Speeches and statementsIllinois Manufacturers' Association Annual Luncheon Keynote SpeechPresident B. Joseph White Thank you. It's a privilege to speak to all of you today. I'm pleased to be joined today by Larry Eppley, Chair of the University of Illinois Board of Trustees, as well as several of my colleagues including Vice President for Technology and Economic Development Avijit Ghosh and officials from our colleges of engineering, business and other units of the University. This is a wonderful turnout. Let me begin with the obvious. We are meeting at time of real crisis in the U.S. and Illinois economies. I am well aware that most of your companies, having successfully weathered many challenges in the last quarter century, are once again going through a profoundly difficult period. Twenty-eight years ago I left the security of a tenured faculty job at the University of Michigan and joined Cummins Engine Company in Columbus, Indiana. As such things go, business literally peaked the day I arrived in mid-1981 and then began a 30-month slide into the deepest recession since the Great Depression. I grew up fast. In those months, I had the terribly difficult experiences many of you have had and are going through now. I headed human resources and was responsible for laying off about 5,000 people out of a work force of 12,000 in a town of 45,000. I learned a lot — like doing what you have to do but doing it well and with compassion. I also learned what a horrible disservice it is to let people's pay outgrow their skills, so when they lose their jobs they also lose their middle-class standard of living, many permanently. I swore I would do my best never to be party to such a thing again and it's probably the reason I am so passionate about education. More about that later. These are really tough times in most of your companies. So let me share one an experience I had in 1982 that has relevance today. I was walking through our Cummins headquarters building one day. Business was in free fall. As I recall, we went from building 500 big engines a day in Columbus to fewer than 150 over just a few months. I was, frankly, feeling a little sorry for myself — overseeing big layoffs, implementing a pay reduction plan, immersed in misery. I felt a firm hand on my shoulder and I was steered directly by and into the office of Henry Schacht, Cummins chairman and a great man. "Joe," he said, "You look like you have the weight of the world on your shoulders. That's a problem. Because you're an officer of this company. We've made a big bet on you, and people are watching. So here are two things I want you to remember. First, business will get better. And second, worry on your own time. One of your responsibilities is to inspire confidence in others. So put your shoulders back and be a leader." It was good advice. And, of course, it's what we all need to do in these hard times. By the way, Henry was right. Just two years later, in 1984, we were going nuts at Cummins as business soared. We were chasing demand, reopening closed operations, trying to keep up in a boomer year. That's manufacturing, at least capital goods manufacturing. Today, I'd like to talk with you about two things:
As you'll hear, I think these topics are highly intertwined.
Manufacturing's Future in IllinoisFirst, manufacturing in Illinois. These days, it's fashionable — but superficial and, frankly, stupid — to regard manufacturing as somehow yesterday, unimportant, largely gone from the American economic scene. It's all about the service economy, and finance (at least it used to be finance), or maybe health care. This view is dead wrong. Contrary to popular opinion, the U.S. today remains the world's most prolific manufacturer — accounting for a fifth of world manufacturing value-added and producing two and a half times more output than those much celebrated Chinese factories. In Illinois, despite the loss of a quarter-million manufacturing jobs since 1998, manufacturing remains the single largest contributing sector in Illinois's economy at 13% of GDP. Bob Sheets at the U of I's Business and Industry Services in Naperville, who is here today, projects that manufacturing will employ about 640,000 workers through 2014. That's twice as many as financial services and transportation and logistics and about the same as the health-care workforce. Manufacturing jobs are good jobs, paying on average $55,000 per year plus health-care and retirement benefits. And each manufacturing job in Illinois creates more than 3.5 additional jobs. Why is there so much confusion about the continued importance of manufacturing in America and Illinois? I can think of at least two reasons. First, people equate manufacturing with job loss. But they don't distinguish between jobs lost for a good reason — specifically, productivity improvement — with jobs lost for regrettable reasons, like loss of market share and international outsourcing. American manufacturing, like American agriculture, is fundamentally a long-arc story of astounding improvements in productivity and quality, something to be celebrated. I spent years consulting on quality with the senior management of Whirlpool Corporation, most of whose products are still produced here in America. We Americans take for granted that fewer than 30 hours of work are required to purchase a new