[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]
OUR NATION OF BUILDERS: MANUFACTURING IN AMERICA
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON COMMERCE, MANUFACTURING, AND TRADE
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED THIRTEENTH CONGRESS
FIRST SESSION
__________
FEBRUARY 14, 2013
__________
Serial No. 113-5
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
______
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COMMITTEE ON ENERGY AND COMMERCE
FRED UPTON, Michigan
Chairman
RALPH M. HALL, Texas HENRY A. WAXMAN, California
JOE BARTON, Texas Ranking Member
Chairman Emeritus JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky Chairman Emeritus
JOHN SHIMKUS, Illinois EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska ANNA G. ESHOO, California
MIKE ROGERS, Michigan ELIOT L. ENGEL, New York
TIM MURPHY, Pennsylvania GENE GREEN, Texas
MICHAEL C. BURGESS, Texas DIANA DeGETTE, Colorado
MARSHA BLACKBURN, Tennessee LOIS CAPPS, California
Vice Chairman MICHAEL F. DOYLE, Pennsylvania
PHIL GINGREY, Georgia JANICE D. SCHAKOWSKY, Illinois
STEVE SCALISE, Louisiana JIM MATHESON, Utah
ROBERT E. LATTA, Ohio G.K. BUTTERFIELD, North Carolina
CATHY McMORRIS RODGERS, Washington JOHN BARROW, Georgia
GREGG HARPER, Mississippi DORIS O. MATSUI, California
LEONARD LANCE, New Jersey DONNA M. CHRISTENSEN, Virgin
BILL CASSIDY, Louisiana Islands
BRETT GUTHRIE, Kentucky KATHY CASTOR, Florida
PETE OLSON, Texas JOHN P. SARBANES, Maryland
DAVID B. McKINLEY, West Virginia JERRY McNERNEY, California
CORY GARDNER, Colorado BRUCE L. BRALEY, Iowa
MIKE POMPEO, Kansas PETER WELCH, Vermont
ADAM KINZINGER, Illinois BEN RAY LUJAN, New Mexico
H. MORGAN GRIFFITH, Virginia PAUL TONKO, New York
GUS M. BILIRAKIS, Florida
BILL JOHNSON, Missouri
BILLY LONG, Missouri
RENEE L. ELLMERS, North Carolina
Subcommittee on Commerce, Manufacturing, and Trade
LEE TERRY, Nebraska
Chairman
JANICE D. SCHAKOWSKY, Illinois
LEONARD LANCE, New Jersey Ranking Member
Vice Chairman G.K. BUTTERFIELD, North Carolina
MARSHA BLACKBURN, Tennessee JOHN P. SARBANES, Maryland
GREGG HARPER, Mississippi JERRY McNERNEY, California
BRETT GUTHRIE, Kentucky PETER WELCH, Vermont
PETE OLSON, Texas JOHN D. DINGELL, Michigan
DAVE B. McKINLEY, West Virginia BOBBY L. RUSH, Illinois
MIKE POMPEO, Kansas JIM MATHESON, Utah
ADAM KINZINGER, Illinois JOHN BARROW, Georgia
GUS M. BILIRAKIS, Florida DONNA M. CHRISTENSEN, Virgin
BILL JOHNSON, Missouri Islands
BILLY LONG, Missouri HENRY A. WAXMAN, California, ex
JOE BARTON, Texas officio
FRED UPTON, Michigan, ex officio
C O N T E N T S
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Page
Hon. Lee Terry, a Representative in Congress from the State of
Nebraska, opening statement.................................... 1
Prepared statement........................................... 3
Hon. Janice D. Schakowsky, a Representative in Congress from the
State of Illinois, opening statement........................... 4
Hon. Fred Upton, a Representative in Congress from the State of
Michigan, opening statement.................................... 6
Prepared statement........................................... 6
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 8
Prepared statement........................................... 10
Witnesses
Rick Yuse, President, Space and Airborne Systems, Raytheon
Company........................................................ 12
Prepared statement........................................... 14
James R. Steiner, Senior Vice President, Specialty Materials,
Corning Incorporated........................................... 19
Prepared statement........................................... 21
Bob Holler, Director, Global Respiratory Protection Business, 3M. 30
Prepared statement........................................... 32
Eric R. Meyers, President, Oil City Iron Works................... 46
Prepared statement........................................... 48
Jeff Smatsky, Factory Manager, Zephyrhills....................... 66
Prepared statement........................................... 68
Joseph K. Block, Vice President of Sales, Block Steel Corporation 75
Prepared statement........................................... 77
Harold Arnold, President, Fram Renewable Fuels................... 91
Prepared statement........................................... 93
Ron Saxton, Executive Vice President, JELD-WEN................... 102
Prepared statement........................................... 104
OUR NATION OF BUILDERS: MANUFACTURING IN AMERICA
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THURSDAY, FEBRUARY 14, 2013
House of Representatives,
Subcommittee on Commerce, Manufacturing, and Trade,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:03 a.m., in
room 2322 of the Rayburn House Office Building, Hon. Lee Terry
(chairman of the subcommittee) presiding.
Members present: Representatives Terry, Lance, Blackburn,
Harper, Guthrie, McKinley, Bilirakis, Johnson, Barton, Upton
(ex officio), Schakowsky, McNerney, Welch, Barrow, and Waxman
(ex officio).
Staff present: Charlotte Baker, Press Secretary; Sean
Bonyun, Communications Director; Howard Kirby, Legislative
Clerk; Nick Magallanes, Policy Coordinator, CMT; Brian
McCullough, Senior Professional Staff Member, CMT; Gib Mullan,
Chief Counsel, CMT; Shannon Weinberg Taylor, Counsel, CMT;
Michelle Ash, Democratic Chief Counsel; Will Wallace,
Democratic Policy Analyst.
OPENING STATEMENT OF HON. LEE TERRY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF NEBRASKA
Mr. Terry. Good morning, and start our hearing.
And Jan said it is OK that Henry is experienced enough to
be able to take the lead right now.
So good morning, and Happy Valentine's Day. It is
appropriate that we have this hearing on Valentine's Day
because we expect it to be a real positive love fest and not
some of the usual hearings that we may have in Congress, or at
least the ones that people see on the news. We are here to
celebrate American manufacturing.
But speaking of love fest, this is my 21st wedding
anniversary as well. So as my wife is taking kids to school and
getting ready for work, happy anniversary, honey. And by the
way, I have got a 3D bust coming for you for Valentine's Day
and our anniversary. And maybe she can put that on her
nightstand and she can see me every night before bed. I am sure
every woman out there is saying that is exactly what they want.
So with a subcommittee title of Commerce, Manufacturing,
and Trade, our first hearing could have dealt with any number
of issues. The agencies and subject matter within our
jurisdictions are numerous and diverse, and they all have
complex issues worthy of our discussion.
I would like to thank all of our witnesses here today
traveling from all parts of our Nation to be here today to
share their manufacturing experiences. And I have Mr. Holler
from 3M. And now, while he is from Minnesota--one of their
plants is in my district in Valley, Nebraska. They make
respirators--masks--for all over the world and they employ over
500 people in my district. And so hopefully, today, Bob and
some of the other witnesses can shed some light on why those
chose where to manufacture.
So at this point, I am going to recognize myself for 5
minutes.
Today, we are going to start from square one by focusing on
a sector which has undoubtedly served as a core building block
in securing America's greatness, and that is our manufacturing.
Our goal is simple: to hear directly from the individuals
most immediately affected by U.S. manufacturing policies--the
manufacturers themselves--and gain a clearer understanding
about what is right with American manufacturing today and what
can be done to make it even better tomorrow.
We will hear from eight different business leaders
representing a broad cross section of U.S. manufacturing,
companies making everything from glass used for iPads and
Smartphones, to respirator masks, to missile defense systems.
My hope is that a wide range of ideas and perspectives will
surface during the discussion that can, in a manner of
speaking, ``set the table'' for more specific manufacturing
topics that will be tackled down the road.
While today's discussion will likely be wide-ranging,
subsequent hearings could focus on specific manufacturing
sectors like autos, auto parts, pharmaceuticals, chemicals,
energy, and steel.
Why have we chosen to kick off the 113th Congress with a
series of hearings covering a topic as broad as the state of
U.S. manufacturing? The bipartisan manufacturing showcase this
morning, which highlighted 60 products from 20 different
districts on this subcommittee, says it all.
In the districts represented on our subcommittee alone,
manufacturing accounts for over 800,000 jobs, which pay an
average of 77,000 nationally, according to NAM. In Nebraska
alone, the manufacturing sector consists of over 37,000 jobs
just in 2011.
One would think that given this morning's showcase and
these impressive statistics that the United States was living
up to the subtitle of our hearing, which is Our Nation's
Builders. Unfortunately, with each passing year, this title
becomes more representative of our past and less so of our
future.
The domestic manufacturing sector was hit the hardest in
terms of job losses during this Great Recession. While
manufacturing jobs account for just \1/10\ of the Nation's
jobs, this sector suffered \1/3\ of the Nation's job losses. To
be clear, during a time of record unemployment, roughly 33
percent of the jobs lost were in the manufacturing sector. To
paint an even starker picture of the state of U.S.
manufacturing, the Information Technology and Innovation
Foundation reported that the manufacturing sector suffered an
average 3.1 percent-per-year decline from 2000 to 2011,
resulting in an average job loss of nearly 1,300 jobs per day.
One answer could be working to create an environment where
companies already here see it worth their while to expand here.
We often talk about job creation, and President Obama devoted a
significant piece of his State of the Union to it, but what
does job creation really mean? That is why you are here. We
want companies manufacturing abroad to come to America, make
investments in capital and take advantage of the most
productive manufacturing labor workforce in the world because I
truly believe that our labor is second to none.
According to the National Association of Manufacturers, on
average, manufactures of all sizes spend over 14,000 per
employee to comply with regulations. Even when taking into
account environmental regulations alone, manufactures spend
7,200 per employee in regulatory compliance. No wonder it costs
more to manufacture in the U.S.
I agree with the President. We need to focus here in
Congress on how we attract more jobs to our shores. We need to
ask how we can equip people with the skills needed for the jobs
that will power the engine of job creation. Manufacturing
doesn't just create jobs, it creates great, high-paying jobs
and it creates jobs in other sectors. Manufacturing has one of
the strongest multiplier effects in the economy. Every $1 in
direct spending produces an additional $1.35 in indirect
outputs.
But the benefits of manufacturing don't stop there. A
strong manufacturing base is key to closing our trade deficit
and to sustaining a U.S. economy that can be a leader in the
global economy in the long term.
I look forward to hearing all of your testimony. At this
time I yield back my 12 seconds and yield to the ranking member
for 5 minutes.
[The prepared statement of Mr. Terry follows:]
Prepared statement of Hon. Lee Terry
Good Morning, and Happy Valentines Day. We expect a love-
fest at our hearing and speaking of love-fest today is my 21st
Wedding anniversary.
With a subcommittee title as broad as ``Commerce,''
``Manufacturing,'' and ``Trade,'' our first hearing could have
dealt with any number of issues. The agencies and subject
matter within our jurisdiction are as numerous as they are
diverse--and all have complex issues worthy of being discussed
before a Congressional committee.
I would like to thank all of our witnesses for traveling to
Washington for this hearing. In particular, I would like to
thank Bob Holler from 3M, for making the trip. 3M has a great
manufacturing facility in Valley, Nebraska that employs over
500 people. Hopefully today, Bob and some of the other
witnesses can shed some light on why those chose to manufacture
here in the U.S.
Today, we are going to start from square one by focusing on
a sector which has undoubtedly served as a core building block
in securing America's greatness. Manufacturing.
Our goal is simple: to hear directly from the individuals
most intimately Affected by U.S. manufacturing policies--the
manufacturers themselves--and gain a clearer understanding
about what is right with American manufacturing today and what
can be done to make it better tomorrow.
We will hear from eight different business leaders
representing a broad cross-section of U.S. manufacturing--
companies making everything from the glass used for iPads and
smartphones, to respirator masks and missile defense systems.
My hope is that a wide range of ideas and perspectives will
surface during this discussion that can, in a matter of
speaking, ``set the table'' for more specific manufacturing
topics we will tackle down the road.
While today's discussion will likely be wide-ranging,
subsequent hearings could focus on specific manufacturing
sectors like autos and auto parts, pharmaceuticals, chemicals,
energy, and steel.
Why have we chosen to kick-off the 113th Congress with a
series of hearings covering a topic as broad as the state of
U.S. manufacturing? The bipartisan manufacturing showcase this
morning, which highlighted over 60 products from 20 different
districts on this subcommittee, should say it all.
In the districts represented on our subcommittee alone,
manufacturing accounts for over 800,000 jobs, which pay an
average wage of $77,000 nationally according to the National
Association of Manufacturers. In Nebraska alone, the
manufacturing sector consisted of over 37,000 jobs in 2011.
One would think that given this morning's showcase and
these impressive statistics that the United States was living
up to the surtitle of our hearing series, ``Our Nation of
Builders.'' Unfortunately with each passing year, this title
becomes more representative of our past and less so of our
future.
The domestic manufacturing sector was hit the hardest in
terms of job losses during the Great Recession. While
manufacturing jobs account for just a tenth of the nation's
jobs, this sector suffered a third of the nation's job losses.
To be clear--during a time of record unemployment--roughly 33
percent of the jobs lost were in the manufacturing sector.
To paint an even starker picture of the state of U.S.
manufacturing, the Information Technology & Innovation
Foundation reported that the manufacturing sector suffered an
average 3.1 percent per year decline for the 2000 to 2011
period, resulting in an average job loss of nearly 1,300 jobs
per day.
We often talk about job creation--President Obama devoted a
significant piece of his State of the Union to it--but what
does job creation really mean?
One answer could be working to create an environment where
companies already here see it worth their while to expand--and
companies manufacturing abroad want to come to America, make
investments in capital, and take advantage of the most
productive manufacturing labor force in the world-because I
truly believe that our labor force is second to none.
Another potential answer could be reigning in the costs of
regulations. According to the National Association of
Manufacturers, on average, manufacturers of all sizes spend
over $14,000 per employee to comply with regulations. Even when
taking into account environmental regulations alone,
manufacturers spend over $7,200 per employee in regulatory
compliance costs. No wonder it costs 20 percent more to
manufacture in the U.S.
