Stricter Bank Rules Stymie Small Businesses
As banks tighten their lending standards in response to turmoil in the industry, it’s small businesses that are suffering, according to The Wall Street Journal (subscription).
What’s going on: “Some entrepreneurs are finding it more difficult to get a new loan or have had existing credit lines cut. Others report stricter terms, higher borrowing costs, longer waits and tougher questions from their bankers.”
Not your imagination: Close to half of all banks reported having tightened their lending standards in the past three months, according to a Federal Reserve Board survey cited by the Journal.
- “The median interest rate for a variable-rate, small-business term loan was 7.44% in the fourth quarter, the last period for which data is available, up 3.42 percentage points from a year earlier, according to the Federal Reserve Bank of Kansas City. Banks have continued to raise rates this year in response to Federal Reserve rate increases,” one source told the newspaper.
Why it’s important: More stringent loan rules are forcing smaller companies—which tend to borrow from small banks—to put off or cancel expansions and consider bringing in equity investors.
- “‘The alternative to borrowing from your local small bank is another form of financing that is going to be notably more expensive,’ said Goldman Sachs chief U.S. economist David Mericle.”
- Some banks are telling small businesses to seek Small Business Administration loans, which “carry a government guarantee” but tend to have higher interest rates than their conventional counterparts.
The last word: “Manufacturers—particularly small and medium-sized firms—are closely following developments related to access to credit, with an eye on the tightening of lending standards that were occurring even before the recent banking crisis,” said NAM Chief Economist Chad Moutray.
- “Businesses need credit to be able to expand their operations, and any pullback in that access could have consequences.”
FERC Seeks to Slash Energy-Project Backlog
As the Federal Energy Regulatory Commission prepares to issue a final rule that would change the way new energy projects connect to the U.S. electrical grid, some are concerned the regulation may be insufficient, according to E&E News’ ENERGYWIRE (subscription).
What’s going on: “Speeding up the grid connection system is critical for the success of the Biden administration’s signature climate initiatives and for many states’ clean energy goals. Today’s protracted process for linking new energy projects to the transmission system is widely considered one of the chief hurdles to deploying more carbon-free energy.”
The problem: Developers of clean energy undertakings and others say FERC’s coming changes likely won’t have the effect of getting new projects online sooner.
- Some policies—such as the direction of regional transmission lines to study interconnection requests in groups, not individually—have already been implemented to little effect, they say.
- And some potential issues slowing grid connection aren’t covered by the regulations, including grid operators’ difficulty in hiring sufficient numbers of experienced engineers to process all the requests.
- Then there are network-upgrade costs, which “are rising sharply” and may not be “meaningfully address[ed]” by FERC’s proposed rule.
Too long a wait: Before being able to deliver power to businesses and households, new energy projects need to be connected to the transmission system—and getting approval for that connection can take years.
- “As of last year, it took an average of five years for a new energy project in the United States to move through that study process and reach commercial operation, according to the Department of Energy’s Lawrence Berkeley National Laboratory. That’s up from an average of three years in 2015 and less than two years in 2008.”
- What’s more, “[i]n the current interconnection process in most of the United States, projects are sometimes restudied up to 10 times before they’re approved to connect,” one source told ENERGYWIRE.
Prioritizing projects: The proposed regulation tries to prioritize projects by commercial viability and construction readiness to cut down on the number of “possible” projects in the lineup.
- However … some in the renewables industry say “it’s unrealistic to expect project developers to have most of their permits and contracts in place before they have gone through the interconnection process,” another source told the news outlet.
A fundamental change: FERC has its work cut out for it given the foundational changes that have taken place in the U.S. energy system in the past few decades.
- “Historically, the electric grid was dominated by large, centralized power plants. But as the clean energy transition continues,” that is likely to change.
The NAM’s take: “Manufacturers depend on access to reliable and affordable energy to expand—which is why we support reforms that would foster transparent, streamlined and timely federal regulatory processes for the siting, permitting and licensing of energy delivery infrastructure of all types,” said NAM Vice President of Energy and Resources Policy Brandon Farris.
Manufacturers Consider China Alternatives
Some manufacturers are reconsidering their dependence on China in the face of growing security concerns and worries about potential military conflicts, according to The Wall Street Journal (subscription).
What’s going on: “Executives are plotting alternate supply chains or devising products that can be made elsewhere should China’s hundreds of thousands of factories become inaccessible. That prospect became more conceivable, they said, after the 2022 invasion of Ukraine prompted companies to sever ties with Russia, sometimes taking huge write-downs.”
- China’s government recently banned key Chinese firms from purchasing products made by U.S. semiconductor firm Micron Technology, saying the company posed a national security risk to China.
Why it’s important: “China’s access to raw materials and ability to produce components for finished goods remains unmatched, and its dense supplier networks have yet to be replicated elsewhere.”
What manufacturers are doing: Some manufacturers that rely heavily on China for revenue and inputs are using extra discretion when it comes to their data and intellectual property in that country.
