For the most part, the owners of America’s businesses that aren’t publically traded are looking out for the long-term interests of their businesses.
For the most part, the owners of America’s businesses that aren’t publicly traded are looking out for the long-term interests of their businesses. In that sense, they invest in their companies to ensure long-term survival. Even in these tough economic times, private owners (for the most part) know that they are competing in a world market and that their survival is dependent on their ability to compete on that stage with technology and competence. This is particularly true for many of the firms servicing the industrial heating markets. Many of these companies are owned by investors who have spent the greater part of their lives in this industry and want to pass that technology on to the next generation.
But it is not universally true. In this global economy, some of these highly successful, small U.S. businesses operating with a weak U.S. dollar have been bought up by foreign investors who see these companies as cash cows for their own enrichment. These are companies that have heavy investments in technology and facilities and a secure, low-competitive market for their unique products. As such, they have a vast storehouse of “seed corn” that can be liquidated by these new owners.
In the name of greater efficiency and high hurdles for investment decisions, they slowly bleed these U.S.-based manufacturing companies of their huge stockpile of assets generated sometimes over many generations of workers and technologists. Depreciation of assets becomes an instant cash generator when no new investments are generated. Instead of reinvesting in their manufacturing base, they “outsource” large portions of their formerly in-house manufacturing base. In so doing, they also get a reduced cost from the elimination of the manufacturing support structure that can now be “downsized.” There is no more depreciation as a cost element, and the profits for the owner soar.
Outside vendors are now counted on to provide all the manufactured items, from electrical control systems to machined subassemblies. This can supposedly continue along indefinitely as long as there are subcontractors around, but can it?
We will continue with this discussion next week.
Our Manufacturing Industries are at Risk
By Jack Marino