Why America Needs More STEAM Power

I must admit it has been exciting to see manufacturing making headlines so much of late. The topic of manufacturing appears to be a current darling of the political talking heads. Much has been discussed about the role of manufacturing in the U.S. economy and how manufacturing will be the engine to power us out of this sluggish economy.

When you look at the data it is evident that manufacturing has all the right stats to power growth in our economy. The higher wages paid versus service sector jobs ($17k per year) and the number of companies supported in the supply chain for every manufacturer (multiplier effect of a $1.50 per $1 spent) just to name just a few.

On the flip side of all this positive talk about how manufacturing will drive our economic recovery is another reality — the vast skills gap facing all manufacturers in America.

For manufacturing to exist in this country it has to be highly automated and on the cutting-edge of technology. These changes are driving the need for a manufacturing worker that is different from decades past. While much is written about the need for a STEM (science, technology, engineering, and mathematics) based education, school districts and states are not hearing the message.

In February of this year, The State Board of Education decided California eighth-graders will no longer be required to take Algebra 1... This is taking our children’s education in the wrong direction! We're losing focus on STEM, but is it the silver bullet we hope it is? Many people are coming forward now saying that advanced manufacturing needs more than just STEM focused lessons. What's missing? Art.

STEAM (science, technology, engineering, ARTS, and mathematics) may seem to be an unlikely pairing but it is not as strange as you may think.

Innovation requires a creative mind and what better training ground than the arts to open up the realms of creativity? For example, 3D and additive technologies require the ability to create in multiple dimensions. But I caution how we build a STEAM based curriculum — it troubles me to see so many graduates earning degrees without practical application skills needed to make them employable.

America at one time had one of the best educational systems in the world. Even with the decline of the system, we're still leaders in innovation and the entrepreneurial spirit. We must find a way to bring STEAM based curriculum to our K-12 system, and it is critical that we make these programs engaging and hands-on. FIRST robotics is a great example. Together, we need to push our kids to think creatively and scientifically at an early age.

Then, we have to continue supplying the most current STEAM based knowledge to our universities and community college systems. We need to show the world how this can be done, and that it can be done. For if we can excel at solving this challenge, America will be able to STEAMroll the rest of the world.

Someone help! Is there a machinist in the house?

I fly often, and often enough, that I have actually been on several flights where the call for a medical expert had been requested. The good news has always been that the call was answered in each of these instances.

As many of you know I get pretty passionate about the state of manufacturing in the United States, sided with a deep care for STEM education opportunities we are providing for our kids. The fact that as a nation we tend to no longer value skilled labor is a crime. It has severely affected our ability to remain the largest manufacturing economy in the world, but more disturbing, is that we have limited the opportunities for our children to exploit their talents and entrepreneurial spirit.

I was recently listening to some talking heads on television that said manufacturing was dead because we are now about the use of technology. What an ignorant statement! But unfortunately that is the belief still held by too many Americans. They still think of manufacturing like it existed in the days of Henry Ford — dirty, low wages, oppressive environments, relying on massive amounts of unskilled labor. We have come so far from that!

Almost every machine on my production and machining floor is run by a computer. Guess what, computers don't program themselves. Someone has to write the program that can create the final part needed, and if that’s for a multi spindle or axis machine, that starts to get fairly complicated.

Making chips fly and producing something out of raw materials is an art form as well as a technical skill and we are losing both at an alarming rate in this country.

The impact of this really hit home during my last quarterly sales meeting with my regional sales managers. As each one reported on their top priorities, they talked about the key issues with each customer and what was needed for the project to go to production. Over and over I heard them report that customers can't find the skilled labor they require to make their product. Granted, this is more than just machinists; their request for help includes needed support from mechanical engineers, CAD specialists, technical sales people, protection workers, programmers etc.

How sad that with the rate of unemployment we have in this country, we still don't have the skill sets we need to capitalize on the manufacturing opportunities we have available. How scary it is that when we call out for skilled and technical employees, the response is mostly silence.

Shame on us.

This week I was quoted in the WSJ. See the article below.

ECONOMY

AUGUST 11, 2010

Firms Spend More—Carefully

Equipment Purchases Make Up for Recession Cutbacks, Not to Raise Production

By JUSTIN LAHART

(Please see Corrections & Amplifications items below)

Companies in the U.S. are stepping up purchases of equipment and software at the fastest pace since the late 1990s. But much of the spending is aimed at replacing older equipment after recession-related postponements or to improve efficiency—not to raise production or boost hiring.

After one of the sharpest declines in spending on equipment and software, companies in the U.S. boosted their spending on such products at a 21.9% inflation-adjusted annual rate in the second quarter, after the first quarter's 20.4% increase, the U.S. Commerce Department said.

