In a move that could have a significant negative impact on manufacturing in the U.S., the Environmental Protection Agency on Wednesday finalized an update to the federal air quality particulate matter standard.
What’s going on: The EPA announced a significantly stricter standard for fine soot, lowering the National Ambient Air Quality Standards for fine particulate matter (PM2.5) from 12 micrograms per cubic meter of air to 9 micrograms.
The background: America’s air is actually cleaner than ever, due in large part to manufacturers’ commitment to innovation.
- In fact, the EPA recently reported that PM2.5 concentrations have declined by 42% since 2000.
- Yet, last year, the agency signaled that it was considering lowering the standards even further anyway—and while the NAM and manufacturers spoke out against the move, the EPA moved ahead.
The problem: If enacted, such an aggressive standard would make it far more difficult and costly for manufacturers to operate in the United States.
- It would put huge swaths of the country in “nonattainment,” meaning that they would not meet ambient air quality standards. Factories in nonattainment areas would be unable to operate. Permitting would become almost impossible, and economic development would grind to a halt.
- A recent NAM-commissioned analysis by Oxford Economics found that a standard at this level could reduce GDP by nearly $200 billion and cost as many as 1 million jobs through 2031.
Our take: “The Biden administration’s new PM2.5 standard takes direct aim at manufacturing investment and job creation in direct contradiction to the president’s stated goal of strengthening manufacturing in communities all across America,” said NAM President and CEO Jay Timmons.
- And it will “mak[e] an already gridlocked permitting system further gridlocked” and discourage long-term investments by manufacturers.
Unfair disadvantage, tough choices: It would put the U.S. at a disadvantage with global competitors, too, Timmons added.
- “Manufacturers in America will also be hard pressed to make long-term investment plans domestically as our global competitors have set more reasonable goals. The EU standard is currently 25, and a proposal there would be to reach 10 by 2030. The UK has a target of 10 by 2040.”
- And it would require state and local officials to make difficult decisions about which critical infrastructure projects in their areas move forward, Timmons continued.
High cost, little impact: What’s more, the tightened rule won’t address the greatest sources of particulate matter, according to NAM partners the American Forest & Paper Association and American Wood Council.
- The “EPA’s rule delivers a devastating blow to U.S. manufacturing and the economy while doing nothing to address the largest sources of particulate matter, including wildfire smoke,” they said in a joint statement. “This unworkable air rule undermines President Biden’s promise to grow and reshore manufacturing jobs.”
- “This administration has set the PM2.5 NAAQS at near background levels, ensuring permit gridlock for most manufacturing sectors around the country, while failing to address 84% of overall PM2.5 emissions.”
Next steps: The NAM has spoken out repeatedly against this stricter regulation and will continue to call on Congress to reverse it.
The last word: “The U.S. already has some of the strictest air standards in the world, and thanks to manufacturers’ innovation and leadership, some of the cleanest air and best environmental records,” Timmons concluded. “Manufacturers will consider all options to reverse this harmful and unnecessary standard, because it is our duty to stand against policies that hold our country back.”
Getting a solid forecast of the year’s key issues in manufacturing can help your business prepare for anything. A panel of experts recently shared their 2024 outlook in the webinar “What’s Ahead for Manufacturing in 2024?” hosted by the Manufacturing Leadership Council, the NAM’s digital transformation arm.
They offered insights on the 2024 manufacturing economy, legislative climate, digital trends, resilience strategies and more.
Economic outlook: NAM Chief Economist Chad Moutray provided a manufacturing economic update.
- The NAM Q4 2023 Manufacturers’ Outlook Survey revealed that more than 66% of member companies have a positive economic outlook for 2024, yet opinions are mixed on whether there will be a recession.
- The top economic challenge this year will be the workforce, with the labor market cooling substantially but remaining tight, Moutray said.
- Private manufacturing construction spending is at an all-time high of $210 billion thanks to the production of semiconductors, electric vehicles and batteries, and general reshoring.
- Risks this year include geopolitical turmoil, slow global economic growth, cost pressures, talk of a recession and labor issues, among others.
Policy perspective: NAM Vice President of Domestic Policy Charles Crain gave an overview of the current climate in Washington, D.C., and the NAM’s legislative priorities.
- The NAM will continue its focus on tax policy following House passage of an NAM-supported bipartisan tax package that would reinstate three manufacturing-critical tax provisions.
- Manufacturing is facing a regulatory onslaught, with the average manufacturer paying $29,000 per employee per year due to unbalanced, burdensome regulations, according to a recent NAM-commissioned study.
