Archive for April, 2014

ROUND ONE

The primary elections next Tuesday herald the beginning of the 2014 elections season. Runoffs for contests where no candidate gets 40 percent of the votes cast will be July 15 (in mid summer at the height of vacation season.).

Most statewide attention has been directed at the Republicans seeking to unseat U.S. Senator Kay Hagan. House Speaker Thom Tillis, the acknowledged front-runner, may get over the threshhold to avoid a primary. Recent polls have him getting as much as 46 percent of the votes, almost two-to-one over rivals Rev. Mark Harris and Dr. Gary Brannock.. Several lesser known candidates also will be on the ballot.

Tillis has said he will preside over the short session of the House which opens May 14. If so, look for it to be a short short session. Unless, of course, the Senate has its own agenda.

WHERE’S THE SURPRISE?

Usually about this time each year the General Assembly looks for the “April surprise.” This comes when tax revenues are reported, often giving lawmakers several hundreds millions of surplus money to plug into the budget. Pay increases for teachers and other state employees are first in line for the money. But reports from the Department of Revenue has been disappointing so budget negotiations are expected to be intense. The Legislature adopted a number of fee increases in the bill to reduce income taxes. But some lawmakers complain the tax reform was not revenue neutral as had been predicted. Maybe that’s the surprise.

MANUFACTURING COMMUNITY

A consortium of public and private organizations and companies, including the Manufacturing Solutions Center, the Textiles Technology Center and the Carolina Textile District have submitted a proposal to be designated as a national Manufacturing Community. With the support of the Western Piedmont Council of Governments, the consortium is seeking access to federal funds to create jobs through support for entrepreneurs and helping existing businesses re-engineer for the return of manufacturing to the U.S. Specific undertakings involve workforce training and development, creating supplier networks, research and innovation services, and access to capital.

The application to the U.S. Department of Commerce includes specific details, timetables, and resources. The Manufacturing Community would center on Catawba, Alexander, Burke and Caldwell Counties, but proposes an outreach that includes most of North Carolina’s central and western Piedmont and the industrial corridors in Western North Carolina, including Asheville.

Designation as a Manufacturing Community amounts to an endorsement for federal funds to help credible operations participate in the rebuilding of a manufacturing base. N.C. Secretary Sharon Decker is among those who submitted letters of support for the initiative.

SYFA Speaker: U.S. Economy ‘Most Favorable In Years’

The rise in consumer confidence and the renaissance in manufacturing has created the most favorable economic landscape in America in recent years. So concludes Dr. Roger C. Tutterow, a Mercer University economist who spoke at the April conference for the Synthetic Yarn and Fiber Association.

Yet, Tutterow acknowledged there is a general “unease” in business circles. The traditional benchmarks for growth – housing and employment – have not made expected gains. Except for auto sales, retail has been lackluster, he suggested.

Even so, Tutterow said that leading economic indicators are up 3 percent and growth is projected to be 2.5 percent over the year. Also, he said that by June of this year, the nation will have recovered the eight million jobs lost since 2007. But with the population growth, the unemployment rate will continue to be higher. Employment in North Carolina still is down 2 percent from the start of the recession.

Labor and energy costs are fueling the manufacturing comeback, Tutterow asserted. The surge in energy costs could alter projections, he acknowledged, but $100 a barrel oil would not be a problem.

Also favorable to business projections: no inflation in sight. Federal treasury rates will remain at zero for the next 14 months, he predicted.

Global trends that are favorable to the U.S. economy, according to Tutterow, including rising labor costs in Asia, especially China, improvement in the European market, and the rebound in home equity in American households.

Bank charge-offs for developer and household loans have about run their course. “Banks do want to lend money, but many companies don’t have the balance sheets to support loans. But if you have the resources, it’s a borrower’s market,” Tutterow concluded.

Walmart Makes Big Push…

…To Boost U.S. Production

The world’s largest retailer says it wants to bring more manufacturing back to its USA base.

At the Synthetic Yarn and Fiber Association spring marketing conference April 3-4 in Charlotte, a spokesman for Walmart announced it will spend $250 billion over the next decade with American manufacturers. In 2013, Walmart global sales reached $476 billion.

Joe Quinn, senior director, Public Affairs and Government Relations, said Walmart is responding to polls that show a growing number of shoppers want products made in the U.S. Some 140 million of those shoppers visit Walmart stores each week.

Quinn described the typical Walmart patron as a “mom” and 85 percent of moms feel made-in-the-USA is important. But, he added, price is the top concern.

Walmart’s 10-year plan to boost manufacturing of consumer products in the U.S., including

hands-on support for entrepreneurs. As an example, he cited the reopening of Kent facilities in South Carolina to make bicycles. The company has ceased production in the U.S. 20 years ago.

