of critical supplies on hand. This was echoed by a March 31 story by Joe McDonald of AP entitled “Disruption of parts supplies after Japan quake stirs unease about 'just in time' production”.

There was a column in the San Francisco Chronicle on Sunday, May 22 that I heartily recommend. It’s entitled “Outsourcing manufacturing hurts U.S.” Written by Henry R. Nothhaft, entrepreneur and author, with David Kline, of the new book Great Again: Revitalizing America's Entrepreneurial Leadership, the article points out that the whole outsourcing philosophy — keep innovation here but move production to low-wage countries — is ultimately self-defeating. Where production goes, innovation follows, leading to an economy without a foundation of true wealth creation. And it has already led to a reluctance of venture capitalists to invest in startups here in the U.S.

But American manufacturers may have seen the light. While certain critical raw materials are available only overseas, steady increases in wages in China and other developing countries, along with changes in the value of the yuan, have made overseas production less attractive. Another article in The Economist entitled “Moving back to America: The dwindling allure of building factories offshore” talks about “the new economics of labour arbitrage,” and mentions that not having a long supply chain from an overseas supplier may even allow for a reduction of in-process (just-in-case) inventory.

So perhaps we’ll come full circle after all.

Battles have been going on within the federal and various state governments on what to do about energy. With oil at between $100 and $110 a barrel, instability in the Middle East, and the nuclear disaster in Japan—while the threat of climate change remains a concern—U.S. politicians are looking at ways to cope. Some want to increase domestic production of oil as fast as possible, and condemn the restrictions on deep water drilling that followed the Gulf oil spill. Others want to greatly increase natural gas production, and look to shift as much as possible of electricity production and transportation to that. Some shout that nuclear energy has shown itself to be a trap, while others insist that a disaster similar to Japan’s is unlikely here, and that, because nuclear energy produces no greenhouse gases, more nuclear generating stations should be built. This is seen as especially urgent in places like the Southeast, where the primary fuel for electric generation has long been coal; there are still people betting on clean coal and carbon capture and sequestration. And the California legislature just passed a bill that would require that one third of the state’s electricity must come from renewable sources—solar, wind and the like—by 2025. The state has had a 20% renewables mandate in place for some years, so this just extends it.

President Obama seems to be embracing several of these options. On March 30 he announced the outlines of a plan to reduce U.S. oil imports by a third in 14 years through a combination of more domestic production, support for increased use of natural gas as a transportation fuel, an acceleration in the increase in vehicular fuel efficiency standards, more use of nuclear energy, and more domestic oil production — in short, an “all of the above” strategy.

Meanwhile, the Houston Chronicle reports that the increase in natural gas supplies are boosting the petrochemical industry along the Gulf Coast.

So things may be looking up — provided the economy stays on track, and provided the government finds a way to pay for any increased incentives it comes up with. Stay tuned.

How much damage will the flooding Mississippi do to Louisiana refineries? Brian Milne, refined fuels editor at Tenet DTN, is widely quoted as saying that 13% of U.S. refining capacity (11 refineries) may be affected. While a flood probably won’t do as much damage — or take as long to recover from — as Hurricane Katrina, it may still affect retail gasoline prices. And it may do enough damage to give valve repair companies at least a small boost.

But in the long term, the continuing high retail price for gasoline and diesel — and the high price for crude — makes one wonder about the viability of the Pickens Plan, which aims to reduce U.S. dependence on imported petroleum by substituting compressed natural gas for diesel in trucks and buses. The plan envisions building large numbers of power-generating wind turbines to free up natural gas currently used for electricity generation. Plan originator T. Boone Pickens is optimistic that a key element of it will soon receive federal approval: On April 14 CNBC reported that, with the increasing price of crude Pickens feels that the president would surely sign it.

With the development of gas shale deposits there’s is a lot of natural gas available these days, and likely to be more. I recently interviewed Travis Davies of the Canadian Association of Petroleum Producers, who told me that the increased supply has moved North America away from looking for ways to import the stuff to ways to export it. There’s so much of it, in fact, that it’s depressing gas development in Canada, just because the price is so low. Any effect on the price of crude, however, seems to be pretty far in the future.

In a recent blog I reported that profits at Halliburton and Schlumberger were up. Not surprisingly, the major oil companies have also reported increased profits. The Washington Post on April 28 reported that Exxon Mobil had a first-quarter profit of $10.7 billion, 69% more than the same period last year. Royal Dutch Shell was up 30%, to $6.3 billion, excluding one-time items and inventory gains. Chevron hit $6.2 billion. Only BP was below last year. This news has, predictably, led to calls for the repeal of oil-company tax breaks. Exxon Mobil issued a statement in self defense, saying that they were not responsible for high gasoline prices, and that high oil company profits helped buoy stock prices, to the benefit of retirement funds and other investors. And National Association of Manufacturers President and CEO Jay Timmons issued a statement saying President Obama’s call for increased taxes on oil companies would increase prices for manufacturers as well as everybody else and contribute to inflation.

Whether or not you believe that the oil companies are making too much profit (in some circles the word “profit” seems to be used almost as an expletive), there’s no denying that high crude prices are driving increased exploration and capital expenditures; Exxon Mobil, for example, increased capital and exploration expenditures by 14%, to $7.8 billion.

So maybe the high oil prices aren’t all bad. Certainly any efforts to increase supply in the face of increased demand have to be good news for suppliers to the O&G industry.

The budget/deficit battle on Capital Hill is entertaining — if you enjoy watching train wrecks in slow motion. So far the solons in Washington have brilliantly figured out that the only ways to cut the deficit are to reduce spending and increase revenue. The problem is, neither one of these alternatives is a way to get re-elected, so neither really gets done.

And if they ever do balance the budget, or even make an actual move in that direction, it will cause pain somewhere. If spending is cut, what is likely to happen with infrastructure spending? How many water projects may be deferred or cancelled?

I remember from my days in the defense business that federal money would be turned on and off suddenly. When the tap was open we were working overtime, but when the money faucet was turned off everything changed. Overtime went first, and then there would be temporary furloughs, then layoffs. Now it looks as if several different faucets — defense spending, for sure, but also infrastructure repair and others — may be closed, or at least turned down.

Oil producing countries, concerned about falling demand, are considering cuts in production. At the same time the number of permits for new deep-water drilling is increasing, but only slightly. Some companies are doing better; Halliburton just reported improved earning due to increased land-based drilling, as did Schlumberger.

