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August 21, 2003

Nearly 350 Attend MSCI Central States Chapter Town Hall Meeting on Manufacturing

August 21, 2003

Nearly 350 Attend MSCI Central States Chapter Town Hall Meeting on Manufacturing

CHICAGO, Illinois, August 21, 2003 – Nearly 350 people who attended the first MSCI Town Hall Meeting on Manufacturing today heard a series of speakers denounce currency manipulation, unfair trade practices and the general lack of awareness of the manufacturing crisis among Washington politicians.

'This is economic warfare, and anyone who doesn't believe it is naïve,” said William M. Hickey, president of Lapham-Hickey Steel Corporation, one of four speakers at the event sponsored by the MSCI Central States Chapter.  'I'm frustrated by the lack of policy makers in Washington who care about manufacturing.'

Program moderator M. Robert Weidner, III, president and chief executive officer of MSCI, called on participants to set aside competitive disagreements to unite behind a program to raise awareness of the need to support manufacturing as a vital element of the economy.

'We are really in a crisis stage,' Weidner said.  'Some 2.7 million jobs have been lost.  At this point we cannot allow our differences to dilute our message.  We're all part of the manufacturing food chain.'

The tone of the other speakers was urgent and pointed as they discussed different aspects of the significant decline of North American manufacturing in the face of currency manipulation and low cost structures of countries such as China.

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Donald R. McNeeley, president and chief executive officer, Chicago Tube & Iron Company, an economist by education, said that in the current global economy, 'free trade is no longer synonymous with fair trade.' Developing countries naturally turn to steel production as one symbol of national economic growth, but then are forced to export to keep the mills running.  'They are not only exporting their steel, they are also exporting their unemployment,' McNeeley said.

Adding to the pressure, he said, are manufacturers like Ford that purchased $1 billion of parts and assemblies overseas last year and want to raise total overseas purchases to $10 billion by 2010.  The U.S.purchased $128 billion worth of goods from China last year, equal to 10% of that nation's gross domestic product, he said.

'Are we really ever manufacturing anything here anymore?' he asked.  'We're assembling, but not manufacturing. If this is a mild recession, why can't we shake it?  It's because it's a structural problem, not cyclical.'  He added:  'Manufacturing is our best friend, the best friend of our society.  When I look at everything good in my life, manufacturing has played a role.'

Hickeyfocused his remarks on the devastating impactof currency manipulation by China, Japan, South Korea and Taiwan.  'They are going to take all of our manufacturing jobs,' Hickey warned.  'We have to do something about it.'

In 1995, he said, an international accord permitted China to peg the value of its currency to that of the dollar in a ratio of about 8.3 to the dollar, up from five to the dollar.  'Overnight, that made Chinese goods 65% cheaper,' he said.  Since that time, the Chinese economy has grown extremely rapidly.

'Now our trade deficit is headed north of $500 billion a year,' Hickey said. 'That's equal to 5% of our gross domestic product.  This is a deficit that's never been run by anyone without a subsequent currency collapse.'

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Hickey noted that manufacturing employment has fallen each month in the 36 months since July 2000. 'The Chinese yuan is a minimum of 40% undervalued,' he said.  'We have to change the value of China's currency. If we don't act, we're going to be out of business.'

David L. Lerman, chairman and chief executive officer of Steel Warehouse Company of South Bend, Indiana, described his company's experience with customers who have closed, in some cases moving facilities to China or elsewhere.  One large health care manufacturer closed its doors and reopened in China; a wheelchair maker now makes its products in Mexico.

'We beat the Chinese on raw material costs, labor productivity, shipping costs and logistics, but we lose to them on indirect costs, such as pensions, health care, taxes, subsidies, and workmen's compensation.' One customer, a maker of folding chairs, has shut down U.S. production, using its factory now solely for distribution of products made in China, he said.

'It was the indirect costs that killed that manufacturing plant and put 250 people out of work,' Lerman said. 'Who feels threatened by this?  We all do.'

JOHN LICHT, chairman and chief executive officer of Duraco Products, Inc., of Streamwood, Illinois, said his company annually makes 140 million plastic flower pots. 'But the Chinese are eating my lunch,' he said.  'Nine hundred of my 1,200 employees have been terminated.  I have lost millions of dollars over the past few years, and I am very, very unhappy about it.'

Licht's message:  If manufacturers and their allies don't wake up to support the manufacturing sector in the U.S., they will have no one to blame except themselves.

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'If you speak up loud enough, it will become a campaign issue,' Licht said.  'If you don't do something about it, you're going to get run over by a bus.  Most of our federal government officers refuse to acknowledge the issue or the consequences of it. We assume they know the obvious, but they don't.  So you have to get in their face, or you'll be looking for a job and your company will go to hell in a hand basket.'

One effective technique, he said, is to refuse to make campaign contributions to politicians who don't align themselves with pro-manufacturing policy.  'I have an elected official who counts on me for campaign contributions, but I ripped up the $10,000 check that I planned to give him,' Licht said.  'Hold back checks from the guys who aren't doing anything for you.'  Holding up a piece of paper, he said, 'Hold up a check and go…'  He ripped it in two.

During a question and answer session, Hickey noted that U.S. Senator Richard Durbin of Illinois had been invited to appear at the session.  'Durbin didn't even bother to respond to the invitation to be here with us today,' Hickey said.  'He didn't even have the courtesy to write to us.  Now I ask you all to write to Durbin to ask him why he wasn't here.'

In other comments:

  • A representative of the Spring Manufacturers Institute noted that some major multinational manufacturers are now requiring suppliers to meet the best available world price.  'That's the price from China, from places that pay their workers only pennies on the dollar,' he said.
  • McNeeley said manufacturing capability is essential for national security, although the Pentagon rigidly defends its policy of sourcing major defense components overseas.  'What are we going to do, subcontract manufacturing of our bombs to our enemies?' he asked.

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  • Hickey said that the easiest way to persuade China to revalue its currency would be to ban all Chinese imports until they do so.  'We are their largest customer,' he said.  'If a customer that represents 10% of your business asked you to make changes, would you do so?'

The next MSCI Town Hall Meeting on Manufacturing, sponsored by the South Atlantic Chapter, is scheduled for October 9 in Charlotte, North Carolina.

Founded in 1907, the Metals Service Center Institute has more than 350 members operating from about 1,200 locations in the U.S., Canada, Mexico and elsewhere around the world. Together, MSCI members constitute the largest single group of metals purchasers in North America, amounting each year to more than 50 million tons of steel, aluminum and other metals, with about 300,000 manufacturers and fabricators as customers. Metals service centers distribute metals and provide first-stage fabrication services.

Contact:   Jon Kalkwarf, 773-867-1300 x105