We had Lynn Tilton of Patriarch Partners on TechTicker this week. She made one of the simpler and more persuasive arguments we’ve heard as to why the U.S. needs to rebuild its manufacturing sector: Because there aren’t enough services jobs, and some folks just aren’t well-suited to “services” jobs and never will be.
(Lots of people decry the downfall of manufacturing. But other than “loss of jobs,” which has been happening forever without hurting the economy, they can’t explain why it’s really a bad thing.)
Peter Gorenstein, TechTicker: U.S. Manufacturing grew in January at its fastest pace in more than five years. Yet, manufacturing makes up only 12% of the U.S. economy – down from its post World War II peak of 28% per cent in 1953.
That lack of an industrial base has put the American economy and worker in jeopardy, says distressed investor Lynn Tilton, CEO of Patriarch Partners. “The reality is, in recent times, every great empire has been built on a manufacturing economy,” notes Tilton. “The fall of every empire has been the failure to remember that one fundamental fact.”
Tilton’s point is simple: the country cannot thrive as simply a service-based economy. As Tilton explains to Aaron and Henry in the accompanying clip, there isn’t enough demand for services and those related jobs to keep the U.S. competitive on a global scale. We should also not over look the fact some people are better at building and making things then working on spreadsheets in a cubicle.
Tilton speaks from hands-on experience, not theory. Her firm either lends to or has controlling interest in more than 70 companies with assets of over $7 billion, including Heritage Aviation, MD Helicopters, Global Automotive Systems, Vulcan Engineering and Amweld Building Products.
Late last year, Patriarch acquired a controlling stake in Dura Automotive Systems, which is headquartered in Rochester Hills, Mich. In the accompanying clip, Tilton discusses the challenges and opportunities of trying to revive Michigan’s automotive sector, and her plans to open a machine shop nearby.
Sounds promising, but how does America compete with cheaper labour from emerging markets?
“It’s a long humble journey back” but with “cash and creativity” Tilton’s confident it can be done. What we lack in cheap labour and certain raw materials American manufacturers can make up with innovation, she says. It will also take sacrifice on the part of capitalists. Investors will have to be willing to accept tighter margins in the short run in exchange for a stronger country in the long run.
“Frankly, if we do not employ people in this country it will ultimately end badly for all of us,” Tilton warns.
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