Emerson Electric CEO: Washington Is Destroying U.S. Manufacturing

Wow, I was taken aback by this story in Bloomberg - it's been a great week for quotes. [Walmart Executive: "There are Families Not Eating at the End of the Month"]

One theme I was stressing about 5000 posts ago in 2007 was everyone cheers our political leadership when they do nothing... our best hope is they do no more damage and are neutered. Please let them bide their time until they "graduate" from Congress into that multi-million dollar position as a lobbyist. Our expectation level for our "representatives" is so low ... all we hope for is they offset each other; that's what is has come to. (pathetic) That shows you how damaging they are to the country. I was saying back then it had reached a point where not only were (a) our political leaders not helping us nor (b) were they so ineffective as to be neutral to the country's progress, but indeed (c) at that time they had reached the point that they were like tire spikes in the road.

Glad to hear a CEO say the UNpolitically correct thing. Thankfully he did not single out one party versus the other or else the extremists on both sides would begin the "it's all their fault" finger pointing. Kudos Mr. Farr - I can at least respect someone who is taking away U.S, jobs but has the courage to explain (partially) why they are doing it.

Not to worry readers... surely more healthcare and government jobs will replace Emerson's jobs too. Because money to pay for jobs in those 2 sectors comes from the heavens. No need to manufacture anything in the U.S... well, there is a need for 1 thing. More fiat paper currency.

Via Bloomberg:

• Emerson Electric Co. (EMR) Chief Executive Officer David Farr said the U.S. government is hurting manufacturers with regulation and taxes and his company will continue to focus on growth overseas.
• “Washington is doing everything in their manpower, capability, to destroy U.S. manufacturing,” Farr said today in Chicago at a Baird Industrial Outlook conference. “Cap and trade, medical reform, labor rules.”

My suggestion to Mr. Farr is to turn into a bank holding company and grow to the size that Emerson becomes too big to fail. Then every person in America shall be sacrificed so his company could turn a profit as long as 1 single light bulb is on. Ask the folks at Citi, Bank of America, Wells, Goldman (the "bank holding company"), for tips. Manufacturing? So 1960s! No need for it in the new paradigm finance-based, daytrading homes economy.

• Emerson, the maker of electrical equipment and InSinkErator garbage disposals with $20.9 billion in sales for the year ended September, will keep expanding in emerging markets, which represented 32 percent of revenue in 2009.
• About 36 percent of manufacturing is now in “best-cost countries” up from 21 percent in 2003, according to a slides accompanying his speech.

Things like that last bullet point dismay me... but I am told by "trickle down economists" it's a great thing. Because one day the people in "best-cost countries" will buy things from America, rather than their own countries. Even though we won't have any manufacturing by that point. (what exactly will they be buying from us aside from mortgage backed securities?)

Solution? Destroy the dollar. (mission progressing as planned)

• Farr, in his presentation, also said manufacturers are being hurt by taxes and regulation. He said companies will create jobs in India and China, “places where people want the products and where the governments welcome you to actually do something.”

Again, just in the wrong industry. As long as you do something involving "financial innovation" Washington wants you, they welcome you... they need you. (specifically your lobbyist dollars) Health insurer or real estate related business also works if you can't get that bank license.

• Emerson has shed more than 20,000 jobs since the end of 2008 to lower expenses. “What do you think I am going to do?” Farr asked. “I’m not going to hire anybody in the United States. I’m moving. They are doing everything possible to destroy jobs.”

Again, a lot of this is structural in a flattening globe... there is no changing it. But certainly our political leadership is "helping" to accelerate trends, not allowing the country time to adjust, innovate, build replacement industries. Encouraging spending & speculating is job #1 while punishing savers is job #1A. A recipe for prosperity in anyone's book!

Oh well, I read today JPMorgan (JPM) wants to hire 1200 new mortgage brokers - back to the 2003-2006 bubble we go. If we're very good people we might be blessed with concurrent real estate and stock market bubbles ... because that's sustainable and healthy! Making stuff? Don't bother me with that... boring.

Disclosure: Author does not own above-mentioned stocks

Comments

[jeff m110:]

Yep. Why should our ruling class (lawyers and govt. employees) put up with unsightly manufacturing and resource extraction? It's been a good time to be in the business of crippling American business.

Nov 12 09:18 AM

[basehitz:]

Unintended consequences of policy actions can have far reaching effects. As another example, corporate reactions to anticipated legislation intending to reign in off-shoring of jobs resulted in off-shoring of companies, with resulting loss in tax revenue.