I agree with the president. We need to focus here in
Congress on how we attract more jobs to our shores. We need to
ask how we can equip people with the skills needed for the jobs
that will power the engine of job creation.
Manufacturing doesn't just create jobs, it creates good,
high-paying jobs, and it creates jobs in other sectors.
Manufacturing has one of the strongest multipliers effects in
the economy: every $1 in direct spending produces an additional
$1.35 in indirect output. But the benefits of manufacturing
don't stop there: a strong manufacturing base is key to closing
our trade deficit and to sustaining a U.S. economy that can be
a leader in the global economy for the long term.
# # #
OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS
Ms. Schakowsky. Thank you so much, Mr. Terry, and I want to
congratulate you on your new role as chairman of this wonderful
subcommittee. I am pleased to serve as the ranking Democrat. I
also want to thank you and all the staff that helped put
together that wonderful display of manufacturing. And a special
thank you to Michelle Ash and Will Wallace of the Democratic
staff for helping make that happen.
Our subcommittee has oversight over many areas that are of
critical importance to the American people--consumer
protection, product and auto safety, travel and tourism,
interstate and foreign commerce, privacy and trade in
manufacturing, which is our focus today.
In this Congress I look forward to working with you, Mr.
Chairman, to find areas where we can all advance the priorities
of the American people. Manufacturing is a great place to
start.
I am pleased to welcome as a witness Joe Block, the vice
president of Block Steel, located in my district in Skokie,
Illinois. Block Steel is great American success story founded
in 1948 and is run today 65 years later by the descendents of
the founders. They have about 60 employees, are a union shop
with good wages and health benefits. As the country's largest
aluminized steel distributor, they are a critical supplier to
the automotive appliance and HVAC industries, and I am sure all
of our witnesses could attest the sector has changed
dramatically from the images that many of us still have of the
giant factories with long assembly lines.
We are seeing major leaps in the area of advanced
manufacturing where a skilled and educated workforce and
groundbreaking technology play a key role. Like traditional
manufacturing jobs, advanced manufacturing jobs are good jobs
and can be filled by workers with a range of training. The
growth of the industry is good news for building the middle
class, a theme the President focused on earlier this week in
the State of the Union Address.
And the industry is growing. After years of job losses,
manufacturing is a bright spot as we come out of the Great
Recession. In my State of Illinois, 40,000 new manufacturing
jobs have been created since December 2009--one of the top five
states in the country for growth in manufacturing jobs. More
than half a million manufacturing jobs have been created
nationwide since the end of 2009.
The manufacturing industry requires a few basic things
including investment in innovation, good and reliable
infrastructure, and an educated and skilled workforce that will
fill the millions of good jobs that manufacturing can produce.
I am extremely concerned about proposed cuts to federal
investments in these areas, including what we would see under
sequestration. This hearing will give us the opportunity to
examine more closely the successes and challenges the industry
is facing, and I look forward to the testimony of our
witnesses. And I certainly hope you will also help us
understand how we can be better partners to help grow our
manufacturing sector.
I would like to yield the balance of my time to my
colleague, Mr. Welch.
Mr. Welch. I think the ranking member.
I want to brag a little bit. We have got Mr. Saxton from
JELD-WEN here, and JELD-WEN is a company with a national
presence, but it has two facilities in Vermont and has been a
great contributor to our Vermont economy. It is combining
skilled manufacturing, creating very good jobs in a State that
has lost a lot of jobs. We used to have a big machine tool
industry in Springfield, Vermont, and we more or less have lost
it. JELD-WEN has come and it is a manufacturing facility that
has created 800 very good-paying jobs in Windsor County, which
is where I am from. And I used to be a State Senator before I
got demoted to Congress.
And so we are very proud of JELD-WEN, which combines very
good manufacturing practices, high technology, good employee
relationships, and energy efficiency. It uses certified wood.
It makes windows and doors that are tremendous in insulating
homes, saving energy.
And we have had big debates about energy policy in this
committee and they will continue, but there seems to be a good
deal of bipartisan support for the notion that anything that
creates good jobs and allows energy efficiency to save
homeowners and building owners money is a really good thing.
So I really want to welcome Mr. Saxton and thank you for
all of the good work JELD-WEN is doing in Vermont. Thank you.
Mr. Terry. At this time I recognize the full committee
chairman, Mr. Upton, for 5 minutes.
OPENING STATEMENT OF HON. FRED UPTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Upton. Well, again, congratulations, Mr. Chairman, for
your first hearing. I was very impressed with the demonstration
downstairs that many of us participate in.
You know, when Henry Ford built his first horseless
carriage in Michigan, Michigan began its journey as the face of
the American automobile manufacturing. We later supplied our
military with vehicles during times of war and felt the
burgeoning consumer demand that followed it. And we have
experience the pains of a changing automobile industry,
certainly over the last several decades that I am very pleased
with the resurgence of manufacturing.
But much like the rest of the country, Michigan's economy
is far more diversified now. Manufacturing, and not just auto-
related, is still extremely important to our economy producing
$70 billion in output in 2011 and accounting for 16 percent of
our State's GDP. In my own district, we have more than 660
manufacturers who employ 10 or more folks, accounting for
nearly 50,000 of the jobs in my district.
Statewide, the manufacturing industry directly employs over
a half a million Michiganders. And each of those jobs produces
others upstream and downstream in Michigan and elsewhere. So we
are pleased with this subcommittee and the hearing. And I would
yield to the vice chair of the full committee, Ms. Blackburn,
from Tennessee.
[The prepared statement of Mr. Upton follows:]
Prepared statement of Hon. Fred Upton
Thank you, Chairman Terry, for calling today's hearing,
``Our Nation of Builders: Manufacturing in America.'' I am also
encouraged by your plan to use the committee's jurisdiction to
further examine manufacturing this Congress.
When Henry Ford built his first ``horseless carriage''
plant in my home state, Michigan began its journey as the face
of American automobile manufacturing. We later supplied our
military with vehicles during times of war and filled the
burgeoning consumer demand that followed.
Michigan's economy is now far more diversified, but
manufacturing--and not just auto-related manufacturing--is
still extremely important to the state's economy, producing $70
billion in output in 2011, and accounting for 16 percent of our
state GDP. In my district alone, we have over 660 manufacturers
who employ 10 or more workers, accounting for almost 50,000
jobs. Statewide, the manufacturing industry directly employs
over a half million Michiganders, and each of those jobs
produces others upstream and downstream, in Michigan and
elsewhere.
According to University of Michigan, professor and American
Enterprise Institute Scholar Dr. Mark Perry, the top 500
publicly traded U.S. manufacturers had $6.01 trillion in
revenue last year and would have been the world's third largest
economy if they were their own country. Our manufacturing
sector has been resilient and is one of the few bright spots in
our economic recovery that has been adding jobs. The benefits
of building products in the U.S. are clear: higher average
wages, increased innovation, and greater economic multiplier
effects for the entire economy. There are many challenges
facing American manufacturers today, but I am still confident
manufacturing can lead the way. Anyone who came by our
Manufacturing Showcase this morning and saw a sample of some of
the broad range of products made in our members' districts--
including the medical devices made by Stryker in my district--
know our manufacturers still define what is ``world-class.''
I am pleased we have such an excellent panel of witnesses
that represent the voices of our constituents. I am anxious to
hear how they assess our current economic situation and what
policies they believe need to be addressed to improve our
shared goal of expanding manufacturing.
# # #
Mrs. Blackburn. Thank you, Mr. Chairman. I think we all
want to welcome you. We are delighted that you are here and
delighted to have bipartisan support for growing the
manufacturing footprint in this country.
I do want to say that, today, we have welcomed Nissan North
America, and they are located right there in my district and
right outside of the district have a facility where they
manufacture the Pathfinder, the Maxima, the Infiniti JX. Bodine
Aluminum is also present with us today and they do an engine
block that is in the Camry and the RAV4. So we are delighted
with those.
Mr. Steiner, I welcome you. Your Gorilla Glass, which is a
product that I have referenced more than once in this
committee, is produced there in conjunction with work from
Doerfer in Nashville and we appreciate that. And at this time,
I yield to Mr. Barton of Texas.
Mr. Barton. Thank you, Ms. Blackburn. I want to take my
brief time to introduce to the committee Eric Meyers. He and
his father, who is sitting behind him, have owned Oil City Iron
Works in Corsicana, Texas, a foundry founded over 125 years
ago. The first major oilfield west of the Mississippi was
discovered in Corsicana in 1895. The first oral refinery west
of the Mississippi, Magnolia Petroleum, now a part of
ExxonMobil, shortly followed. The Meyers family have been
providing through their foundry the basic building blocks for
industrial might for America, as I said, for over 125 years.
Eric has got a master's degree and an undergraduate degree.
He and his father have a company that has no debt. They provide
over 250 good-paying jobs in Corsicana, Texas. In his spare
time, Eric is the emergency manager for Navarro County which he
self-funds. If there is a tornado within 100 miles, he is
there. And 2 years ago we had a tornado in Rice, Texas. He was
there before the Highway Patrol was there. So Eric, we welcome
you and we look forward to your testimony.
With that, I want to yield to my good friend from New
Jersey, Mr. Lance.
Mr. Lance. Thank you, Mr. Barton. And congratulations to
you, Chairman Terry, and thank you for giving me the
opportunity to serve as vice chair of the subcommittee. And I
look forward to working in a bipartisan fashion to generate new
ideas and increased regulatory efficiencies that will benefit
our Nation's manufacturing sector.
I welcome those who have participated in the showcase from
the area of New Jersey I represent: Ortho Clinical Diagnostics,
a J&J affiliate in Raritan, New Jersey; Bihler of America,
based in Phillipsburg, New Jersey, which works with J&J to
create extremely small needles for sutures; Voltaix:
Electronics Chemicals company, manufacturing specialty gases in
Branchburg, New Jersey; All-State Legal, an engraving and
stationery manufacturer in Cranford, New Jersey; and Kuhl
Corporation, a third-generation commercial egg-washing
manufacturer that opened its doors in Flemington, New Jersey,
in 1909. I look forward to working with manufacturing
operations throughout the Nation to determine how Congress can
be a partner in future growth.
And I yield to Congressman Harper.
Mr. Harper. Thank you, Mr. Lance.
And I am pleased to introduce Mr. Rick Yuse of Raytheon
Company, who serves as the president of Raytheon Space and
Airborne Systems, a division that is a leading provider of
products that give military forces the most accurate and timely
information on today's network-centric battlefield.
One product under his purview is Raytheon's active
electronically scanned array, or AESA radar. These radars are
an integral piece in the U.S. Military's tactical aircraft
fleet, as well as a number of our foreign allies' aircraft. We
have over 700 Mississippians who work at the Raytheon facility
in Mississippi that are responsible for assembling these highly
technological and life-saving radars. Raytheon takes advantage
of Mississippi's track record of being business-friendly, its
skilled and plentiful workforce, and its quality workforce
training programs.
We look forward to hearing from you today, and we welcome
you, Mr. Yuse, and appreciate you being here today.
And with that, I will yield to the gentleman from Kentucky,
Mr. Guthrie.
Mr. Terry. At this time, I have got to interrupt because
you are out of time. So what we are going to do is go to 5
minutes over here and we will do a unanimous consent so the
others can introduce. Fair? So I recognize the gentleman from
California, the full committee ranking member, Mr. Waxman.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. Thank you very much, Mr. Chairman. And I want
to congratulate you on your new chairmanship of the important
subcommittee which is holding its very first hearing today.
I also want to welcome Ms. Schakowsky as the subcommittee's
new Democratic ranking member. I look forward to working with
both of you and our colleagues as we continue our oversight
over interstate commerce and strive to ensure commonsense
consumer protections for all Americans.
A strong manufacturing sector is vital to our identity as a
nation. It is a source of countless scientific breakthroughs
and is essential to maintaining our national defense
capabilities. Manufacturing is also a key building block for
strong and stable middle class in this country.
In my home State of California, the manufacturing sector
adds more than $200 billion to the economy and employs more
than 1.2 million people. In the Los Angeles area, particularly
the South Bay region, this is one of the country's greatest
centers of defense and aerospace manufacturing. And I have the
great honor to have been elected to represent this area. It is
also home to several promising manufacturers of energy
efficiency technology.
This morning, I am proud to showcase examples of
manufacturing from El Segundo in Redondo Beach in my district.
NanoH2O displayed an industry-leading energy efficient reverse
osmosis membrane that it has developed for desalinization
purposes. Northrop Grumman displayed two aerospace products it
is manufacturing for the Federal Government: the Navy's F/A-18
Super Hornet strike fighter and Nassau's James Webb Space
Telescope.
And I am also pleased to recognize Mr. Yuse from Raytheon,
who was centered in El Segundo, and Raytheon has facilities in
Mississippi but it is headquartered in the South Bay. And we
are pleased to have you with us.
Tuesday's State of the Union address reaffirmed the
President's dedication to making the Nation a magnet for new
jobs in manufacturing through the development of manufacturing
innovation institutes. The President's proposals for targeted
investments in education, infrastructure, and clean energy will
also help grow the manufacturing sector.
There is one big threat to manufacturing looming on the
horizon. For the health of the manufacturing sector and the
economy as a whole, Congress should work to avert the massive
arbitrary spending cuts set to take effect on March 1. The
sequester should be replaced with a balanced, responsible
deficit reduction plan. It is time we returned certainty and
predictability to our manufacturers, small businesses, American
families, and our entire economy.
Our manufacturing sector has accomplished great things. The
U.S. can continue to be at the forefront of global
manufacturing creating transformative technologies for years to
come, but Congress must do its part. We can't expect our
economy to rebound if we keep dragging the economy down with
obstacles to growth, like the sequester.
I am looking forward to the testimony from our witnesses. I
must apologize that there is another subcommittee meeting at
the exact same time and I have to go down there to that
subcommittee hearing as well. I will come back as soon as I am
able to, but I want to welcome all of the----
Mr. Terry. Henry, you actually have a little bit of time
left. Our clock is off.
Mr. Waxman. Well----
Mr. Terry. If you would like to yield----
Mr. Waxman [continuing]. Yes----
Mr. Terry [continuing]. To Mr. Barrow.