Economist David Levy warns that reducing the budget risks harming the economy, a view shared by fellow economist and Nobel laureate Paul Krugman. On the other hand, S&P on April 18 downgraded its outlook on U.S. sovereign debt, so there are arguments to be made on both sides.

One group that may benefit from this sudden impulse toward governmental thrift is the lobbying industry, as different groups try to protect their pieces of the pie. So perhaps we should all become lobbyists.

News stories on March 14 were full of a report from forecasting company IHS Global Insight that the value of Chinese manufacturing last year surpassed that of the United States, reaching 19.8% of global manufacturing output, compared to 19.4% for the U.S. This was tempered a little by the news that it took China 100 million manufacturing workers to do it, compared to only 11.5 million in the U.S. A March 10 posting by Michael Schuman in Time’s Curious Capitalist section suggested that productivity may yet save the American manufacturing sector. Schuman’s premise is that China, like Japan before it, will move from mass production of low-tech goods to more advanced ones, but that this plays into American manufacturing strengths.

Not mentioned is the fact that China must increase its productivity over time simply for demographic reasons. For decades the Chinese government has enforced a one-child policy; one might think that for this reason the supply of workers available to staff its factories might be getting tight, but that hasn’t happened so far. The country has had an almost unlimited supply of people who can be induced to move from rural areas into manufacturing centers, and 100 million workers is not that large a fraction of a population of 1.3 billion. But the trend is inexorable: median age in 2011 is 35.5, compared to 34.1 in 2009, according to the CIA World Factbook. In coming decades China will have to improve productivity. And productivity, according to Schuman, is America’s game (which is good for us, because the median age in the United States is 36.9 (in Japan it’s 44.8).

But what happens if all our manufacturing is done by just a few people? Our people may be older than in China, but there are still plenty of people out of work, and at the same time U.S. manufacturers are having a tough time finding skilled workers.

I talked about this in my Feb 5 post, and I’ll address it more in the future. In the mean time I’d like to hear what you think about it.

With the ever-rising price of crude, other energy sources are becoming more attractive. We’re all familiar with the excitement over natural gas, and its potential for reducing the United States’ reliance on imported petroleum, but there are other domestic energy sources as well. One of them is geothermal.

According to the Department of Energy’s U.S. Energy Information Administration, in 2009 renewable energy accounted for 8% of U.S. energy consumption, and geothermal accounted for just 5% of that, but that’s not to say that geothermal is unimportant — far from it. That 0.4% share comes to 0.39 quads (quadrillion Btu), and it’s growing. On March 30 the Geothermal Energy Association released its annual U.S. Geothermal Power Production and Development Report, which points out that the United States continues to rank first in the world in geothermal energy production, with a total installed capacity of 3102 MW.

Current geothermal installations are confined to nine western states, says the report, but development is spreading east, with new projects, ranging from the planning stage to active development, underway in 15 states, increasing by more than 12% over 2010. And there are companies involved in geothermal development operations in 43 states.

Cuts are possible in federal incentives and subsidies, of course, but the growth in this industry as we climb slowly out of the recession is encouraging. For valve and other manufacturers, geothermal is certainly worth looking into.

What will the unrest in the Middle East and Africa have on U.S. valve manufacturers? Surprisingly, it looks positive. Let’s look at Libya, for example. Libya isn’t a huge oil exporter, but it’s significant. According to The Economist, most Libyan oil is sold to Europe (Italy and France in particular) and China, although how much these countries depend on Libyan oil varies from 23% of total imports for Ireland and 22% for Italy to only about 3% for China.

The worry is what will happen if Libyan oil exports are interrupted. While the U.S. would not suffer a shortfall directly, other countries would, and would have to turn to alternate sources. Saudi Arabia has promised to make up any shortfalls, but not everyone (especially the peak oil folks) believes they really have the ability to do so.

In any case, the result has been a run-up in the price of oil (Brent Crude) to above $100/bbl. And while that may hurt the U.S. economy in the long run, it’s a boon to anybody associated with the oil business. Speaking with some U.S. valve companies for an article I’m writing for the spring issue of Valve Magazine, I’m hearing that the increases in the price of crude benefit U.S. valve companies because they lead to increased domestic exploration and production of both oil and natural gas. So there’s some good to be found in all this—including the satisfaction of seeing a madman dethroned.

I was going to write about competing with China, the money from Libyan oil shipments and American productivity levels, but the disaster in Japan has taken priority. While U.S. companies may or may not be directly affected by the disruptions that the disaster is causing, I think it’s important to remember that disasters can happen anywhere, and their effects can be widespread.

Japanese companies have to deal not only with damages to their own facilities but to disruptions to their supply chains. In a country heavily dependent on rail transportation, the loss of trains for even a few days will have a severe impact—not to mention workers who find it hard to get to work, even if they themselves haven’t suffered too much from what the government is calling the worst national disaster since the end of World War II.

And of course anyone doing business with those companies, even indirectly, is likely to feel the effects, even though the Japanese are working very hard to make repairs. Great chunks of the infrastructure in the affected regions are damaged or destroyed and will have to be rebuilt.

Could something similar happen here? Remember Katrina? The damage was made much worse by the fact that the protections in place turned out to be inadequate, because the magnitude of the hurricane exceeded what was expected (and for a couple of less pardonable reasons, like faulty design and bad workmanship). The designers of the Fukushima nuclear plants doubtless never expected to have to deal with an 8.9 earthquake followed immediately by a gigantic tsunami. And those plants are 40 years old.

Ours are about the same age, because of the 1979 Three Mile Island incident. Even though it was nowhere near as bad as the Fukushima plant problems seem to be, it put a stop to nuclear plant construction in the U.S.

And earthquakes happen in the United States. In the Bay Area of northern California (where I live), as in Japan, seismic standards have been toughened, but when the next great earthquake happens (which has a predicted probability of 97% within the next 30 years) it is expected to do at least $200 billion in damage. Buildings will fall down. Roads will be blocked. Power will go out. Water and sewer will go out. Communications will fail. There will be fires. This is why the more prudent folks around here keep earthquake kits with water, food, clothing, first aid kits and other things close at hand and well stocked. Nobody knows how long it will take for municipal services to return, and nobody knows how long it will take business to recover.

There have been suggestions that the disaster in Japan may end up stimulating that country’s economy, with all the money that will be spent to rebuild. But it may affect other things here. Just as plans were moving ahead for new nuclear power plants there are calls for a moratorium on new nuclear construction. This does not bode well for folks in the nuclear equipment industry such as valve and actuator manufacturers.

So keep an eye on events, and give some thought to your company’s supply chain. And take a good look at your disaster plan. You do have one, don’t you?

