Manufacturers See Gap Between White House Promises, Deeds

WASHINGTON —  Nearly four months after the Bush administration promised to go to bat for beleaguered U.S. manufacturers, it has yet to produce much in the way of tangible results. But in one respect, Washington has moved decisively: It has slashed funding for the Manufacturing Extension Partnership, a well-regarded program designed to help small and medium-sized factories become more competitive.

The 63% cut, which would have been even deeper if the White House had had its way, already is producing results. Across the country, MEP centers are preparing to lay off employees, scale back operations and turn down potential clients.

Administration officials insist they intend to make good on their promises to manufacturers and are no longer seeking to phase out MEP funding entirely. But the conflicting signals are causing some manufacturers to question the depth of support for a part of the economy that has shed 2.6 million jobs since President Bush took office.

“The problem is that everything Washington does penalizes manufacturing,” said Richard Posiviata, general manager of Mission Rubber Co. in Corona, Calif. “Our government is unfriendly, unlike the Chinese government that supports its manufacturing sector. We battle not only state and local governments, but the federal government as well.”

The administration argues that manufacturers will be helped by its broader initiatives to cut taxes, reduce regulatory burdens, reform health care and pension funding and rein in litigation. But policy analysts say the White House is reluctant to help specific industries in need.

“I don’t believe they’re hard-hearted,” said Robert Atkinson, vice president of the Progressive Policy Institute, a centrist Democratic think tank. “They honestly believe that the proper role of government is a minimalist one.”

It was on a rainy Labor Day in Ohio, when jobs were still disappearing and the economic recovery seemed stalled, that Bush declared his intent to help.

“I understand that Ohio manufacturers are hurting, that there’s a problem with the manufacturing sector,” he told a group of factory workers. “And I understand for a full recovery, to make sure people can find work, that manufacturing must do better.”

Bush said he had instructed Commerce Secretary Don Evans to appoint a new assistant Commerce secretary for manufacturing, a move some critics joked would create at least one job.

Evans promised to have a broad manufacturing initiative on the president’s desk by the end of September. In addition to the “manufacturing czar” position, he said it would call for another new assistant secretary to coordinate trade promotion, an “unfair trade practices team” to combat abuses by trading partners, an “office of industry analysis” to assess new regulations, and an “export readiness” initiative to help U.S. firms sell into global supply chains.

So far, no appointments have been made, no teams have been created, and the strategic plan has yet to be submitted to the president. The lack of visible progress has been interpreted by some critics as a sign the administration has little enthusiasm for a more aggressive industrial policy and feels less political pressure to intervene now that the recovery is picking up steam and factory production is beginning to revive.

Commerce Undersecretary Grant Aldonas, principal author of the administration’s manufacturing initiative, insists that is not the case. He said the strategic plan had been drafted and would be submitted to Bush by mid-January. Appointment of a manufacturing czar and creation of the unfair trade practices team have been held up by Congress, which has not yet appropriated the money, he said.

“The report is sitting here on my desk,” Aldonas said. “The president’s on record. The secretary’s on record. We will be punching this thing out soon.”

Though the administration has signaled that the plan will draw heavily on previous Bush initiatives, it may also contain new proposals, such as tax incentives for research and development.

But some analysts argue that the administration’s real sentiment is reflected in the slashing of the Manufacturing Extension Partnership, a program they characterize as a litmus test of Bush’s commitment to factory owners and employees.

Created in 1988, MEP is a network of 60 nonprofit centers and 400 satellite offices that provide consulting services to small and medium-sized manufacturers who want to adopt new processes and technologies. The federal government provides a third of the funding; the rest comes from state governments and participating companies, which pay a fee for the services.

The program has received generally good reviews from external auditors. This year, the White House Office of Management and Budget said the program was well-managed and provided tangible benefits.

Nevertheless, the White House asked Congress to phase out federal support for the program, saying, “It is not evident that similar services could not be provided by private entities.” It proposed cutting funding from $106 million last year to $13 million in 2004. After protests, Congress appropriated $40 million instead.

Manufacturers say the administration’s rationale for abandoning the program is based on faulty assumptions. Among other things, they say, big consulting firms generally price their services beyond the reach of most small and medium-sized firms.

“Normally speaking, small companies do not have budgets for consultants, and they’re run by entrepreneurs who have never asked for help,” said David Braunstein, president of the California Manufacturing Technology Center in Gardena.

Braunstein runs the nation’s largest MEP center. Last year it helped 350 Southern California manufacturers boost their productivity by improving everything from factory floor layouts to just-in-time production processes. About $6 million of Braunstein’s $23-million budget last year came from consulting fees paid by participants.

“Most every one of our clients are Republicans who don’t believe in corporate welfare,” Braunstein said.

One of Braunstein’s recent clients was Ace Clearwater Enterprises, a Torrance-based manufacturer of metal ducts and other products for the aerospace industry. Two years ago, giant Honeywell Inc. offered to sell the firm one of its manufacturing operations, but only if Ace Clearwater could relocate the equipment and restart production within six months.

Kellie and Gary Johnson, the firm’s owners, turned to the MEP center for help. It assigned two consultants to help the Johnsons outfit a 20,000-square-foot hydroforming plant in Compton with equipment that had occupied 80,000 square feet at the old Honeywell facility.

The plant was up and running in six months, enabling Ace Clearwater to avoid layoffs that otherwise would have occurred following the loss of a big contract with General Electric Co. The firm now employs 172 people in Torrance, Compton and Paramount, up from about 160 two years ago.

“They made it a really efficient operation in a smaller amount of space. It fit like a glove,” said Gary Johnson. “We weren’t capable of doing that. We make parts. We don’t have people who sit around and analyze how equipment is set up.”

The Johnsons paid $60,000 for MEP’s services. Private consultants had offered to do the same work for $300,000 and up. Without MEP’s assistance, Johnson said, he doubts they would have accepted Honeywell’s take-it-or-leave-it offer to acquire the production line. “It would have gone to Mexico,” he said.

Aldonas did not divulge how much MEP funding the administration now considers appropriate. But after hearing from manufacturers like Ace Clearwater and Mission Rubber, he said the administration had reconsidered its plans to phase out federal support for the program.

“There’s a commitment to make sure we keep it alive,” he said. “But there’s also a commitment to make sure we reform it. We have to do a better job of delivering those services at a lower cost, because the budget constraints are still there.”

Johnson thinks the administration’s priorities are misplaced.

“Anything that helps create and retain good jobs is a good thing,” he said. “Federal money is wasted on a lot worse stuff.”