Made in America?

More and more U.S. businesses are trekking overseas to explore cheaper ways to make their products. But what does that mean for small manufacturers left behind on the home front?

Vince Ruffolo, president of SIC Inc., a small Wisconsin manufacturer of metal finishings and coatings, is not too worried about his company's future. Though many of his American peers have gone belly up in the face of intense foreign competition, Ruffolo, 48, believes Racine-based SIC remains strong. "We made a series of good investments in the 1990s, and we're able to cut costs effectively and deliver the type of just-in-time service that distinguishes us from foreign competition," he says. "We still have a strong client base."

Ruffolo's optimism is not shared by many of his peers. Over the past decade, the U.S. manufacturing sector has shrunken rapidly, destroying thousands of jobs. Small manufacturers have been hit particularly hard, and the recent economic downturn has only exacerbated this trend. Like SIC, some small manufacturers have used the downturn to retrench and make themselves more competitive. But many others have simply gone bankrupt, leading some entrepreneurs and economists to question whether small manufacturers have a future in America.

Troubled Times
Manufacturing has had a rough decade. According to the Economic Policy Institute, America's manufacturing sector has been declining for at least the past seven years, losing nearly 2.5 million jobs since 1998. Jerry Jasinowski, president of the National Association of Manufacturers (NAM), says the industry has lost jobs for 32 consecutive months.

And states dependent on manufacturing have been decimated. South Carolina, home to much of the nation's textile industry, has shed thousands of jobs in the past 10 years, a slump the American Textile Manufacturers Institute has called the "worst downturn since the Great Depression." Meanwhile, in Indiana, where manufacturing is responsible for the largest share of GDP of any state, the government estimates the manufacturing sector has lost 10 percent of its jobs in just the past three years.

Small and midsize manufacturers have suffered more than large companies. IndustryWeek's 2000 Census of Manufacturers, the most recent available, noted the number of small manufacturers nationwide was declining at a faster pace than the number of large manufacturers. "Small companies don't have the capital reserves and other safety nets that bigger manufacturers have," says Collie Hutter, owner of Click Bond, a small Carson City, Nevada, manufacturer of adhesive fasteners used on airplanes. "Today is the worst environment for small manufacturers I can remember." Indeed, in some industries, such as toys and shoes, there are already virtually no small American companies left.

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This article was originally published in the October 2003 print edition of Entrepreneur with the headline: Made in America?.

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