Mr. Waxman. I do want to yield the balance of my time,
which I assume is substantial, to Mr. Barrow from Georgia.
[The prepared statement of Mr. Waxman follows:]
Prepared statement of Hon. Henry A. Waxman
I want to thank Mr. Terry for holding this hearing and to
congratulate him on his new chairmanship of this important
Subcommittee. I also welcome Ms. Schakowsky as the
Subcommittee's new Democratic Ranking Member. I look forward to
working with both of you--and all of our colleagues--as we
continue our oversight of interstate commerce and strive to
ensure commonsense consumer protections for all Americans.
A strong manufacturing sector is vital to our identity as a
nation. It is the source of countless scientific breakthroughs
and is essential to maintaining our national defense
capabilities. Manufacturing is also a key building block for a
strong and stable middle class in this country.
In my home state of California, the manufacturing sector
adds more than $200 billion to the economy and employs more
than 1.2 million people.
In the Los Angeles area, the South Bay region is one of the
country's greatest centers of defense and aerospace
manufacturing, and I have the great honor of being elected to
represent this area. It is also home to several promising
manufacturers of energy efficiency technology. This morning, I
was proud to showcase examples of manufacturing from El Segundo
and Redondo Beach in my district. Nano H2O displayed an
industry-leading, energy-efficient reverse osmosis membrane
that it has developed for desalination purposes, and Northrop
Grumman displayed two aerospace products it is manufacturing
for the federal government: the Navy's F/A-18 Super Hornet
strike fighter and NASA's James Webb Space Telescope.
This is something that President Obama and his
Administration clearly recognize. The Obama Administration has
a number of initiatives underway to bolster American
manufacturing.
Tuesday's State of the Union address reaffirmed the
President's dedication to making the nation a ``magnet for new
jobs and manufacturing'' through the development of
Manufacturing Innovation Institutes. The President's proposals
for targeted, deficit-neutral investments in education,
infrastructure, and clean energy will also help grow the
manufacturing sector.
There is one big threat to manufacturing looming on the
horizon. For the health of the manufacturing sector--and the
economy as a whole--Congress should work to avert the massive,
arbitrary spending cuts set to take effect on March 1. The
sequester should be replaced with a balanced, responsible
deficit reduction plan. It is time we return certainty and
predictability to our manufacturers, small businesses, American
families, and our entire economy.
Our manufacturing sector has accomplished great things. The
U.S. can continue to be at the forefront of global
manufacturing, creating transformative technologies for years
to come--but Congress must do its part. We can't expect our
economy to rebound if we keep dragging the economy down with
obstacles to growth like the sequester.
I'm looking forward to the testimony of our witnesses.
Thank you.
Mr. Barrow. I thank the gentleman for yielding.
And I want to congratulate Mr. Terry on his being elected
as chairman of the committee and thank him for holding this
hearing on manufacturing in America.
Most folks agree that American manufacturing is good for
our country, but American manufacturing is good for other
countries as well. In my district, goods that are made in
America are literally running the rest of the world.
Fram Renewable Fuels is doing just that. As one of the
first wood-pellet producers and exporters in the southeast,
they manufacture fuel that serves in place of coal to generate
electricity to utility companies around the world. I had the
honor of visiting Fram on a manufacturing tour of my district
last fall, and I was impressed by the sophistication of their
operation, which is responsible for exporting over 375,000
metric tons of wood pellets each year. I have seen the
difference that they are making through manufacturing, and I
look forward to the testimony of Fram's president, Mr. Harold
Arnold, as we examine how we can better support America's
manufacturers and continue to be a ``Nation of Builders.''
And with that, Mr. Chairman, I yield back.
Mr. Terry. Thank you, Mr. Barrow. The time has run out. I
would ask unanimous consent for 2 additional minutes on the
majority's side so that two members can introduce their guests.
Hearing none, we will have 2 minutes. And Mr. Guthrie, you
are recognized for 1 minute.
Mr. Guthrie. Thank you, Mr. Chairman. I appreciate that.
It is my pleasure to introduce Mr. Jim Steiner. He is the
vice president for Corning Special Materials and general
manager of the Harrodsburg, Kentucky, plant that makes Gorilla
Glass, which, if you don't know what it is, if you have an
iPhone in your pocket or if you have an iPad in front of you,
you are touching it every time you tap the glass to get to your
areas you want to go to. And this product is emblematic of
cooperation between a couple of great American innovators and
where they always say good enough is never good enough. And we
appreciate you being here. I have enjoyed touring your
facility. It is a wonderful place.
I also point out in the room below, there is another
manufacturer. The gateway to the Bourbon Trail is Clermont,
Kentucky, and there is Jim Beam and you saw Booker's and Knob
Creek down there and Basil Hayden and also Toyota, which is not
in my district, a manufacturing plant, but they have a lot of
parts suppliers down there as well. They are in Georgetown,
Kentucky.
So with that, I yield to Mr. Bilirakis.
Mr. Bilirakis. Thank you. I appreciate it very much. Thank
you, Mr. Chairman.
I would like to welcome and thank Mr. Jeff Smatsky at
Zephyrhills Water for their appearance today. Mr. Smatsky
serves as a factory manager at the Zephyrhills Water plant. It
is in Zephyrhills, Florida, in my district, the 12th
Congressional District of Florida. The 258 employees at the
Zephyrhills plant produce both the Zephyrhills and the Nestle
Pure Life brands of bottled water in a variety of single-serve
and bulk containers ranging from 8 ounces to 5-gallon water
cooler containers, which are distributed to homes in Florida,
offices in Florida, all across Florida.
Zephyrhills serves a valuable role in Pascoe County, a
community that I represent in the Tampa Bay area in Florida as
well, all of Florida. His testimony will shed light on the
state of our economy and how we may be able to spur economic
growth in this vital sector.
And I yield back, Mr. Chairman. Thank you.
Mr. Terry. Thank you, Mr. Bilirakis. And all of our
witnesses have been introduced by their sponsoring member.
So we will begin our testimony. Mr. Yuse, you have 5
minutes.
STATEMENTS OF RICK YUSE, PRESIDENT, SPACE AND AIRBORNE SYSTEMS,
RAYTHEON COMPANY; JAMES R. STEINER, SENIOR VICE PRESIDENT,
SPECIALTY MATERIALS, CORNING INCORPORATED; BOB HOLLER,
DIRECTOR, GLOBAL RESPIRATORY PROTECTION BUSINESS, 3M; ERIC R.
MEYERS, PRESIDENT, OIL CITY IRON WORKS; JEFF SMATSKY, FACTORY
MANAGER, ZEPHYRHILLS; JOSEPH K. BLOCK, VICE PRESIDENT OF SALES,
BLOCK STEEL CORPORATION; HAROLD ARNOLD, PRESIDENT, FRAM
RENEWABLE FUELS; AND RON SAXTON, EXECUTIVE VICE PRESIDENT,
JELD-WEN
STATEMENT OF RICK YUSE
Mr. Yuse. Good morning, and thank you, Chairman Terry,
Ranking Member Schakowsky, and committee members. On behalf of
his Raytheon constituents, I also want to thank Congressman
Harper.
As president of Raytheon Company's Space and Airborne
Systems business, I am honored to be here representing our
company and discussing our contributions to America's
manufacturing infrastructure. Thank you for the opportunity to
share the many ways that Raytheon, and in particular, Forest,
Mississippi, Consolidated Manufacturing Center contribute to
America's national security, global competitiveness, and
economic prosperity.
While my focus will be on Raytheon's Forest operations, I
would be remiss if I failed to note Raytheon's manufacturing
footprint covers many other States and our suppliers'
operations expand that economic footprint even further.
As a member of the defense and aerospace industry, Raytheon
proudly competes in a market that contributed $218 billion in
overall sales to the United States economy in 2012. Raytheon
specializes in defense, homeland security, and related mission
support services, providing state-of-the-art electronics,
mission systems integration, and other capabilities in the
areas of sensing; effects; command, control, communications,
and intelligence; and cybersecurity. But more importantly, the
work we do and the products we design and manufacture in places
like Forest save lives and make the world a safer place.
Raytheon's ability to succeed in the global marketplace
requires skilled, well-trained, and dedicated workforce; a
stable fiscal, tax, and regulatory environment; and the ability
to export our products to United States allies. In fact, as our
domestic budget faces increased pressure, defense exports can
help decrease costs and risks associated with technological
advances for the U.S. military, support America's industrial
base, and strengthen our balance of trade.
Our operation in Forest, Mississippi, contributes
significantly to Raytheon's capability and reputation for
manufacturing excellence. Our legacy in Mississippi stretches
back to 1983 when we opened our doors in support of a single
military radar program. Over the years, we have increased the
scope and scale of our operations in Forest, expanded our
facility, added jobs, and broadened the array of products
built.
Today, we have over 700 employees in Forest. They are some
of the most skilled laborers in the country. They work in a
340,000 square-foot state-of-the-art manufacturing space
building sophisticated airborne, ground-based radars,
electronic warfare technology, and advanced communication
systems for use by U.S. and allied war fighters.
Thanks to Forest, we have delivered more than 500 active
electronically scanned arrays, or AESA radars, an industry
first that we will soon celebrate with our Mississippi
employees.
The AESA radar is used on our military fighter planes to
greatly increase their ability to detect and track airborne
targets. Its capabilities also allow our pilots to identify
multiple targets at once. This technology provides game-
changing performance and tactical advantages, enabling war
fighters to accomplish their mission and return home safely to
their families. This radar and the lives it protects are a
source of tremendous pride for the Raytheon workers who build
it. Our radars have logged more than 400,000 cumulative
operational flight hours on Air Force, Navy, and Marine
tactical aircraft.
Between 2004 and 2011, Raytheon ramped up its AESA
production rates tenfold with a 100 percent on-time delivery
rate in 2012. This efficiency supports our customers' growing
needs and demonstrates our ability to further increase
production and jobs as we win additional contracts. In
particular, foreign sales of U.S. military aircraft are an
important growth area for Raytheon, the industry, and our
country. As of last year, three key military aircraft
production lines, the C-17, the F-15, and the F-16 were being
extended largely by international export demand. These foreign
sales drive increased demand for radars built in Mississippi.
Whether driven by domestic or international sales,
increased demand for Raytheon's products significantly enhances
the economies of the United States and Mississippi. In 2012
Raytheon operations contributed over $38 million in payroll to
employees in the State. In most cases, our employees earned
almost double the average annual Mississippi salary.
Mr. Terry. Excuse me. Could you get to the conclusion?
Mr. Yuse. Beyond our employees, we estimate that Raytheon's
overall economic activities generated more than 400 additional
jobs. Much of our success in Forest also is tied to the quality
of our local and regional suppliers, who range in size from
small business to Fortune 100 corporations. In 2012, for
example, we spent nearly $6 million with 60 Mississippi
suppliers.
Finally, I want to point out the strong partnership that
Raytheon has established with the federal, state, and local
officials who count on our Forest employees and the facility as
their constituents. This partnership is vital to our
manufacturing process.
Raytheon and the men and women of Forest, Mississippi,
produce complex and cutting-edge technologies that protect our
Nation, help our war fighters and their vital missions, and
contribute to our Nation's economic prosperity. We are proud of
these employees and their many accomplishments.
[The prepared statement of Mr. Yuse follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Terry. Thank you, Mr. Yuse. Appreciate your testimony.
There are what we call the shot clocks, little monitors there
on your desk. And it will turn to yellow at 1 minute left, so
if you hit 1 minute and have a couple pages left, maybe skip a
couple of them. We are really anxious to get to questions.
So at this time, Mr. Steiner, appreciate you. You are from
Corning, representing Corning.
STATEMENT OF JAMES R. STEINER
Mr. Steiner. Chairman Terry and Ranking Member Schakowsky,
thank you for the opportunity to be here today. My name is Jim
Steiner. I am responsible for the Specialty Materials business
at Corning. It includes our Corning Gorilla Glass business and
our factory in Harrodsburg, Kentucky. But I would also like to
thank you because we do have a small aerospace and defense
business and you set me beside one of our customers today.
But I would also like to thank Congressman Guthrie, who
represents our facility in Harrodsburg. He has personally
witnessed the success of Gorilla Glass manufacturing, and we
appreciate his interest and support.
Many of the members I notice are actively touching our
product as we speak, so I thank you for also being a user of
Gorilla Glass.
We have been in business for over 160 years. Corning was
founded by the great-great-grandfather of Amo Houghton, who
many of you served with here in Congress, and Amo sends his
best.
Innovation and invention are keys to Corning's success over
its long history. It includes the invention of many life-
changing things like the catalytic converter, optical fiber,
and glass for liquid crystal displays.
Today, I want to tell you the story of Gorilla Glass, an
American success story. It is a good enough story that I
shouldn't be able to screw it up. We invented in 1962 when Amo
Houghton was our president a material we called Chemcor. It was
a chemically strengthened glass we actually saw as a way to
compete with the steel industry. It was a cool invention. The
issue was we never really found any mass markets to
commercialize it in, so it never became a success. In 2006 this
small group in my division worked on taking the Chemcor base
and inventing a new glass that could be used on mobile devices.
In late 2006 we did a small development run, and once again, we
thought we had a really cool invention but we needed a way to
commercialize it.
Then, along came Steve Jobs and Apple. In early 2007, as
Apple was approaching the launch of the iPhone, they had
originally designed the phone with a plastic cover. And as
Steve Jobs did the first exhibition of the iPhone, as he walked
off the stage, he looked down at it and the plastic was
scratched. So he told his team that he wanted to use glass and
he took an active role in finding a solution. He called our
chairman Wendell Weeks and he challenged us to provide a glass
that he could use for the launch of the iPhone. Luckily, we had
done this small development run and we had the invention. The
challenge was we had to take that invention and commercialize
it. And the iPhone was due to launch in 3 months.
So we went to our factory in Harrodsburg, Kentucky, and
gave them 3 months to take a glass composition and develop the
manufacturing process and make the initial shipments in May of
2007. Now, typically, for us a glass development will take
years, even decades to go from invention to commercialization
but we had 3 months this time. We challenged the Harrodsburg
plant and they pulled it off. Now, this only happened because
of a close working relationship with Apple and the opportunity
to meet that timeline and launch on their product.
