The Last Word: A Look Back...and Ahead

November 21, 2007
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It’s customary to look back and assess the past year. Not wanting to buck this tradition, I pulled out my folder of manufacturing and quality-related highlights, and lowlights, from 2007. As I write this there is still one month to go in the year, so I ask for your indulgence should something major occur from mid-November through December.

Let’s first look at some of the positive news from 2007.
  • Manufacturing tool purchases increase throughout 2007. The latest numbers showed machine-tool consumption increased 6.2% from 2006 numbers. With investment in quality-related tools running a couple of months behind, the strong sales numbers reported among quality equipment, software and services suppliers should continue in 2008.

  • Jobs increase during 2007. The U.S. Labor Department reported a gain of 166,000 nonfarm jobs during October-double most analysts’ predictions. This was part of a continued trend that occurred throughout 2007.

  • Inflation is at the lowest annual rise since the 1960s. The Office of Management and Budget reported that the budget deficit fell to $163 billion, its lowest level in five years.

  • The trade deficit fell to $57 billion during the third quarter of 2007, its lowest point since January.

  • The gross domestic product increased 3.9% during the third quarter of 2007, following a second quarter increase of 3.8%. This means the economy is growing.

  • Durable goods spending, which has a direct effect on discrete manufacturing, increased 4.4% during the third quarter, after a drop in the second quarter and a very healthy 8.8% increase during the first quarter of 2007.

  • The dollar fell to a 25-year low against many major currencies. Bad news? Now, “cheaper” U.S.-made goods are experiencing an export boom.

  • Productivity increases to nearly 5% during the third quarter of 2007, doubling the rise in the second quarter, and it’s the fastest surge since 2003. Correspondingly, there was a decline in labor costs. This allows employers to pay higher wages without raising the cost of goods to consumers, which can lead to inflation.
There was some bad news during 2007, and some sure signs that quality, manufacturing and the economy have some challenges ahead of them for 2008.
  • Chinese product recalls. Fish, dog food, toothpaste, automotive tires, jewelry, toys and the list goes on. These frequent recalls were reminders that cheap prices sometimes come at a high price in quality and safety.

  • General Motors loses the top spot to Toyota. The U.S. automaker succumbed to poor domestic sales, burdensome healthcare costs and the perception of poor quality. The good news was that worldwide GM, Ford and Chrysler showed profits for most of 2007, crafted new contracts that removed much of their responsibility for retirees’ healthcare costs and introduced some exciting new models. This should improve the playing field during 2008.

  • Chrysler split from Daimler. In what was long seen as a partnership of non-equals, Chrysler did end up with the better outcome from the “merger of equals.” They benefited from Daimler’s quality improvements and better-designed models.

  • China arrests almost 800 people in a crackdown on substandard goods; the head of the company responsible for a massive toy recall commits suicide; and the former head of China’s food and drug agency is executed for approving untested medicines. While it is certainly appropriate to hold those responsible for quality and safety issues accountable when their actions are deliberately criminal, China needs a more long-term approach to handling its quality woes than jailing and executing individuals.

  • President Bush unveils a safety seal for imported goods. The goal is to make consumers aware for at-risk imports such as food, toys, tires, jewelry and other consumer products. While it seemed like a good response to the recalls on Chinese products, the measure falls short. The “seal” lacks any real teeth, as it will be a voluntary program.

  • The price of oil surges toward $100 per barrel. The biggest negative effect is an increased cost in producing and transporting goods. Rising energy costs could, if gone unchecked, create inflation. Just be glad you don’t do business in China where the price of fuel hasn’t changed in more than 17 months, despite increasing costs to suppliers. Does the phrase “fuel shortages” ring a bell?

  • Airbus continues to suffer production setbacks with its A380. As Boeing gets closer to production of its new Dreamliner 787, the A380, unveiled in 2005, still suffers assembly and quality issues. Both airplane makers understand competition between them is necessary to drive innovation forward, and Airbus’ problems are bad news for the industry.
What do you think? What is on your list of the big manufacturing and quality stories of 2007 and the challenges for 2008? Share your thoughts with me at williamst@qualitymag.com.

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