Although manufacturers might be slashing costs left and right amidst a weak recovery, they readily acknowledge that's not much of a long-term solution.
Ninety percent of manufacturing executives say that innovation, not cost-cutting, is the key to long-term growth in the manufacturing industry, according to a new report.
The report, which surveyed 360 manufacturing executives and was released on Tuesday by its sponsor General Electric, found that although 62 percent of manufacturing executives say that cost-cutting would help in the near term, nearly all of them say innovation is crucial to long-term success.
Overall, 61 percent of manufacturing executives said that ensuring a higher quality of production was the strongest safeguard against competition from emerging markets such as China. More than half of manufacturing executives said that research and development was an important part of their long-term strategy.
Although the United States remains a top producer of advanced technology, its dominance has recently deteriorated, according to MIT President Susan Hockfield. She says the country's former trade surplus in advanced technology products has evaporated into an $81 billion annual trade deficit.
The United States' overall monthly trade deficit in August was $45.6 billion, according to the U.S. Census, which if multiplied over 12 months would translate into an annual trade deficit of about $550 billion.
The White House has professed a dedication to innovation in order to offset the decline of American manufacturing. President Obama announced in June that the government would help fund the Advanced Manufacturing Partnership, a $500 million initiative that would bring together major engineering universities to develop high-powered batteries, bio-manufacturing, and alternative energy, and conduct research in robotics that could help human workers in a variety of different fields.
The President's Council of Advisors on Science and Technology released a report in June emphasizing that the government needs to help "create a fertile environment for innovation" so that the manufacturing industry can succeed in the future. The report recommended "robust support" for research and the training of a "highskilled workforce," among other suggestions.
Meanwhile, some American manufacturers continue to aggressively cut costs in the aftermath of the financial crisis. General Motors has quickly downsized its workforce, offering early retirements to workers in their 40s and 50s, according to The New York Times. Together, GM and Chrysler have shuttered hundreds of dealerships.
At the same time, though, some American manufacturers have expressed a desire to enhance quality. With new designs, GM and Ford are trying to make their case to American consumers that their cars are in fact better than the likes of Toyota, according to The New York Times.