The Milwaukee Journal-Sentinel, which diligently covers manufacturing and Wisconsin industry, today reports on the latest Institute for Supply Management’s manufacturing report and the condition of the state’s manufacturers in “U.S. manufacturing strengthened in August.”  

ISM’s manufacturing index rose to 56.3 percent in August, up from 55.5 in July, and manufacturing has expanded for 13 straight months, indications that a “double-dip” recession is unlikely. Still, mixed signals.

Business has not rebounded to pre-recession peaks, but it’s much better than it was in 2009, said Dave Sucharski, general manager of Miro Tool & Manufacturing Inc., in Waukesha.

“Right now, all of the sectors of our company are busy,” he said. “The only downside is that orders are coming in with very short lead times.” To conserve cash, “customers are ordering things just when they need them,” he said, “and sometimes later than that.”

JS reporter Rick Barrett also notes points raised in the NAM’s Labor Day Report for 2010, released Wednesday.

“We have had four consecutive quarters of economic growth, but much of the increase was temporary in nature,” said David Huether, chief economist for the National Association of Manufacturers.

“More than half of the upturn in the economy over the past year was from business restocking inventories. Now, with inventory-to-sales ratios back to reasonable levels, this source of growth will likely fade,” Huether said.

The NAM’s Labor Day report is available at http://bit.ly/LaborDayReport .

The ISM index — available here – rose by an unexpected amount, which sparked probably too enthusiastic of reports about the economy, e.g., the Wall Street Journal blog entry, “Surprising Many, Manufacturing Is Bright Spot.” Congress is back soon, and could easily tarnish that brightness.

As NAM President John Engler wrote in the introduction to the Labor Day report:

Any serious Labor Day analysis of the U.S. economy and employment must address the uncertainty factor. Costly tax and regulatory proposals enacted or being considered by Congress and the Obama Administration make employers apprehensive, investors cautious and consumers anxious. Policies that expand government, taxes and regulations also pose serious questions about the ability of business in the United States to compete in the global marketplace. The predictable result is a faltering recovery and troubling times for U.S. workers.

From The Milwaukee Journal-Sentinel and reporter Rick Barrett, who have done an excellent job with this story, “Snail’s pace of Bucyrus loan worries officials“:

The U.S. Export-Import Bank on Wednesday took the first step toward reversing an earlier decision that had put up to 1,000 U.S. jobs and $600 million in Bucyrus International Inc. sales at risk. But the process is taking so long, Bucyrus’ chief executive is worried the contract still could disintegrate, sending the orders – and jobs – to China. 

The bank, which earlier had refused to finance the sale of Bucyrus coal-mining equipment for a power plant in India, on Wednesday voted 3-0 to put the sale back on track. Two more votes remain – one on the project’s financial aspects, and the other for final approval. There’s also a 35-day period during which the deal will be sent to Congress for comments. 

The delays are a concern, said Bucyrus CEO Tim Sullivan, who says the Indian power plant operator, Reliance Power Ltd., could grow frustrated and turn to China or another country for mining equipment since it needs the shovels, draglines, trucks and other gear in early 2011. South Milwaukee-based Bucyrus also needs to start making the equipment soon to meet Reliance’s timeline. 

The story quotes the NAM’s Pat Mears, recounting how the Ex-Im Bank is less aggressive than its foreign counterparts in promoting exports.

Here’s the Export Import Bank’s news release, “Ex-Im Bank Approves Preliminary Review of Export Financing Application for India’s Sasan Power Plant.” Unfortunately, the official statement shows the Bank to be still paying obeisance to the self-imposed environmental dictates that sidelined the project in the first place.

“We are pleased that Reliance is making this commitment to renewable energy, which allows us to sustain U.S. jobs and promote both conventional and renewable energy exports,” said Ex-Im Bank Chairman and President Fred P. Hochberg.

Chairman Hochberg also noted that, “this transaction was also made possible because of Anil Ambani’s leadership and vision in diversifying Reliance Power’s production portfolio of energy projects in India. Reliance Power’s efforts will benefit the people of India and Ex-Im’s efforts will benefit U.S. energy exporters.”

So Reliance Power in India is also doing just enough in the way of alternative energy projects to give the board cover for voting for this specific financing. But the loyalty to environmentalism remains, institutionally limiting the Export-Import Bank’s ability to carry outs basic mission — supporting U.S. exports.