Metso's ESD valve received recognition in Tom Clancy's newest best seller, Dead or Alive. In the book, Petrobras Paulinia (REPLAN) oil refinery is a target for terrorists’ attack, but the company’s intelligent safety valves are hampering their deceitful plans.

Quoting from the book (page 566): "The facility's hundreds of control valves (officially known as ESDs; or emergency shutdown devices), which regulated the flow of chemicals to the labyrinth of distillation columns, fractionation towers, cracking units, and blending and storage tanks, were virtually invulnerable, having been recently refitted with something called a Neles ValvGuard system, which was, in turn, regulated from the refinery's control center, which from their earlier reconnaissance trips they knew was below ground and heavily fortified."

On Feb 10 Industry Week published an article by Josh Cable reporting on a talk given by Andy Chatha, president and CEO of ARC Advisory Group, at the ARC World Industry Forum in Orlando on Feb 8. Chatha, according to the article, said that U.S. manufacturers need to increase their rate of innovation in order to compete globally. Chatha went on to advocate closer collaboration between company’s different departments, and said that communication and collaboration between R&D, engineering and other disciplines would be greatly improved by betting away from legacy IT solutions and moving to the cloud.

“Cloud computing,” according to NIST’s Information Technology Laboratory, is a model for enabling convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction.” Andy Chatha, along with others, says it’s the way to better collaboration among parts of a company, and others claim it will offer IT departments great benefits and save them tons of money.

But it’s interesting to note that much of what NIST has to say about cloud computing comes from its Computer Security Division, and Microsoft lists the four key issues as security, privacy, reliability and operational control. Google “cloud computing risk” and you get more than 14 million results.

NIST, Microsoft and others devote a lot of resources to the security part of cloud computing, as they should, but I wonder how much we should trust it. Cloud computing is in its infancy. Computer security people and hackers seem to be neck-and-neck, and nobody knows where the next major breech will occur, if it hasn’t already. Hackers traced to China recently stole classified information from two Canadian government ministries, and similar break-ins seem to happen every week. How much of your company’s proprietary design and business information do you want to put out there?

Halloran said he and his colleagues give a lot of credence to the PMI (the Institute for Supply Management’s Purchasing Managers Index) as an important indicator of future trends: “We’ve seen a strong move off of the 2009 bottom. It has defied our expectations.” He said this has also been mirrored in Europe; in China, it’s been a little weaker, and in Brazil, in between, but “overall, expectations are healthy.”

As for some of the end markets that use VMA member’s products…

• Oil and gas upstream is in recovery mode. Rig count is going to be an important driver in this. It’s still 10% off where it was but we’re seeing some important subtrends such as the horizontal drilling market. This is hard on products and that means they are burning through products more quickly.
• Oil and gas downstream is a much weaker market. Expect more MRO work rather than project work. Committed orders are still hard to come by. Look for highest growth in Latin and Central America and China. Still, the long-term outlook for this market is good.
• The chemical market in 2010 was better than expected, but still weak. Cap utilization has risen but not enough to drive new investments. International demand is a little stronger. We are seeing a decline in the U.S. chemical market as more production moves overseas.
• In the U.S., the power markets are still pretty weak, though we are starting to hear about some quoting activity. European activity is doing better because they have a plan—as opposed to the U.S.
• Everyone tells you the water/wastewater market is the next great investment opportunity… but they’ve been saying that for the last 30 years! The wastewater market has been stronger than clean water for the last few years. Aging infrastructure will drive long-term repair and replacement opportunities in the U.S.; replacement work is projected to ramp steadily over the next 25 years. In China, demand for water treatment products is expected to increase 15.5% a year through 2012. Long term, expect robust growth in desalination, particularly in areas with limited freshwater resources.

Halloran advised members: “Don’t sell energy efficiency and increased automation short. Motors are a great example. Only 3% is acquisition cost; so why would you focus on 3% of the cost rather than all the maintenance and energy consumption costs, which makes up the other 97%?”

He concluded by saying that, “when I think about 2011, I see very healthy cap ex, but not a lot of talk about new additions. People still don’t want to add capacity of people, so they are spending dollars on increased efficiency and productivity. Process automation companies are seeing extremely strong order trends.”

In June of 2010 ValveMagazine.com published my article Dealing with the Threat Posed by Chinese Counterfeiting, which discussed the threat posed by Chinese counterfeiting of U.S. goods and theft of intellectual property, both of which are major industries in China. In it I outlined efforts by Chinese companies to steal information from other countries for competitive advantage. That was followed in January by “Cyber War: Are Your Defenses Sufficient?” which did a rundown on the danger of malware to American companies. One of the points brought out was that cyber attacks are a continuing threat, and we now have confirmation of that. On Feb. 10 McAfee published a white paper entitled Global Energy Cyberattacks:“Night Dragon,” which gave the details of a major and continuing cyber attack that extracted information on operational, bidding and financial information from oil, energy and petrochemical companies around the world, and to all appearances originated primarily in China.

The McAfee report is a wakeup call, showing that the threat is increasing exponentially, both in number of attacks but in their sophistication. I strongly suggest you read it, and/or pass it on to your IT people.

Let’s be honest. Despite all the outsourcing that has eaten into many American industries, manufacturing in the United States is not going to disappear. After an economic convulsion – and the recent one has been particularly disastrous – companies (those that made it through the recession) have made many changes to how they operate by further increasing productivity and efficiency, becoming increasingly lean. In the world of valves, that means more process automation, a greater reliance on technology, and top-level managers who know how to streamline their operations. The end result: our industry, and many others, needs ever more skilled workers.

That’s one of the interesting points made by Dr. Brian Lindquist, Associate VP and Dean of the Business School at the University of Phoenix (UP). I heard him talk at VMA’s recent Valve Industry Leadership Forum in Phoenix.

And yet, even as unemployment remains high, there are still openings in many industries… and positions that go unfilled because specialized skills are needed—and the people with those skills are nowhere to be found. So how can we match people to jobs? That’s the crux of what Dr. Lindquist discussed when speaking to the VMA leadership. He suggested that while two-year technical, or associate degrees, are valuable, many of today’s employers need more: A combination of technical skills (“the hard skills”) and interpersonal, or “soft” skills such as collaboration, critical thinking and problem solving

To find exactly what employers need, educational institutions must stay connected to industry. The University of Phoenix is a firm believer in this approach, said Dr. Lindquist, and has established a partnership with The Manufacturing Institute, the non-partisan affiliate of the National Association of Manufacturers, enabling UP students to now receive a B.S. degree with a Concentration in Manufacturing. Courses will include “Managing Quality in the Supply Chain” and “Logistics Management.”

