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issue: October 2003 APPLIANCE Magazine

Guest Editorial
Eating the Elephant

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by Evan Gaddis, president, Gas Appliance Manufacturers Association (GAMA)

If you perceive a scolding as you scan this article, you are partially correct. We should all be more aggressive in protecting our future. Let me try to explain the circumstances of U.S. manufacturing as I understand them.

GAMA President Evan Gaddis

If the recently released study, Securing America's Future: The Case for a Strong Manufacturing Base, is correct, our standard of living and jobs for our children are in jeopardy. The study was conducted by Joel Popkin at the request of the National Association of Manufacturers, Council of Manufacturing Associations. The study concludes, "If the U.S. manufacturing base continues to shrink at its present rate and the critical mass is lost, the manufacturing innovation process will shift to other global centers. Once that happens, a decline in U.S. living standards in the future is virtually assured."

We see manufacturing companies moving their operations to locations outside the U.S. at a steady and now alarming rate. The CEOs are charged with making money for shareholders and keeping the stock strong, and they are accomplishing the task - but at what cost? Let's hope it's not our future.

So what is causing this exodus, and what motivates the CEO to move manufacturing operations overseas? The answer is clearly advantage, and therein lies our problem.

Some economists believe there is a natural aging process in which our economy is moving from a production to a service economy. There may be some truth to this, but others would tell you that U.S. companies are being driven overseas by over-regulation, a legal system that is out of control, and already outrageous and rapidly rising health care costs for employees. These are disadvantages not encountered in most locations abroad. And that is the advantage the CEO is seeking.

How do we stop this manufacturing migration? I think it is important to focus on the heart of the issue, to eat this "elephant" one bite at a time. The elephant by another name is product liability, class-action lawsuits, or needless regulation. Trial lawyers are taking advantage of a liberal court system that allows enormous awards bearing no relation to the harm alleged - for example, a U.S. $250 million award to a single plaintiff in an asbestos case. I'm sure you are aware of doctors moving out of states or quitting the practice of medicine due to the high cost of medical malpractice insurance.

We at GAMA, the U.S. Chamber of Commerce, and many other organizations are working to educate the manufacturer, the public, and the legislators about this dangerous trend. It is important that we recognize the elephant for what it is, that we secure our future, and that we stop the migration of manufacturing out of the U.S. We need legal reform to address the rising cost of litigation, especially in the areas of medical liability, class actions, and product liability. We must encourage the U.S. Senate to pass class-action reform legislation that was recently approved by the U.S. House. We should encourage tax incentives to spur research and development and to make manufacturing in the U.S. so attractive that we eliminate the lure of foreign climes. And we need to find the right balance of worker health and safety and a clean environment based on sound science and cost-effective means. We need to be more aggressive about securing the future for our children. This is a big job, but we can get it done, one bite at a time.


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