There is no question about it. American manufacturers have their work cut out for them these days. If they are not innovative, cost competitive and quality driven, they won't survive.
While some manufacturers in Washington state struggle, others thrive. There are a number of reasons why, but one of the keys to success is having the support of the public and their workers, as well as a good political climate.
For example, in Pullman, Schweitzer Engineering Labs, Inc., is steadily adding innovative projects, new facilities and jobs. The company, founded in 1982 in Ed Schweitzer's garage, produces high tech devices that instantaneously re-route electricity when a line fails.
Schweitzer revolutionized the way utilities and industry handle power failures. He developed his digital power relay while earning his doctorate in electrical engineering from Washington State University and now offers a 10-year guarantee on the equipment his company manufactures.
Today, Schweitzer Engineering Labs employs more than 1,500 people in 64 locations around the world, with more than 1,000 of them working in Pullman, and sells products in 120 countries. This year the company will add 300 new positions, and the firm has more than a hundred positions available.
In the Pullman area, a Schweitzer Engineering Labs job is prized. The company offers good wages and benefits and is part of the community fabric. The company is a welcome addition to our state and a rural university town.
Nelson Irrigation in Walla Walla is as valued in its community as Schweitzer Engineering Labs. Nelson provides good wages, promotes a pleasant workplace atmosphere, and is highly regarded.
Nelson, a privately held company with 200 workers, competes worldwide with state-of-the-art sprinklers that apply targeted amounts of water at the right time and in the right place. It is a leader in water conservation technology, and rather than outsource components, it is becoming its own supplier.
Like Schweitzer, quality and customer satisfaction are important ingredients in Nelson's success. Nelson tests and retests its components under the kinds of conditions its customers face in agricultural fields around the world. They back up their products. If a problem should occur, they are there to fix it.
The ability of these companies to stay competitive depends in part on the cost of doing business. Washington is a high-cost state for business. In fact, we have the highest unemployment insurance tax in the nation. In addition, the state's major tax burdens - the sales tax, the Business & Occupation tax, and the property tax - are not linked to profitability.
This situation is offset to some degree by the sales tax exemption for new machinery, equipment, and research and development. That exemption is important because it allows Nelson to stay ahead of the competition by buying state of the art machinery from around the world and developing its own proprietary manufacturing equipment.
There are hundreds of other manufacturing success stories in Washington. So what, besides tax incentives, makes companies invest in manufacturing here rather than moving production to China or India? A couple of things stand out.
First, companies like Schweitzer Engineering Labs and Nelson need to know people in our state want them to invest here. If people don't want manufacturers, why should those manufacturers beat their heads against the wall convincing residents and elected officials of the value of the jobs, taxes and economic opportunities they create?
Second, state and local elected officials must do everything to keep their costs down by not adding piles of new regulations, laws or fees. There is a tendency to add new costs and regulations without looking at the cumulative impact. Today, more than ever, costs matter and pennies count.
Third, if the state or local government promises them an incentive, they need to keep their word. If a sales tax exemption is put into law, keep it.
Fourth, expedite and streamline the permitting process so projects can happen. Today, more than ever, time is not only money but position in ever-changing markets. If a company is not able to build a new facility in our state in a timely way, they may miss the window of opportunity to beat the competition to market with a new product.
Finally, remember that when the economy slumps and government revenues dip, manufacturers and other employers are struggling as well. The best way to prolong an economic slowdown is to eliminate tax incentives and heap more costs onto the private sector, the goose that lays the golden eggs.
Don C. Brunell is president of the Association of Washington Business.