We got a very quick start in 2007. Our first year sales
were 19 million, which sales for a new product in the first
year of 19 million are quite significant. But we have grown
significantly. We are now on over a billion devices out in the
field. We have 33 different customers. And in 2012, I am happy
to say, we broke $1 billion in revenue. See what I mean? It is
a tough story to screw up.
So our employment in Harrodsburg now is well over 400 jobs.
We are running the factory full. Back in 2008 we got as low as
about \1/5\ of our capacity, but the success of our work in
Harrodsburg to bring up the manufacturing has allowed us to
continue to invest in Harrodsburg. Last year, we started up two
new melting tanks to make additional glass and we have invested
over $240 million in the Harrodsburg facility for new
production capacity.
That success of Gorilla Glass has also allowed us to spend
more in research and development in our Corning, New York,
facilities. We have recently expanded our capabilities in
Corning to do additional specialty flat glasses and have spent
about $200 million in capital in that facility, too. And we
believe over 1,000 people in Corning are now supported by the
success of the Gorilla business.
So our next product we are working on and we have invested
in Harrodsburg is Willow Glass. This is Willow Glass. It is 100
micron thick glass, about the thickness of your human hair. It
is a cool invention and now we are looking for where to
commercialize that.
So I thank you for your support.
[The prepared statement of Mr. Steiner follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Terry. Thank you very much.
Mr. Holler from 3M, you are recognized for 5 minutes.
STATEMENT OF BOB HOLLER
Mr. Holler. Thank you. Good morning, Chairman Terry,
Ranking Member Schakowsky, and members of the committee. My
name is Bob Holler. I am the director of the Respiratory
Protection Business of the Personal Safety Division for the 3M
Company. The 3M Valley plant in Nebraska----
Mr. Terry. Is your mic on or----
Mr. Holler. The 3M Valley plant in Nebraska is the primary
manufacturing site for a complete range of 3M respiratory
protective equipment, including disposable and reusable
respirator protection and surgical masks, along with medical
electrodes, patient warming plates, sorbent materials, hearing
and eye protection.
As a manufacturer of personal protective equipment, one of
our most pressing issues facing our Valley facility is making
sure that America's workers are not only able to address the
day-to-day safety needs, but also that our Nation is prepared
to respond to threats and hazards that pose a risk to our
country. This is an issue that the 3M Valley alone cannot
address. It needs to be a shared responsibility with many
stakeholders, both public and private, and today, I would like
to focus on our roles.
The role of government is to own the leadership position in
prevention, protection, mitigation, response, and recovery of
national threats and hazards. They need to ensure that the
proper protective equipment is integrated into the capabilities
of protection response and recovery. Although the Nation has
made great strides in preparing against threats and hazards, we
feel the role of personal protective equipment is not being
fully leveraged in national preparedness.
For example, the Pandemic and All-Hazards Preparedness Act
is intended for us to improve our Nation's public health and
medical preparedness and response capabilities for all
emergencies. And the strategic intent is to advance
countermeasures to diagnose, mitigate, prevent, or treat harm
from any biological agent, toxin, chemical, radiological, or
nuclear agent or agents whether naturally occurring,
unintentional, or deliberate.
However, the definition of countermeasures is so narrow
that it only recognizes FDA-cleared respiratory protection
devices. FDA-cleared respirators only represent a small segment
of the devices and the capacity to produce these devices is
very limited. Plus, they do not provide protection against
chemical, radiological, or nuclear agents.
3M feels the definition for countermeasures should be
expanded to include the National Institute for Occupational
Safety and Health-approved devices. And as such, the strategic
direction would match its intent while also expanding the scope
of products that would be available during an event.
Additionally, if the definition is expanded, it could open up
new opportunities and benefits to manufacturers to engage in
developing technologies that may increase protection from many
types of hazards.
Another key area that needs addressing centers on preparing
and responding to an event. The time to secure personal
protective equipment for our responders and the general
population is before, not after, an event. 3M has played a
major role in providing PPE during many major events over the
last 12 years from 9/11 to H1N1. And producing and delivering
products during an event is extremely challenging from all
aspects to the manufacturing process, to raw material
availability, to capacity, and to who gets the products and
when.
We have two recommendations. First, the government should
work more closely with manufacturers on plans on how to ramp up
production and delivery when an event occurs. The second,
nations should secure and maintain a stockpile of product with
necessary types of PPE that will be available to both
responders and the civilian population. For example, prior to
H1N1, the national stockpile of N-95 respirators was over 103
million, and the majority of these were shipped during that
event. Today's N-95 stockpile by our reports sits only at 17
million.
As one of the world's largest designers and producers of
PPE, 3M would like to work closely with all stakeholders in the
mission to protect our Nation in preparing, responding to
emergency events.
We thank the chairman and ranking member and the committee
for the opportunity today to share these thoughts, and we look
forward to continuing to dialogue with all on this important
topic. Thank you.
[The prepared statement of Mr. Holler follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Terry. Thank you, Mr. Holler.
And now Mr. Meyers from Oil City Iron Works.
STATEMENT OF ERIC R. MEYERS
Mr. Meyers. Good morning. Chairman Terry, Ranking Member
Schakowsky, and members of the subcommittee, and from my
district, Congressman Barton, I want to thank you for the
opportunity to testify before you today to discuss the
opportunities and challenges facing our company in the foundry
industry, as well as ways to make American metal casters and
manufacturing more competitive in the global marketplace.
My name is Eric Meyers, President of Oil City Iron Works. I
am a third generation Texas metal castor. We employ close to
250 folks there at our foundry. Our foundry has been in
existence for 125 years with our family operating it close to
50 years. We manufacture thousands of different types of iron
castings ranging in weight from 2 to 8,500 pounds for the
energy, mining, agriculture, waterworks, and transportation
sectors.
Metal castings are the foundation for all other
manufacturing, and metal casters are a vital building block for
every nation's economic wealth. Every sector from agriculture,
construction, healthcare, mining, to automotive, aerospace, and
defense relies on castings. In fact, 90 percent of all
manufactured goods and capital equipment incorporate engineered
castings into their makeup.
Oil City Iron Works supplies valves and pumps for power
generation, gas turbine and compression parts, and general
oilfield equipment parts to well-known companies such as
Caterpillar, Halliburton, and FMC, as well as many other
smaller ones.
During the State of the Union address, President Obama
called for a variety of energy initiatives, including expedited
oil and gas permitting and increased funding for
infrastructure. As part of his energy agenda, the President
should move to approve the building of the Keystone pipeline to
bring oil from Canada to the Gulf Coast.
The growth in energy sector has provided significantly more
work for Oil City and our industry, which has led to more jobs
and lower domestic natural gas prices over the past few years.
Establishing new stringent regulations on our energy sector
will not only hinder foundries and domestic manufacturers but
the long-term health of the economy and the prosperity of
American workers.
Today, the U.S. metal casting industry is comprised of
2,000 facilities with 80 percent employing 100 workers or less.
Our sector is truly one of small business. Unfortunately, over
300 foundries have shut their doors over the past 5 years. This
reduction can be directly attributed to the recession, foreign
competition, and onslaught of regulations. Our government has
created barriers to competitiveness and making it harder than
ever for the manufacturer in the United States.
There are a number of roadblocks that stand in the way of
competitiveness and I am going to focus on just three key
issues in my verbal comments today--number one, federal
regulations. Unfortunately, over the past several years, we
have not seen sensible and cost-beneficial regulation being
proposed by EPA, OSHA, Department of Labor, and NLRB.
I want to highlight a proposed rule under development by
OSHA of serious concern to the foundry industry. The Agency has
submitted its proposed rule for crystalline silica sand to OMB
for review that is expected to mandate extensive and costly
engineering controls. We believe the best way to protect our
workers is stronger enforcement of the current regulations.
A recent economic study reveals that the annual compliance
cost of such a rule will likely reach $5.5 billion for all
industry sectors, including manufacturing, construction, and
shipbuilding. The foundry industry is estimated to face
compliance cost of roughly $2 billion per year, and that is for
engineering and ancillary costs alone. OSHA's potential new
regulation would amount to about a 6 percent factor of U.S.
foundry revenues for 2007, making our sector one of the most
heavily impacted among all those affected. This regulatory cost
burden would be very difficult for our industry to bear.
Number two, the shortage of skilled workers. Adding to the
challenges of regulatory overreach is the fact that
approximately hundreds of thousands of manufacturing jobs
remain unfilled due to the lack of qualified applicants.
Despite an unemployment rate hovering near 8 percent,
manufacturers are still struggling to fill jobs. Foundries rely
on a variety of skilled workers to maintain and grow their
companies, including machinists, electricians, welders, and
pattern makers. Many of these positions have taken a long time,
as long as 7 months to years to fill.
For example, our Class A electrician position has been open
for nearly 2 years with no qualified applicants. We have
approached an area technical school to send graduating welders
to us for possible employment. However, all of those graduates
are already promised positions with other Texas-based
companies. Currently, we are working with our local college to
implement a certificate program for welding.
Number three, tax policy. We need fair and competitive tax
policies. Depreciation is an area of the tax law where
uncertainty has significant impact on our capital expenditures
and decisions. The difference is 50 percent bonus depreciation,
100 percent depreciation, and no bonus depreciation is
substantial. The change in the tax law determines whether we
purchased an asset this year or perhaps not at all or whether
we hire additional workers.
In conclusion, Oil City understands and supports the need
for reasonable regulations to protect the environment and
workers' safety and health, but we also recognize that our
industry and the entire manufacturing sector are facing
unprecedented pressures in their efforts to remain competitive
in the global economy. To continue manufacturing momentum and
promote hiring, the United States needs not just improved
economic conditions but also government policies that are more
attuned to the realities of global competition. In this current
economy it is clear that cost of ineffective regulations and
increases in taxes dampen the economic growth and will continue
to hold down job creation. For some foundries, it will be the
final straw that destroys their whole business.
Thank you again for the opportunity to appear before you
today, and I would be happy to respond to any questions.
[The prepared statement of Mr. Meyers follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Terry. Thank you, Mr. Meyers.
Mr. Smatsky from Zephyrhills, Florida.
STATEMENT OF JEFF SMATSKY
Mr. Smatsky. Thank you, Chairman Terry, Ranking Member
Schakowsky. It is a pleasure to be here today. I assure you, I
will honor my time commitments.
I would like to thank Congressman Bilirakis for his
leadership in our district and to congratulate him on joining
this prestigious committee.
I would also like to point out that there is an additional
Nestle Waters facility connected with spring sources located in
Congresswoman Blackburn's district in Hohenwald, Tennessee. I
would like to thank the Congresswoman for her support and
friendship.
Zephyrhills brand spring water was established in 1964, is
one of five regional spring brands for Nestle Waters North
America. It is the primary brand produced and manufactured at
our factory in Zephyrhills, Florida.
The Zephyrhills spring water comes from natural springs
located in the Zephyrhills area, as well as other carefully
selected spring sources across Florida. Today, 70 percent of
what Americans drink either comes in a can, in a bottle, or
another container. We take pride in producing healthful
beverage bottles in Zephyrhills, Florida. We produce the
Zephyrhills natural spring water, Nestle Pure Life purified
water, along with Deer Park spring water, which is also bottled
out of our sister factory in Madison County, Florida.
At Zephyrhills, we are proud to not only produce great
quality bottled water, but as well as have great quality jobs.
A couple statistics about our factory: our plant was built in
1990. We employ 258 full-time employees. We also additionally
bring on 30 seasonal employees to cover peak season demands.
The plant produces Zephyrhills and Nestle Pure Life in single-
serve containers, as well as the 5-gallon water cooler
containers, which are distributed to homes and offices across
Florida. Our spring water is piped to the factory and in some
cases tankard, at which point it goes through a state-of-the-
art multifaceted, multistage quality process and ends with the
hygienically sealed bottle that ensures food safety and quality
in the marketplace.
Preforms, which come from our sister factory in Madison
County, are made into bottles in our blow molders. They are
then filled, capped, labeled, packed, wrapped, palletized,
wrapped again, prepared for shipment, all within the four walls
of our facility. Across Florida, Nestle Waters employees 1,000
people with an annual payroll of $42 million. We spend an
additional $80 million with Florida-based business partners,
compete in engagement activities as well as distribution
networks. Incidentally, Madison County plant was the first
lead-certified factory in the State of Florida.
Our company is committed to both understanding water
resources and share that understanding with the community. Our
showcase partnership in Zephyrhills is with Crystal Springs
Preserve. This 525-acre nonprofit sanctuary has been restored
to its natural spring habitat and houses an educational
facility, which is visited by more than 35,000 students
annually. Last month, we just launched a traveling science
center with the Crystal Springs Preserve. It is called Water
Ventures. It is really cool. It is a 53-foot semi trailer that
has been customized to provide a museum-quality-like platform
for water education and encouraging positive stewardship to
Florida's diverse watersheds.
Bottled water has the lightest environmental footprint of
any packaged beverage. We are intensely focused on lightening
that footprint even further. We want and need our bottles back
so that we can achieve cradle-to-cradle recycling and reuse.
And we made a commitment to be the bottled water industry
leader at 60 percent recycling rate for all plastic bottles
nationwide.
Mr. Chairman, you may not always hear from the industry
representatives who are generally pleased with how they are
regulated by the Federal Government, but bottled water is one
such industry. Under the jurisdiction of the FDA, bottled water
is one of the most regulated food products in the country. For
example, every day, every line across 29 facilities throughout
the United States, our product is tested, quality inspected at
least 200 times to ensure that we meet and exceed FDA
requirements and our own internal quality standards. The FDA
regulations are even stronger since the enactment of the Food
Safety Modernization Act, and we feel that we and the rest of
the industry are regulated appropriately and in accordance with
all laws and the high standards of our consumers.
One area where we are not currently regulated at a federal
level where we may be able to find some bipartisan compromise
is with the issue of labeling and consumer's right to know. We
believe that Americans have the right to know where their water
is from and what is in it. In recent years, there has been an
effort by some in Congress to introduce one federal standard
for bottled water labeling and transparency and we have in our
industry association looked forward to working with this
committee on ideas for such a legislative approach.
In closing, I would like to thank you again, Chairman
Terry, Ranking Member Schakowsky, as well as Congressman
Bilirakis and the committee members for your attention today.