The more closely academia and industry work together, the better. A good number of universities have cooperative education programs in which students move back and forth between classrooms and companies. And many engineering societies and associations — including VMA — run educational programs, some in concert with universities and some independently.

Because I also serve as director of VMA’s education program, I was particularly interested in speaking with Dr. Lindquist after the presentation. VMA has a “Valve Ed” program (including a two-day Valves & Actuators 101 course) to help educate engineering students and others new to the industry, so I was wondering if there might be a way for our two organizations (VMA and UP) to work together. Dr. Lindquist and his colleagues agreed to open a dialogue with us to discuss the possibilities.

It's been very clear to VMA members that more specialty education is needed — and in our industry, that means learning more about valves, actuators and controls — but there really isn't much out there. Even engineering schools offer little curriculum on these critical products. That's one of the reasons VMA developed an entry-level Valves & Actuators 101 education course. We'd love to be able to make this training available to schools, and I look forward to having further discussions with the folks at UP and other institutions of higher learning.

So it seems that schools like UP are making progress in developing new educational programs to meet the needs of today’s employers, and doing what they can to make their educational offerings known to the public. But looking at the bigger picture, have we, as business people and citizens, done a good enough job of spreading the word to young people that manufacturing jobs are not going away? Have we told them that today’s manufacturers have numerous opportunities and some really interesting jobs, many of which use technology skills and are well paying?

High schools often appreciate outside speakers. What a great opportunity to speak with students (and, hey, why not start in middle school?) about manufacturing careers. Has your company done any outreach to tomorrow’s workforce? If so, please drop me a line.

VMA members attending the Valve Industry Leadership Forum, held Jan. 24-25 in Phoenix, heard three valve industry execs, each paired with one of their company’s future leaders, in a session called: “Leadership: Established vs. Emerging.” Sam Deep, author and leadership consultant, posed questions to the panel (representing Cameron Valves & Measurement, PBM Inc. and Rotork Controls), asking each what they are doing to develop and prepare future leaders. [We’ll be talking more about what Sam Deep and the panelists said in another article on ValveMagazine.com in the near future.]

What about your company? Do you currently have a strong chief executive? A visionary, perhaps, who has guided it to success, and who is an inspiration to both employees and stockholders? If so, you may be sitting on the edge of a precipice. What happens if that leader gets sick or dies? Will the company be able to right itself and continue, or will it lose its direction and be lost?

On Jan. 17 Apple CEO Steve Jobs announced he was taking an indefinite medical leave of absence. Over the next few days Apple stock, which had been rising steadily — up an astonishing 274% over the past two years — dropped more than 6%, despite reporting first quarter 2011 earnings of $6.43 per share, 16% above analyst estimates.

Granted, not many companies can trace so much of their success — their survival, in fact — to the leadership of one man, but that’s what Jobs did for Apple, even bringing it back from the edge of bankruptcy in 1997.

Yet the company’s stock seems to be recovering, up almost 2% as of mid-day Monday, Jan. 24. And the Jan. 22 edition of Barron’s “The Trader” column reported that Dan Chung, CEO of Fred Alger Management, had predicted that AAPL might hit $500 on annual earnings of $26 per share or more and $20 next year, driven by business purchases of the iPad and increasing international sales, and citing Apple’s careful planning for Jobs’s departure.

And that is key: a company that is heavily dependent on the leadership of one person will be severely harmed if anything happens to that person, but careful succession planning can go a long way to keep that from happening, or at least minimize it.

Now Apple may be a special case: Jobs had experienced severe medical problems twice before -- a liver transplant and pancreatic cancer -- and the company and its investors were probably better prepared than most. And Chung may be wrong. But so far things look pretty good. Can you say as much for your company?

Jim Cahill from Emerson Process Experts brought this to our attention. Getting kids involved in math & science can be a challenge, fun projects like this might rouse their interest:

You really can find everything and anything on YouTube.

This clip is from a British show called The Secret Life of Machines. Here, a man uses several solenoid valves to spell out the word: UTOPIA.

In an article posted on June 3, “An Upside to the Downturn,” I mentioned a piece by Jeff Klingberg, President/CEO, Mountain Stream Group, Inc. in Product Design & Development entitled “Wake Up Fluid Power Industry Or Prepare For Extinction.” In that article Klingberg suggested electric actuators are making strong inroads into the U.S. fluid power industry largely because that industry has failed to embrace new technology. Environmental considerations (leaking and spilled hydraulic fluid) and energy conservation are the chief drivers, he said.

Klingberg emailed to thank us for the mention, and in replying I mentioned an article I wrote in PD&D for Feb 3, 2006 entitled “What Lies Ahead For Hydraulics?” At that time, I also cited Klingberg as having said the fluid power business seemed to be on a long slide, particularly at the low-power end. The article also pointed out that environmentally friendly hydraulic fluids like water and vegetable oil were little used, and cited Klingberg as saying they had received little publicity.

Well, not much seems to have changed in the past three years: fluid power is still declining. In Klingberg’s words, “The issues are exactly the same for the fluid power industry, but worse. This economic recession has really caused a lot of heartache for many manufacturers in the industry, especially at the mobile hydraulic end. There are a few that are at 1/16 of their sales from just last year. Employees who are being laid off are fed up with decisions of the corporate leaders.”

“If something radical doesn’t happen within the industry in the next 5-10 years,” he predicts, “especially from the pneumatic side of things it will be an extinct industry.”

We have three questions for readers: Is the industry really doomed? Can it be saved? And if so, how?

Email your answers/comments to pcleaveland@earthlink.net

You may have come here because you just read the article I wrote (VMA Seeks to Fill Education Void with ‘Valve Ed’). If not, why not give it a read now? We welcome your thoughts, ideas and insight into the topic of valve industry education. The more we know about what those working in the valve industry need, the better job we can do as we develop Valve Ed.

I just received a letter from a reader named Jeff Roberts about an article I wrote (posted Dec. 15, “Green stands for $$”) and would like to take this opportunity to respond.

Roberts said:

“People in the Midwest states say California is full of people that do not have a good grip on the cost of all their mandates. Then we see California look to the federal government to bail them out.

“Now people are [whining] because other states do not buy into their restrictions and the businesses move to those states, costing California jobs and state money. Well, the same is true for the whole USA verses the world.

“Look at Wisconsin, the DNR has slowly driven manufacturing out of the state with regulations.