The second-quarter jump was the biggest since 1998, when enthusiasm for technology was running hot. It was a much stronger increase than what was seen after the previous two recessions.

That stands in sharp contrast to the muted hiring and lackluster consumer spending that have characterized the economy since it began growing again in the middle of last year.

International Paper Corp., for instance, cut capital spending to $534 million last year from $1 billion in 2008. This year, it expects to raise spending to about $800 million.

Some of the company's higher spending will add capacity in developing markets such as Brazil, where demand for paper products is growing. But in the U.S., where the bulk of International Paper's operations are, the money will go into maintenance, improving energy efficiency and meeting regulatory standards, rather than boosting capacity.

"Businesses invest when there's demand," said International Paper Chief Executive John Faraci. "There's not going to be any [U.S.] capacity expansion, or for that matter job creation, until you see an increase in demand."

American companies, particularly manufacturers, recently have been raising output without adding workers.

The Labor Department reported Tuesday that productivity, measured in output per hour of work, fell at a 0.9% annual rate in the second quarter from the previous quarter. It was the first quarter since the end of 2008 in which productivity didn't rise. That's a hint that companies may soon need either to increase workers' hours, hire new ones or install more labor-saving equipment.

Companies may keep increasing spending on equipment, computers and software even if they don't add capacity. Nomura Securities economist David Resler calculates that businesses didn't spend enough in 2009 on new equipment to offset the wear and tear on their existing equipment. As a result, the capital stock—the inflation-adjusted value of all business equipment and software in place in the U.S.—dropped 0.9% from 2008—its first decline since World War II.

Mr. Resler estimates that even with the recent sharp increases in capital spending, the total capital stock is still $100 billion less than it was two years ago. That suggests that capital spending could continue to grow strongly the rest of the year.

The rebound in capital spending and strong demand from overseas markets such as China have boosted companies that make equipment and software. Revenue at technology companies in the S&P 500 index was up an estimated 21% in the second quarter versus a year earlier, according to Thomson Reuters, and profit rose by 65%. Capital equipment makers such as Caterpillar Inc., Rockwell Automation Inc. and Illinois Tool Works Inc. reported large second-quarter sales and profits gains.

Sales at Bishop-Wisecarver Corp, a Pittsburg, Calif.-maker of motion systems used in everything from wood-shop machinery to food-processing plants, are up sharply from last year, and are on track to be as strong as in 2007, before the recession kickded in.

Bishop-Wisecarver President Pamela Kan thinks some of the rebound has come from companies trying to make plants more efficient, but she worries that many customers are catching up on projects put off during the downturn. That makes it difficult for her to gauge how strong business will be in the future and plan accordingly.

"I don't know how much of this is just pent-up demand," she said. "It's a finger in the wind now."

As a result, she's hesitant to hire, but is looking to add a few workers to the company's payroll of about 45. She doesn't plan to make any big purchases, in part because the company did major upgrades to its equipment right before the recession hit.

In general, manufacturers, which are benefiting from the global economic upswing, are boosting capital spending more than services companies are.

In a survey conducted by KPMG International in June, 35% of U.S. manufacturing executives said they expected to increase capital spending over the next year, while just 7% said they expected such spending to decline. In comparison, 27% of service company executives expected to increase spending, with about 9% expecting to spend less.

On Monday, Carrols Restaurant Group, which operates Burger King franchises and other restaurants in the U.S., said it expected to make capital expenditures of $40 million to $45 million this year, up from $37 million in 2009, but below 2008's $62 million. Most of that increase will be devoted to remodeling and equipment purchases at existing restaurants.

"We have limited capital spending for new-unit development this year so that we can continue to reduce debt," said company President Dan Accordino.

Ariens Co. of Brillion, Wisc., which employs about 1,000 workers making lawn mowers and snow blowers, has been buying capital equipment steadily over the past two years, taking advantage of the flood of inexpensive machinery that came on the market as other companies pulled back. Those purchases were aimed not at increasing Ariens' manufacturing capacity, but rather to bring in house work that it used to have outside suppliers perform.

Last year the company bought a pulley-making machine from a former General Motors Co. supplier for $1 million—a new one would have costs $4 million, said CEO Dan Ariens—and began making pulleys it used to buy. "It kept about 15 of our people busy," he said, helping the company avoid layoffs.

Mr. Ariens reckons he will keep buying equipment, but that he will be getting less bang for his buck in the year ahead than he has in the past year.

"I'm pretty confident that the cost of hardware and software is going to go up as the recession abates," he said.

Corrections & Amplifications

International PaperCorp. plans capital spending of about $800 million this year. This article incorrectly gave the figure as $800 billion.

Write to Justin Lahart at justin.lahart@wsj.com