We applaud your leadership in assessing the current climate for
manufacturing in America today and finding ways to improve it.
Thank you.
[The prepared statement of Mr. Smatsky follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Terry. Thank you.
And Mr. Block from Block Steel, who is Jan's witness today.
Thank you for coming from Chicago.
STATEMENT OF JOSEPH K. BLOCK
Mr. Block. Thank you, Chairman Terry, Ranking Member
Schakowsky, distinguished members of the subcommittee. I really
appreciate being here today because I think my company has a
fantastic story to tell.
We have been in business since 1948. That is 65 years. We
are in our 65th year. And the story of our company, I believe,
especially post-World War II, tracks a lot of the issues that
are happening with American manufacturing. I would like to talk
a little bit about my company, and while I do, I hope this
illuminates some of the issues that are not only specific to
Block Steel Corporation but in general to those small- to
medium-sized U.S. manufacturers. I think with the knowledge of
these issues and an understanding of their ramifications,
public policy can be fashioned which more effectively supports
the growth and sustainability of U.S. manufacturing, especially
for the smaller and medium-sized businesses such as Block Steel
Corporation.
Block Steel Corp. represents a great American success
story, and for the past 65 years, we have adapted to the
changes which have occurred in the manufacturing base in the
United States. Located in Congressman Schakowsky's district--we
were actually previously on the west side of Chicago--we began
by supplying a lot of the companies that today don't even
exist, such as Zenith Electric, who made television sets,
Sunbeam Appliance, and a company called the Hurley Electric
Company, which was--their product was Thor washing machines,
and they were actually the first company to produce an electric
washer that we know today. Although there is a little bit of
debate about who was the first.
Those companies really don't exist anymore. In fact, at one
time in the '70s, Zenith Electric was our largest customer.
This is for those of us that don't remember of a certain age,
television sets used to be big steel boxes and used a lot of
material. And how we have adapted to those changes and that the
change in our customer base I think represents some of the
changes that have occurred to American manufacturing over the
years. Certainly, televisions today are not produced with a
quantity of steel, and to the best of my knowledge, they are
not produced even in the United States anymore.
We made a decision in the '60s and early '70s based upon
the request of one of our customers to get into a product
called aluminized steel. Aluminized steel is aluminum-coated
sheet steel. I have a piece of it here and I can show it to
you. And it is used primarily in HVAC, automotive applications.
It is used in any application where heat and corrosion
resistance is needed. We have become the premier supplier of
aluminized steel in the United States and really in North
America, and we are really known worldwide for that product.
What I think is interesting is that we are in the middle of
a supply chain, so we buy from the mills which produce steel
and then we sell to manufacturers which use that steel to make
a product, whether it is an automobile or a fireplace or an
appliance. So we see both sides of some of the arguments which
have to do with trade.
I would like to really quickly quote--this is from Thomas
J. Gibson, and he is the president of the American Iron and
Steel Institute. Now, I don't agree entirely with what he says
but I think it points out some of the issues that we all have
to deal with because there is a real dichotomy in dealing with
what side of the equation you are on with trade in
manufacturing. He was responding to President Obama's speech
the other night and he said, ``We need to recognize the massive
trade imbalance we have with China and the fact that China
operates with a built-in competitive advantage by undervaluing
its currency. China has at least 200 million tons of excess
production capacity in steel that is almost double the size of
our entire domestic industry. The President needs to take
action to address the import surge we are facing in steel,
including declaring China a currency manipulator and working
with Congress to pass a tougher trade enforcement legislation
like the ENFORCE Act.'' Really quick, there is two sides to
that story. Manufacturers want cheap steel wherever they can
get it but the steel mills want protection so that they
obviously can protect their market.
Thank you.
[The prepared statement of Mr. Block follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Terry. Perfect timing.
Mr. Block. All right.
Mr. Terry. Thank you very much. And by the way, Mr. Block
and others, we are actually contemplating a steel-only
hearing----
Mr. Block. Great.
Mr. Terry [continuing]. So we could work through those
issues.
Mr. Arnold, appreciate you here from Fram Renewable Fuels.
STATEMENT OF HAROLD ARNOLD
Mr. Arnold. Glad to be here. Thank you very much for
inviting me.
Fram is a small company in South Georgia. We make wood
pellets. Wood pellets are wood fiber that has been dried and
compressed into a pellet form, and the purpose of doing this is
to enhance transportation and logistics of it and increasing
the energy density when it is burned. The uses of wood pellets
are for the residential stove and heating market. Mostly, that
market is in the upper Midwest and the Northeast in the United
States. Combined heat and power plants in Europe use wood
pellets extensively where they generate heat for communities or
large office complexes and a little bit of electricity and
provide steam for industrial off-takers and then large-scale
power generation in Europe, wood pellets can be used as a
renewable fuel component to displace coal. And because of
treaty obligations, they have to have an increasing amount of
renewable fuel in their fuel mix every year.
Because of the Kyoto Treaty and other obligations that they
have such as the 20/20/20 target--20 percent reduction in
greenhouse gases, they are looking for 20 percent of the mix
from renewable fuels, and 20 percent from improved energy
efficiency--wood pellets are a low-cost form in this. And what
they have found there in markets such as the U.K. is that you
can base load your power grid with wood pellets whereas
intermittent sources--very good sources with cheap fuel like
solar and wind, you can't base load.
We manufacture in America. We have Appling County pellets
in Baxley, Georgia. We employ 40 people there, original
investment about $25 million. That mill originally had a design
capacity of 130,000 tons. We have recently expanded that by
another 100,000 tons up to 230. February of last year we
constructed a joint venture operation in Lumber City, Georgia,
where we can produce another 120 or 125,000 tons, a $10 million
investment, and created 14 or 15 jobs there.
We have just broken ground on a new plant to be constructed
in Hazlehurst, Georgia, in two phases. The first phase will
employee 62 people, produce 300,000 tons per year, and then it
will be expanded later, another $30 million investment with two
additional lines and increase employment by about another 20
people in that. We do aggregate pellets from other very small
producers in Georgia, and we expect to export over 450,000 tons
this year and we expect to double that next year.
The foreign market is the demand that Fram feeds. That
demand--the U.S. exported about a million-and-a-half tons in
2012. We expect that to grow to over 12 million tons in the
next 10 years. So it is an area with tremendous growth in it.
We have been helped by various government programs that are
in place. The USDA rural loan guarantees were very helpful to
us in establishing our plants. We have availed those. The
Investment and Production Tax Credits, of course, are very
helpful to us. Port infrastructure in the U.S. is somewhat
lacking, and the work that the Corps of Engineers is doing to
improve that with dredging is very important to us and, you
know, in budget constraints, hopefully, they get enough to keep
the channels open so we keep the ships going in and out.
Thank you very much for inviting me up to tell our little
story of our little company. We expect the global demand for
the products that we are making to increase. The U.S. can be at
the forefront in this and develop many things as we go along.
And we are just on the edge of raw materials coming from bio
sources that is going to really help in a lot of ways.
Companies like Bridgestone are making tires now entirely from
plant matter, and we will see a lot of things like this develop
out of our industry as things move along. So this is a great
country to be in and a great town to be end in the forest
industry.
[The prepared statement of Mr. Arnold follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Terry. Well, thank you. I have asked for a wood pellet
grill, so I am with you.
Mr. Saxton, I appreciate you being here today, JELD-WEN.
STATEMENT OF RON SAXTON
Mr. Saxton. Thank you, Mr. Chairman, Ranking Member
Schakowsky, members of the subcommittee, and especially
Congressman Welch for the opportunity to testify today.
My name is Ron Saxton and I am an executive vice president
of JELD-WEN. And I also serve on the board of the Window and
Door Manufacturers Association and the Executive Committee of
the National Association of Manufacturers.
JELD-WEN began in 1960 in Klamath Falls, Oregon, and is now
one of the world's leading manufacturers of windows and doors.
JELD-WEN employees 20,000 people across more than 100 locations
in the Americas, Europe, Asia, and Australia. In the United
States, JELD-WEN manufacturers in 17 states and employs
approximately 9,000 people. Vermont is an example of our
commitment to U.S. market. As Congressman Welch knows, we
employ over 800 people there in two of our facilities in Ludlow
and North Springfield.
Well before the term sustainability was popular, JELD-WEN
adopted an ethos that the efficient use of our natural
resources was a critical aspect of manufacturing. One example
of our sustainability ethic at work is a facility where we
utilize wood waste from our window framing manufacturing plant
to create door skin products in a neighboring facility.
While JELD-WEN sells products into both commercial and home
remodeling markets, our strength as a company and job creator
is intimately tied to the new housing construction market. With
the steep decline in housing starts, the last 6 years have been
very challenging for everyone in the housing industry. The
slow, steady recovery in housing is having a positive impact on
our bottom line, and we are hiring again, almost 1,000 people
in the last year.
However, as you are well aware, what you do in Washington
can have a positive or disruptive impact on our industry.
Consistency and predictability with regard to housing, finance,
and regulatory policy are necessary, and I would like to
highlight some energy efficiency policies that have significant
impact on JELD-WEN and our industry.
In remodeling, doors and windows are very important
products. They are important to manufacturers like JELD-WEN,
but they are also an important part of the U.S. energy debate.
To illustrate this, consider that much of the existing housing
stock in the United States uses single-pane windows
manufactured prior to the late 1970s. If America focused on
replacing the almost 1 billion single-pane windows in older
homes with new energy efficient windows, we could avoid the
need for literally dozens of new power plants. Clearly, JELD-
WEN would benefit, but a broad commitment to improving the
energy efficiency of existing housing would be a boon to
American employers and consumers well beyond window and door
companies.
The not-too-distant past shows how government action can
move markets. In 2009 at the height of the housing collapse,
Congress passed a significant 2-year tax incentive for energy-
efficient residential products, including windows. The enhanced
25-C tax incentive attracted consumers to energy-efficient
products and saved jobs across the sector from manufacturers to
distributors to installers. In addition to providing a bridge
to better times, it locked in energy savings for years to come.
Recent bipartisan efforts to utilize incentives beyond the
tax code have been led by members of this committee, most
notably Representatives Welch and McKinley. We hope you will
continue with those efforts in the 113th Congress. A good
energy policy is also a good job strategy. However, misaligned
energy policy, even if well-intentioned, can hamstring growth.
JELD-WEN has been an ENERGY STAR partner since 1998 and
past Partner of the Year in both the United States and the
Canadian ENERGY STAR programs. As such, we are very concerned
that recently proposed changes to that program relative to our
products are a mistake for consumers and homeowners, as well as
manufacturers. ENERGY STAR for windows has been a phenomenally
successful program. For decades, it has pointed the consumer
toward the best and most cost-effective energy-saving products.
Through active collaboration with industry, the program has
offered a voluntary and informative system that has promoted
energy efficiency, consumer economic benefit, and encouraged
manufacturing in the United States.
Today, the EPA is considering changing the criteria for
ENERGY STAR-rated windows to a point where there is no
realistic cost-effectiveness for consumers, and we fear the
long-respected program will become irrelevant. We are working
diligently with EPA to fix the issue but a standard that does
not recognize a balance of cost-effectiveness with energy
efficiency threatens to dramatically and negatively impact an
extraordinarily popular and effective program.
In closing, I want to reiterate just two points. First, a
stable, strong housing construction market is important to all
of us, from my son and daughter-in-law looking to buy their
first home to companies like JELD-WEN that supply materials for
home construction. Second, there is an important and
constructive role that the government can play in energy
efficiency, but if programs like EPA's ENERGY STAR program are
pushed beyond the standards that consumers recognize, those
programs marginalize benefits to everyone.
I thank the Committee for your time and attention.
[The prepared statement of Mr. Saxton follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Terry. Well, thank you very much. Appreciate all of
your testimony. It has been very insightful.
And I will recognize myself for the first question because
I get to.
But what I am curious--and several of you have put it into
your testimony, but I want to highlight that, so what I want
each to do--eight of us in 4 \1/2\ minutes--to be able to just
say one, two, maybe three things that if someone came to you
and said we need you to expand your production, give me one of
the things that you would worry that would be a barrier or
something that we can do that would really make it easier for
that to happen.
Mr. Yuse, we will start with you since you just sat there
the longest.
Mr. Yuse. Thank you. I appreciate that.
The top of my list would be reforms and the tax codes and
regulations. The best way for us to expand our manufacturing
and product base is to become more affordable. Over the years,
we have had numerous affordability programs. We have been able
to drop the product prices. We have been able to drop or hold
steady our labor rates. We need to go look at the other aspects
of cost which affect our competitiveness in the marketplace.
Mr. Steiner. So I would just quickly answer that to focus
on U.S. tax rates. When we expanded Gorilla Glass, we had the
choice to expand in the U.S., Korea, Taiwan, or Japan, and
higher U.S. tax rates make it more difficult to justify an
expansion.
Mr. Terry. Mr. Holler?
Mr. Holler. Illuminating my comments to the area of
preparedness for an epidemic or a safety hazard, I think it
would be close coordination with the government on what areas
and what types of products we would need to expand our capacity
so that way we are working in concert to make sure we are
addressing the right products for the events that we need to
prepare for in the future.
Mr. Terry. Good point.
Mr. Meyers?
Mr. Meyers. Thank you. For us in our industry, obviously,
uncertainty with regulations is a huge issue with us and it
plays a major role in what we do as far as expansions and what
we look at. I echo the gentleman to my right. And tax codes are
very important to us, as well for all small manufacturers
because that uncertainty as well will either ultimately decide
on whether we expand or whether we do not.
Mr. Smatsky. I don't think we have a barrier that exists
with our company today. I think the challenge that we faced is
getting our consumers and folks out in the communities to
switch to that healthier lifestyle and consumer more water,
quite honestly.
Mr. Terry. OK.
Mr. Block?
Mr. Block. Probably the barriers that I would see to us
would be certainly taxes are always an issue, not necessarily
the particular level of taxes for myself, but to see a fair and
simplified and more equitable tax code across the Nation so
that there is more of a level playing field, I think that would
be fairly important.
I also would like to see harmonization of, you know,
environmental or regulatory issues so that there isn't a
competition necessarily between States to who can be the least
regulatory or even if possible or to the amount feasible
worldwide to a degree so that there is a harmonization of
regulatory issues that gives pretty much a level playing field.