“Why don’t you write an article on the biggest scam of all. Green energy, wind turbines and the credits (I mean the subsidy money every American pays to whoever may own them) and carbon credits.

“I really do not see the USA industry surviving this next good idea.”

Response:

I agree, Californians don’t have a good grip on their mandates, and it’s not just in the pollution area. The state’s constitution allows citizen-sponsored initiatives to be put on the ballot, and if they pass they become state law. Many of these mandate certain levels of spending in specific areas, and limit taxation levels, which means the state government is in real fiscal trouble. The regulatory environment is much the same, with too little attention paid to cost-benefit analysis. Yes, complying with the new green regulations will be expensive. But the eventual cost of doing nothing would probably be greater, as I’ll discuss in a moment.

Many jobs have been moved overseas, and that’s a real problem. Manufacturing in the U.S. has been badly damaged by lower labor costs and lax (or nonexistent) environmental and safety standards in other countries. Have you tried to buy a pair of U.S.-made shoes lately? I won’t even get into the car industry.

But then again, look at the ship-breaking industry: Ships are no longer scrapped in the United States; instead many have been towed to places like Bangladesh, where they’re cut up on the beach by workers making a dollar a day with no protection against asbestos and other hazardous substances. Not a pretty picture. Perhaps in response to adverse publicity, a high court in that country recently ordered the closing of all ship-breaking yards that do not have environmental clearances.

We are told to recycle our e-waste, but much of it is shipped to third-world countries where it’s burnt or otherwise stripped for valuable materials by untrained people with no protection against chemical hazards.

As for direct costs of pollution to Americans, let’s consider increased healthcare costs due to air pollution (without trying to put a dollar value on quality of life). A recent report, The Benefits of Meeting Federal Clean Air Standards in the South Coast and San Joaquin Valley Air Basins by the Institute for Economics and Environmental Studies at Cal State Fullerton, puts the annual cost to California at $28 billion a year. Other areas (Houston and Texas City, TX, for example) have similar problems.

But perhaps the most important long-term problems are climate change and sea level rise. The March 16 edition of Science Daily reports that a number of studies predict rising sea levels will have an especially bad effect on New York City, with increased susceptibility to damage from hurricanes, among other things. The EPA has a whole section on line dealing with the effects of sea level rise on the United States. A 2008 MIT report entitled Estimating the Economic Cost of Sea-Level Rise puts the cost of a one-meter rise in sea level over the next century to the U.S. at several hundred billion dollars for the loss of wetlands, loss of capital, and the cost to provide protection (dikes and so forth).

Other areas at risk include low-lying areas in Florida, Western Europe and various third-world countries. Several island nations in the Pacific are making plans for the time when their countries will cease to exist.

What about climate-related problems, like the loss of farmland due to worsening droughts and related effects? Parts of the Midwest just experienced severe flooding due to unusual weather conditions. How unusual will those conditions be in the future?

The solutions, if they can be found, will be very expensive. Béla Lipták, long-time process control guru and winner of an ISA Lifetime Achievement Award, recently wrote “If Global Carbon Emissions Were Cut by 15% by 2050 by the Increased Use of Nuclear Power, 1,070 Plants Would Need to Be Built at a Cost of $5 Trillion.” That’s expensive, and it has environmental and security issues that have still not been dealt with adequately.

The windmills you dismiss may turn out to be a good investment. On April 6 the Associated Press reported that Interior Secretary Ken Salazar said there is enough wind energy available off the East Coast to equal 3,000 coal-fired power plants, although fossil fuels would still be required. Oilman T. Boone Pickens has been advertising his Pickens Plan to cut U.S. reliance on imported fossil fuel and make more use of wind energy. Boone may be old, but he’s no fool.

Bottom line: Yes, pollution abatement is, and will be, expensive. The alternative is worse.

The internet is an invaluable source of information for manufacturers. It's importance can't really be measured, but that doesn't mean you can't get lost. For news, resources, and other information, you've got the essentials like Industrial Info or the Houston Chronicle. But blogs pick up the slack by finding some great stories that often fall through the cracks. For example...

VMA member Emerson Process Control has their very own blog called Emerson Process Experts.

For smaller businesses, try the aptly named Small Business Trends.

Fabrictor.com has their very own, what else?... Fabricator Blog.  

ThomasNet is maybe the best resource on the World Wide Web for manufacturing and industrial information. Their official blog, Industrial Market Trends, doesn’t disappoint.  

If you want to keep up to speed on lean manufacturing, check out the Operational Excellence Tools Blog and Lean Blog.

US News & World Report keeps tabs on what goes on inside the beltway at Capital Commerce.

NAM has a blog that’s recently undergone a renovation, Shopfloor.

Association Inc is a site that’s all about the world of, you guessed it, associations.

If it’s a search engine you’re looking for, a “Google” for manufacturers, try Global Spec.

The ARC Advisory Group does comprehensive research on sensor technology, automation, production, design, and business systems. They have tons of info on manufacturing, energy, and supply chains.

Control Global gives you the who, what, when, where, and how of everything in the world of process automation.

And when you go to VMA.org, you have to check out our Valve Product Finder and Valve & Actuator Industry Online Guide to Suppliers.

Unresolved Economic Crisis Could Destabilize Governments

That was the ABC News headline that summed up a warning Hillary Clinton delivered while on her first trip overseas as Secretary of State. But if you look at other headlines, both here and abroad, one has to wonder if these words of caution are too little too late.

Wall Street Journal: Russia's Industry Slows Far Faster Than Expected

Financial Times of London: Manufacturers Blame Woes on Demand Not Credit

The Globe and Mail: U.S. Crisis Batters Canadian Manufacturing

Los Angeles Times: Japanese Downturn Is Worst In 35 Years

The people of Japan have their work cut out for them. While in the Land of the Rising Sun, Secretary Clinton, like the rest of us,was informed that the country’s Financial Minister was resigning amidst scandal.

In related news, President Obama will visit Canada tomorrow to discuss trade issues.

The Associated Press is reporting that several large labor unions could be on the verge of putting aside past differences, with the political winds currently at their backs:

Union leaders are talking about reuniting under a single, more powerful federation, nearly four years after a nasty breakup split organized labor.

Leaders from 12 of the largest unions, along with rival federations AFL-CIO and Change to Win, have held three meetings since January aimed at setting aside differences and taking advantage of the most favorable political climate for unions in 15 years.

This comes days after the U.S. Senate officially confirmed Hilda Solis as Secretary of Labor. Solis’ past support of organized labor has excited many activists on the left the way no other cabinet member appointed by President Obama has. During her long, drawn-out confirmation process, BeyondChron wrote:

Hilda Solis would be the greatest Labor Secretary since FDR’s Francis Perkins. She has spent her career fighting for economic justice, and now deserves progressive support.