How in the world could the Ex-Im Bank vote down financing for a solid project in the first place, costing a potential $600 million in sales and 1,000 job? Especially now, as the Milwaukee Business-Journal reports, “Milwaukee loses one-third of manufacturing jobs in 10 years: “The Milwaukee metropolitan area has lost 54,800 manufacturing jobs over the last 10 years, the 15th-biggest drop among the largest 100 metros in the country, according to a new Business First of Buffalo analysis.”

While most recent attention toward the Export-Import Bank has been on its wrong-headed decision to reject loan guarantees for an Indian power project — threatening $600 million in U.S. equipment sales — another mishandled project demonstrates institutional problems the Ex-Im Bank must address. From NAM President John Engler’s column in The Hill, “Rejection of U.S. deals and jobs undermines goal of doubling exports“:

The other troubling case involves a potential $2 billion sale of commercial satellite equipment and services by Lockheed-Martin to the Iridium Corporation. Held back by excessive rules and restrictions, Ex-Im could not make its decision in time — even though expedited financing was the competitive factor in determining who would win the bid, Lockheed or Thales, a French company.

Given the same time limitations, the French export credit agency, COFACE, committed to finance the deal and Thales was awarded the contract. The French decided that they wanted their company to get the sale; the same cannot be said about the United States.

This represents a major missed opportunity for the United States. The deal would have supported an estimated 2,000 highly paid, skilled U.S.-based engineering, design and manufacturing jobs. It would have increased U.S. exports by $2 billion, much of that from U.S. small and mid-sized companies in Lockheed’s supply chain. A successful U.S. bid would have also supported our domestic satellite advanced technology base — once first in the world but now trailing the European Union’s.

The National Association of Manufacturers has been vocal in calling for the Export-Import Bank to reconsider its 2-1 vote denying loan guarantees for a power generation project in India, a denial that could cost Bucyrus, the Wisconsin-based equipment manufacturer, and its suppliers some $600 million in sales and 1,000 jobs. (See earlier posts.)

This one, misguided decision aside, there are bigger issues affecting the Export-Import Bank that need to be addressed. NAM President John Engler addressed some of them in a new op-ed published at The Hill, “Rejecting U.S. deals and jobs undermine goal of doubling exports“:

Governments of other nations operate similar export-financing programs, but with more substantial government backing and without attaching as many anti-competitive restrictions to projects.

Ex-Im Bank’s financial support for exports reached a record $21 billion last year. But its counterpart north of the border, Export Development Canada, provided $80 billion to support Canadian exports, an even more impressive number when you consider the relative size of the U.S. and Canadian economies.

Japan’s equivalent agency did nearly $140 billion in support last year!

The Export-Import Bank is also is saddled with restraints that its competitors are not — environmental impact studies, economic impact tests, requirements that U.S.-flagged vessels carry the financed cargo, etc. These non-trade objectives are well-meaning but surrender advantages so other countries get their power plants and other equipment but from non-U.S. suppliers using non-U.S. financing.

Tim Sullivan, President and CEO of the Wisconsin-based manufacturer Bucyrus, was on CNBC’s Squawkbox this morning to discuss the Export-Import Bank’s handling of the loan guarantees to support Bucyrus’ sale of mining equipment to build a mine and power plant in India. The Ex-Im Bank rejected the financing because the Indian project involved coal, in the process surrendering potentially $600 million in sales to foreign competitors and costing 1,000 U.S. jobs. As we reported last week, the decision provoked intense reaction from industry and elected officials, and the Ex-Im Bank is reconsidering its decision.

Sullivan:

I think this will get done. There has to be a memorandum of understanding with our customer that hopefully will be completed this week, and then next Thursday it will go back for a revote. I am confident, I think, because of the situation today that this deal will get down.

We’ve got four more pending, though, and those deals will not get done with the current environmental policies at U.S. Eximbank.

And later in the interview:

I have a standing invitation from [Ex-Im Bank] Chairman Hochberg to come to Washington. We’ve got to talk about the follow-on. We have to get these policies aligned with U.S. technology, not Chinese technology. Otherwise, we’re out.