- Artificial intelligence is a hot topic on Capitol Hill, with 60 AI-related bills introduced in Congress last year. The NAM is working to help policymakers understand the benefits of AI, including safety, worker training, product design and development, and efficiency.
Manufacturing 4.0 Trends: MLC Senior Content Director Penelope Brown offered a look at digital manufacturing trends on the horizon.
- Manufacturers can expect to see a broader adoption of existing AI applications, including predictive/preventative maintenance, improved processes and enhanced productivity.
- According to the MLC’s recent Smart Factories and Digital Production survey, 65% of manufacturers anticipate their level of M4.0 investment this year will stay the same as last year.
- Other trends to watch include the rise of global partnerships such as Catena-X and CESMII, digitized supply chains and reshoring.
Resilience perspective: Cooley Group President and CEO (and MLC Board of Governors Chair) Dan Dwight shared his approach to resilience in 2024 and the years to come.
- Business leaders should prioritize agility and adaptability, even if it means admitting to suboptimal results that require redirection.
- Resilience doesn’t mean perfection; it means learning from failures.
- AI and machine learning contribute to resilience by building out end-to-end visibility across an organization—from vendors to manufacturing operations to customers.
For additional details from these experts, watch “What’s Ahead for Manufacturing in 2024?”
The Biden administration’s proposal to invoke so-called “march-in” authority to seize the rights to patents developed in any part with federal funding would undermine the American innovation economy, the NAM told the federal government Tuesday.
What’s going on: A proposal put forth in December by the Biden administration would allow the government to seize private-sector patents for products it considers too costly.
Why it’s important: “Undermining manufacturers’ [intellectual property] rights would have sweeping ramifications for innovation in the United States and America’s world-leading innovation economy,” the NAM told the Biden administration.
- “In particular, start-ups and small businesses would bear the brunt of the drastic changes proposed by the administration, as … government march-in would disincentivize early-stage entrepreneurship and dissuade much-needed capital formation from outside investors.”
The background: The Bayh-Dole Act, passed in 1980, allows recipients of federal research dollars to license groundbreaking technologies to private-sector companies to commercialize them.
- “Prior to the act’s passage, the government held approximately 28,000 patents—yet fewer than 4% of those patents were licensed to the private sector. This is because private-sector participants viewed these patents as ‘contaminated by government funding,’” according to the NAM.
- Bayh-Dole includes a narrow “march-in” provision that allows the government to step in to ensure consumer access to certain products during times of crisis—but march-in “has never previously been used during the 44 years since the law’s enactment,” the NAM said.
- Allowing march-in based on the price of a product or technology “would hinder industry collaborations with research universities and laboratories across the country, stymieing manufacturers’ efforts to develop the products and technologies of the future and bring them to the public.”
What we’re doing: Last month, the NAM launched a seven-figure ad campaign opposing the proposal.
- The administration should “provide certainty to manufacturers and other stakeholders in the innovation economy by affirmatively and unequivocally withdrawing the proposal—and making clear that the administration will not implement any of its recommendations,” the NAM said.
The last word: “Undermining America’s world-leading patent system is a recipe for reduced innovation and significant economic damage, with a disproportionate impact on small manufacturers,” said NAM Vice President of Domestic Policy Charles Crain.
- “The administration’s march-in proposal would raise the spectre of government price controls on a wide range of technologies—fundamentally reshaping how life-changing innovation is developed, financed and commercialized in the United States. The administration must affirmatively and unequivocally withdraw this radical and flawed proposal.”
Pharmacy benefit managers are contributing to the skyrocketing cost of health care for manufacturers and must be reined in—and that’s why the NAM supports the bipartisan Delinking Revenue from Unfair Gouging (DRUG) Act, passed yesterday by the House Oversight and Accountability Committee.
What’s going on: PBMs, created in the 1960s with the intention of keeping prescription drugs affordable, are now doing the very opposite, the NAM informed the committee ahead of Tuesday’s markup.
- PBMs “increas[e] the price that health plan participants pay for medicines,” NAM Vice President of Domestic Policy Charles Crain said. “By applying upward pressure to list prices that dictate what patients pay at the pharmacy counter, pocketing manufacturer rebates and failing to provide an appropriate level of transparency about their business models, PBMs increase health care costs at the expense of manufacturers and manufacturing workers.”
- In addition to other reforms, the DRUG Act would require “delinking”—ensuring that PBMs charge a flat rate for their services rather than charging a percentage of a medication’s list price. This critical reform would “remov[e] PBMs’ incentive to put upward pressure on list prices in order to maximize their own profits,” Crain said.