As for the Employee Free Choice Act? President Obama has a lot on his plate, to say the least, and he’s going to have to choose his battles. There’s a good chance that card check won’t make it to the floor of Congress this year, in part because Democrats aren’t totally convinced they have the votes to overcome a filibuster in the Senate.

With cabinet nominees to confirm and a stimulus package to negotiate, one of the most contentious upcoming fights in Congress has, temporarily, been put on the back burner; The Employee Free Choice Act (EFCA). Labor unions, and their Democratic allies in the Senate, will need 60 votes to avoid a Republican filibuster and make “card check” the law of the land.

Democrats have a 58-41 seat advantage in the Senate, with the Minnesota Senate race still tied up in the courts. If Al Franken, who leads by 225 votes, prevails in that race, then the 59 Democratic Senators would only need one Republican to pass the EFCA. That one Republican who might break ranks is Pennsylvania’s Arlen Specter, a longtime ally of organized labor in the Keystone State. Specter is up for re-election in 2010, and some anticipated that he might have to vote with the rest of his party in order to avoid a primary challenge on his right. In 2004 Specter narrowly defeated Club for Growth President Pat Toomey 51%-49% in the GOP Senate primary. But recently Toomey decided to run for Governor in 2010 instead. That means that Specter might be free to vote with the Democrats without fear of alienating his base. But odds are some other Pennsylvania Republican will step up in the coming months.

But even if Specter votes for the EFCA and Franken gets seated, there’s still hope. There’s one Democratic Senator who has refused to say where he stands on the issue, and that’s freshman Sen. Mark Warner (D-VA). NAM President John Engler spoke very highly of the Senator when Warner addressed the association last month. On Jan. 19 Warner spoke to NAM members about the importance of lean manufacturing. The former Governor has a reputation as a savvy business man and under his leadership, Virginia flourished economically from 2002-2006.

The other Democrat who’s expressed some reservations over card check is Sen. Blanche Lincoln (D-AR). But if Maine’s two GOP Senators, who voted with Specter and the Democratic Caucus on the stimulus package, once again cross party lines, even Warner and Lincoln won’t stop the EFCA from being signed into law.

The world economic paroxysms since October have more than upset the prices of commodities. These had begun to sink before the major U. S. banking crisis but since have slumped into steep decline. The Commodities Metals Price Index was around 192 in May and 132 in October. Such shifts have caused headaches. The mining company Rio Tinto announced it is moving away from long-term contracts with customers and instead selling iron ore through the spot market or hybrid securities contracts. The commodities drop brings relief to purchasers of metals, but no one is saying we are entering months of good fortune.

Indeed, one of the reasons given for the drop in commodities prices is the prediction of world recession, meaning lower demand, meaning lower prices. But metals prices, and commodities in general, are still high by historic standards, and analysts are divided on where they think commodities   prices are headed from here. The Economic Times was reporting that analysts believed if copper dropped under $3,100/tonne - the average cost of production -- then the "the copper economy around the globe would go into a tailspin." The London Metal Exchange price on Nov. 19 was $3,500/tonne. Much of last year, and as recently as July, copper was trading at close to $9,000/tonne. Gayle Berry, base metals analyst for Barclays Capital, predicted that base metals prices will continue to slide into the first quarter of next year, but that there they might find a bottom.

David Croson, associate professor of strategy and entrepreneurship at the Cox School of Business at Southern Methodist University, believes the drop in metals prices does not bode well for U. S. valve makers - in two ways. "The drop owes to a decline in demand, which means there will be less demand for valves, which means lower revenue. Second, lower metals prices means valve purchasers will be looking for lower prices, which will tend to lead them to offshore producers whose labor and overhead costs are lower than those of U. S. manufacturers. It's a psychological but very real effect on how buyers make decisions."

Where are prices headed? A posting on Mineweb early in November noted that most analysts believed the world economy would continue to grow, even if just barely [the "western" economies in recession being offset by the "developing country" economies growing] and that this being the case, "when the real picture is understood, there could be a fast and dramatic rise in commodity prices - perhaps not back to the recent bubble-driven highs, but high enough to pull the mining sector out of the current gloom."

Frank Hemsley writing in the Contrarian Profits believes commodities are merely in a correction that is part of a secular bull market. He believes much of the selling of commodities was forced owing to the need to "finance the mess in other sectors." He sides with legendary commodities investor Jim Rogers, who he says, believes this sell-off will only make the commodities bull market longer.

Ultimately, much depends on the Chinese and Indian economies. And China recently announced a two-year $586 billion economic stimulus plan to boost domestic demand. If China can keep growing despite a fall-off in exports to the United States, then commodities prices will remain under pressure to stay high.

I’d like to introduce you to Peter Cleaveland, who you’ll be hearing from on a regular basis. Pete is a new contributing editor to Valve Magazine and ValveMagazine.com. Some readers may recognize Pete’s byline—he was a senior technical editor with Instrumentation & Control Systems (which later changed its name to Control Solutions) from 1982 to 2002. Since then he’s written articles for magazines including Chemical Processing, Control Engineering, Food Engineering, Food Manufacturing, IAN, Industrial Maintenance and Plant Operation, In MFG, Medical Design Technology, Pharmaceutical Processing and Product Design & Development. Before embarking on a writing career, Pete was an engineer in defense electronics and later in industrial (CNC) control manufacturing.

Feel free to post comments about Pete’s articles in our Valve Industry Blog, or contact editor Judy Tibbs if you have ideas for topics you’d like us to explore on this website and in the pages of Valve Magazine.

There seems to be plenty of bad news to go around. The fall 2008 issue of Valve Magazine had several predictions of an economic downturn, and it seems to have arrived. The Institute of Supply Management’s October Report on Business put the PMI at 38.9%, a sharp drop from September’s 43.5%.

It didn’t help the valve industry that the only two industries that showed growth were not big users of valves: Apparel, Leather & Allied Products; and Computer & Electronic Products. Click here for more details.

The Federal Reserve reports that industrial production and capacity utilization had been flat to down on a month-to-month basis for most of 2008, with the decline accelerating in September. The car companies have gone hat in hand to Washington to beg for money, and consumer spending is down.