And you know, if you look at what’s in the marketplace today, there’s 250 gigawatts of coal-fired power plants being constructed. That’s a billion tons of coal. We have a trillion tons of reserves of coal in 77 countries around the world. We’re going to burn coal. This puts us on the sidelines. It basically puts us out of business, and it tells manufacturers like myself, don’t expand in the United States. If you’re going to expand, go to some of the countries that have that capability to back your products.

• Milwaukee Journal-Sentinel, “Bucyrus chief dug deep for support “
• Milwaukee Journal-Sentinel, “Bank’s reversal lifts shadow over Bucyrus“

President Obama speaks in Racine, Wisc., today on the economy. We trust this Wall Street Journal editorial was on the top of his pile of pre-trip briefing materials this morning. From “The Bucyrus Travesty“:

The manager of a Milwaukee custard stand on Friday asked Joe Biden for lower taxes in return for dessert, and the Vice President told him not to be “a smartass.” Perhaps on his own visit to Wisconsin today, President Obama will have a better answer for the latest blue-collar casualties of his Administration’s anticarbon obsessions.

Last Thursday, the U.S. Export-Import Bank denied loan guarantees to Reliance Power Ltd., an Indian utility building a coal-fired power plant near Sasan, India. Bucyrus International Inc., a South Milwaukee-based manufacturer, was ready to export some $310 million in mining equipment—and about $600 million over three years—but Reliance’s order was contingent on the favorable financing rates provided by the Ex-Im guarantee. Reliance cancelled the order Monday morning and will reboot with Bucyrus’s competitors in China or Belarus if the bank doesn’t reverse in the coming days.

The Reliance-Bucyrus deal met all of the Export-Import Bank’s qualifying criteria, including the tougher environmental and CO2 standards that the White House has imposed over the last several months. But the bank nonetheless rejected the project in a 2-to-1 vote under pressure from the Treasury and State Departments. “We were absolutely flabbergasted and shocked,” Bucyrus CEO Tim Sullivan told us in an interview.

The Business Journal of Milwaukee: “Feingold, NAM also urge Export-Import Bank to rethink Bucyrus decision“:

U.S. Sen. Russ Feingold and the National Association of Manufacturers have joined in urging the U.S. Export-Import Bank to reconsider its decision to deny financing of mining equipment for a coal-fired power plant in India, which has effectively canceled a $600 million equipment order for Bucyrus International Inc.

 Milwauke Journal-Sentinel, “Calls mount mount for Export-Import Bank to reverse Bucyrus decision“:

Former Michigan Gov. John Engler has urged the U.S. Export-Import Bank to reverse its recent decision that denied loan guarantees for mining equipment that would be made by Bucyrus International to supplying coal for a power plant in India. 

Engler, now president of the National Association of Manufacturers, said he spoke with Bank Chairman Fred Hochberg. 

AP reports that Bucyrus chief executive Tim Sullivan has spoken with officials at the U.S. Export-Import Bank, who have told him they are having detailed discussions with the White House about it. It’s hard to see how President Obama can travel to Racine, Wisc., Wednesday to talk about the economy and not have this issue resolved.

From The Milwaukee Journal-Sentinel, “U.S. agency’s action may kill Bucyrus deal, cost 1,000 jobs”

MILWAUKEE — Up to 1,000 jobs at Bucyrus International Inc. and its suppliers could be in jeopardy as the result of a decision by the U.S. Export-Import Bank, funded by Congress, to deny several hundred million dollars in loan guarantees to a coal-fired power plant and mine in India.

About 300 of those jobs are at the Bucyrus plant in South Milwaukee, where the company has 1,410 employees and its headquarters. The remaining jobs are spread across 13 states, including Illinois, Minnesota and Indiana.

On Thursday, the Export-Import Bank denied financing for Reliance Power Ltd., an Indian power plant company, effectively wiping out about $600 million in coal mining equipment sales for Bucyrus, chief executive Tim Sullivan said.

NAM President John Engler spoke to the Export-Import Bank chairman, Fred Hochberg, on Monday, and issued a statement following the conversation:

This is a case of ideology winning over common sense and one thousand American jobs. The mine will be dug and the plant will be built. Advanced technology will be put to use to minimize the environmental impact. The only question is whether U.S. companies will supply the equipment or if Reliance Power will turn to non-U.S. suppliers.

In Wisconsin and all across the country, American workers think the answer to that question should be clear.
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