Why it’s important: The NAM—whose advocacy, including a six-figure ad campaign, helped lead the DRUG Act to passage by the House Oversight Committee—“has long favored delinking PBM compensation from the list price of medications, including in the commercial market,” Crain continued.
- The NAM will continue to advocate for PBM reforms that “will benefit employers by making PBM contracts more straightforward, transparent and predictable—and will benefit workers by reducing the prices they pay out of pocket for their prescriptions.”
Manufacturing operations are meticulously scheduled and dependent on consistent in-person labor—so how can employers in the sector give workers the flexibility that many want?
With competition for workers remaining fierce, it’s a question that the Manufacturing Institute (the NAM’s workforce development and education affiliate) has started to tackle. Now, manufacturers looking into providing flexible options can consult a new MI whitepaper that draws on real companies’ experiences and decision-making processes.
The new reality: Flexibility is a high priority for workers nowadays, as the MI’s own research shows.
- “Nearly 50% of manufacturing employees cite flexibility as a reason they stay with their employer, with 63.5% reporting that they would look for more flexibility in their next role if they were to leave their current company.”
Figuring it out: So how are manufacturers adjusting? According to a working group of 17 companies convened by the MI, many manufacturers have started by surveying their workers and talking through options with them.
- While feedback from current employees is often a prime motivator for companies considering flexible work arrangements, some manufacturers also pursue them to attract a wider pool of prospective workers—including parents of young children, who may put a premium on flexibility.
What’s on offer: As feedback from the working group showed, manufacturers are considering a wide range of creative options. The whitepaper cites several intriguing examples, which should give other manufacturers ideas for their own operations.
- One manufacturer in the group was trying out different shift options, remarking that they’re “exploring 4–9s and 4–10s primarily as well as adding a Sunday second shift and having folks on rotating shifts.”
- Other companies organized teams of “floaters.” At one firm, these employees work limited hours on different shifts and acquire a large variety of skills. While not full-time, such positions offer a viable option for workers in search of considerable flexibility.
- Shift swapping was another option under discussion, with one company allowing workers to swap up to a week at a time, so long as a supervisor approved.
How to get started: Check out the full whitepaper for more useful tips, including a toolkit to help companies start making these complex decisions on their own.
- Here is the recommended first step: “Identify the objectives that your company hopes to achieve in providing workplace flexibility by focusing on the challenges that you would like to solve, whether it’s increasing the number of applicants or reducing turnover and absenteeism. Establish your baseline by evaluating your company’s status on these metrics.”
- Manufacturing employers can learn more about effective approaches to flexibility for production employees at the MI’s upcoming workshop March 19–20 in Washington, D.C. Check out more details from the MI here.
The last word: As one working group participant said, “At our company, we’ve seen what workplace flexibility means for our production workers. The change in company culture is so valuable.”
The Biden administration is nearing the end of a lengthy review on whether to adjust or extend tariffs on a variety of goods and materials from China—and the NAM is working to make sure manufacturers’ voices are heard.
The background: Following a 2017 investigation into China’s trade practices, the Trump administration put in place a set of levies on imported goods from China—called Section 301 tariffs—intended to incentivize change in practices by China that were found by the Office of the U.S. Trade Representative to be “unreasonable or discriminatory.”
- These included policies and practices related to technology transfer, intellectual property and innovation.
The review: In May 2022, USTR initiated a legally required four-year review of the Section 301 tariffs that focused on tariff efficacy in changing Chinese discriminatory practices and the impact of the tariffs on the U.S. economy, workers and consumers, among other considerations.
- More than 18 months later, the review remains unfinished. The NAM is urging USTR to finish and publish it—and to take actions that reduce the burdens on manufacturers while maintaining appropriate leverage to incentivize China to adhere to bilateral and multilateral commitments.
- “Ideally, USTR will conclude the four-year review in the next few weeks and make the results public,” said NAM Senior Director of International Policy Ali Aafedt. “We would like to see the results reflect the 1,498 public submissions USTR received during the process and the reduction or removal of some of the tariffs that are harming manufacturers in the U.S. more than they’re creating leverage on China.”
The exclusions: There are 429 existing exclusions from the tariffs—including 77 COVID-19-related products and 352 reinstated exclusions—which are in effect through May 31.
- The NAM has also been pushing for a new process that allows manufacturers to ask the government to exclude specific products they need from the tariffs.
