A case for economic optimismPosted on
Last year Bill Yeargin, president and CEO of Correct Craft, the builder of Nautique ski boats, became a member of the Manufacturing Council, which advises U.S. Commerce Secretary Penny Pritzker on the manufacturing industry.
Yeargin says other countries are doing more to support their industries than the United States, and that the country needs a comprehensive manufacturing policy.
Nonetheless, he believes U.S. consumer confidence should be higher because the country has seen a drop in the federal deficit, growth in exports and gains in the stock market and the Federal Reserve is increasingly confident.
In this interview Yeargin discusses his work on the panel of business leaders and explains why he’s optimistic about the economy.
Q: First, can you tell us about the Manufacturing Council?
A: The Manufacturing Council is a group of about 25 business leaders who advise the U.S. secretary of commerce, Penny Pritzker. Our primary focus is to provide recommendations that will ensure the U.S. is an attractive location for manufacturing investment and is the world’s manufacturing leader in the years ahead.
Q: How did you get involved?
A: Well, it’s a long story, but the short version is that in 2011, after a trip to Korea, I was invited to join the Korean ambassador in an Oval Office meeting with President Obama. After that meeting other opportunities to serve came along, including the NMMA promoting me as a member of the Manufacturing Council. I was appointed about a year ago.
Q: What was it like to meet the president?
A: He was gracious and personable. He said he was aware of our company and thinks we build great boats. It was an incredible opportunity.
Q: How do the Manufacturing Council members view U.S. manufacturing?
A: Well, frankly, we are concerned. We believe the U.S. has been falling behind and we are now competing on an unlevel playing field. Other governments are doing much more to support their manufacturing industries than the U.S. government is doing. Our company has dealers in 62 countries, and as I visit those locations I often meet with government officials. In almost every country they ask me what they could do to entice us to start building boats in their country.
Q: In the U.S. there seems to be a negative perception of government helping businesses.
A: You are right, but sometimes we forget how much the government has done to help us become the world’s economic powerhouse. The government built the roads we use to transport our boats in North America and the ports we use to ship them overseas. I am answering your questions in an airport the government built so I could go visit the dealer I met with today. We all use GPS and the Internet in our businesses, as well as other government innovations. The list goes on and on. We already have lots of government support.
Q: So how does the Manufacturing Council go about addressing the problems?
A: Though all council members are involved in all areas we are addressing, to be more efficient we have organized ourselves into four committees: taxation, innovation, work force and energy. I serve on the innovation committee.
Q: So, let’s take them one at a time. What are you doing with taxation?
A: Regarding taxation, we are providing recommendations which we believe will encourage manufacturers to invest in the U.S. Currently the U.S. has a higher corporate tax rate, by about 10 percent, than the average of other developed countries, which incents companies to set up plants overseas. Additionally, once U.S. companies have earned money overseas there are strong tax disincentives keeping them from bringing that money back to the U.S. Fixing these two issues without eroding the tax base would go a long way toward helping U.S. manufacturing and the U.S. economy. We need to figure out how to equitably tax flow-through entities when we fix these problems. We are also looking at many issues related to small businesses and what we could recommend that would help them.
Q: What about work force?
A: When I speak with people about the council, this comes up consistently as the biggest issue with which manufacturers struggle: finding good people. To help solve this problem we first need to work together to change the perception of manufacturing. People think it is dark, dull, dangerous and dirty (the 4 Ds of manufacturing) and that incorrect perception keeps people from desiring a manufacturing job. Additionally, we have a skills gap that falls into two categories: technical skills and employability skills. The technical skills gap is the most discussed, and it is serious. We need effective training programs, as well as immigration reform that allows entry to highly skilled people who want to live in the U.S. The second is employability skills, which is tougher. Many of the CEOs I speak with tell me they need people who will actually show up and diligently work all week. If they can find those people, they are happy to help them develop the necessary technical skills.
Q: What about energy?
A: Recent developments in the energy arena are astounding. The U.S. is close to being energy-independent and the world’s largest producer of energy, ahead of Saudi Arabia and Russia. Additionally, there are rapid and significant developments happening in photovoltaic (solar) energy. Last summer I was in a meeting with House minority whip Steny Hoyer, and he said that 10 years ago everyone was worried about running out of energy and now we are trying to figure out how to manage the abundance. I am hopeful that the U.S. will use the upcoming energy cost advantage to export energy in the form of manufactured goods which, in my opinion, is much better than exporting it in barrels.
Q: The last focus area is the committee on which you serve — innovation. What can you tell us about that?
A: We are currently focused on three topics related to innovation. The first is the need for a comprehensive manufacturing policy. Other countries are doing this, and our lack of a comprehensive policy is hurting the U.S. This would not mean government is involved in our businesses, but it would mean we are looking at the infrastructure we need and how the government can help support research and connections that particularly help small businesses. Regarding research, there is a huge disconnect (sometimes called the “Valley of Death”) between basic research, which is largely done by government and universities, and the applied research being done by businesses. We need to figure out how to connect the two better. Also, related to research, we need to better balance the research done on product development with the research done on manufacturing processes. We spend much more on product development research, which creates product that gets manufactured overseas. We need to correct that. Finally, we need to do a much better job with connections and collaboration. There are so many “silos” of great work, and the potential synergy is incredible if we do a better job connecting.
Q: Since you have been spending more time in Washington, D.C., what have been your observations?
A: It has been a very interesting experience. Probably the biggest pleasant surprise for me has been the incredible commitment to help U.S. businesses I have observed from the people I work with in the Department of Commerce and the White House. I know some people reading this interview will be surprised by that comment, but based on my observations it is true. I have been impressed with Secretary Pritzker and her team. The second observation is related to the widespread consensus there is on the issues. I have been to Capitol Hill several times and have met with Republicans and Democrats, and almost everyone agrees on what needs to be done. However, it seems like politics has become a team sport. Each side is so afraid of giving the other side a victory that we get gridlock. If we would just do what we all agree on, the results would be very positive, but politics get in the way and both parties are to blame. That is frustrating because it is hurting U.S. businesses and, more important, the people of the U.S. Finally, as I have gotten a little closer to what is happening in Washington, D.C., I have come to better understand how many people in the U.S. develop very strong opinions based on a very tiny view of what is happening.
Q: Overall, are you optimistic or pessimistic?
A: We all understand that the key indicator for the boating industry is consumer confidence. Unfortunately there currently seems to be a disconnect between consumer confidence and what is actually happening. When you look at the data, there are a lot of good things happening; the federal deficit came in much smaller last year than expected and has dropped significantly as a percentage of GDP, exports are at a historic high and the trade deficit is declining, the unemployment rate has dropped significantly, the housing markets are recovering, the stock market is at an all-time high and the Fed has enough confidence that they are actually talking about raising rates. When you factor in the energy windfall we seem to be on the brink of and other technological advances, I believe an argument could be made that consumer confidence should be high. Therefore, I am optimistic.
Q: One final question. Do you think your work will have a real impact?
A: I hope so, but to be honest I have no idea. However, I believe strongly that since I have been asked to serve I need to give it my best effort.
This article originally appeared in the May 2014 issue.