From a Reuters story March ’09:
“Yet a wave of energy companies has in the last few months announced plans to move to Switzerland -- mainly for its appeal as a low-tax corporate domicile that looks relatively likely to stay out of reach of Barack Obama's tax-seeking administration.”
“Over the past six months companies including offshore drilling contractors Noble Corp and Transocean, energy-focused engineering group Foster Wheeler and oilfield services company Weatherfield International have all announced plans to shift domicile to Switzerland.”
www.reuters.com/articl...

This is just one of many examples that could be cited.

Nov 12 09:21 AM

[Monty Pelerin:]

Finally. someone is courageous enough to say what everyone else is thinking . There is little doubt that many other companies feel the same way and are taking the same actions as David Farr, Emerson Electric’s CEO. They choose to keep low profiles by not standing up and speaking out. Not so Farr, who issued a very powerful indictment against the economic policies of the Obama Administration. I applaud the man for his honesty and bravery. Of course I am not a shareholder, which makes it easier for me to applaud his bravery.
Monty Pelerin economicnoise.com

Nov 12 09:28 AM

[Steve in Gr...:]

Thanks, TM. I enjoy your posts, including this one.

"...One theme I was stressing about 5000 posts ago in 2007 was everyone cheers our political leadership when they do nothing..."

“No man’s life, liberty or property is safe while the legislature is in session...” is a quote from an 1866 New York Surrogate Court decision.

"...But certainly our political leadership is "helping" to accelerate trends..."

I'm not sure to which trends you are referring. Most of the malignant trends the political class is "accelerating" are ones for which the political class is wholly responsible. They aren't just accelerating, they are causing these trends.

--Monetary debasement and distortion of the yield curve is wholly caused by the U.S. government. Anybody who thinks the Fed is independent of the U.S. government is not paying attention.

--Massive, structural deficit spending is wholly caused by the political class, including stimulus spending, Social Security, Medicare, Medicaid, socialized medicine, etc.

--Massive tax increases which never will catch up with the deficits including socialized medicine, carbon taxation, VAT taxation, the expiration of the Bush tax cuts, etc.

--Massive growth of government and regulation which reduces the resources available to the private sphere where growth, innovation and capital accumulation occur.

The U.S. government is actively working to prevent the recovery of the U.S. economy, to turn us into a permanent high-unemployment, low-growth economy like Europe.

Nov 12 10:25 AM

[jsevenseven:]

What a load of garbage. I love how guys like Farr never say which regulations or taxes are the cause of his troubles. The fact is that the percentage of tax revenues paid by corporate America is at an all time low, and companies like Emerson have become masters at the art bleeding subsidies and tax breaks out of state and local governments for the honor of allowing them to build a factory and create a few hundred jobs.
These guys have been moving jobs offshore for years, even during the Bush administration when corporate tax breaks, and un-enforced regulations were the flavor of the day. Why, because the workers get paid very little, have virtually no rights, and the paid off local officials look the other way when you pollute the air and water. This allows CEO's to pay themselves ever fatter paychecks as well as satisfying the penny pinching buyers at Wall Mart.
The United States (even under the Democrats) is of the corporations, by the corporations, for the benefit of people like David Farr, who run the corporations. So spare me the platitudes about his honesty and bravery.

Nov 12 10:30 AM

[TraderMark:]

just to be clear

the GOP policies encouraged all the same bad behavior. Spend spend spend, reward speculation, punish savers.

I just get discouraged when any of the threads turn into Dem v GOP. Both are milking the system for all its worth. Just with different facades.


On Nov 12 09:28 AM Monty Pelerin wrote:

> Finally. someone is courageous enough to say what everyone else is
> thinking . There is little doubt that many other companies feel the
> same way and are taking the same actions as David Farr, Emerson Electric’s
> CEO. They choose to keep low profiles by not standing up and speaking
> out. Not so Farr, who issued a very powerful indictment against the
> economic policies of the Obama Administration. I applaud the man
> for his honesty and bravery. Of course I am not a shareholder, which
> makes it easier for me to applaud his bravery.
> Monty Pelerin www.economicnoise.com

Nov 12 10:32 AM

[Alan Young:]

Blah, blah—gimme a break. Taxes and regulation have been "destroying American business" for at least 100 years, probably longer. Prohibiting child labor was going to destroy American business in the 1920s (is that what caused the Great D?). Minimum wage laws. 40-hour weeks. We've been destroying business with regulations and taxes since before big business started destroying the rest of us. But now taxes on corporations are only a fraction of what they were in the 1950s; how destructive can that be?

So EMR is joining the flight to cheap-labor countries so they can lay off more American workers and boost the unemployment rate; what else is new? And of course it's more expedient to blame Washington for that than to take responsibility for tearing down our economy with their own greed.