- “The NAM has been calling for a new, fair and transparent Section 301 tariff exclusion process that would allow all U.S. stakeholders an opportunity to seek relief or weigh in on the existing tariffs,” said Aafedt. “The last opportunity to petition USTR for relief from Section 301 tariffs was in 2020, and a new exclusion process will help to better align the tariffs with U.S. economic goals.”
The outlook: Reports such as this one from The Wall Street Journal indicate that the Biden administration will look to rebalance the tariffs, potentially reducing those that are not in the U.S. interest and raising tariffs on other items, including, potentially, on imports from China in the electric vehicle and battery sectors.
- “The NAM will continue to push for a more strategic approach,” said Aafedt.
If your company has interest in a specific existing exclusion, USTR is seeking feedback here by Feb. 21.
Manufacturers scored a major victory last night when the House passed a bipartisan tax package containing provisions critical to the industry.
What’s going on: The House voted 357–70 to pass the bipartisan Tax Relief for American Families and Workers Act. The bill includes three important manufacturing priorities:
- Restoring immediate R&D expensing for domestic research
- Reinstating full expensing (also known as 100% accelerated depreciation) for businesses’ capital investments
- Returning the U.S. to a pro-growth interest deductibility standard
What it means: The measure will enable manufacturers to invest in their businesses, create jobs and compete in the global marketplace.
- The bill is particularly important for small and medium-sized manufacturers, many of which experienced significant tax increases as a result of the expiration of these pro-growth provisions.
- “While it was once a paid expense, R&D is now a cost that many small businesses cannot afford,” said Carol Miller (R-WV), in a speech on the House floor last month.
- The overwhelming majority—89%—of respondents to the NAM’s Q4 2023 Manufacturers’ Outlook Survey said higher tax burdens on manufacturing would make it more difficult for them to hire, buy new equipment and expand their facilities.
What’s next: It’s critical that the Senate now also pass the measure, the NAM said.
- “Manufacturers thank [House Speaker Mike Johnson (R-LA)] and [House Ways and Means Committee Chairman Jason Smith (R-MO)] for their leadership in passing the Tax Relief for American Families and Workers Act—and the bipartisan work in the House and Senate to secure progress for America’s manufacturing workers,” said NAM President and CEO Jay Timmons in a social post Wednesday night. “Manufacturers are now counting on the Senate to act quickly to restore these provisions that are absolutely critical to strengthening America’s competitiveness and growth of manufacturing in America.”
- Added Ketchie President and Owner and NAM Small and Medium Manufacturers Group Chair Courtney Silver, “This just isn’t about numbers on my financial statements and my tax returns—this is about taking care of the people here [at Ketchie] and in communities across this country…. Let’s restore some common-sense tax provisions, and let’s support our American manufacturers across our country.”
Lubrizol, a specialty chemicals company, faced a challenge common to manufacturers in its sector: how do you test dozens or hundreds of new chemical formulations every year in a timely and cost-effective manner? The answer: better data analysis.
The Wickliffe, Ohio, company developed a virtual testing and data analytics system called Q.LIFE®, a solution so successful that the Innovation Research Interchange (the NAM’s innovation division) recognized it with the IRI Innovation Excellence Award for Digital and Technological Innovation. Here’s how they did it.
The problem: To develop its additives for engine oils, industrial lubricants, gasoline and other products, Lubrizol must run expensive tests that often took weeks if not months to complete.
- LIFE® changed the game, by providing more than 1,000 predictive models for different aspects of product development and deployment. For example, Q.LIFE® can help predict the outcome of those tests before they’re conducted, sometimes even eliminating the need to run a test in the first place.
- It also helps the company identify potential issues with raw materials before they end up in Lubrizol’s products.
- Last, as an added benefit, the system serves as an aid for training new employees on company processes.
Putting it to use: “Getting a handful of early adopters to start using it was key to making this a successful analytics system for years to come,” said Lubrizol Senior Manager of Data Science & Analytics Allison Rajakumar, one of the project’s pioneers.
- The team started by training a small group of employees in how to use Q.LIFE®. Those early users provided feedback on the system as it was being launched.
- As the use of the system grew, those employees acted as ambassadors for Q.LIFE® and trained other workers to use it, too.
Looking ahead: Lubrizol plans to expand Q.LIFE® to include more tools and to extend it to other areas of the business.
- The data science team is working with employees in other divisions, such as the company’s supply chain specialists, to develop models that will help optimize their processes as well.
Get involved: Has your company developed innovations to improve its operations and better serve its customers? If so, it might also be eligible for an IRI Innovation Excellence Award.
- Click here to learn more and start your nomination now. Submissions are due by Feb. 15.