Yet not all companies are reporting bad news. For example, Flowserve Corp. announced record third-quarter performance including earnings per share, sales and bookings. On Oct. 10, Frank Vargo, Vice President for International Economic Affairs of the National Association of Manufacturers (NAM), said that the trade figures released by the Commerce Department showing that manufactured goods exports continued a rapid growth pace in August, up 15% over August 2007, offers “a positive counterpoint to the otherwise grim economic news from Wall Street.”

And so far things aren’t all that bad for valve makers. The VMA State of the Economy Survey for October 2008 reported that 84.6% of respondents to the latest member survey report an increase in shipments over the previous month, and 65.4% expect to see more business this year.

And remember that the price of crude oil is down, which may help reduce some manufacturing costs, and seems to have changed its relationship to the stock market. When crude was above $100/bbl the Dow tended to follow it in an inverse way, falling as crude rose and rising as it fell. Now the two numbers run in the same direction, perhaps showing that crude has reverted to being a commodity, rather than the plaything of the speculators and hedge funds.

Predictions of how long it will take for the economy to begin growing again vary from 2009 to 2010 and beyond, but we’ve been through rough patches before ,and we’ll do it again. And right now would be a fine time to look for ways to save money in normal operations. We’ve been asking executives at VMA member companies for suggestions on that very topic. We’re putting their responses into an article for the winter 2008 issue of Valve Magazine, so keep an eye out for it.

'You Don't Want to Meet Bill' is the name of a new ad paid for by the U.S. Chamber of Commerce that's airing in key states during the runup to election day.

In addition to trying to influence the presidential race, the CoC is also worried about the numbers of votes they'll have in congress next year. Most everyone agrees that the GOP has virtually no chance of taking back the majority until 2010 at the earliest, but now Democrats are increasingly optimistic about achieving a 60 vote "filibuster-proof" majority in the Senate.

Many agree that 57 or 58 seats is the likeliest scenario for the Democrats next year, but more and more races have become competitive in recent weeks. In Minnesota, Al Franken has been maintaining a narrow lead over incumbent Norm Coleman according to Real Clear Politics average. Jim Martin and Saxby Chambliss are neck-and-neck in Georgia. The race in Mississippi between Ronnie Musgrove and Roger Wicker is very close (Wicker was appointed to the seat following Trent Lott's retirement late last year). Even Senate Minority Leader Mitch McConnell is having a tough time fending off businessman Bruce Lunsford in the heavily-Republican state of Kentucky.

For a long time, political analyst Charlie Cook scoffed at the notion that the Demcrats could control 60 seats after the '08 elections. But these days, he's singing a different tune:

National Journal (09/27/08):

The bottom line is that things have gotten worse for Senate Republicans over the past few weeks, so much worse that a magnitude of losses that seemed impossible just a few months ago now seems entirely possible.

In 2007, the people at Scott Paper Co. figured out that 90,000,000 toilets flushed during halftime of the Colts-Bears Super Bowl. While experts disagree over how much damage this so-called "Halftime Flush" does to water infrastructure on Super Sunday, Scott recruited legendary coach Mike Ditka to put their two cents in:

That's the advice Jim Cahill was giving this week in Washington D.C. at the annual Emerson Users Exchange. Cahill runs Emerson Process Management's official blog: Emerson Process Experts. Blogs are, of course, one of the most popular ways in the internet to express yourself and get information on a variety of topics. But blogs are just the tip of the iceberg.

Sites like Google Reader, Delicious, Linkedin, Twitter, and FriendFeed are changing the way we communicate on the world wide web.

Google Reader is Google's "web-based feed reader." Actually, they do a good job of explaining it themselves:

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Delicious is described as a "social bookmarking web service."

From wikipedia:

Delicious uses a non-hierarchical keyword categorization system in which users can tag each of their bookmarks with a number of freely chosen keywords

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Linkedin, according to their website:

...is an online network of more than 25 million experienced professionals from around the world, representing 150 industries.

When you join, you create a profile that summarizes your professional accomplishments. Your profile helps you find and be found by former colleagues, clients, and partners.

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If you haven't caught wind of the Twitter phenomenom, you will soon. "Tweets" are fast becoming a national obsession.

wikipedia:

Twitter is a free social networking and micro-blogging service that allows its users to send and read other users' updates (otherwise known as tweets), which are text-based posts of up to 140 characters in length.

Updates are displayed on the user's profile page and delivered to other users who have signed up to receive them.

Click here to follow Emerson blogger Jim Cahill on Twitter. 

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FriendFeed is similar to Twitter. It allows you to keep tabs on your friends and family.

From their site:

FriendFeed enables you to keep up-to-date on the web pages, photos, videos and music that your friends and family are sharing. It offers a unique way to discover and discuss information among friends.

You don't need to install anything to use FriendFeed. But if you already use Facebook, you can add our Facebook application to connect your Facebook profile to all the other products you use around the web.

Improving Plant Safety, Reliability and Efficiency, by Curtiss-Wright Flow Control Corporation, a Feature of "Industry Today" on Industrialinfo.com

Industrial Info Resources will host special guest Curtiss-Wright Flow Control as part of this week's "Industry Today" webcast.

Click Here to listen (subscription req'd)

The Employee Free Choice Act has been a hot button issue for more than three years. With control of the White House up for grabs, both sides are going all out in an effort to sway public opinion on the card check issue.

According to the National Assocation of Manufacturers: 

Currently, the preferred method for determining whether or not employees want a union to represent them is a private ballot election overseen by the National Labor Relations Board (NLRB). The NLRB, an independent government agency, provides detailed procedures that ensure a fair election, free of fraud, where employees may cast their vote confidentially without peer pressure or coercion from unions or employers. However, union bosses find secret ballot elections an impediment to unionization. They prefer "card check" elections, where employees are forced to cast their vote in front of union organizers and fellow employees who support unionization. We strongly urge all members of Congress to oppose this “Employee Forced Choice Act.”

This is from America's favorite source of "fake news," The Onion:

Bush Told To Sign Birthday Treaty For Someone Named 'Kyoto'

Enlisted by members of the House and Senate, presidential aide Rebecca Tandy brought a copy of the international climate-change treaty to President Bush's desk Monday and asked him to sign a birthday document for a Japanese dignitary named "Kyoto Protocol."....

If you like that, check out this gem from our friends at ShopFloor.org, the official blog of the National Association of Manufacturers (NAM).

What's on your mind? Share your thoughts here about industry education and training, controlling quality in a global environment, recent editorial you've read about in Valve Magazine or any other issues of interest to the valve community.

Now that Barack Obama and John McCain are the two major parties’ choice for President of the United States, manufacturers and other business leaders have plenty of time before Election Day to get to know the candidate’s positions on issues important to them.