Mr. Terry. Thank you.
Mr. Arnold?
Mr. Arnold. I would say number one is access to capital. At
21 years old I could walk in a bank--I inherited that I guess
from my father and grandfather--but it was much easier to
borrow capital than it is today. It is very, very difficult and
time-consuming and you need a raft of legal counsel,
accounting, and all to make those things happen.
The second thing would be in an export business access to a
sufficient port infrastructure and keeping the channels and
waterways open. Those are things we can't do. We can build a
manufacturing plant, but we can't do those things.
Mr. Terry. Interesting.
Mr. Saxton?
Mr. Saxton. If the market gives us the opportunity to
expand, there are no barriers that are going to stop us. The
one concern that we do have, which one of the previous
witnesses mentioned, is the labor force. As I said, we hired
1,000 new workers in the last year and we are continuing to
expand, and the reality is that with high unemployment rates we
have been very surprised how hard it is to hire qualified
workers in many places.
Mr. Terry. That is an interesting mention. I have actually
heard that from other manufacturers in Omaha, one that had five
welding positions open for months and they couldn't get them
filled. So I appreciate that.
The ranking member is now recognized for 5 minutes.
Ms. Schakowsky. Let me just follow up on that. How many of
you have found it hard to fill slots with qualified workers?
Can you just raise your hand? We have an issue here that I
think our committee ought to definitely explore----
Mr. Terry. That is seven of the eight raised their hands.
Ms. Schakowsky. Yes. And who didn't? Was it Mr. Holler?
Mr. Terry. The----
Ms. Schakowsky. So you are able to hire?
Mr. Holler. Within my limited scope with 3M. I really can't
speak for the whole company.
Ms. Schakowsky. OK.
Mr. Holler. But oftentimes, we have many candidates for
different roles at 3M and we are known as an innovative company
and oftentimes can attract many good employees.
Ms. Schakowsky. Let me also continue along the line of
workers and talk to my friend and neighbor and business in my
district, Mr. Block.
We know that global competition in manufacturing is far
more intense today than it was 3 decades ago, the result in
advances of transportation and communication and increasingly
free flow of international trade. And consumers have benefited
from that with lower prices on many everyday products and
multinational firms have benefited from various savings related
to cost of labor. But the impact of globalization on smaller
manufacturers and American workers is far more uneven. You
mentioned even playing field a couple of times. So in your
testimony you mentioned the un-sustainability of the race by
businesses to find the lowest cost wages or lowest taxes around
the world and you called for a level playing field to help
ensure that companies large and small compete on innovation,
better products, better business practices instead of on
cutting wages and benefits. And I wondered if you could
elaborate on this recommendation and how you believe it might
help American manufacturing workers.
Mr. Block. Sure. I think that part of it stems----
Ms. Schakowsky. Put your mike on. Yes.
Mr. Block. You know, part of it stems from how our company
was founded and how we deal with our employees. And ever since
the inception of our company, we treat our employees like
family. We have always paid very good wages and we have always
created a situation where they have had pretty good health
benefits. And when we see situations where new competition
comes into areas whether it would be from overseas or whether
it would be in other locations, and they start up businesses
with a much lower cost structure--perhaps they do have those
wages or they don't provide those health benefits--it really
creates an unlevel playing field to a degree. And that is why,
from our point of view, we don't want to be a race to the
bottom. We don't want to have to survive by cutting benefits,
by cutting wages to my employees. I know when I was--if I can
expand on this----
Ms. Schakowsky. Yes, go ahead. Sure.
Mr. Block [continuing]. But I know a lot of us when I was
growing up, I always thought that America, the land of
opportunity, things would always get better, and there was
always an opportunity for advancement. And it just kills me
today personally when I see workers who have worked for 20, 30,
40 years having to deal with having their wages cut, having to
have to deal with their benefits cut. And I am not naive. I
understand that we live in a world in which there is
competition for labor and there is competition for resources.
But is it fair that the United States should have to follow the
lead of whether it would be Asian countries or whatever
countries it is that we have to bring our wages down to match
that? Would it not be better if we put in place leveling the
playing field that they eventually would have to bring their
wages up or their healthcare costs or whatever the case may be?
And that troubles me because these consumers who are having
their wages cut are the very people who buy the products that I
certainly supply to the marketplace, the cars, the appliances,
or whatever, or houses, as the case may be.
Ms. Schakowsky. Thank you. That was kind of Henry Ford's
idea that he wanted his workers to be able to buy his cars.
I wanted to talk about the uncertainty from current fiscal
policy because we are facing so many issues right now. And I
just wondered, you know, with the idea, for example, Mr. Yuse,
of sequestration, which would affect your business. It seems to
me it would--actually, let me just ask you. Would it be correct
to say that sequester would threaten economic harm to the
aerospace industry?
Mr. Yuse. Well, first off, let me say that, you know, we
share the concerns expressed by the Secretary of Defense and
the Joint Chiefs regarding the impact of sequestration should
it be implemented. And yes, we are concerned about the impact
on the business if indiscriminate budget cuts are made. It is
difficult for us right now to anticipate the level or the exact
mechanism by which those cuts will be implemented, so the exact
impact to any program or any facility is difficult for us to
predict. But if you take large quantities of funding out of the
system, it will have an impact.
Ms. Schakowsky. So the lack of predictability itself is a
problem, though, is it not?
Mr. Yuse. Yes. And the uncertainty is absolutely
problematic.
Ms. Schakowsky. Can I ask just one raise of hands? Raise
your hand if you feel that your business would be better off in
2013 if there were greater certainty on predictability right
now in the outlook for fiscal policy. OK. Thank you.
Mr. Terry. All right. Thank you.
Mr. Barton, you are recognized.
Mr. Barton. I love to be recognized, Mr. Chairman. Thank
you.
I want to ask--since Mr. Meyers is my friend and from my
district and he is in the oil patch--what his view is on the
competitiveness as related to natural gas prices in the United
States. Does that help your industry or hurt your industry?
Mr. Meyers. Well, thank you, Congressman Barton. Obviously,
the competitiveness in the industry has been a benefit to most
metal casters because we have seen quite an increase in
products going out to the energy sector. One of the things that
we do face with the natural gas industry and its increasing
competitiveness is also a competitiveness for some of our raw
products, one being sand. That is a big issue for us in Texas
in foundries and metal casters. But I think overall, if you
look at the increase in energy, specifically natural gas and
oil, that increase has been beneficial to us in manufacturing
not only just for foundry corporations or companies but also
across the board to people producing machines for other various
reasons.
Mr. Barton. As a fuel source, though, do you use a lot of
natural gas in your foundry? Is that a base load fuel for your
foundry?
Mr. Meyers. We use some natural gas, but primarily, it is
all electric-run.
Mr. Barton. Electric.
Mr. Meyers. So in a tangible way, the natural gas prices do
affect our operations because of the energy costs. We have seen
energy costs maintain a pretty stable level for the past year-
and-a-half, but some forecasts are now starting to trend up. So
that will be an issue as we move through this year and the next
year and some of our contracts are 6- to 8-month contracts
begin to expire and we move forward on new contract
negotiations.
Mr. Barton. Well, I will ask Mr. Steiner of Corning the
same thing. What I am trying to get at is the fact that we have
used hydraulic fracturing and horizontal drilling in our shale
formations and drop natural gas prices so that they are the
lowest in the world, I am told that that helps our
competitiveness in our base manufacturing sector because of the
lower natural gas prices. Have you found that to be the case,
Mr. Steiner?
Mr. Steiner. Yes, it takes a lot of energy to melt sand at
1,200 degrees, so our melting units are both natural gas and
electric-fired so that the competitiveness of natural gas
certainly helps us.
Mr. Barton. OK. I am going to switch gears a little bit
with Mr. Arnold. My first question is just kind of
serendipitous, but when I saw Fram, I thought oil filters. Is
your company related at all to the Fram oil filter company?
Mr. Arnold. No, sir, we are not. One of our investors is
Norwegian roots, and Fram in the Norwegian language means
onward and upward.
Mr. Barton. Oh.
Mr. Arnold. And it is also the name of a wooden polar
exploration vessel that is in a museum in Oslo that was near
and dear to his heart. He used the word Fram in many of his
companies.
Mr. Barton. OK. Now, my friends on the minority side, on
the Democrat side, are always talking about green jobs and how
great green jobs are. I am not anti-green job. I think I have
finally seen an example of a green energy company that actually
makes a little sense, and that is yours.
Mr. Arnold. Thank you.
Mr. Barton. You know, from what little bit I was able to
gather from your testimony, your company takes wood and makes
it into pellets and sells the pellets for fuel. Is that right?
Mr. Arnold. That is correct.
Mr. Barton. Now, what percent of your market is residential
in the United States versus exported overseas for base load
power plants in Europe?
Mr. Arnold. One hundred percent of our market is export.
Early on in the formation of our company, we were a participant
in the domestic market, but logistically, we are too far
removed from the Northeast where the concentration of
residences with wood pellet stoves is. It is actually more
economical for us to ship into Europe than it is to ship into
Maine.
Mr. Barton. I want the subcommittee to understand this. We
don't have cap-and-trade in the United States so we are using
natural gas and coal and nuclear for our base load power plants
pretty much. But in Europe, they do. But it is more competitive
to pelletize wood in the United States, ship it to Europe, use
it as a base load fuel source in spite of the fact that your
BTU content as compared to coal is not all that good, but
because you are renewable, you get credit in Europe and we are
burning wood pellets just like we used to burn wood here in the
United States for transportation on the railroad. So it is kind
of odd that we are doing it that way, but it is good for you
and your company and the people in Georgia. Are there a lot of
companies like yours that are springing up to do that?
Mr. Arnold. There is a growing number of companies, but to
make it clear on what is going on there is the European
utilities are required to use a renewable fuel by government
dictate. And it is not more economical to them than using coal.
Mr. Barton. I understand.
Mr. Arnold. But it is----
Mr. Barton. And they are mandated to do it so it is helping
us.
Mr. Arnold. It is helping us.
Mr. Barton. Their mandate in Europe is creating green jobs
in the United States.
Mr. Arnold. It is creating green jobs and also there is an
evolution going on in the technology. We are building our third
mill now, and each one of them is great improvements in
technology and efficiency, which will lower the cost of it and
eventually will help you guys.
Mr. Barton. I am all for a renewable fuel mandate in
Europe.
Mr. Arnold. Yes.
Mr. Terry. All right. Mr. McNerney from California, you are
now recognized for 5 minutes.
Mr. McNerney. Well, thank you, Mr. Chairman.
You know, I spent about 10 years in manufacturing before
coming to Congress, and so I found this to be a very
interesting panel and I appreciate your coming out here and
talking to us.
I have a couple of observations. Mr. Smatsky, I really
appreciated your comments on the cradle-to-cradle philosophy,
and that is adopted. Could you explain what that means a little
bit and maybe give us a hint of how you think that could be
more widely adopted in the United States?
Mr. Smatsky. Yes, thank you for the question.
The cradle-to-cradle philosophy is really about recycling
and reuse and getting the bottle back. About 27 percent across
the United States currently today have recycle programs, so we
need to develop the recycling aspect to get the bottles back.
Currently, right now, we are working on recycled PET bottles
that we are introducing into the California marketplace, as
well as in our Deer Park spring water brand.
Mr. McNerney. OK. Thank you.
Mr. Meyers, I found your comments about the lack of
appropriately trained workers to be concerning as did the
ranking member and other members of this subcommittee. And it
sounds like you have taken steps in your company to help ensure
that you are going to have those workers that you need. Do you
see that as the way education is going to be going in this
country where the private sector has to take a more strong
step, a more strong active role in providing for educated
workers? Or do you think the public education system is going
to be able to step up and provide that service?
Mr. Meyers. OK. Well, thank you. First of all, that is
correct. I do believe that the private sector is pushing
technical trade training, and that is very obvious when you
look at our sector and any manufacturing job in specific. It is
just not something that is pushed at the local level or through
public schools, so we were proactive in that in approaching our
local college there to look at technical trade programs. And as
we talked to other foundries throughout the country, they are
basically doing the same thing if not just for the lack of
skilled workers or tradesmen, simply because in our State we
look at the competition with other sectors. For us it is very
difficult because a lot of our skilled workers and tradesmen
will either go to work in an oil field or in areas such as
higher-level manufacturing in the aerospace or defense. So it
is very hard. And either way you look at it, it is very
competitive for the workforce, and we are not seeing the
increases in the workforce that we need.
Mr. McNerney. Well, thank you.
Mr. Yuse, I know Raytheon has made significant
contributions towards STEM education--science, technology,
engineering, and mathematics. Could you elaborate a little bit
on the direction that Raytheon is moving and how that could be
replicated by smaller companies?
Mr. Yuse. Absolutely. So as an engineering company, we are
very concerned with the decline in interest in science,
technology, engineering, and mathematics. Our industry is very
dependent on a robust source of engineers and scientists for us
to deliver the kind of innovation and technology the country
needs. We have created a series of programs at a variety of
levels--both the local, state, and at the university levels--
for encouraging younger folks to go into that field of work.
Mr. McNerney. Have you found that program to be effective?
Mr. Yuse. Yes, we have. We have found we had over the years
now spent in excess of $72 million promoting STEM in a variety
of different venues up to and including with the Smithsonian
Institute. I would encourage companies across the board, but
particularly those who are very dependent on high-skilled
workers, to look into doing similar types of activities because
we do find that the younger folks, when they get into it,
really start to become interested in it. And I think that is
very important for the future of our country and for our
national security. And I would encourage the Congress to look
into programs that could accomplish the same thing.
Mr. McNerney. So somehow, Congress might be able to give
incentives to smaller companies to getting engaged in the way
that the larger companies like Raytheon----
Mr. Yuse. Smaller companies, school districts, teachers.
There are a variety of different ways. I think communications
to younger folks is a major factor. The more they know about
it, I think the more interest that can be generated. It is for
the high-tech industry a decline in interest in STEM is a
concern for the country.
Mr. Terry. Thank you.
Mr. McNerney. Thank you, Mr. Chairman.
Mr. Terry. I recognize the vice chairman of the committee,
Mr. Lance.
Mr. Lance. Thank you, Mr. Chairman.
To the panel in general, to what extent does the fact that
the Chinese currency does not float freely have an impact on
your manufacturing? Mr. Block?
