To turn the corner on manufacturing, California leaders are first acknowledging the pain

The Golden State’s most dependable manufacturing truth teller may be the trade group charged with its health and efficacy — the California Manufacturers and Technology Association, or CMTA.

CMTA released data earlier this month that points to more pain than pluses. They deserve credit for doing so.

Manufacturing is measured in multiple ways. Today, more manufacturing companies call California home than any state. But as reports cited by CMTA tell us, California now lags way behind America’s leading manufacturing outposts in private-sector investments and job growth across manufacturing’s varied sectors; at the same time, it tops the list in undesirable categories like energy costs, insurance premiums for workers comp, and corporate tax rates. See the correlation?

How far behind is debatable, but the trends are unmistakable. According to Site Selection magazine’s Conway Projects Database, states like Texas and Ohio are adding “corporate facility projects with significant impact, including headquarters, manufacturing plants, R&D operations, and logistics” at a rate that leaves California in the dust. In 2020, Texas added 781 private-sector corporate projects that exceeded $1 million, added 20 jobs, or involved 20,000 square feet of new floor area. California added 103, behind such manufacturing stalwarts Louisiana (116) and South Carolina (110). The per-capita ranking — projects per million residents — are even worse. (Arizona led the rest of the West with 108. Colorado (29) and Utah (21) lagged further.)

The trends aren’t a surprise to those in a position to fight back on behalf of California manufacturing. CMTA president Lance Hastings and other advocates like Jim Watson of the CMTC, California’s NIST-sponsored Manufacturing Extension Partner, helped craft a comprehensive road map for the sector in 2019. The California Forward Advanced Manufacturing recommendations outline a “statewide manufacturing ecosystem strategy” along four primary axes: strategy, workforce, infrastructure, and trade.

Its proscriptions are detailed and touch on many of the high points in today’s national narrative, like “taking action to upskill our workforce, rebuild our infrastructure, fight for free trade, and promote sustainability.” It also calls for the creation of a new manufacturing bureaucracy, a network of new departments, councils, institutes, and committees. The tactics seem well reasoned. But there’s so much. It can be a head-spinning roadmap.

I can envision company executives asking simply for lower business costs, targeted tariffs and value-added taxes that level the playing field for U.S. companies, more suppliers and better tools to find them, and marketing air cover to encourage consumers and OEMs to buy local, to support local manufacturers.

If California leaders don’t want to emulate Texas, perhaps China’s approach is worth watching. Miao Wei, a retiring minister of industry and trade, made news earlier this year by stating that the global manufacturing leader is in fact “30 years away from becoming a manufacturing ‘great power.'”

It’s a bit of an overstatement.

But his language reflects the importance of manufacturing in the world’s second-largest economy: “Basic capabilities are still weak, core technologies are in the hands of others, and the risk of ‘being hit in the throat’ has significantly increased,” he said, and concludes: “We must maintain our strategic resolve, stay clear-headed, and deeply understand the gaps and deficiencies.”

China leaves little doubt of its intentions to be the global manufacturing superpower. California — and other Western states that ranked poorly — will hopefully redouble efforts to deliver on the recommendations in the California Forward plan, to advance manufacturing.

A renewed sense of urgency would be welcome. So much is at stake.

Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.