For example, on Obama’s website you can download an extensive report on his Energy Policy which, among other things, proposes an 80% reduction in carbon emissions by 2050 and converting manufacturing centers into clean technology centers:

“Obama supports implementation of a market-based cap-and-trade system to reduce carbon emissions by the amount scientists say is necessary: 80% below 1990 levels by 2050. Obama's cap-and-trade system will require all pollution credits to be auctioned. A 100% auction ensures that all polluters pay for every ton of emissions they release, rather than giving these emission rights away to coal and oil companies. Some of the revenue generated by auctioning allowances will be used to support the development of clean energy, to invest in energy efficiency improvements, and to address transition costs, including helping American workers affected by this economic transition.………

Obama will establish a federal investment program to help manufacturing centers modernize and Americans learn the new skills they need to produce green products.”

On McCain’s site you can review his Economic Plan, which includes his intention to promote competitiveness and lower the corporate tax rate by 10%:

“Ninety-five percent of the world's customers lie outside our borders and we need to be at the table when the rules for access to those markets are written. To do so, the U.S. should engage in multilateral, regional and bilateral efforts to reduce barriers to trade, level the global playing field and build effective enforcement of global trading rules. These steps would also strengthen the U.S. dollar and help to control the rising cost of living that hurts our families.……..

John McCain believes the taxes we impose on American companies should be no higher than the average rate our major trading partners impose on theirs. We currently have the second-highest combined corporate-tax rate in the industrialized world, and it is driving many businesses and the jobs they create overseas.”

What about the VPs?

We may know what we’re getting out of Obama and McCain, but what about their prospective running mates? Throughout history vice presidents have, for the most part, had little influence on a president’s decision making. However in the last 7+ years, Dick Cheney has almost single-handedly redefined the role VPs play. Some even consider him to be a “co-president” of sorts with George W. Bush.

In 1980, GOP presidential nominee Ronald Reagan briefly pondered giving former President Gerald Ford that sort of influential role as vice president in his future administration. But the two men couldn’t work out the details, and the deal fell apart.

Several months ago on the campaign trail, Sen. McCain said that, “The issue of economics is not something I’ve understood as well as I should.” That admission has led many politicos to envision someone with a strong economic background winding up as the GOP vice presidential nominee. Former Massachusetts Gov. and business leader Mitt Romney (NAM President John Engler’s original choice for president in ‘08) may be the favorite right now due to the current state of the U.S. economy. Former Ohio Congressman Rob Portman has also generated a lot of buzz. Portman has recently served as director of the Office of Management and Budget and U.S. Trade Representative.

Other names being floated on the right include Florida Gov. Charlie Crist who, like McCain, now favors offshore drilling; and former Hewlett Packard CEO Carly Fiorina, once considered the most powerful woman in the business world. Minnesota Gov. Tim Pawlenty, arguably THE frontrunner right now for the job, is another name to keep an eye on.

On the Democratic side, expect more of the “co-president” talk to heat up if Obama chooses Hillary Clinton as his running mate. Clinton, unlike her husband, has taken more pro-labor, anti-free trade positions. Among the other names being mentioned: Virginia Gov. Tim Kaine, who’s recently angered some on the left with his pro-business stances and repeal of the estate tax. Kansas Gov. Kathleen Sebelius is someone with whom Obama has a very good rapport. Sebelius’ popularity in her home state has caused many Republicans to jump ship for the Democratic Party.

In the end though, many politicos feel the safest thing for Obama is to shore up his national security credentials. That’s why you hear a lot about former Marine Corps Gen. Anthony Zinni or Rhode Island Sen. Jack Reed, himself a former Army Ranger.

Chris Guy is co-editor of the Valve Manufacturers Assocation’s monthly e-newsletter and is the web coordinator for ValveMagazine.com and VMA.org. He also co-founded and writes for a blog about central Virginia politics.

We know that more and more visitors have been checking out the new ValveMagazine.com, and we’d love to hear from you. How about giving us your thoughts on some of the content we’ve been posting? For instance, our contributing editors have been writing articles about topics we think would be of interest to the valve community. Have we succeeded?

In the first 6 weeks since relaunching ValveMagazine.com, we’ve posted four original articles (all still available for viewing):

·         Manufacturing Woman—Colleen VanderVelde

·         There’s More to Ethanol Than Corn

·         Our Deteriorating Water Infrastructure

·         No Sign of Rollback on Steel Prices

What do you think of these articles? Are you interested in the topics we’ve selected? Do you have some points you’d like to make about one of these subjects? How about sharing some ideas for future content?

And, of course, feel free to give us your feedback on the website as a whole. What are your favorite parts? Is there a feature you’d like to see us add? ValveMagazine.com is a work in progress, and your comments will help us improve the site and further expand our growing community of valve professionals.

ValveMagazine.com has joined the Web 2.0 generation with a new website designed to create a community of valve professionals, complete with the latest news, web exclusive articles, a blog and other resources designed to inform you about the North American industrial valve, actuator and control industry.

Feel free to check out this site and let us know what you think by responding to this post, part of our new Valve Industry blog. Members of the Valve Manufacturers Association will post comments on a wide range of subjects of interest to our community, from the pressing need for basic valve training, to the growing problem of copyright infringement. Perhaps they’ll share an anecdote from a visit to a customer’s plant, make an observation about new product demands, explain why they think a particular industry is poised for further growth, or help explain how a sticky valve problem can be alleviated through preventive maintenance.

This is also a good place to comment on an article you’ve read about in Valve Magazine or give your opinion about one of our web-exclusive articles. Or you can suggest future topics like you’d like to see us cover. Whatever you want to talk about, if it’s related to the North American valve, actuator and control industry, we’d love to hear from you! (Of course, this forum is not designed to promote your company’s products and services, so please, no sales pitches.)

Recently my company, which makes actuators, completed a display trailer with a number of functional products. The trailer has been on the road for a total of 6 weeks, with excellent response from those who have seen our presentations. I recall in years past that many companies had mobile displays and that the benefits appeared to be worth the cost. On the road, I hear stories from distributors about how they and their principles “used to have” a similar display, and they were always very effective. The key phrase is “used to have,” which brings me to ask if others in the valve and actuator industry are still using such displays or if they have all been abandoned.

I understand that arranging mobile display visits is much more complicated than visiting users with simply a catalog in hand, but the user interest seems so much greater. Are valve and actuator manufacturers collectively missing a great opportunity to fully educate valve industry users? I am interested in learning about what others in the industry are doing and hearing about their experiences. And if you’re a valve user, what do you think of this concept?