Nov 12 10:34 AM

[John Galt:]

On Nov 12 09:21 AM basehitz wrote:
> Unintended consequences of policy actions can have far reaching effects.
> As another example, corporate reactions to anticipated legislation
> intending to reign in off-shoring of jobs resulted in off-shoring
> of companies, with resulting loss in tax revenue.
>
> From a Reuters story March ’09:
> “Yet a wave of energy companies has in the last few months announced
> plans to move to Switzerland -- mainly for its appeal as a low-tax
> corporate domicile that looks relatively likely to stay out of reach
> of Barack Obama's tax-seeking administration.”
> “Over the past six months companies including offshore drilling contractors
> Noble Corp and Transocean, energy-focused engineering group Foster
> Wheeler and oilfield services company Weatherfield International
> have all announced plans to shift domicile to Switzerland.”
> www.reuters.com/articl...
>
>
> This is just one of many examples that could be cited.


Obama turns "big oil" into bad words, they start talking about windfall profits, and tax increases, and the oil companies pick up shop and move headquarters to Switzerland.

Would you rather have 30% of something, or 100% of nothing?

Nov 12 10:48 AM

[Leftfield:]

I agree with the forthrightness of Mr. Farr who speaks the truth that the gauntlet of obstacles a private business must run has reached utter indecency. The bullying, parasitic bureaucracies and legislatures routinely hand down laws, edicts and costs to punish success that make a decent, productive American feel like a criminal.
I know several people who went to China and aren't coming back. Here, bad treatment of entrepreneurs has been in the air, like pollution, and it's actually getting far worse. Most Americans don't realize how stifling it has gotten in the "land of the free."
It remains to be seen if we emerge from this epic crisis with commonsense and decency restored, or whether Americans are now content to proceed all the way to servility to the plantation of fascism.

Nov 12 11:13 AM

[GotLife:]

Regulation is often portrayed as good or evil, constructive or destructive, etc. Simplistic but inaccurate. Wise regulation protects health and lives, industry and jobs, homes and communities. Example, home building codes often perform all of the above functions. However, regulation in the US has become the end game. Cost, probabilities, and reason fail to enter into many decisions. Regulations are used for political advocacy and often implemented merely to save a small group or personal interest at the expense of those areas listed above. Like most reasoning that has veered to the extreme, it will, at some date future, become dated, ridiculed and abandoned, and we will be the poorer and wiser for the education.

In the meantime, the Titanic continues to take on water and Americans wonder how long we will float, remaining skeptical of the crew or designers that lead us to this iceberg... Can you fault Mr. Farr? Most multinationals have been in the exact same self preservation mode for decades. While we want to punish our corporations for the wealth they create, other economies work to compete and win against US firms internationally. And, they are laughing at us in the rear view mirror right now as we ponder the next snail darter or contemplate if a tree and whale should have legal standing.

Nov 12 12:12 PM

[Tom Armistead:]

Agree with Alan Young.

Statements like those made by Mr. Farr demonstrate a callousness and arrogance that cries out for correction.

Mr. Farr would like to bring back the 60 hour work and the company store.

Nov 12 12:19 PM

[TraderMark:]

Agree on that comment below, actually both your main comments.

The problem is we are competing with countries who don't care about many of the things we care (or at least try) to care about.

I've actually thought moving healthcare OUT of the cost structure of our corporations would help them compete globally.. but unfortunately it would then go to OUR government. There must be some middle ground or maybe we could employ the Swedes government or some country who actually has a pragmatic government. Anything our leaders touch, turns to lead.

On Nov 12 12:12 PM GotLife wrote:

>
>
> While we want to punish our corporations for the
> wealth they create, other economies work to compete and win against
> US firms internationally. And, they are laughing at us in the rear
> view mirror right now as we ponder the next snail darter or contemplate
> if a tree and whale should have legal standing.

Nov 12 01:57 PM

[TraderMark:]

frankly 70% of the job creation is small biz so the dizzying array of costs pushed onto them is the bigger issue. The job losses in the multinationals who can locate anywhere, are in my mind - impossible to stop over time. They have the means to move labor to places where the wage is 5% of Americans so there is very little you are going to do to change that over 20 years.

In that place you need to encourage the next generation of companies who innovate and create jobs. I am having a hard time figuring out where that ground swell is going to come from, hence my fear its just going to be a new tranche of health care and public jobs. Or a new real estate bubble to bring back all the realtors, mortgage brokers, and construction workers making houses we don't need as 19M units sit empty.

