Frank Vargo, the National Association of Manufacturers’ vice president for international economic affairs, appeared on C-SPAN’s Washington Journal program this morning, a very good and serious segment. You can watch it on the web here. Most of the discussion involved trade, but at one point the interviewer, Greta Brawner, read these paragraphs from today’s Wall Street Journal, “Some Firms Struggle to Hire Despite High Unemployment“:

Manufacturers of high-precision products such as automobile and aircraft parts are in a particularly tough spot. Global competition keeps them from raising wages much. But they need workers with the combination of math skills, intuition and stamina required to operate the computer-controlled metalworking machines that now dominate the factory floor.

At Mechanical Devices, which supplies parts for earthmovers and other heavy equipment to manufacturers such as Caterpillar Inc., part owner Mark Sperry says he has been looking for $13-an-hour machinists since early this year. The lack of workers is “the key limitation to the growth of our business and to meeting our customers’ expectations,” says Mr. Sperry. He estimates the company could immediately boost sales by as much as 20% if it could find the 40 workers it needs.

Vargo reacted:

This is a very serious problem. When we talk to our companies, this is – especially for our smaller companies – this is the most serious problem they face. They just cannot find the skilled workers. The existing workforces are getting older and older, and as they retire, the companies are having a great deal of difficulty in finding the younger workers with the skills. (continue reading…)

Big news in North Carolina last week, with Caterpillar Inc. announcing construction of a new manufacturing and assembly facility in Winston-Salem, North Carolina, to serve the company’s growing global mining operations. The new operation will center on an approximately 850,000 square foot state-of-the-art manufacturing facility for machining, assembly, test and painting of axle assemblies for large mining machines. Five-hundred direct jobs could result.

From the release, “Caterpillar Continues Expansion of Mining Operations; Announces New Facility in North Carolina“:

“Caterpillar has worked hard with many local partners in North Carolina, and we thank them for their assistance during the site selection process,” said Hans Haefeli, Vice President of Caterpillar’s Advanced Components & Systems Division. “We look forward to establishing our new lower powertrain facility in Winston-Salem, which will allow us to substantially increase our capacity, improve process capability, flexibility and flow of our operations. This location will improve our supply chain efficiency and, as a result, allows us to better serve our customers more effectively while reducing operating costs.”

We appreciated the coverage of The Winston-Salem Journal. Its story, “FTCC’s offering helped attract Cat,” highlighted the role of Forsyth Technical Community College and President Gary Green in ensuring Caterpillar of the availability of high-quality workforce training. And, the Manufacturing Institute merits kudos, too.

Caterpillar may also have been swayed by Forsyth Tech’s involvement in the Manufacturing Institute, a nonprofit affiliate of the National Association of Manufacturers that is backed by the Bill & Melinda Gates Foundation.

Forsyth Tech is one of four community colleges in the country participating in the pilot program, which gives students a chance to learn skills in the classroom while acquiring certifications that are recognized by industry. The goal is to better prepare entry-level workers. Students in such areas as welding and machine technology will be eligible for those added credentials. They will have some of the skills that will be needed at the Caterpillar plant, which will produce axle assemblies for its big mining machines.

For more information about the NAM-Endorsed Manufacturing Skills Certification System, go to www.manufacturingskills.org. Coverage…

• Winston-Salem Journal, “‘Jobs you can count on’“
• Winston-Salem Journal, “We’re CAT people“
• The Herald, “Caterpillar to build NC plant“
• The State (S.C.), “Caterpillar picks NC over SC“
• Business Journal of the Greater Triad Area, “$426M Caterpillar plant may yield 500 jobs”
  

From The Detroit News, “Savings, investment key to recovery, CEO says“:

Southfield — To survive and thrive in the years ahead, the U.S. economy needs three things, according to the CEO of construction equipment maker Caterpillar Inc. : more savings, more investment and more exports.

The United States will also have to tame the threatening twin deficits of the federal budget and trade imbalance, Caterpillar CEO James Owens told the Detroit Economic Club on Tuesday.

Owens, a corporate economist who rose to the top of the world’s leading manufacturer of construction and mining equipment, foresees a cyclical recovery ahead for the U.S. economy as it bounces back from the recession.

Also Tuesday, from the San Antonio Business Journal, “Caterpillar supplier working to fill 400 jobs in Seguin“:

City of Seguin saw a huge number of job fair applicants for new employees for the new Texas Power Systems (TPS) LLC manufacturing facility.

TPS — a supplier of component manufacturing and assembly services to Caterpillar — will make and assemble C-9, C-13 and C-15 diesel engines and related products for Caterpillar as well as other clients worldwide.

As such, the company is looking for job candidates in the skilled trades, production and professional/administrative areas.

Robert Samuelson in today’s Washington Post, “A new economic world order?”

