American Manufacturing in 2019: What Does Made in America Really Mean?

In March 2019, German automaker Mercedes-Benz came under some light fire from a non-profit consumer watchdog organization called Truth In Advertising (TINA). TINA accused Mercedes of dishonestly claiming its Sprinter van was Made in America when, really, only about 10 percent of the finished product was being constructed in the company’s South Carolina plant. (The rest was assembled in Germany.) As a result of TINA’s complaint, Mercedes pulled the advertising and pivoted its campaign to showcase the local job creation generated by the new $500 million facility.

No harm, no foul, right? Well… While it might not seem like a big deal, this encounter illustrates a really important feature of American manufacturing: It means something. Those three little words—Made in America—carry a lot of weight. People believe in them. They trust in them. So much so, that they are willing to invest in them.

For decades now, the prevalence of American manufacturing has been on the decline. Outsourcing, a lack of skilled labor, and the slow uptick of automation have taken their toll. However, recently, there has been a noticeable rise in both a demand and support for homegrown goods, with several manufacturers advertising their return to American soil, as those who stayed and weathered the recessive storm receive outspoken consumer praise.

But why does it matter that a product be made in the USA? What makes American manufacturing so desirable that consumers actively seek it—and some companies go so far as to fake it?

Star-Spangled Heart

Ironically, many of the forces currently threatening U.S. manufacturing are the very things which shaped it into a golden standard. Sure, no one enjoys overzealous regulations. They bite into profits and often create a mess of red tape for workers, management, and everyone in between. But, it’s largely thanks to federally-mandated safety protocols and quality assurances that American factories are among the safest in the world, producing some of the safest goods.

Likewise, as expensive new tech threatens not just individual jobs but also entire markets, many innovations vastly increase productivity, output, sales—and again, safety. And, though we find ourselves in an alarming technician shortage, American tradespeople are earning more for their craft today than ever before. In fact, a 2018 Deloitte Institute report indicates that 83 percent of executives are offering higher pay to attract and/or retain skilled workers. That’s a 15 percent increase from just three years prior.

Simply put: A product of American manufacturing tells a consumer, “This was built of safe materials, on modern equipment, by skilled hands that were paid a decent, living wage. You can feel good about using this product.”

With that kind of powerful, built-in endorsement, is it any wonder that some companies feel inclined to bend—or even break—the rules?

Race Around the World

Part of the issue surrounding false American manufacturing advertising, lies in the Federal Trade Commission’s surprisingly vague definition of what constitutes a domestic product. “For a product to be called Made in USA, or claimed to be of domestic origin without qualifications or limits on the claim, the product must be ‘all or virtually all’ made in the U.S.,” says the FTC.

Yep. That’s it.

Admittedly, however, this is isn’t the only issue.

In a nutshell: “Buying American” isn’t as clearly defined today as it was in the past. Materials, labor, and design are global endeavors now, aimed at keeping production costs low and profit margins high. Today, a car assembled in Atlanta may wear parts manufactured in Mexico, while another is built in Canada for a European badge using American-made parts.

Granted, those logistics costs are changing as more manufacturers shorten their supply chains and invest in domestic production, warehousing, and distribution. But it is still very plausible that a product sitting in your home has traveled more miles in its lifetime than you ever will in yours.

Compromise & Sacrifice

Even with high operating costs, regulatory red tape, and overseas competition, the United States still produces roughly 18% of all global products. But despite maintaining a foothold as the third largest export economy in the world, American manufacturing is beginning to show its wear-and-tear.

Like it or not, “Buying American” in today’s economy involves much more complication and, more often than not, much more compromise. From government regulation and trade wars, to labor shortages and rising overhead, down to the mainstreaming of next-gen technology and self-driving cars, American manufacturing has perhaps never faced more unique challenges than it does right now. The production of U.S. goods looks worlds different than it did just a few short decades ago. And in a few more, it may just be unrecognizable.

Yet despite these struggles, the nonprofit professional group Manufacturers Alliance for Productivity and Innovation predicts 2019 will show the “best U.S. manufacturing growth performance in more than a decade,” expecting production to grow 3.9 percent. And, global media company Forbes points out, “In the past thirty years, a time during which lots of ink was spilled about American manufacturing disappearing, absolute output has risen almost nonstop.”