They say all you need is love, but in fact, you need a lot of magnets, too. Computers, appliances, electric generators and cars are powered by permanent magnet motors. Yet, most of the permanent magnets that make our modern life possible rely on rare earth materials, which are expensive, unsustainable and typically mined and processed in China.
To fix this bottleneck, Minneapolis-based Niron Magnetics is producing a new kind of magnet that uses two abundant raw materials: iron and nitrogen. By taking rare earths out of the equation, Niron’s Clean Earth Magnets® provide superior cost and supply chain stability to the countless manufacturers that depend on reliable access to high-powered magnets.
Why it matters: According to Niron, the demand for rare earths for critical magnets is outstripping the supply, and the problem is only getting worse.
- “When you look at the amount of magnets that are needed over the next 10 years, it’s triple the amount that are available today,” said Niron Magnetics CEO Jonathan Rowntree.
- “There’s only enough rare earth materials to double the amount of rare earth magnets manufactured every year. So there’s going to be this big imbalance later this decade. We’re well positioned to [meet] the shortfall of permanent magnets using iron nitride technology.”
The value proposition: Niron’s technology has several exciting upsides, according to company leaders.
- First, it relies on materials that are far more abundant and accessible than rare earths.
- Second, the supply chains for components like nitrogen and iron salts are very stable—and not centered in China.
- Finally, the production of a kilo of rare earth magnets generates 2,000 kilos of waste, according to Niron. By contrast, the production of Niron’s rare earth–free magnets is much more environmentally friendly.
- “Depending on which part you look at, whether it’s water or waste or greenhouse gas emissions, our production process is between 70% and 90% more efficient than the current rare earth processes today,” said Rowntree. “We’re excited about solving the environmental burden from the energy transition.”
Next steps: Niron is planning its first large-scale production facility in the United States, a 10,000-ton facility that it hopes will be operational by 2027.
- While its leaders are still considering different locations for the plant, they anticipate that the facility will ultimately result in 680 to 700 full-time jobs, not including the construction and infrastructure roles needed to build it.
- “We’re growing very quickly here in terms of our capability,” said Rowntree. “We’ve doubled the number of employees this year, and we will likely double that number again over the next several years.”
The bottom line: “There’s a growing awareness of critical materials and the rare earth supply challenges, and the risks posed by U.S. reliance on China to supply those magnets. But there isn’t a lot of awareness around the fact that there is an alternative solution,” said Rowntree. “There is alternative technology that we’re aggressively scaling and that will be commercially available by the end of this year.”
Earlier this month, Congress unveiled the bipartisan Tax Relief for American Families and Workers Act—and now it’s time it passed the legislation, the NAM recently urged congressional leaders.
What’s going on: The bipartisan tax package—a compromise between House Ways and Means Committee Chairman Jason Smith (R-MO) and Senate Finance Committee Chairman Ron Wyden (D-OR)—would restore immediate R&D expensing for businesses, reinstate full expensing (also known as 100% accelerated depreciation) for businesses’ capital investments and return the U.S. to a pro-growth interest deductibility standard.
- Thanks to the NAM’s advocacy, the House Ways and Means Committee supported moving the legislation to the House floor by a bipartisan vote of 40–3.
- A vote on the House floor is expected tomorrow or Thursday, thanks in part to the NAM’s work.
Why it’s important: “All three of these tax policies have a long history of bipartisan support and are critical to strengthening America’s global competitiveness,” the NAM, along with more than 260 other businesses and allied groups, told House Speaker Mike Johnson (R-LA), House Minority Leader Hakeem Jeffries (D-NY), Senate Majority Leader Chuck Schumer (D-NY) and Senate Minority Leader Mitch McConnell (R-KY) earlier this month.
- The policies “have enabled U.S. businesses to innovate, create [well]-paying jobs, protect our national security and remain at the cutting edge of the global economy. Restoring these provisions will have a profound impact on business investment, economic growth and job creation.”
Small businesses: The policies are particularly crucial for small- and medium-sized manufacturers, said Courtney Silver, president and owner of precision machining company Ketchie Inc. group chair of NAM Small and Medium Manufacturers Group.
- The absence of these three tax “provisions directly impacts our ability to invest in new technology, to purchase equipment and to create jobs,” she said.
- “Nearly 90% of manufacturers share similar concerns about their higher tax burden, and if left unaddressed, our companies and our teams will have a harder time securing an edge over our global competitors. … Passing this law would give companies like ours the certainty needed to plan for growth and more investments.”
What you can do: Your members of Congress need to continue to hear why it is imperative they support this tax package. Add your voice at the NAM’s Tax Action Center.