Decline of US smokestack industries worries their high-tech suppliers
Palo Alto, Calif.
This is the last place one would expect a conference on the future of smokestack America. After all, this is Silicon Valley, home of high-technology giants like Hewlett-Packard and National Semiconductor. The decline of the nation's old-line industries - steel, autos, and rubber - just hasn't been a concern here.
That may be changing.
After enjoying years of heady growth, an increasing number of companies here are expressing concern that the decline of heavy manufacturing in America could have a negative impact on their own operations. The reason in a nutshell: Heavy manufacturers provide a vital market for high-tech products, buying more silicon chips and other electronic parts than any other industry.
When the Stanford University School of Business held a conference here recently on the future of heavy manufacturing in America, more than 1,000 representatives of big business, organized labor, and the government attended. Not surprisingly, many industry participants came from high-tech firms - robotmakers, chip producers, and computer concerns - that had been thought immune to downturns in old-line manufacturing.
Although proposals to strengthen core industries such as automobiles and steel differed widely, nearly everyone who spoke at the conference agreed steps can be taken to restore heavy manufacturers' competitive edge. Among speakers were Lee A. Iacocca, chairman and chief executive of the Chrysler Corporation; John A. Young, chairman of President Reagan's Commission on Industrial Competitiveness; Ed Zschau, a former Harvard Business School professor and now a congressman from California; and Charles L. Schultze, chairman of the Council of Economic Advisers under President Carter.
Mr. Young, who in addition to serving on the President's commission is also president of Hewlett-Packard, said manufacturers' biggest problem continues to be the slowed growth in worker productivity. He called for more profit sharing by major corporations and for increased financial support by the government to colleges and universities offering technical training courses. Mr. Young also noted that the Commission on Industrial Competitiveness will soon consider a proposal to offer tax breaks to persons saving for vocational education via accounts similar to individual retirement accounts.
Representative Zschau, who has headed a congressional task force on high technology, cited government regulation as heavy manufacturers' biggest problem. In particular, he said the government's antitrust policy discourages companies from joining to do research. And he said the corporate tax rate, despite recent cuts, continues to discourage new ventures by big companies wanting to improve their manufacturing capabilities.
Perhaps the most contentious issue was whether the United States should have an industrial policy favoring basic industry. Mr. Iacocca told reporters such a policy is vital to maintain American industry's competitive position in world markets and save thousands of jobs. He called for a program in which old-line manufacturers would make concessions, such as cutting wages and installing new plants, in return for government aid.
''If we don't have an organized industry policy, we lose our industry and the country loses its future,'' Mr. Iacocca said.
Zschau and Schultze disagreed. ''It is difficult for anyone to look into the future and see which will be the key industries,'' Zschau said. ''To think that the government can do so is folly.''
A representative from Apple computers brought out surprising findings challenging longstanding beliefs - in particular, that high interest rates have figured prominently in basic industry's demise. Controller Debi Coleman said her company will earn a satisfactory return on its new Macintosh computer even with using interest costs of 25 percent in return calculations.
The same Apple executive also seemed to rebut the belief that manufacturing in the Far East is less expensive because of lower labor costs. Reporting on a lengthy study, she said the company expects to save tens of thousands of dollars this year by producing Macintosh in nearby Fremont, Calif., as opposed to an Apple plant in Singapore. The reasons, according to Miss Coleman: lower shipping and communications costs, less management time spent keeping track of inventory, and less time devoted to thwarting computer counterfeiters with easy access to foreign plants.
''A lot of times people say, 'Gee, it's $30 an hour less in labor costs if we do it in Singapore,' '' Miss Coleman said. ''But the trade-off might be a three-month inventory pipeline. You have to consider these hidden factors when you're deciding where to build a factory.''