Mr. Block. I think it is certainly a big problem, and you
know, in my industry, which is the steel industry----
Mr. Lance. Yes.
Mr. Block [continuing]. The whole China situation is
certainly very complex. But just a few statistics, raw steel
production in China, they have excess capacity of something
around 200 million tons of excess capacity to produce steel.
And we don't even really know for sure because the steel
industry in China is very fragmented. But there is an estimate
today that 50 to 70 percent of the world's productive capacity
to produce steel is in China. And what that creates is,
obviously, on a global scale huge market manipulation in theory
because if the Chinese decide to go at a policy to just produce
steel at a crazy rate and sell it on the world market, it will
drive prices down, which may or may not be good, depending upon
which side of the supply chain you are on, but it certainly
would not be good for the American steel industry.
Mr. Lance. Thank you. Is your company--is it called Block
Steel or is it Inland Steel?
Mr. Block. Block Steel.
Mr. Lance. Block Steel.
Mr. Block. You are thinking probably of Joseph Block?
Mr. Lance. Yes.
Mr. Block. It is not related.
Mr. Lance. Not related.
Mr. Block. But he was the chairman of Inland Steel.
Mr. Lance. But that was in the Middle West, was it not?
Mr. Block. Correct. Inland Steel was actually in--well, the
remnant of Inland Steel is still there. It is owned by
ArcelorMittal now.
Mr. Lance. Yes.
Mr. Block. Yes.
Mr. Lance. Thank you.
And to the panel in general on an issue that had been
raised earlier, we are going to be engaged in a reform I hope
this year on corporate tax policy, Ways and Means more so than
E and C, but certainly an important issue to us all. What would
you suggest as we try to have a better corporate tax system in
this country? Yes, sir?
Mr. Yuse. In general, American businesses pay among the
highest corporate tax rates in the world.
Mr. Lance. Yes, sir.
Mr. Yuse. We compete internationally. International sales
are of a benefit to our customers and to the economy in
general. The higher tax rates cause us to be less competitive
in the international marketplace. So anything that could be
done to reduce overall tax rates and make U.S. products more
competitive in the marketplace would be very helpful.
Mr. Lance. Yes.
Mr. Yuse. It would also be very helpful to have that
coupled with a substantial research and development incentive--
--
Mr. Lance. Yes.
Mr. Yuse [continuing]. Which is also common
internationally.
Mr. Lance. And of course, certainty in that area, making
sure the R&D portion is permanent----
Mr. Yuse. Correct.
Mr. Lance [continuing]. And does not have to be extended
periodically by the Congress.
Mr. Yuse. Absolutely.
Mr. Lance. A final question to the panel. Manufacturing's
future needs, besides your current concerns, what do you think
might be the next big thing to confound growth in your
industries and what challenges are you likely to face looking
forward in the next 5 to 10 years or even 10 to 20 years?
Mr. Yuse. So as we try to deal with the potential for
budget cuts, we have been focused on international sales.
International sales, as I mentioned a few minutes ago, benefit
this country in a number of ways. A lot of development can go
on in those programs that our U.S. customers can take advantage
of. The bulk of the jobs are here in the U.S. They are not
overseas, at least in my industry, which tends to offset some
of the earlier discussions today. So I do believe that, you
know, the ability to expedite international sales in my
industry is a stabilizing influence going forward.
One of the things we see competing internationally is that
we compete not only with companies, but we compete with
countries. So it would be very helpful to get congressional and
administrative advocacy for the promotion of international
sales. That would be a big help. Fully fund all of the
international security assistance programs, which enable U.S.
allies to make the purchases of the systems that they need. And
then finally, streamline the armed sale process in general. I
know that is something that has been talked about recently. It
can be a lengthy process. Anything that can be done to expedite
that would help this entire situation and boost manufacturing
in the U.S.
Mr. Lance. Thank you. My time is expired.
Thank you, Mr. Chairman.
Mr. Terry. Thank you.
And now we would recognize the gentleman from Georgia, Mr.
Barrow.
Mr. Barrow. Thank you, Mr. Chairman.
Mr. Arnold, I want to follow up on some of the leads that
were opened up by my friend Mr. Barton from Texas because he
talked about one of two trends we have discussed today that I
think provide an object lesson. Each provides an object lesson
in the tension for the debate between folks that say we ought
to put mandates out in front of technology in the blind hope
that technology will catch up to the mandates on the one hand,
and folks who think no, we ought to invest in technology. Put
the technology out in front of the mandates and the mandates
will take care of themselves.
He brought up one of these trends, the fact that Europe has
imposed conditions on the marketplace that are not market-based
at all. They have imposed mandates on the marketplace and say
you have got to go do something you are not doing now. And the
unintended consequence of that is at the cost of European
utility consumers, we are investing in research and development
here in this country where the raw materials to meet that
artificial mandate can be found and where it is stimulating
research and development in your area, not exactly I ought to
think they contemplated but that is what is happening as a
result of that approach to put the mandate out in front of the
technology. The nearest available technology may be in America.
We may be benefiting from it in the 12th District of Georgia as
a result of what is going on there at their expense but not the
expense of our utility consumers.
Likewise, we talked about what is going on with fracking,
the fact that there has been an explosion in a traditional
source of energy but it has been inaccessible to us because of
our inability to get to it because of our technology. But what
is happening now? If you listen to Ted Nordhaus and folks at
the Breakthrough Institute, they will tell you this is a direct
pay off of 35 years of investment in very basic research that
has only come into fruition now, stuff that was started during
the Carter years.
So what is happening in natural gas is the payoff of an
investment in technology ahead of mandates. Without cap-and-
trade, we have achieved tremendous reductions in CO2
and we have exploded the available natural gas to our consumers
because we invested in technology, not mandates.
Now, that is a lead-in to what I want to ask you. What do
you think we ought to be doing in the area of research and
development? How can government help encourage and incentivize
manufacturers to invest in research that will provide a long-
term payout? What do you think ought to be our priorities in
that area?
Mr. Arnold. I think the priorities in that area should be a
very broad base, putting as much research and development money
in small amounts into as many different companies as you can to
foster as many ideas out there, because out of there will come
the one that will pay off in the beginning. As Thomas Edison
said, he has found 1,000 different ways not to make a light
bulb. That is what we have to have in this country to keep
bringing new technology to the forefront. There will have to be
some pull in some technologies in some markets to get people
involved, but we also need a lot of research and development
and it needs to be academic tied to industry sponsorship in
some way. But it doesn't need to be giant block grants from
Department of Energy or anybody else that goes to one segment
of one industry to one company where success or failure has
used up all of that money. It can be used in many, many
different places in my opinion.
Mr. Barrow. My friend Tom Fanning, the head of the Southern
Company, is fond of describing sort of an S curve in which you
can get from research. There is a small amount that is spent at
the most basic level, the most basic pure research. We don't
know where it is going to lead. Then, there is a tremendous
amount of money in the high part of the S curve in which folks
are researching how to develop a lead, something that has come
out of basic research. And then there is the deployment phase
where it levels off again where you are just trying to deploy
something that you have got ready to go in the marketplace. His
position is that the government ought to confine its
investments or its incentives at the most basic level possible
where the highest payoff will be from investing in that very
basic research where there is very little support that you can
get from the private sector to get the kind of breakthroughs
that you will need. But the private sector is good at taking
off with that. What do you think about that? Is that a model
that we should build on?
Mr. Arnold. I personally think that is a very good model to
build on, and that is the kind of things that we look for is
reading some research paper where somebody has stumbled across
an idea and then I can take that idea and improve our processes
or come up with a completely different business model out of
that.
Mr. Barrow. I think of the difference between investing in
something like DHARMA where they are doing incredibly basic
research on the one hand and the payoffs you get from that, as
opposed to investing in a development or deployment strategy
for a big old outfit like Solyndra. I can't help but think that
the biggest payoff is investing at the front end of that S
curve, where there is the least amount of outside money that is
available through private sources to lead to the kind of
development and breakthroughs that private sector knows what to
do with once they have got it. But it is very hard for them to
provide that kind of support. That sort of seems to me to be
sort of a good object lesson.
Mr. Arnold. I would agree with that approach.
Mr. Barrow. Thank you, Mr. Arnold.
No further questions.
Mr. Terry. Thank you.
Mr. Harper is recognized for 5 minutes.
Mr. Harper. Thank you, Mr. Chairman. And thank each of you
for taking the time out of I know what is a very busy schedule
for each of you to be here and to shed a little light on your
businesses and make us perhaps think outside of the box and to
give us some ideas to go forward on how we can make it more
conducive to do your business and how we can create and grow
jobs in this country, and that is a great thing and we
congratulate you on the successes that you have had.
And Mr. Yuse, we are certainly glad to have you here, and I
remember the very first time that I came into almost official
contact with Raytheon in my district was when I was running,
and you had a great advocate there in Forest, Mississippi,
Mayor Chambers, who just went on and on about the impact that
you had as a company there in east central Mississippi. And you
know, I have been there for Veterans Day event and, you know,
the workforce, the team there is exceptional and you should be
very, very proud of what is there and what you see.
But how is that support of your local and state government
officials, what has that meant to you in Forest, Mississippi?
Mr. Yuse. Well, thank you for the kind words. We are very,
very proud of the facility and the workforce there. We have an
excellent working relationship with all levels of the
government in Mississippi from local, state, up through this
level. And it has gone a long way in helping us work with
various agencies. We are on a number of statewide initiatives
to do everything from expand the use of broadband technology to
energy initiatives. The workforce is very, very involved in
community service. They put in a lot of time on a regular basis
and I think that goes a long way to building community spirit,
which helps us work with the community when we need to go do
something with the facility or find people or expand the
facility. So in general, the working environment has been
extremely beneficial to the success of our operation there, and
I thank you for it.
Mr. Harper. Well, we are delighted to have you there and
look forward to working together for many years on that. And
you mentioned earlier in your testimony that with us as a
country having one of the highest corporate tax rates, you
mentioned that as something if you could see done--you talked
about tax codes and regulations earlier. If our corporate tax
rates were reduced to a level where we were one of the lowest
and not highest, what would you see as the benefits that would
come from that and how quickly would we realize the benefits
after a change was made?
Mr. Yuse. I think the change would be quite quick. The
primary effect would be we would be much more competitive very
quickly in the international marketplace where we are competing
with companies that do have lower corporate tax rates. And I
think that is the primary factor there. And there is a large
potential for foreign sales but we have to be able to compete.
We have to have, as I said, advocacy from the United States
Government. We have to have affordable prices, and we have to
have the ability to export the technology. In many cases,
foreign companies, you know, can sell technology that we are
not allowed to export out of the U.S. Those are kind of the
three things that tend to limit our ability.
Mr. Harper. You mentioned also the regulatory burdens that
are there. What area of regulation are you referring to when
you say that we need to look at improving, you said, the tax
code and obviously regulations? Would that be in the area of
the export regulations you just referred to?
Mr. Yuse. That would be one area just, you know, general
reporting on, you know, a variety of different business
processes. We might want to take a look and see how those are
being used. Anything that is being used and is meaningful, I am
happy to do it.
Mr. Harper. Great.
Mr. Yuse. If it is not being used, maybe we ought to think
about it.
Mr. Harper. Again, thank you all for being here.
With that, I yield back.
Mr. Terry. Mr. Guthrie, you are recognized for 5 minutes.
Mr. Guthrie. Hey, thank you, Mr. Chairman. Thanks.
And to be a witness for Mr. Barton's question, actually my
family has an aluminum foundry and we are gas. And so it has
made us tremendously competitive compared to people that we are
competing with in other countries. And you know, it is all
about inputs and how much input costs. And any time we do
mandates and things here that raise the price of energy, it
will go counter to bringing manufacturing jobs back to the
country. It is just a fact of--that is our competitive
advantage in Kentucky, particularly with coal. We have cheap
electricity and it has made us a competitive State.
But a question with Mr. Steiner, I think we heard the other
night in the State of the Union about the tax credits that
incentivize people to send jobs overseas. One thing that does
is our tax rate, so if we want to lower our tax rate, it will
bring jobs back as well.
Mr. Steiner, you are in Kentucky. Obviously, I know you are
there because of the great working employees that are there.
But I know the iPhone isn't necessarily completely assembled in
the United States----
Mr. Steiner. Correct.
Mr. Guthrie [continuing]. And so why are you competitive in
Kentucky and what decision-making did you--I know you got a
great workforce, but I am interested to know why you chose to
manufacture it here.
Mr. Steiner. So at Corning we always start with an
invention and then what allows us to compete is a very
efficient process. So we spent a lot of our R&D dollars on
process efficiency. And the process we use in Kentucky allows
us to compete worldwide. But we are hampered by the effective
tax rate. A dollar of income out of Harrodsburg is about 39
percent and our effective tax rate as a company is 21 percent.
So it is much lower in other areas of the world.
Mr. Guthrie. So----
Mr. Steiner. So we have to offset the tax rate difference
with a much more efficient process.
Mr. Guthrie. But if you had a lower tax rate, you would
still strive to be more efficient just because of competition--
--
Mr. Steiner. Absolutely.
Mr. Guthrie. Yes, so that would----
Mr. Steiner. You always compete with the process first.
Mr. Guthrie. Always compete with the process. But your
process is energy-intensive.
Mr. Steiner. It is. And our process again in Harrodsburg,
labor, batch materials, and energy are the three major cost
components so----
Mr. Guthrie. What do you think that drives your energy
costs----
Mr. Steiner. Reduction in energy costs certainly helps us.
Mr. Guthrie. And anything that drives up energy costs makes
you less competitive.
Mr. Steiner. Makes us less competitive and that is an
advantage we have over other areas of the world----
Mr. Guthrie. Yes.
Mr. Steiner [continuing]. In Kentucky.
Mr. Guthrie. And not specifically in Kentucky, but yes, as
a country as well, most parts of the country.
Mr. Steiner. Correct.
Mr. Guthrie. So with the trade agreements that we are
talking about, there is the Transpacific and the European. What
are your issues with that and what----
Mr. Steiner. So again, about 78 percent of what we make we
export. In the case of Gorilla Glass, virtually every square
foot that is made in Kentucky gets exported outside of the U.S.
because industry, as Mr. Block said, to make televisions don't
exist in the U.S. yet. So to keep access to global markets is
vital to us because we are basically an export company.