This just in: Caterpillar — the maker of earth-moving equipment, including bulldozers and monster mining trucks — reported first-quarter profit of 36 cents a share, up from a loss of 19 cents a year earlier. More important, the improvement stemmed heavily from much higher demand from developing countries. Although machinery sales dropped in North America and Europe, they rose 40 percent in Asia and 7 percent in Latin America. With more exports, Caterpillar is hiring again. The U.S. job increase, though only 600, contrasts pleasantly with the roughly 10,000 layoffs since late 2008 that had reduced the company’s American workforce to about 43,000.

What’s significant about this is that it suggests a much-desired “rebalancing” of the global economy. The world needs a new engine of growth to replace free-spending American consumers and their ravenous appetite for other countries’ exports.

Apropos Caterpillar and trade, last Thursday the Senate Finance Committee’s Subcommittee on International Trade, Customs, and Global Competitiveness held a hearing, “Doubling U.S. Exports: Are U.S. Sea Ports Ready for the Challenge?” Among those testifying was Steve Larson, Chairman and President, Cat Logistics and Vice President of Caterpillar Inc. in Morton, Ill., with comments that addressed the same economic priorities Samuelson raised. From Larson’s prepared testimony:

Today, Caterpillar exports to nearly 200 countries around the world. In 2008 the average in-transit inventory of U.S. machines and engines exported on any given day was about $500 million. Caterpillar spent more than $5 million on logistics each day to export U.S.-built machines and engines, while spending $2.4 billion worldwide on transportationrelated expenses. (continue reading…)

Chairman Henry Waxman (D-CA) of the House Energy and Commerce Committee is calling major corporate executives to a hearing to challenge the accounting charges their companies have made in response to passage of the health care legislation. (Bloomberg, “AT&T, Deere CEOs Called by Waxman to Back Up Health-Bill Costs.”)

From the committee’s homepage:

The Subcommittee on Oversight and Investigations will hold a hearing on April 21, 2010, regarding claims by Caterpillar, Verizon, and Deere that provisions in the new health care reform law could adversely affect their company’s ability to provide health insurance to their employees. These assertions appear to conflict with independent analyses, which show that the new law will expand coverage and bring down costs.

They’re not “claims,” they are financial and accounting decisions the companies are required by law to make and report. President John Engler of the National Association of Manufacturers addressed the company charges in an interview with Fox News’ Neil Cavuto Friday. Engler:

There was a suggestion, “Oh, these companies are overstating this, they’re making it up.” But, remember, the CEO and the CFO sign …under Sarbanes-Oxley under penalty of law the accuracy of the statements. They cannot make this up. Cannot!

The Administration originally tried to spin the charges as hyped or “irresponsible,” but the White House has obviously decided to change its approach. White House economic advisor Valerie Jarrett was just on ABC’s “This Week,” and she responded to the questions about the company charges as serious ones warranting a serious response.

Jarrett argued the companies will benefit more in the big picture, long run, from the health care legislation even with the charge offs. And, she continued, the White House has talked to the Business Roundtable during the drafting of the health care legislation, and agreed with the group’s request to delay parts of the law’s effects until 2013. So the White House now, after a little hemming and hawing, clearly regards the companies’ actions and businesses’ objections as legitimate.

If there’s anything that’s suspect, it’s the always hyperpoliticized accusations of the Oversight and Investigations panel. As The Wall Street Journal editorialized Saturday in “The ObamaCare Writedown“:

Black-letter financial accounting rules require that corporations immediately restate their earnings to reflect the present value of their long-term health liabilities, including a higher tax burden. Should these companies have played chicken with the Securities and Exchange Commission to avoid this politically inconvenient reality? Democrats don’t like what their bill is doing in the real world, so they now want to intimidate CEOs into keeping quiet.

From Associated Press, “Companies say health care costs hard to swallow“: “The health care overhaul will cost U.S. companies billions and make them more likely to drop prescription drug coverage for retirees because of a change in how the government subsidizes those benefits.”

The points of reference are reports by Deere & Company, Caterpillar and Valero that the companies will take charges totaling hundreds of millions of dollars because of the loss of a federal deduction for prescription drug benefits. The move should come as no surprise to lawmakers or the White House. More from AP:

Industry groups say they lobbied hard against the change in the tax rules before it was added to the health care law over the winter.

“It was in all of our letters and communications that went up to the Hill, and the companies were heavily involved in that,” said Dena Battle, a tax specialist with the National Association of Manufacturers.

Nationwide, companies would take a $14 billion hit on their financial statements if all of the roughly 3,500 companies receiving the subsidies continued to do so, according to a study by Towers Watson, a human resources consulting firm.

The Wall Street Journal reports administration officials saying the companies are exaggerating the impact. From “Companies Take Health-Care Charges“:

“During the past year, I have heard from CEOs from across the country that skyrocketing premiums are crippling the competitiveness of their companies,” said Commerce Secretary Gary Locke. “It is simply not responsible to suggest that the new health-care law is bad for business.”