- Manufacturers’ caution levels have risen since April, when China revised an espionage law that lets its authorities inspect the facilities and electronic equipment of any companies they suspect of spying.
- Some manufacturers are aiming to assemble new supply chains to circumvent China. These companies are “brac[ing] for higher prices and slower service than [they receive] in China” but “won’t be cut off by the threat of war or a trade embargo.”
Nuclear-Reactor Bill Sails Through Senate Committee
Advanced nuclear reactors got some good news Wednesday when a measure to speed their development and deployment passed the Senate Environment and Public Works Committee, according to E&E News’ GREENWIRE.
What’s going on: “The ‘Accelerating Deployment of Versatile, Advanced Nuclear for Clean Energy (ADVANCE) Act,’ S. 1111, passed 16-3, with Chair Tom Carper (D-Del.) and ranking member Shelley Moore Capito (R-W.Va.) leading the effort to revitalize American leadership on nuclear energy.”
What it would mean: Through a series of awards, the bill would encourage companies to develop advanced-reactor technology. In addition, it would seek approval easing for reactor projects on brownfield sites, land that is underused or has been abandoned because of industrial waste.
- “The proposal would also give the Nuclear Regulatory Commission, the nation’s chief nuclear regulator, additional authorities to increase hiring. Lawmakers say current staffing is not enough to effectively deal with the high number of applications for new reactors.”
- And it would supplement “early licensing work” to deploy the reactors more quickly “at critical national security infrastructure sites.”
Manufacturing Job Openings Decline
Manufacturing job openings in April declined to their lowest level in more than two years, according to the U.S. Bureau of Labor Statistics.
What’s going on: There were 676,000 manufacturing job openings in April, down from 702,000 in March and the smallest number since February 2021. It is still above pre-pandemic levels.
- In the past 12 months, job openings in the sector have averaged 783,000, though that figure is 741,000 in just the past six months.
Hiring and separations: Manufacturers hired 387,000 workers in April, an increase from March’s two-year low of 373,000.
- Over the past year, net hiring in the industry has seen a monthly average of 19,250, but in the past six months, that number has dropped to 5,833.
- Meanwhile, total separations in manufacturing were also at 387,000 in April, down from 394,000 in March.
- Net hiring—hiring minus separations—was flat in April.
Quits and layoffs: Total quits in manufacturing dipped to 244,000 from 256,000 in March. That’s the lowest level in two-and-a-half years, but it remains elevated.
- There were 120,000 layoffs in manufacturing in April, an increase from 118,000 in February and the most in nearly three years.
In related news: Manufacturers continued to have had business challenges in May, with the ISM® Manufacturing Purchasing Managers’ Index® dipping to 46.9 from 47.1 in April.
The final word: “Even with the overall labor market remaining solid, the number of job postings in the sector continues to cool, as expected,” said NAM Chief Economist Chad Moutray. “Firms continue to cite a high degree of churn in the labor market, even with recent improvements.”
Debt Deal a Win for Permitting Reform
The bill passed in the House Wednesday to raise the nation’s debt limit and avert a default makes some of the most significant revisions to U.S. environmental law in years, “potentially accelerating new renewable-energy investments championed by the Biden administration,” according to The Wall Street Journal (subscription).
What’s going on: The Fiscal Responsibility Act, which boosts the U.S. debt ceiling until after the 2024 presidential election and now heads to the Senate, includes several energy infrastructure-related moves.
- Expedites permitting for MVP: The legislation hastens permitting for the Mountain Valley Pipeline, an Appalachian natural-gas project that would bring affordable energy to the Mid- and South Atlantic regions.
- Shortens timelines: It also “tightens the scope of environmental reviews required under the National Environmental Policy Act of 1970 and allows more projects to win approval without having to undergo the most complex types of reviews. It also sets time limits of no more than two years to complete the studies.”
- Streamlines processes: In addition, the bill assigns review of each project to one federal agency rather than multiple agencies and allows infrastructure undertakings “to piggyback on existing reviews for similar projects rather than starting from scratch.”
Rep. Garret Graves (R-LA), who joined NAM President and CEO Jay Timmons at the recent NAM Competing to Win Tour stop in Harahan, Louisiana, and who wrote a previous measure from which the Fiscal Responsibility Act drew, said the legislation is “all about unlocking America’s resources.” This is a point the NAM has long stressed to Congress, too.
- On Tuesday, after the NAM consistently applied pressure on lawmakers to reach a deal, Timmons urged the House to pass the measure, citing its ability “[t]o strengthen manufacturing in our nation, reach our industry’s full potential and outcompete other nations like China” through permitting reforms.
- Bureaucracy and red tape hamstring plans for critical infrastructure, resulting in “yearslong delays on energy projects, making them unfeasible. The most rigorous type of review takes an average of 4½ years to complete, according to the White House,” the Journal reports.