refrigerator, a product that provides at least 20 years of usually flawless service at rock bottom operating costs. The home appliance industry is emblematic of the miracles of modern American manufacturing. There is a second reason for the confusion about manufacturing role in America. It is that troubled companies — like GM, Ford and Chrysler these days — grab the headlines while thousands of truly great manufacturing companies — including household names like Cat, Deere, Boeing, and Kraft, and successfully reborn companies, like those in the steel industry — just quietly go about their business. In the minds of many people, manufacturing equals troubled. Just the opposite should be true. To be personal, I'll always be proud that I was part of the management team at Cummins that met the challenge of tough new foreign competitors like Komatsu, while extending our business into power systems and expanding around the world. Figuring out how to survive at low volumes while cutting prices by 30% — and then going on to thrive — is an experience you never forget. I know you know what I mean. My point is that in general, American manufacturing is an incredible success story — for consumers, employees and shareholders. More Americans need to understand this. And take pride in it. By the way, speaking of GM, Ford and Chrysler, if any of you have simple and clear-cut advice to Congress and the administration, you're smarter than I am. Just bail them out? I don't think so. Let them collapse? I don't think so. What to do and how to do it is a very tough call. It may be the most vivid case of competing values on the national stage I've ever seen. For what it's worth, I think financial assistance needs to be tied to some form of receivership with loans premised on the unprecedented collapse in demand. Big changes of the kind bankruptcy protection can provide are needed, but bankruptcy could be ruinous. So they need to happen in a different framework. As both Forbes magazine and Rahm Emanuel have said recently, "Never waste a crisis." That certainly applies to the situation in the domestic auto industry. We also shouldn't waste this crisis when it comes to the work we face in Illinois to make it attractive for you and your companies to remain and expand here in our state. I did site location work for Cummins. I know what you look for: hospitable communities, reasonable taxes with competitive incentives, an educated and motivated work force, a sensible litigation environment and supportive public leaders and legislators. There is an awful lot to do on this checklist in Illinois. Whether we can get it done, and done soon, is my biggest concern about manufacturing's future in our state.
Properly Educating our PeopleI want to turn now to one of the things you look for — an educated work force — for which I have a special passion. A well educated work force is vital for manufacturers. You need employees with reading, math and problem-solving skills as well as integrity and good judgment. We know that the returns on education for the individual and society are enormous. There is a high positive correlation between education level and lifetime earnings and a strong negative correlation between education level and lifetime unemployment. The process of creative destruction in capitalism is brutal — you know, you've experienced it. It's hard on companies and it's hard on individuals. But it's produced the highest standards of living the world has ever known. So, it's worth it. With a proper education, most people can navigate this process successfully. Without it, they are lost, many permanently. Like many of you, I expect, I've had a few professional passions in my life that go beyond my job. One of mine has been leadership. Two years ago, my thirty-year interest in the subject culminated in the publication of a book, The Nature of Leadership. Now I have a new passion — I call it Brilliant Futures for America's Children. In a nutshell, it's about the horribly leaky education and development pipeline from birth to adulthood that is ruining lives and weakening America. More important, it's about how to fix it. For every 100 kids who start school, only about 70 graduate from high school the conventional way and another 15 eventually earn a GED. Fifteen percent, millions of young people, don't even finish high school. Then, among high school graduates, two-thirds continue on in school, but only half end up earning a college degree. It dismays me — and I expect you — that America, which was forever #1 globally in the college graduation rate of our citizens, has fallen to #8 in the world in the last ten years and we're sinking fast. This is disastrous for America's future, including the manufacturing sector. And I haven't even talked about how much worse these numbers are for African-American and Latino kids or uneven educational quality or the inadequate interest of young Americans in engineering, math and science. In other words, the hard stuff on which a developed economy depends for global competitiveness. Properly educating our children and young adults is a big subject. I think America's future depends on it. I know many of you share this passion. I'm grateful to you and your companies for urging and supporting more and better education at all levels. The University of Illinois plays a big