"This Is a Business-Led Recession"


Arthur D. "Don" Wainwright, chairman and CEO of Wainwright Industries, was recently elected chairman of the Washington-based National Association of Manufacturers (NAM). Wainwright's 53-year-old, family-owned company, based in St. Peters, Mo., produces metal parts and products for automotive, aerospace, home-security, and computer companies. On Dec. 11, he sat down with BusinessWeek editors and reporters in Washington to discuss the state of the economy, NAM's national agenda, and his business. Following are edited excerpts from the discussion:

Q: What's your outlook on the economy?

A: In general, the economy is going to be pretty slow in the fourth quarter and the first quarter of 2002. It's going to have a hard time poking its head above water for the first half of 2002. Hopefully, it will emerge in the second half and start to come back.... The real ugly thing is if we lose control of the terrorist situation, the war situation. There's a lot of uneasiness.

This is a business-led recession. Capital formation -- there has been six or seven months of noninvestment.... We need the stimulus package to help electrify [the economy].

Q: Which parts of the stimulus package would be most helpful?

A: Capital formation, depreciation, alternative minimum tax reform, and from the consumption side, accelerated tax cuts. Pretty much along the lines of what the House [of Representatives] will put through.

Q: There's some skepticism about the value of a provision for accelerated depreciation in the stimulus package given the low level of capacity utilization throughout industry. What's your take?

A: I don't know that you would build up capacity -- what you would build up is efficiency. Productivity is what causes growth. That comes about by buying new, faster, better, bigger machines or information technology. We recently just couldn't wait any longer and replaced all of our computer hardware. There are a lot of people out there just waiting to do this.

Q: What else will help?

A: [Passage of] Trade Promotion Authority [TPA]. And hopefully, the consumption side. We're putting a lot of weight on the consumer right now. We need to give him some help, maybe accelerate those tax cuts.

Q: What are the odds that a stimulus package will pass?

A: We can't sit around with unemployment doing what it's doing, with the slowdown in the economy. And the Bush Administration is pushing for the stimulus package. The Administration just came off an important win on TPA, which is part of the stimulus itself. I have a lot of confidence in the leadership of the country at this time.

Q: What is NAM's agenda for next year?

A: Interest rates, international trade, and education. We want to reduce the regulatory burden on manufacturers -- especially [from the] Occupational Safety & Health Administration, ergonomics, safety rules. I look at that as out of control and onerous on business. And we need a national energy policy. We have to be less dependent on foreign sources of energy. It's gone the other way since the '70s.

Q: Why do you fear a patients' rights bill?

A: It would be costly. Because of government control -- that's bad. Two, some of the provisions would make companies liable if [they] initiate the policy. We were self-insured, but this year we're going to move toward a fully insured program because of cost. You're talking 10% to 15% cost increases every year.

We don't know where to go for help in controlling health-care costs. We do "wellness" -- a lot of literature, training, helping people go through nonsmoking programs, employee assistance programs, a lot of time spent showing people how costs can be saved with generic drugs. It's all education and training. And it has brought our increases below the average.

Q: Two years ago, when the economy was on a roll, business lobbied successfully for an increase in H-1B visas, temporary visas for skilled foreign workers. Now, there's an economic slowdown, yet there has been a big increase in H-1B workers this year. Are there still skills shortages?

A: Lots. Just about any area you want to look at from the standpoint of true skills and abilities.... At Wainwright, 7% of our total wages go to training, three times the national average of 2.5%. One of the toughest areas is computer-aided-design people. A lot of that design work is going overseas to other countries.

Q: What's the outlook for productivity? Has most of the low-hanging fruit been picked?

A: [I see] continuous improvement -- it never ends -- probably at a greater rate. I believe in science and engineering and processes and systems, and I've seen it work in our organization. For example, we make some motor covers that go in cars and trucks. That particular part was not able to be made 20 years ago. Now, it not only is made, but the price of the material would have been less than the finished part 20 years ago. That only happens through quality and efficiencies.

Q: Wainwright Industries won the Malcolm Baldrige National Quality Award in 1994. Did applying for the Baldrige award make a big difference to your company?

A: A big difference. We might not be around right now if not for that. We just didn't have the processes in place that we needed. It taught us the importance of integrating all the systems we had and empowering the people. We started in the early '80s. Being in the automotive industry, we were being forced to try to save our markets. We woke up to the fact that the customer was the person we were serving, not ourselves. By Amy Borrus


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