Giving the business floor back to factories

Are manufacturing jobs and the 'smart economy' incompatible? KARLIN LILLINGTONreports on the debate over job creation

IS IT TIME to return to a manufacturing economy? A spirited speech last week by Glen Dimplex chief executive Seán O’Driscoll to the Lemass International Forum in Dublin argued that the country had forgotten the importance of having manufacturing as part of the economic mix.

“We need to go back to making things again, to real engineering, not financial engineering,” O’Driscoll told an audience of senior industry figures, academics, politicians and civil servants. “We need to export our products, not our jobs.”

His talk was blunt and pointed to the undeniable fact that the countries leading the recovery out of global recession were all countries that retain a focus on manufacturing – China and other east Asian manufacturing-based countries, and in Europe, France and Germany.

What were once thought of as low-end manufacturing sectors – such as those producing television sets or batteries – have gone on to develop freshly innovative, new high-end industries in gaming consoles, mobiles, laptops and screen manufacture in Asia. These are the same Asian countries that such manufacturing work migrated to, he noted.

O’Driscoll was critical of the Government’s focus on “smart economy” jobs, which he noted could not supply work for the entire population. “Do we really want an economy based on a number of high-end jobs, with the rest making little money?” he asked.

The talk was part of a thought-provoking seminar called “The Factory of the Future: the Role of Manufacturing in Ireland’s Economic Recovery”. The premise of the event was simple: as the Celtic Tiger came into being, attention shifted away from medium- and low-technology manufacturing. While such work may invest little in research and development, it does provide a basis for innovation that percolates upwards and also provides jobs built on a science and technology base. Has the country though really moved that far away from manufacturing?

Other presentations at the event underlined that manufacturing actually remains a vital part of many industries in the State, especially at the high to medium end.

Statistics seem to back this point: Ireland has 4,300 manufacturing companies and 4,500 manufacturing plants, 90 per cent of them Irish-owned. About half of manufacturing employment is in foreign-owned companies, via the huge employers in areas such as pharma and electronics manufacturing.

“If you look at foreign direct investment companies in Ireland, about 70 per cent of jobs are in manufacturing, so manufacturing is far from dead,” IDA chief executive Barry O’Leary told the audience. He noted that Eli Lilly, Merck and Coca-Cola had recently completed manufacturing projects worth €1 billion, while Lufthansa was investing €40 million into its Irish manufacturing facility. Liebherr and Allergan were also making manufacturing investments, he said.

Although it was O’Driscoll’s talk which was most contrarian and drew the most attention – because it was so directly in opposition to the knowledge jobs mantra in government and corporate circles – there was also plenty of evidence that others do not necessarily see “smart economy” in opposition to manufacturing jobs.

Hewlett Packard vice-president Lionel Alexander, currently president of the American Chamber of Commerce in Ireland, clearly sees HP’s manufacturing jobs as smart economy jobs. He also argued that there were many ways in which manufacturing was innovative. His key warning was that once manufacturing jobs began to leak out of the country, it lost a basis for research and development, because inspiration often started on the shop floor.

“Manufacturing is important to research and development. Once you lose manufacturing, you begin to lose that [research and development (RD)] capability.”

Unlike O’Driscoll, though, Alexander does not see the point in trying to hang on to low- end manufacturing, which he believes will go to lower-cost Asia. It was more important to “transition” low-end manufacturing up to medium or high end and give it more value.

Intel vice-president Jim O’Hara, a former president of the American Chamber of Commerce, said that advanced manufacturing, because it was not a commodity, could hold on to jobs better than lower-end manufacturing. Intel could capitalise on what he termed “some of the strengths we have here in Ireland” to keep its chip fabrication plants based here.

Intel’s workforce “competes against the best in the world, not local benchmarks” and thus had to be best in class.

A benefit of Intel’s type of manufacturing is that it provides further jobs both “upstream and downstream”, supporting other third-party manufacturing jobs as well as helping develop high-end RD jobs.

Pfizer vice-president Paul Duffy noted that Pfizer could compete in manufacturing with China and India “by focusing on efficiency and chemistry” and increasing collaborative work, especially in new areas of convergence between medical devices and pharmaceutical products. Ireland could be well placed for this type of work because “Ireland is small enough and people know each other”.

Audience members also had varying views of what manufacturing means. Jim Browne, president of NUI Galway, noted that manufacturing was changing in significant ways, with products often combining an add-on service. “We need to understand manufacturing not just as a product, but as a potential product and service.”

Concern about the role of manufacturing has been raised before by Intel’s O’Hara last December at an event in Trinity’s Science Gallery. In the presence of senior figures from the IDA and Enterprise Ireland, he bluntly noted then that the public would not support the knowledge economy “if it is an elitist, white-coat initiative.

“I don’t believe research and development can survive in an isolated environment from manufacturing. Ireland inadvertently communicated to the world that it was interested in RD, but the consequence was that we were not interested in manufacturing,” he said then.

“I think that’s a very dangerous approach. I think advanced manufacturing in its various forms is the building-block and foundation from which wonderful RD can thrive.”

Jim Lawlor, Enterprise Ireland’s director of industrial technologies commercialisation, acknowledged at the event that there was truth in the criticism. At last week’s event, O’Hara reiterated these points.

“There’s an absence of manufacturing in terms of our language, even, when we talk about the smart economy. Somehow Ireland lost manufacturing as an anchor tenant of a smart economy,” he said.

Refocusing on manufacturing will require rethinking overall costs to companies in Ireland, industry speakers all agreed. Competitiveness is a serious problem, they said. Labour, energy, service and construction costs were now down, O’Hara noted, “but if we don’t get our act together in some of those areas, we won’t have any manufacturing left”.

O’Driscoll was highly critical of costs, noting that if he was not Irish, Glen Dimplex would likely not have retained three high-cost plants on the island. Later that day, he also called for a moratorium on existing wage agreements.

At the Lemass seminar, however, he underlined there was no point in laying blame for current troubles on decisions made recently. “Governments, unions and employees must realise that we lost our national competitiveness not over the last year, but over the last decades.”