role in properly educating talented people, primarily from and for Illinois. We have 70,000 students on three campuses and more than half a million alumni, half of them within 50 miles of where we are sitting — and hopefully a few seated in this room. All this is good — but the Board of Trustees and I have decided it isn't good enough. We are deeply concerned that a college education on our residential campuses — and all of the state's public university campuses — costs at least $75,000, often much more. With median annual family income less than $50,000 — and in a city like Rockford just $35,000 — a college education, even with financial aid, costs too much for many people. So it's not in their game plan. And that's why most college graduates come from families in America's top two income quintiles. So we have launched an online University of Illinois Global Campus that will partner with community colleges to enable well-qualified people across Illinois and beyond to earn a quality college education for less than $30,000 while staying in their communities, holding down jobs and meeting family and other responsibilities. We intend to launch three such baccalaureate completion programs in September 2009. I'm also very pleased that the Global Campus staff is working with the IMA to develop an online degree in manufacturing management. Thank you for the opportunity. The connection between the University of Illinois and manufacturing companies in Illinois and beyond is long and strong. Our College of Engineering at Urbana-Champaign is world class. Its undergraduate and graduate programs enroll 5,000 students and we regularly rank in the top five out of about 300 engineering programs nationally. You might be surprised, and I hope delighted, to learn the College is creating a new department called Industrial and Enterprise Systems Engineering. It encompasses industrial and process engineering and operations and quality control. It also includes the business and enterprise side of manufacturing engineering: economics, finance and supply-chain management. Universities have been builders of functional stovepipes and chimneys that you work so hard to break down in your companies. Now, we are trying to break them down a little at the source. Our College of Engineering in Chicago has 100 faculty, and 2,500 of the most diverse and highly motivated students you've ever recruited. You might have read in the paper about one of those students last Mother's Day. Lucy Trevino, confined to a wheelchair because of a rare disease, not only was the first in her family to attend college — which is common at UIC — but she was able to do so because her mother Rosa brought Lucy to every class for six years. Now that's dedication. So, the University established a scholarship in Rosa Trevino's name when Lucy graduated last spring. Each of our campuses — Urbana, Chicago and Springfield — has a College of Business accredited by the Association to Advance Collegiate Schools of Business, and all three have a strong orientation toward entrepreneurship and manufacturing. Our research parks in Chicago and Urbana are proud to host great Illinois-based companies like Caterpillar, ADM and State Farm. These companies get special access to our faculty, students and commercially valuable intellectual capital. And we have specialized units of unique importance to manufacturing like:
I am pleased to deliver some "green" news from our campuses as I know this is a theme of your annual meeting here today. At UIC, the mechanical and industrial engineering department is proud of its Energy Resources Center, established in 1973, in the wake of the first energy crisis. Its mandate is to conduct studies in the fields of energy and environment and to provide industry, utilities, government agencies and the public with assistance, information and advice on new technologies, public policy and professional-development training. You may have heard about the $500 million biofuels research grant that energy giant BP made to the Urbana campus and the University of California at Berkeley. BP and the U of I are committed to doing the necessary research to develop the green and clean energy of the future. A side benefit of this partnership is that we have come to terms with the ownership of intellectual property that has, in the past, been a stumbling block in creating industry-and-university partnerships. Going forward, we'd like to expand the University's original Extension mission to include working with industry to develop "green" technologies and build sustainability into manufactured products. Let me end now with a question. How deep is our commitment to manufacturing at the University of Illinois? Well, it's fair to say that it's in our DNA. When Lincoln signed the Morrill Act in 1862, he gave rise to America's land-grant universities, including the University of Illinois in 1867. Our purpose from the beginning was to educate, conduct research and do outreach for the benefit of two key industries in our state: manufacturing and agriculture. One hundred forty years later, we do much more. But, as you've seen, our core mission continues. Thank you again for the opportunity to speak with you today. Thank you for the tremendous value you bring to the state of Illinois. And let's all hang in there — better days lie ahead. |