Mr. Guthrie. Yes. That is what is interesting to note about
what you do is you are not making for the--well, eventually,
the products come back for the American----
Mr. Steiner. Many of the products come back.
Mr. Guthrie. Many of them come back but you are not just
here making for the domestic market; you are actually exporting
and find yourself competitive. But anything that we do here--
well, what kind of things could we do to make it better? I know
the tax rate, we don't want to affect energy rates.
Mr. Steiner. Access to foreign markets is quite important.
The other issue that is very important for us is IP protection.
Again, we compete because we invent first and then reinvent a
process. It is important to have U.S.-style IP protection all
over the world, not just in patent law but in trade secrets. It
is a little easier to enforce patents because we can look at a
product and tell whether or not it has used our glass
composition. Trade secrets is a more difficult issue from us
because somebody could copy our manufacturing process, but
since you don't have access to it outside the U.S., you may not
know that. So we need fair enforcement all around the world in
both patent law and trade secret.
Mr. Guthrie. Is some of your decision to manufacture here
is to protect your intellectual property?
Mr. Steiner. So we feel more comfortable certainly with our
situation in the U.S. A lot of our industries are in China and
that is a constant discussion in Corning of how do we protect
ourselves outside the U.S. like we can within?
Mr. Guthrie. Well, you are great employer and we really
appreciate what you do for that community. It is several big
industries. A lot of it is driven by energy costs and we really
appreciate what you do. And I actually just picked you guys up
in redistricting, so I have been very blessed to represent you
and look forward to working with you.
Mr. Steiner. Thanks. And we appreciate your support.
Mr. Guthrie. Thanks.
I yield back.
Mr. Terry. Thank you.
And Mr. McKinley, you are now recognized for 5 minutes.
Mr. McKinley. Thank you, Mr. Chairman. And thank you for
assembling the meeting prior to this with the displays and also
for this panel that we have.
I guess I am taking a little bit more of a cynical approach
perhaps. I have been here 2 years in Congress. Years ago,
before going to college, I worked on an assembly line. My
brother was in the steel industry working in the mills, and I
have seen the demise of the industry in our area. In northern
West Virginia, we have lost 30,000 steel worker jobs. They have
been lost in part primarily because of, I believe, government
interaction, government intrusion, government regulations. And
I have heard you talk a little bit about that. I have heard a
lot of love coming from the side of the table from people that
say they have your best interests at heart, and I would think
that the manufacturing all should be very robust given all the
love that you are getting from the side of the table.
But we have heard comments made about the sequester. We
have had 2 votes on the sequester. We are trying to avoid in
the sequester but we can't get the other side of the aisle to
support us on that. Oh, they will say they are concerned about
it, but we have given them the votes and they don't take them.
So I am concerned about it. I am concerned about where we
are going to go with us. I listened to that initial polling and
I thought it was a very good question that the chairman came up
with, and it was just Joe Hanson. It certainly wasn't
scientific. But when he mentioned tax code and regulations,
that is more than all the other combined, the issues that were
raised. Tax code and regulation. But yet, we can't get the
people on certain areas of our Congress to accept that. They
think it is more of what we have been doing for the last 4
years in Congress, more regulation, more government intrusion,
more taxes, higher energy costs. Is that the direction? Is that
what you are telling us now? I would like to make sure we are--
should we be going in that--do you really think the last 4
years is the best direction we could go if we are going to make
manufacturing all that it can be where we have American
exceptionalism again in our manufacturing? Is this the
direction we should continue?
Or what would you suggest to wake up Members of Congress to
understand what it is like to see a demise and struggle within
the manufacturing business? Can you give us some direction on
where you might give it to us? I heard you say tax code and
regulation but EPA and OSHA, regulatory, tax policy, ObamaCare,
I have heard how that is affecting businesses all over. The
sequestration, R&D, energy costs, what should we be doing, not
just sweet talk but actual what can we do? What should we do if
we are going to reverse manufacturing in the demise? Can a few
of you give me some good examples?
Mr. Meyers. Thank you for the question. You asked what
Congress should do, and honestly, for our industry, the
regulations and taxing, healthcare, everything that we see
coming down the pipeline is becoming more burdensome. What you
could do is stop.
Mr. McKinley. Thank you.
Mr. Meyers. You could stop. That would allow us to be the
manufacturing engine that drives this country and let us get
back to work.
Mr. McKinley. But why don't you think that people are
hearing that? It is so basic. Get government off our backs.
Free up--I hear it time and time again. Manufacturing will get
back if we just back off, but the Congress doesn't seem to want
to back off. It thinks it is going in the right direction by
becoming more intrusive in your workplace. How do you do it?
What are we missing here? Why aren't people listening to you?
Mr. Meyers. Well, basically, we have been vocal for years,
and why that has not reached Congress is beyond us. But I think
when you look at the jobs lost and how our entire manufacturing
sector continues to struggle, you know, when is it going to be
too late? When we are all out of business? So I appreciate the
opportunity to be here and express our issues of not only my
company but our industry and manufacturers in general.
Mr. McKinley. Thank you. Any others in the time remaining?
Yes, sir.
Mr. Arnold. It is not so much the regulation as it is the
unknown, as Congressman Waxman talked about. You know, gridlock
and arguing from both sides is a necessary part of the
government process. We need that. But when something is
enacted, get to it, then, on specifically what we have got to
do about that. We have had the ObamaCare for 2 years now. The
only thing I have seen out of that--we provide hospitalization
for our employees. Our insurance cost just went up 20 percent a
year for the last 2 years. And yet, it is not even enacted yet,
but the anticipation of that, the unknown, the insurance
companies have had to respond that way. So what we need is
swift action.
I talked for a second about the dredging of the entrance to
the channel in Brunswick. The Corps of Engineers has been
working on that for 4 years. They don't get the allocation of
the money to be able to do that completely at one time. So it
is piecemeal and it fills right back in. We are in a world
where we have to respond to market conditions immediately and
government is not responding as quickly.
Mr. McKinley. Thank you.
Mr. Terry. Thank you very much.
Mr. Johnson from Ohio, you are recognized for 5 minutes.
Mr. Johnson. Well, thank you, Mr. Chairman. I too
appreciate the opportunity for today's hearing and the
demonstration of products that we saw earlier. I have several
manufacturers from Ohio that displayed their wares, Thermo
Fisher and their orbital mixer, Quanex and their window
efficient linings, and of course, Magnum Magnetics, one of the
few companies that provides flexible magnets to consumers and
businesses.
I had a line of questions here but I want to take just a
second because we have asked you guys a lot of questions and
you have been very gracious to give us your opinion. One of the
issues that came out in the State of the Union that has been
alluded to here several times is the President's insistence
that cap-and-trade is still on the table. Climate control is
still a big issue. It probably doesn't come as a surprise to
you in eastern and southeastern Ohio where we have a wealth of
oil and natural gas and the prosperity that that is bringing to
our region and to America's ability to become more energy
independent and secure, the vast amounts of coal that we have
that provide reliable and affordable energy. That is a big
issue. And because of where we are located, manufacturing is a
big deal. We are in a manufacturing corridor.
And I talked to businesses every single day that are
saying, Bill, we are in jeopardy of having to lay off our
people because we simply cannot keep pace with these rising
energy costs as coal-fired power plants shut down, as energy
costs go up. As the tax burden and regulations continue to
drive up our cost of doing business, we are not going to be
here.
So let me just ask--you have been polled a couple times now
so for the sake of time, let me just ask one final polling
question in my time. How many of you believe that additional
climate control regulations coming out of the Federal
Government that are going to drive up your cost of operations,
including driving up the cost of the energy that it takes to
run your operations, how many of you think that is going to
have a negative impact on your ability to grow and expand and
hire and innovate within your companies? How many of you think
that is going to have a negative impact?
The rest of you don't think it is going to or are you just
silent? I have got to ask.
Mr. Holler. For me it is just beyond the scope of my
responsibility.
Mr. Johnson. Mr. Yuse, you don't think climate control
regulations are going to have an effect on your business?
Mr. Yuse. So I guess, in my opinion it depends on how they
are implemented exactly.
Mr. Johnson. I qualified that. They are going to raise
operating costs; they are going to raise the cost of reliable,
affordable energy. It was very specific, because that is what
is happening with the shutdown of the coal industry, the
elimination of coal-fired power plants, and the attack on
hydraulic fracturing and our ability to go after fossil fuels.
That is going to affect your operating costs. Is that going to
affect your business?
Mr. Yuse. Well, let me just say that anything that impacts
operating costs will theoretically have a negative effect.
Mr. Johnson. I realize this is a politically charged
question because it is one that the President is very
interested in pursuing. I can see the stares and the why are
you putting me in this position to have to answer this. Well,
folks, I am going to tell you. You folks are the ones that help
us determine what the agenda is and how we fight these battles.
If you don't want to see increased operating costs, if you
don't want to see your electricity rates go up, then I would
simply encourage you, speak out. Speak out in your industries.
Speak out when you come here. Let the American people hear what
it is doing to manufacturing.
Do you know why we can't stand up a nuclear power plant in
America anymore? It is not because of technology. It is not
because of permitting. It is because of what David McKinley
talked about earlier. It is because we don't manufacture the
kind of steel here anymore to enclose nuclear reactors. We have
to buy that overseas. And you have got other industries that
are in jeopardy of being closed down because of onerous climate
control regulations. So I would just encourage you, don't be
bashful. You want us to help your industry and spur many
fracturing? Give us a voice with the American people.
Thank you, Mr. Chairman. I yield back.
Mr. Terry. The gentleman from Florida, Mr. Bilirakis.
Mr. Bilirakis. Thank you, Mr. Chairman. I appreciate it
very much. Thank you for giving me the opportunity to serve on
this committee as well. This is an outstanding hearing.
Mr. Terry. As long as you continue to think that way.
Mr. Bilirakis. Thank you. I will. I promise you. This has
been outstanding.
Now, I want to focus also on the regulation and the
overlapping regulation or overregulation as well. And I want to
ask Mr. Smatsky a question. Your testimony briefly touched on
how your company and business is regulated by the FDA but has
faced the possibility of also being regulated by the EPA. Can
you further explain how your business operations would possibly
be impacted by adjusting to a new regulatory scheme? Must you
also comply with the sets of state and local regulations? Do
your federal regulations again conflict or overlap with these
state and local regulations? Because that is what I keep
hearing in my district and all over the State of Florida. And
then what is it going to cost you to comply with these over-
burdensome regulations in my opinion? That is my question.
Thank you.
Mr. Smatsky. Thank you for the question.
In terms of the FDA regulations, they are of the highest
standards to protect the consumers. So we feel as a food
manufacturer, it is in our best interest to go with the
highest-level standards, which is above and beyond the EPA. I
can't recall the second question that you asked me as well.
Mr. Bilirakis. Well, in other words, do the state and local
regulations in general conflict with each other? Do federal
regulations ever conflict--and I believe they do--and overlap
with state and local regulations?
Mr. Smatsky. They do, Congressman, although I just don't
have enough data at this point in time. I would have to get
back to you to further answer that question to give you more
clarity. So I am happy to submit anything for the record.
Mr. Bilirakis. Yes, what does it cost you? I would like to
hear from other members of the panel as well, anyone that once
to jump in. Thank you. Anyone else want to? Mr. Block?
Mr. Block. Well, we don't really do any particular hot
processes or have any issues with the regulatory environment
ourselves. Certainly, our customers do. But I am not
knowledgeable enough to directly answer that question for my
customers and for what they do. Obviously, the mills themselves
have certain issues with regulatory situations. I know, Mr.
Johnson, I am not sure which district you cover. I think----
Mr. Johnson. Ohio 6, all along the Ohio River.
Mr. Block. Oh, OK. But like AK Steel, which is in southwest
Ohio, has had environmental issues which has impacted them.
They are difficult issues. I don't know if you want me to
expand on this or not, but I might be going off on a tangent
here and that might not be a good thing.
Mr. Bilirakis. Well, give me a specific example of how you
face overlapping regulation.
Mr. Block. Well, we personally don't, to be honest with
you. I mean my business is relatively--it is complex and it is
details, but in the actual factory, it is relatively simple. So
we really don't deal with regulations that impact us directly.
Mr. Bilirakis. OK. I have one other question, Mr. Chairman.
Can you please describe--and this is for the entire panel--
how your manufacturing enterprises fit within the domestic
economy? And then how do you impact other businesses and
sectors up and down the supply chains? Anyone want to jump in?
Mr. Meyers. Well, obviously, with the casting industry, our
products are used throughout the U.S. and primarily domestic.
And what we see as the beginning user of the beginning process
with castings is it is a cascading effect all the way across
the entire supply chain.
So I want to go back real quickly to what you are asking
about regulations and the overlapping. Fortunately, in the
great State of Texas, we have regulatory issues that are pro-
business not only from the fact of the areas that they come,
but our agencies in the State of taxes work with businesses.
They are not coming down against us but they work with us to
help us maintain goals and achievements that we need to look at
as far as environmental or safety. So I think that when you
talk about overlapping regulations, you know, it it is more of
a regulatory-friendly issue in helping our manufacturers and
not constantly bombarding us with regulations and issues that
we simply can't do.
Mr. Bilirakis. Very good.
Mr. Chairman, I would like to yield back the rest of time.
Mr. Terry. Thank you.
Mr. Bilirakis. Thank you very much.
Mr. Terry. And so there is no more questions to be asked of
you here at the panel, but that doesn't mean that we won't
submit questions to you. You or your representatives probably
already know that or have been briefed that we have the
opportunity. And I have several questions that were kind of
prompted from your testimony and answers to questions. So be
looking forward to receiving your answers to those.
And to all the members, I remind you that you have 10
business days to submit questions for the record and ask the
witnesses to respond promptly.
And then, I want to mention that the manufacturers'
showcase will open again for an hour after this hearing. And I
want to thank all of their help for the showcase, our clerk,
Kimberly Howard; our press secretary, Charlotte Baker; and
Caroline Ferguson from the committee.
Now, thank you. You guys were awesome, great testimony and
feedback, exactly what we were looking for. So thank you for
being here today. And we are adjourned.
[Whereupon, at 12:17 p.m., the subcommittee was adjourned.]
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