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U.S. Manufacturers Plan to Modernize Factories by Kent Hoover, Washington Bureau Chief Sacramento Business Journal, April 3, 2006

Even though they expect only modest growth this year, most manufacturers plan to increase capital spending, primarily to modernize and increase efficiency.

That's according to a survey done by the National Association of Manufacturers.

The survey also found that 53 percent of manufacturers plan to add workers. The demand is greatest for skilled workers for production jobs. More than half of manufacturers say they currently have positions that are unfilled because they can't find qualified candidates.

"I have at least five empty slots, some of which have been empty for months," said Ronald Bullock, chief executive of Bison Gear & Engineering Corp. in St. Charles, Ill. "I need more people to keep up with demand, but I can't just hire anyone off the street. This is complicated work. We need people with strong backgrounds in math, science and computers."

But costs -- healthcare, materials and energy -- are hammering manufacturers, concluded the survey. Almost half have seen energy prices rise by more than 25 percent in the past year.

"The government encourages us to rely more and more on natural gas for energy, and then makes it virtually impossible to access more supplies of natural gas," said Tony Raimondo, chairman and chief executive of Behlen Manufacturing Co. in Columbus, Neb. "The result is the highest natural-gas prices in the world."

More than 70 percent of manufacturers export their products to other countries, and 41 percent of them expect their exports to increase this year.

"The rise in exporting is a win for manufacturers," said John Engler, president of the manufacturers' association.

But a new report released by the U.S. Business and Industry Council concluded that more than 100 U.S.-based manufacturing industries lost a big share of their home markets to imports from 1997 to 2004. More than 30 industries lost nearly 50 percent or more of their U.S. market to imports, including telecommunications hardware, petrochemicals, and electricity measuring and testing gear.

These losses are happening in both capital- and labor-intensive manufacturing, the report said.