“What Works” in American and German Manufacturing

Enlarge image Ambassador Peter Ammon opening a conference on manufacturing on May 16, 2012 (© Steve Johnson/The Aspen Institute) “Today we witness another revolution in manufacturing,” long after the first “was driven by the invention of the steam engine 200 years ago.”

These the words of German Ambassador Peter Ammon on Wednesday, May 16, as experts from disparate sectors descended upon the Aspen Institute's headquarters in Washington, DC to discuss a common theme: manufacturing's role as a jobs motor. The goal was to isolate paths to competitiveness and innovation in the German and American markets, in the process sifting through the manifest differences between the two, then arrive at “what works” for both.

The conference was jointly sponsored by the the German Embassy, the Aspen Institute Program on Manufacturing and Society in the 21st Century, the Representative of German Industry and Trade (RGIT) and the German Center for Research and Innovation (GCRI).

Ambassador Ammon opened the event on Wednesday morning, and Dr. Rebecca M. Blank, the US deputy secretary of commerce, delivered the keynote address. Following the preliminary remarks, three panels discussed as many topics, the first of which focused on industrial perspectives on manufacturing growth, the second on the place of government support in spurring said growth through innovation and the third on workforce training.

Manufacturing, noted the ambassador, has indeed undergone several paradigm shifts; and as it continues to adjust, today's global production networks require manufacturers to innovate their techniques, re-directing them to emerging needs uncovered by new discoveries. Along those lines, and specifically concerning the growth strategies of Germany and the United States, Ambassador Ammon concluded that “education and training … for the manufacturing jobs of tomorrow seems to be the core challenge of today.”

Enlarge image Rebecca Blank, US deputy secretary of commerce, giving the keynote address at the Aspen Institute on May 16. (© Germany.info) In her remarks, Deputy Secretary Blank emphasized the decisive role that manufacturing plays in growth and job-creation. It is responsible for 37 percent of US growth since 2009. Furthermore, according to the deputy secretary, the sector pays an average of 17 percent better than jobs in comparable sectors.

Deputy Secretary Blank said that in many respects the robust German sector for manufactured goods represented a good act to follow for the US. She then outlined the Obama administration's three-pronged strategy to strengthen it, which includes more research and innovation, doubling US exports by 2014 and unfurling US potential by enriching education prospects for future leaders in the sector. To this last point, the deputy secretary made especial mention of increasing graduates in so-called STEM (science, technology, engineering and mathematics) degrees.

Currently glowing: German manufacturing

Manufacturing has indeed been a bright spot for Germany, both traditionally and during economic travail. But in the midst of a worldwide slog, Germany is not resting on tradition. First, to continue to foster a productive industrial environment, the German government is spending more on education and research, investing upwards of 12 billion euros in addition to  planned outlays between 2010 and 2013. The goal is to invest 10 percent of GDP in research and education by 2015.

The second step is producing good workers. The German apprenticeship system, a firmament since the Middle Ages, continues to invest in the human capital who ultimately produce the tools, cars and engineering products by which the country earned a reputation for manufactured goods of impeccable quality. Finally, Germany is committed to providing a modern infrastructure for energy, transportation and telecommunications.

With its high wages, strong unions and effective regulation, German manufacturing has helped fuel a spunky, post-recession German economy that is indeed a formidable global force. Germany's Federal Statistical Office, Destatis recently reported that German manufacturing had grown in each month measured thus far in 2012. Furthermore, the Ifo Business Climate index, a survey measuring Germany's business mood that receives intense, global scrutiny, last reported that in April manufacturers judged “both their current business situation and their business outlook as significantly more positive” than even a month before.

Enlarge image Glazing bowls at a porcelain factory in Fürstenberg, Germany (© picture alliance / dpa) At the Aspen Institute on May 16, panelists and speakers sought to tease out the precise measures that have made German manufacturing a motor for its economy, both during and after the global recession. For instance, in the second panel, Dietmar Harhoff, chairman of the Expert Commission for Research and Innovation of the German government, emphasized the cooperation in Germany between government, the private sector and academia, one promoted by the “High Tech Strategy 2020 for Germany.” In this context, Harhoff mentioned Germany's electro-mobility platform and its leading-edge cluster competitions, government-organized contests rewarding enterprising ideas, as concrete instruments to bring stakeholders of innovation around a common table. And although the apprenticeship model that greases said cooperation was praised again and again by many panelists, Harhoff said it could always become more flexible and transparent.

The American side

Manufacturing has been part of the economic recovery in the US up to now, and is becoming an ascendant priority. Even if it does not play so commanding a role in the States as in Germany, Aspen's executive director, Thomas Duesterberg indicated a state-side “resurgence,” writing that “manufacturing production [is] expanding by over 10 percent in the first quarter of 2012, compared to 2.2 percent in national GDP.”

But more can be done, as was evident at the recent conference. For instance, US Under Secretary of Commerce Patrick Gallagher, who also serves as head of the National Institute of Standards and Technology, mentioned the current administration's efforts to promote innovation and research. Investments in research and development can uncover new jobs in previously non-existent fields. For instance, although 70 percent of all private research and development investments go to manufacturing they do not bear a sole benefit to this sector; rather, these efforts then cascade outward to open up new, or benefit existing fields. Here, as Gallagher made clear, it is imperative that the government act as a “convener” of actors from business to research.

Again, training plays a deciding role. Introducing the last panel, Friedrich Hubert Esser, president of Germany's Federal Institute for Vocational Education and Training (BIBB), referred to the German apprenticeship system and the cooperation it fosters between the public and private sectors. However, echoing Harhoff before, Esser said it must continue to improve if the “Made in Germany” label is to maintain its reputation.

But how does that come over to America? There are some success stories: During the first panel, Josef Kerscher, president of BMW Manufacturing LLC, described how his company had founded a training center and even established a health-care package specially tailored to BMW. Another example, this time from without, is Siemens, which shares a cooperation with Central Piedmont Community College (CPCC) in Charlotte, North Carolina, which stresses vocational training and cultural exchange, while approximating the German skilled-labor training system.

Enlarge image A Volkswagen employee at the factory in Chattanooga. (© picture alliance / dpa) That is not to say that the German system might be directly transplanted onto US soil. Germany's manufacturing system, as Duesterberg elucidated, “is anchored in its unique history, culture, and political environment, which cannot be replicated in the United States.” More important – and appropriate – than a one-to-one translation is taking up foundational elements separately, then fitting them to form on the ground in America. In addition to these, American manufacturers employ their own, independently discovered best practices, to arrive at the most fitting mix for America.

But the crux of the issue, regardless of country, is increasing competitiveness and fueling innovation.

In order to do so, as was evident at the conference, industry, government and education must play complementary roles in fostering the environment for successful manufacturers, supported by sufficient research and development, to produce wares expertly crafted by a well-trained workforce.

Because of their different histories, America and Germany cannot proceed down the same path to manufacturing's Elysian Fields; but they can innovate together and learn from one another. Working jointly, both countries, as was evident on May 16, can create the right policy mix for growth and jobs.

To do so, all players must be ready to experiment, share experiences, then move forward – and as all members of the American and German sides have made very clear they intend to do exactly that in the months to come.