Impact Manufacturing

By: Jason Tuma, CPA

Last week, I attended a  meeting hosted by the Regional Manufacturing Coalition (RMC) in Shelby, Ohio.  The RMC is a coalition of approximately 50 manufacturers in Ashland, Richland and Crawford Counties. The coalition’s mission?  To help north central Ohio manufacturers prosper through education and networking. 

During the meeting, Linda A. Duessel, Senior Vice President and Senior Portfolio Manager for Federated Investors in Pittsburgh, gave an update on the economy.  Although many of the things she had to say were a bit depressing, she had a great presentation style and delivered her message with the perfect mix of humor and gravity. 

Some key points from her message:

• The unemployment rate in the U.S. has been above 9% for the longest period of time since the Great Depression.
• Although 2010 showed very positive signs of recovery, the manufacturing industry is still not in the mood to spend.
• Biggest issues impacting manufacturers right now; growing sales and dealing with uncertainty in government regulations.
• For all the hype and oftens time negative press, the auto bailout from 2008 appears to be showing signs that it worked.  In 2010, U.S. automakers are showing a 4% increase in production, 12% increase in sales and 49% increase in profits.

Duessel also spoke at length about the growing national debt. She believes that a value added tax (VAT) is coming to help alleviate the national debt. Currently about 100 countries, including Canada, Mexico and European Union countries assess the VAT.  A VAT is like a sales tax in that ultimately only the end consumer is taxed. It differs from the sales tax in that, with the latter, the tax is collected and remitted to the government only once, at the point of purchase by the end consumer. With the VAT, collections, remittances to the government, and credits for taxes already paid occur each time a business in the supply chain purchases products from another business. 

Duessel also pointed out that most people think raising taxes is bad for the economy. She points out that history has shown if the extra revenue from a tax raise is put directly towards paying down debt, there is little impact on the economy. However, if the extra revenue from taxes is turned around and spent on various government programs, then this has historically had a negative impact on the economy.

As 2011 is finally setting in I think we can expect to see gradual growth in the manufacturing industry as a whole, but those who will come out on top are those who innovate. As leader of the firm’s Manufacturing Practice Group I am digging down into innovation and plan on sharing what I find on this blog. We will also again be holding our Impact Manufacturing Forum this fall which will focus on Innovation for today’s manufacturer.

Stay Tuned…