Additionally, Quinn said Walmart has set us a $10 million program to assist government agencies that support entrepreneurs with research and development and prototyping.

Quinn said challenges to American manufacturing “renaissance” involve decisions as to where to locate, supply chain limitations, shortage of skilled labor and access to financing. Walmart is sponsoring a series of Domestic Manufacturing Conferences to address these issues. He said a recent such gathering attracted eight governors,530 suppliers to Walmart, and 1,400 attendees. Another conference will be held August 14-15 in Denver, he reported.

MSC International

Dan St. Louis

Thomas Guevera

The growing reputation of the Manufacturing Solutions Center, a state-supported complex supporting businesses, was underscored when representatives from 19 Central and South American countries recently came to learn about its mission.

Sponsored by the International Trade Administration for the Western Hemisphere, the visit included a tour of the testing and prototyping laboratories where research and development projects are undertaken for scores of manufacturers. Participants included governmental officials promoting economic growth in their countries and exporting opportunities.

A host for the visit was the City of Conover which spearheaded the construction of the 45,000-square foot facility occupied by the MSC and related offices. The city received $2.7 million in state and federal grants.

In his welcoming remarks, Conover Mayor Lee Moritz stressed the city was willing to “think outside the box” to partner with the MSC and Catawba Valley Community College to reinvigorate the area’s economy. He reported 15 companies have been started by entrepreneurs who have used the research and development and other support services.

Moritz said the city’s vision is to use the MSC to transfer a liability into an asset. The liability, he added, is the empty manufacturing buildings and 44,000 jobs lost by the recession and global trends.

Thomas Guevera, Deputy Assistant Secretary International Trade Administration for the Western Hemisphere, described the MSC as an “innovation center with job creation services…a model for enhancing regional competitiveness.”

Guevera cited structural changes in the world economy, requiring innovation “in the way we do business. Guevera said the MSC has assisted over 300 companies, creating and preserving thousands of jobs.

Guevera stressed that the regional approach is the key to economic development. “No two regions are alike…each needs to establish a competitive plan for economic development.

“We never know which undertaking will succeed or fail,” he observed. He said the MSC is an example of how a region can succeed with strategic implementation.

Walter Bastion, also a top official with the U.S. Department of Commerce International Trade Division, cited the leadership of MSC director Dan St. Louis and the staff for serving as a model. The Economic Development Agency of the U.S. Commerce Department awarded $1.5 million toward building the MSC.

In his follow-up presentation, St. Louis insisted his work “is all about jobs.” He gave an overview of the center’s current priorities. During the tour that followed, the participants met several of the entrepreneurs who are currently supported by the MSC.

Shelby Mason, founder and CEO of Bootights, a hosiery product that now has nationwide distribution in retail chains, related her experiences with the MSC and the critical role the services played in her success.

“Made in America” Trust the Label?

Julie Reiser

When consumers see a “Made in America” label, what does it mean?

Was it assembled in the U.S., with component parts made abroad? Does it have 51 percent of compenents made in the U.S? What should the label require to assure American manufacturing maintains a competitive edge in the global marketplace?

Participants at the recent SYFA conference in Charlotte pondered these questions during a presentation by Julie Reiser, president and co-founder of “Made in America Certified.” Reiser heads an organization that holds a patent to the name.

To qualify for the “Made in America Certified” requires a full scale proprietary audit of the product and its supply chain. Each product must go through the audit process and each gets a certificate of compliance. The company also gets rights to use the logo and authorized message in its marketing, along with the seal and logo.

The Federal Trade Commission is charged with preventing deception and unfairness, Reiser asserted. The FTC requires that “all or virtually all” of the product be made in the U.S … California requires 100 percent of the content be American-made.

Reiser said over 3,500 products have been approved for “Made in America Certified.” Consumers and retailers, she allowed, want a standard that is meaningful – a standard they can trust.

Manufacturers in America employ 12 million people, about 9 per cent of the workforce, and another 17 million are supported by manufacturers.

As the demand for more American-made products grows, the question arises: Has the offshoring boom run its course? Reiser thinks so.

“Quality is our competitive edge,” she insists.” “We don’t succeed by making crap.”

Two Memorable Days in April




WHAT WE DO: During the recent visit of the international delegation to the Manufacturing Solutions Center, companies that have developed new products and markets through the center’s support offered displays in the incubator area. Executives from these companies also were present to discuss the role the MSC has played in their success.

Two days in April. At separate gatherings in North Carolina the talk was about the “renaissance” of manufacturing in the USA. Production is coming home.
Economists, government officials, and manufacturers from 19 countries in Central and South America arrived Thursday, April 3 at the Manufacturing Solutions Center in Conover to see how a multi-million dollar operation is focusing on rebuilding the manufacturing economy in North Carolina.

