ROME, N.Y. — Walking through his high-ceilinged factory here, explaining the production of sheets of copper, M. Brian O’Shaughnessy comes across as a staunch advocate of manufacturing in America. But he invariably adds: “There is nothing made in the United States that has to be made here — that can’t be shipped in from some other country.”
As chairman and principal owner of Revere Copper Products, O’Shaughnessy runs one of America’s oldest manufacturing companies, started by Paul Revere himself, a fact that exerts considerable pressure. As he put it: “What kind of a message are you sending to the people of the country if you abandon America?”
But spend a day with him, and a more complex picture emerges. He wonders sometimes about the less patriotic alternative of relocating production to Asia or closing the factory entirely on the ground that Revere’s profit margin here is too thin — less than $1 million on $450 million in annual revenue.
“If we simply shut down today,” O’Shaughnessy said, “I could sell the inventory and the machinery, which could be moved elsewhere in the world, and pay off our debts and walk away with $35 million to $40 million.”
What staves off those alternatives are labor concessions and a substantial government subsidy, something he and others in the U.S. say is increasingly important to fuel a nascent recovery in manufacturing.
The labor concessions at Revere, in a contract endorsed by the United Auto Workers, are much like those unions are giving to other manufacturers. The subsidy comes from New York state, which supplies, at cost, the electric power that Revere uses to produce copper sheets and slabs. O’Shaughnessy says it accounts for half of Revere’s profit.
With such support, the key measure of manufacturing’s presence in America is ticking upward. The Commerce Department’s Bureau of Economic Analysis reported in April that manufacturing’s contribution to the gross domestic product rose in 2011 to 12.2 percent from 11.7 percent in 2010 and 11 percent in 2009.
The current share is, of course, far less than in the 1950s, when manufacturing reached 28 percent of the economy, and then went into a long, gradual decline. But for the first time since then, the percentage has risen over a three-year period.
“Basically, manufacturers are realizing that the cost structure for making products in America no longer needs to be as unfavorable as it was,” said Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities in Washington and a former chief economist to Vice President Joe Biden.
Apart from subsidies, organized labor’s givebacks in recent years have contributed significantly to what manufacturers call “lean” practices.
At Revere, “lean” means that employment has fallen to 360 from 450 two decades ago. The half-hour lunch break is no longer paid time for the 260 hourly workers. (They earn $19 an hour on average.) Employees pay some of their health insurance premium. And management alters factory routines and tasks without first consulting the union, UAW Local 2367, which for months has turned the other cheek. Partly as a result, the time required to turn a 22,000-pound cake of copper into finished sheets of various thicknesses has been reduced to three days from three weeks.
“The company shows us a newsreel that makes the point that since the year 2000, the United States has lost 56,000 factories and 5 or 6 million manufacturing jobs,” said Tom Slocum, chairman of the UAW local’s bargaining committee, “and the message is that, but for the O’Shaughnessys, the factory here could join the 56,000.”
Despite those lost factories, the U.S. was the world’s largest manufacturer in terms of value added for many years — until China gradually edged into the lead over the last few years. Value added means the value in dollars that is added when a $100 sheet of copper, for example, is cut and shaped into a $150 roof gutter. By that standard, a fully assembled car is worth more than the value of its numerous parts before assembly. Each factory operation adds value, and the measuring gauge speeds along, reaching $1.8 trillion in the U.S. in 2011.
In China, where the gauge has been rising faster than in the U.S., the value added by manufacturing was about $1.9 trillion last year, according to government and private estimates.
That Chinese milestone is reflected in America’s merchandise trade deficit, which has remained stubbornly high, mainly because of the imbalance with China. U.S. multinationals have contributed to the shift, frequently making in Asia what they sell in Asia and, in many cases, in the U.S.
Revere hasn’t participated, though, even as its customers moved their production of copper products like pots and pans, electrical wiring and roof gutters offshore. Those customers shifted to foreign suppliers.
“We have lost 30 percent of our business this way,” O’Shaughnessy said. “We had to shrink our staff to stay alive.”
Given his druthers, he would have the U.S. step up its own mercantilist practices, which means greater government support. A big one, from a manufacturer’s point of view, would be a devaluation of the dollar to lower the cost of exports in foreign currencies.
O’Shaughnessy’s boast about the potential windfall from closing the remaining factory here is rooted in the belief that conviction and determination, as much as economics, sustains manufacturing in America.
“As manufacturing moves abroad, mostly to China, could Revere follow? Yes,” he says. “Will Revere? Never.” To minimize the risk that his decision will be reversed after he is gone, he is leaving all his shares, he said, to whichever of his three sons is most likely to keep Revere’s production in America.
That son might even someday restore electric power to a huge neon-lighted depiction of Paul Revere on horseback, who, back when the sign was lighted, seemed to gallop across the night sky high above the factory’s roof. O’Shaughnessy cut the power to save money, and Rome, N.Y., lost a distinguishing spectacle — an animated landmark that drew schoolchildren and tourists and that heralded Rome as a proud manufacturing city.