In the litany of efforts to marginalize critics of the health care bill, that’s pretty mild, but please, Mr. Secretary. These companies are not issuing inflammatory news releases, they’re making official accounting judgments that are reported to the SEC. Making misleading or false statements, THAT would be irresponsible.

The Senate Republican caucus highlighted Caterpillar’s $100 million hit, recalling President Obama’s appearance at the company last year in support of the stimulus bill:

PRESIDENT OBAMA: “So what’s happening at this company tells us a larger story about what’s happening with our nation’s economy, because, in many ways, you can measure America’s bottom line by looking at Caterpillar’s bottom line. (President Obama, Remarks To Caterpillar Employees, 2/12/09)

Reuters, “Deere sees $150 mln hit from healthcare reform“:

NEW YORK, March 25 (Reuters) – Farm equipment maker Deere & Co (DE.N) expects after-tax expenses to rise by $150 million this year as a result of the healthcare reform law President Barack Obama signed this week.

Most of the higher expense will come in Deere’s second quarter, the company said on Thursday. The expense was not included in the company’s earlier 2010 forecast, which called for net income of about $1.3 billion.

Caterpillar Inc (CAT.N) said on Wednesday it would take a $100 million after-tax charge to earnings in the first quarter because the new law will lower its tax deductions

Also, Bloomberg, “Obama Tax’s $14 Billion Charge Starts at Caterpillar”

Bloomberg notes the NAM and Chamber of Commerce’s opposition in the article, “Business Groups Press Lawmakers to Oppose Health-Care Measure, as well as:

“The measure would drive up labor costs to the point of forcing job losses,” the National Retail Federation said in its letter. “A ‘transparent procedural ploy’ for passing the package would harm Congress’s reputation.”

Caterpillar Inc., the world’s largest maker of construction equipment, in a letter said the measure would raise its cost by $100 million in the first year.

“We can ill afford cost increases that place us at a disadvantage versus global competitors,” wrote Gregory S. Folley, vice president and chief human resources officer at Peoria, Illinois-based Caterpillar, in the March 18 letter.

More …

• Dow-Jones, “UPDATE: Groups Make Final Push To Influence Health Bill Vote“
• MarketWatch, “Pros, cons take last shot at health-care bill“

We previously posted the NAM’s key vote letter in opposition.

And, in case the thought crossed your mind, no, House leadership did not find a way to use the reconciliation process to sneak tort reform into the health care bill. Total dollars spent on medical liability reforms? Zero.

From Dow Jones (hat tip, Drudge), “Caterpillar: Health care bill would cost it $100M“:

In a letter Thursday to House Speaker Nancy Pelosi (D-Calif.) and House Republican Leader John Boehner of Ohio, Caterpillar urged lawmakers to vote against the plan “because of the substantial cost burdens it would place on our shareholders, employees and retirees.”

Caterpillar, the world’s largest construction machinery manufacturer by sales, said it’s particularly opposed to provisions in the bill that would expand Medicare taxes and mandate insurance coverage. The legislation would require nearly all companies to provide health insurance for their employees or face large fines.

The Peoria-based company said these provisions would increase its insurance costs by at least 20 percent, or more than $100 million, just in the first year of the health-care overhaul program.

“We can ill-afford cost increases that place us at a disadvantage versus our global competitors,” said the letter signed by Gregory Folley, vice president and chief human resources officer of Caterpillar. “We are disappointed that efforts at reform have not addressed the cost concerns we’ve raised throughout the year.”

Wall Street Journal, “Factories Get Set to Hire“:

Manufacturers are seeing more signs that the U.S. economic recovery is on a solid footing, opening the way for new hiring as well as call-backs for factory workers laid off during the depths of the recession.

Caterpillar Inc., the Peoria, Ill.-based heavy-equipment maker, has brought back 600 workers in the past 60 days, including 100 recalled to an engine plant in Indiana last week. Allen Edmonds Shoe Corp. has been relying on overtime to meet growing demand, but is now preparing to start adding new workers at its U.S. plants in coming weeks.

The Federal Reserve said Wednesday that industrial production, which includes utility and mining output, as well as manufacturing, rose 0.9% in January, the seventh straight monthly increase. Factory output rose a solid 1%, with improvement across a wide range of industries, including apparel and appliances. Output of motor vehicles and parts was particularly strong, rising 4.9%, which economists attributed to pent-up demand and government incentives that fueled traffic to dealers.

From informal conversations with NAM member companies, we do get a sense that employers are starting to consider the possibility of being hopeful in the recovery. David Huether, the NAM’s chief economist, commented on the latest Federal Reserve’s industrial production numbers on Wednesday, “While recent signs are encouraging, the recovery is unlikely to be sustainable at this rapid pace as much of it was driven by short-term inventory and one-time government spending.”

The Fed’s news release is here.

• Associated Press, “Economic recovery showing endurance“
• Bloomberg, “Industrial Production in U.S. Rose 0.9% in January“
• Inside Indiana Business, “CAT Recalls About 100 Workers“