Nov 12 02:00 PM

[danj:]

The United States government does not play on a level playing field. We beat our chests that we have provided the PRC with a most favored nation policy to gain access to their country. But China has continued to put roadblocks in the path of American industry. Additionally, those products that are delivered to China quickly become "knocked off" with inferior materials and workmanship. Who was the President who provided MFN status to The Peoples Republic Of China? I think he came from Arkansas. Ironically, the same state where Wal-Mart is located.
Additionally, which U.S. President allowed the merger of investment banks and commercial banks. Want to guess on that one too? Finally, which U.S. President reduced the import tariffs on Chinese imports, Indian imports, southeast asia imports?
You can blame GWBush all you want, but look at history and you may change your opinion.

Nov 12 02:53 PM

[Sharon Merkle:]

REG: They've bled us white, the bastards. They've taken everything we had, and not just from us, from our fathers, and from our fathers' fathers.

LORETTA: And from our fathers' fathers' fathers.

REG: Yeah.

LORETTA: And from our fathers' fathers' fathers' fathers.

REG: Yeah. All right, Stan. Don't labour the point. And what have they ever given us in return?!

XERXES: Perfect dividend record?

REG: What?

XERXES: The perfect dividend record.

REG: Oh. Yeah, yeah. They did give us that. Uh, that's true. Yeah.

COMMANDO #3: And the 90,000 US jobs remaining.

LORETTA: Oh, yeah, the 90,000 US jobs remaining, Reg. Remember what St. Louis used to be like?

REG: Yeah. All right. I'll grant you the dividends and the 90,000 jobs are two things that the Romans have done.

MATTHIAS: And the hospitals backup generators.

REG: Well, yeah. Obviously the hospitals. I mean, the hospitals go without saying, don't they? But apart from the dividends, the jobs, and the hospitals--

COMMANDO: $100 million to community 501(c)s.

XERXES: 2700 patents.

COMMANDOS: Huh? Heh? Huh...

COMMANDO #2: Preferred military veteran hiring.

COMMANDOS: Ohh...

REG: Yeah, yeah. All right. Fair enough.

COMMANDO #1: And the new construction.

COMMANDOS: Oh, yes. Yeah...

FRANCIS: Yeah. Yeah, that's something we'd really miss, Reg, if the Romans left. Huh.

COMMANDO: Green energy investment.

LORETTA: And it's safe to invest in now, Reg.

FRANCIS: Yeah, they certainly know how to keep order. Let's face it. They're the only ones who could in a place like this.

COMMANDOS: Hehh, heh. Heh heh heh heh heh heh heh.

REG: All right, but apart from the sanitation, the medicine, education, wine, public order, irrigation, roads, a fresh water system, and public health, what have the Romans ever done for us?

XERXES: Brought profits.

REG: Oh. Profits? Shut up! Bloody corporations!

---for jsevenseven, who got lost on his way to this month's meeting of the Judean People's Front.


On Nov 12 10:30 AM jsevenseven wrote:

> What a load of garbage. I love how guys like Farr never say which
> regulations or taxes are the cause of his troubles. The fact is that
> the percentage of tax revenues paid by corporate America is at an
> all time low, and companies like Emerson have become masters at the
> art bleeding subsidies and tax breaks out of state and local governments
> for the honor of allowing them to build a factory and create a few
> hundred jobs.
> These guys have been moving jobs offshore for years, even during
> the Bush administration when corporate tax breaks, and un-enforced
> regulations were the flavor of the day. Why, because the workers
> get paid very little, have virtually no rights, and the paid off
> local officials look the other way when you pollute the air and water.
> This allows CEO's to pay themselves ever fatter paychecks as well
> as satisfying the penny pinching buyers at Wall Mart.
> The United States (even under the Democrats) is of the corporations,
> by the corporations, for the benefit of people like David Farr, who
> run the corporations. So spare me the platitudes about his honesty
> and bravery.

Nov 12 03:16 PM

[jsevenseven:]

Emerson made profits, while being based in the US of A. How is that possible in our crushing regulatory and tax environment. If you read the bloomberg article and it sounds as if they never made a dime in this country. Emerson is moving jobs to Asia because those workers earn in a year what US workers earn in a month. It's got nothing to do with the US taxes or regulations. I'm sure that's a great comfort to those 90,000 remaining US workers.