So, how is it that a reportedly dying facet of the U.S. economy continues to survive and, in some markets, thrive? How are the country’s manufacturers, both big and small, maintaining the integrity of that Made in America stamp?

Inquire Within

In a special report conducted by Popular Mechanics Magazine, interviewing 26 companies about the state of manufacturing in America, the number one challenge disclosed by respondents was the lack of qualified workers. “Carhartt can’t find pattern makers,” reports the publication. “Stihl said it could take seven months just to find a tool-and-die-maker candidate. Merck’s trouble is control technicians—one of the highest-paying hourly jobs it offers.”

Despite paying well, these jobs don’t appeal to a younger workforce raised to believe manufacturing jobs aren’t sustainable. A worrying trend, as the aforementioned Deloitte study indicates that the skills gap may leave an estimated 2.4 million positions unfilled over the next decade, a shortage which could put $454 billion of manufacturing GDP at risk in 2028 alone.

Thankfully, concerted efforts are slowly chipping away at the problem. Both politicians and private companies are funneling more money into struggling technical programs at high schools and community colleges. And the schools themselves are working to repair the damaged reputation of American manufacturing and trade jobs, by highlighting the better pay and STEM education opportunities, as well as exploring formerly untapped recruitment markets.

Additionally, major players like SEMA host countless events to build enthusiasm and brand awareness within the automotive aftermarket, specifically. High-profile competitions like Battle of the Builders and the Young Guns program showcase the talent of industry craftsmen. This is in addition to the work the SEMA Board of Directors does to keep car culture alive in a world actively seeking alternative methods of transportation.

Buddy Up

We pointed out the rise in corporate partnerships during our Geneva Motor Show coverage. “We are entering a period where chaos is going to make competition extremely selective,” PSA Group CEO, Carlos Tavares, said at the auto show. “This perhaps changes the way our companies are operating.”

Sometimes, when it’s a matter of staying in the game, your enemy is your friend.

For example, historic automaker Ford recently pledged a $500 million investment in electric start-up Rivian. (Presumably to help it build up a viable EV portfolio—an area where it is sorely trailing other OEs.) This is in addition to the alliance it struck with Volkswagen to build commercial pickups and vans, who, coincidentally, has its own deal with an electric start-up in Germany, concerning its new MEB technology.

The aftermarket industry is not exempt from this tactic either, as can be gleaned from even a quick glance at a recent stack of press releases. In a one-month period, Tuff Country Suspension joined the Daystar Products family of brands, FOX and RideTech buddied up, and Truck Hero acquired both Backrack, LLC and Lund International, adding two new names to its growing family of over a dozen brands.

Brave New World

It’s inevitable that as the U.S. shifts into a more service-based economy—dominated by industries like banking, healthcare, and IT—traditional American manufacturing will struggle to attract skilled workers. And as long as Americans keep buying excess amounts of cheap goods, foreign manufacturers with low production costs will retain a space in the market.

However, that doesn’t mean U.S. manufacturing is dying. It simply means it needs to adapt.

Yes, automation will rise. But it might not be as bleak as you think. As Popular Mechanics points out in its survey, less parts of the manufacturing process are handled by machines than you would expect. And most are still under human supervision. “They’ve mostly taken over in places where precision is of the utmost importance—or where humans might get injured,” explains the magazine.

In a January interview with CBS News, A.I. expert and venture capitalist Kai Fu estimated that “roughly 40 percent of the world’s jobs will be replaced by robots capable of automating tasks.” And while that will undoubtedly affect lower income workers, there will be opportunities for new tech-minded professions. Which is why “early college” programs, trade job scholarships, and a revamped attitude toward American manufacturing are so important.

“The decade ahead will reshape global manufacturing as demand grows, technology unlocks productivity gains, and companies find growth in new parts of the value chain—all of which creates an opening for US manufacturing to turn things around,” reports American worldwide management consulting firm, McKinsey & Company. “Rather than attempting to re-create the past or preserve the status quo, the United States will need to focus on positioning its manufacturing sector to compete in the future.”