Four hours later, another organization in Charlotte was starting a two-day session to study new trends and the opportunities they bring for textiles. The annual marketing conference of the Synthetic Yarn and Fiber Association (SYFA) included speakers to confirm to the innovations sparking growth in manufacturing.

TRENDS was present to cover the exciting news related to the re-emergence of traditional manufacturing – hosiery, furniture, textiles, and supply chain
companies – in the fast-paced 21st century with its changing technologies and market opportunities.

It is indeed a brave new world and those with courage to participate will thrive.

PAUL FOGLEMAN, Publisher

April Legislative Report

DOES SENIORITY MATTER?

Paul Fogleman

Paul Fogleman

There was a time – not that long ago – when seniority was the path to power in the North Carolina General Assembly. Chairs of the top committees – appropriations, finance, rules – all went to legislators in their fourth terms or higher in the House or Senate. But then came the 2010 elections. Democrats were swept out, replaced by agenda-driven legislators eager to push change. During next session starting in January 2015, it is estimated that 75 percent will have served fewer than three terms.

The election of a new House Speaker soon will reflect the power of seniority over activism. Leading candidates to replace Thom Tillis include Rep. Leo Daughtry of Johnson County and Rep. Edgar Starnes of Caldwell County. They have been on the scene for two decades and “paid their dues.” But also campaigning for the post are Mike Hager of Rutherford and Tim Moffit of Buncomb, both completing their second term. Also said to be seeking the office are Tim Moore of Cleveland and David Lewis of Harnett, finishing their fourth terms.

The new speaker will set the tone for the House into the 2016 elections. He also will have major influence on the path North Carolina takes in the foreseeable future.

HIS HONOR … THE MAYOR

Sen. Dan Clodfelter is now Mayor Clodfelter who will preside over the policymakers for Charlotte. Senator Clodfelter served as a Finance Chairmen when Democrats were the majority and worked hard for tax reform.

The death of Minority Leader Martin Nesbit and the departure of Clodfelter diminishes the impact of Democrats in the Senate. But Sen. Dan Blue, a former House Speaker, is a savvy operative whose influence may be seen in the upcoming elections. Republicans still will control the Chamber.

SECTION 179 N.C. REVENUE CODE

Lawmakers when adopting a tax reform package voted to decouple from the Federal code which allows business to deduct up to $250,000 for business expansions and up to $800,000 over a five-year period. But a clerical error had some companies scrambling as the tax deadline neared. The intention was to lower the deduction for state returns to 85 percent of the federal. Instead the deductions were listed at $15,000 and $125,000. Rep. Julia Howard, senior Finance chair, said the figures were a clerical error and will be corrected during the upcoming short session.

OUR LEGISLATIVE VISIT

The leaders of the Hosiery and Textiles Governmental Affairs Council are working on dates for industry visits to the General Assembly shortly after it convenes May 14. Maintaining support and appropriations for the Textile Technology Center and the Manufacturing Solutions Center tops the agenda.

SPECIAL NOTICE

Section 179 N.C. Revenue Code

Rep. Julia Howard, senior chair of the House Finance Committee, and Rep. Mitchell Setzer, chairman, have responded to our concerns about changes in the deductions allowable for business investments under Section 179 of the N.C. Revenue Code. A clerical error dramatically reduced the deductions by 85 per cent when the 2013 tax reform bill was adopted.

On Tuesday, April 1, Rep. Howard advised manufacturers to use the old deductions schedule when filing this year. She advised against seeking an extension because “the problem is fixed.” She has worked with the Revenue Department and will put a retroactive clause in the technical corrections bill that will be presented next month. Adoption is expected to be routine.

Several of our members were shocked when accountants advised them of their tax liabilities under the new code. But you are safe.

THURSDAY, MAY 15 – 2014 LEGISLATIVE DAY

A cancellation gave us the opportunity to reserve the Legislative Cafeteria on Thursday, May 15 for our annual lobbying day in the N.C. General Assembly. We would be the first organization to sponsor a breakfast and the timing is excellent for the budget process. We were worried that our previous date in June – which we lost to a political caucus—would have been too late. Most observers predict the short session will be fast and furious with adjournment before July 4. After, all this is an election year and all seats are up.

You will be receiving constant reminders over the next six weeks.

SYFA MEETING

The annual marketing conference for the Synthetic Yarn and Fibers Association opens Thursday this week at the Sheraton Airport Hotel in Charlotte. As usual, a challenging agenda of speakers and presentations has been developed.

We will cover the two-day conference in future issues of TRENDS.