On Nov 12 03:16 PM Sharon Merkle wrote:

> REG: They've bled us white, the bastards. They've taken everything
> we had, and not just from us, from our fathers, and from our fathers'
> fathers.
>
> LORETTA: And from our fathers' fathers' fathers.
>
> REG: Yeah.
>
> LORETTA: And from our fathers' fathers' fathers' fathers.
>
> REG: Yeah. All right, Stan. Don't labour the point. And what have
> they ever given us in return?!
>
> XERXES: Perfect dividend record?
>
> REG: What?
>
> XERXES: The perfect dividend record.
>
> REG: Oh. Yeah, yeah. They did give us that. Uh, that's true. Yeah.
>
>
> COMMANDO #3: And the 90,000 US jobs remaining.
>
> LORETTA: Oh, yeah, the 90,000 US jobs remaining, Reg. Remember what
> St. Louis used to be like?
>
> REG: Yeah. All right. I'll grant you the dividends and the 90,000
> jobs are two things that the Romans have done.
>
> MATTHIAS: And the hospitals backup generators.
>
> REG: Well, yeah. Obviously the hospitals. I mean, the hospitals go
> without saying, don't they? But apart from the dividends, the jobs,
> and the hospitals--
>
> COMMANDO: $100 million to community 501(c)s.
>
> XERXES: 2700 patents.
>
> COMMANDOS: Huh? Heh? Huh...
>
> COMMANDO #2: Preferred military veteran hiring.
>
> COMMANDOS: Ohh...
>
> REG: Yeah, yeah. All right. Fair enough.
>
> COMMANDO #1: And the new construction.
>
> COMMANDOS: Oh, yes. Yeah...
>
> FRANCIS: Yeah. Yeah, that's something we'd really miss, Reg, if the
> Romans left. Huh.
>
> COMMANDO: Green energy investment.
>
> LORETTA: And it's safe to invest in now, Reg.
>
> FRANCIS: Yeah, they certainly know how to keep order. Let's face
> it. They're the only ones who could in a place like this.
>
> COMMANDOS: Hehh, heh. Heh heh heh heh heh heh heh.
>
> REG: All right, but apart from the sanitation, the medicine, education,
> wine, public order, irrigation, roads, a fresh water system, and
> public health, what have the Romans ever done for us?
>
> XERXES: Brought profits.
>
> REG: Oh. Profits? Shut up! Bloody corporations!
>
> ---for jsevenseven, who got lost on his way to this month's meeting
> of the Judean People's Front.

Nov 12 03:52 PM

[cstauffer:]

Mr. Farr's comments are a smoke screen to deflect the realities inherent in their industry segment. The fact is that many manufacturing businesses are finding that it makes sense to move the labor component of their costs to lower skilled and lower cost locations outside of the U.S. The reality is that your product must be condusive to being made by less educated and lower skilled workers. That is what happened to the textile industry in this country 40-50 years ago, the toy making industry and virtually every other low value added industry. As long as our country continues to become more highly educated and more prosperous this trend will continue. It has been occuring in less complex electrical components and it should not be surprising that this trend is making its way into Emerson Electric.

It is shameless for a CEO to blame the government for a normal capitalistic trend which has been occurring for almost 100 years in one fashion or another.

Nov 12 08:34 PM

[Steve20423:]

"It is shameless for a CEO to blame the government for a normal capitalistic trend"

Truth be told Countries with the greatest prosperity have the lowest government Red Tape and obstacles to overcome to start a business.
Countries among highest barriers are the UK and Mexico. Countries with the lowest are Hong Kong and Singapore. The USA for along time was always amongst the lowest we are now in the middle of the pack.
The bigger issue is the government's focus on Health Care which will only serve to create another barrier and drain on the economy. The focus should be on jobs. Jobs come from business. Therefore efforts by the Gov. should be to lower the barriers to entry not to raise them.
The government never lowered the cost of anything. Price controls in health care will not work just like they failed in the steel and milk and everywhere else they have been tried.
"It's the economy Stupid"
I'd rather have a well intended dumb President than an intelligent President with a dumb agenda.

Nov 13 10:58 PM

[sapereaude:]

What's destroying American manufacturing is the struggle among corporate plutocrats for a monopolisitic liplock on Mammon's prepuce. How many times must Mammon ejaculate in their mouths before their stomachs fill up? Lynch a few thousand of these cockroaches and see if things don't improve.

Nov 23 03:18 PM

[sapereaude:]

Let's deport these free market enthusiasts to Hong Kong and Singapore. My family has been here for nearly 400 years, and we didn't shed our sweat and blood to enrich a bunch of slime eel urban carpetbaggers who can't claim a single ancestor here for the heavy lifting. Free market cheerleaders are analogous to the crowds who yelled "give us Barabbas." In the French Revolution, enraged people nailed aristocrats' children to the walls of their parents' churches. It could happen here.

Nov 23 04:39 PM