Something we can all agree on:
“‘We see an enormous amount of demand for new clean energy projects that are being held up,’ said Sasha Mackler, who directs the energy program at the Bipartisan Policy Center. ‘That reality has brought Republicans and Democrats together here.’”
NAM Opposes Overtime Rule
The NAM is leading a coalition of business groups in advocating against a potential new overtime rule from the Department of Labor.
The background: The current overtime rule, part of the Fair Labor Standards Act, mandates that employees must receive overtime pay of at least time and a half for hours worked over 40 in a workweek.
- However, it contains certain exemptions for white-collar workers. If an employee makes a minimum amount of money or is classified as an executive, administrator or professional, they are exempt from overtime pay.
The new rule: The new rule is expected to raise the salary threshold from the current $35,568 per year.
- The change would potentially cause challenges for employers, as well as for employees who have worked to advance themselves away from hourly jobs and into salaried company positions, as the NAM has long argued.
- In addition, the widespread adoption of hybrid work brought about by the pandemic “makes compliance with potential changes to the white-collar exemptions measurably more difficult,” the coalition pointed out. New regulations may force employers to restrict these work arrangements that many workers value highly.
The last word:
As the coalition told the Department of Labor, “Many businesses are not well-positioned to absorb new labor costs associated with changes to the overtime pay regulations, and such changes would only exacerbate the difficulties businesses are currently facing”—including inflation, supply chain disruptions and the aftereffects of the pandemic.
Manufacturers Find Opportunity in AI
How will AI change the work you and your employees do? The Manufacturing Leadership Council—the digital transformation arm of the NAM—is helping manufacturing leaders figure out the opportunities created by new generative AI technologies, including ChatGPT.
Recently, the MLC held a Decision Compass discussion to help manufacturers learn how to take advantage of these new tools safely and effectively.
The participants: The conversation was led by two members of West Monroe’s Center of Excellence for AI: Ryan Elmore and David McGraw. Elmore and McGraw shared their expertise and addressed questions from manufacturers throughout the call.
The use cases: AI is a diverse and complex tool that is likely to have a lasting impact on manufacturers across the United States. According to McGraw and Elmore, there are a range of applications for the technology, from supply chain optimization and production planning to predictive maintenance issues.
The workforce impact: According to Elmore, AI will also transform the manufacturing workforce.
- Some roles that involve repetitive tasks like data processing could be adjusted or eliminated, while some new jobs will be created around tasks like prompt engineering, which ensures AI programs deliver the most useful and accurate results. Most importantly, however, existing jobs will likely be modified to account for new tools.
- “Some are going to go away, some are going to be created, but the vast majority is going to change mentality, change infrastructure, change the way we work,” said Elmore.
Learn more: Want to find out more about how digital tools are changing manufacturing? The MLC will delve deeper into these issues at this year’s Rethink Summit, taking place June 26–28 in Marco Island, Florida. Learn more and register
Read the full story here.
“Mountaire Cares” Is More Than Just a Slogan
“Making a difference” might be the best description of what Mountaire Farms does. Founded in 1914, the fifth-generation family-owned chicken processing company has a long history of helping its communities thrive.
Mountaire Cares: Through its Mountaire Cares program, the company’s employees are committed to changing lives for the better.
- “The Mountaire Cares program was created to fulfill three main core pillars: how are we faithful to our people, how are we faithful to our communities and how can we look to be faithful to the future,” said Mountaire Cares Director JR LaPearl.
Meals for thousands:
One of Mountaire Farms’ biggest events during the year is its Meals for Thousands program, where the company partners with local churches, food banks and nonprofit organizations to provide meals for families in need at Easter, Thanksgiving and Christmas.
The program had humble beginnings 28 years ago, with Roger Marino, who was PR and community relations director at Mountaire, leading the group to provide 300 meal boxes at Thanksgiving. The company has distributed more than 1 million boxes since then.
- For this year’s Easter event, the company’s employees and other volunteers packed 15,000 meal boxes, each of which contained a Mountaire roaster chicken; vegetables; macaroni and cheese; mashed potatoes and gravy; and brownies—enough food to feed a family of four
- “Our employees really enjoy being a part of this effort to give back to the community,” LaPearl said. “What I love about these events is that they bring people together to share love and kindness to one another.”
Read the full story here.
Lithium-Mine Project Moves Ahead
A plan to build a lithium mine in Nevada’s Thacker Pass moved forward this week, according to E&E News’ GREENWIRE (subscription).
What’s going on: “The Interior Department’s Bureau of Land Management announced on Tuesday that it had finished a court-ordered review of the government’s approval of Lithium Americas’ plan to build the mine and found evidence of ‘mineralization’ under areas where the company plans to store waste.”
- “The arcane issue of where and how mine waste is stored on federal land … was a remaining hurdle for the Thacker Pass project.”
The background: Lithium Americas, which owns multiple claims at the Nevada site, is building the mine with General Motors Co.
- As more automakers embrace electric vehicles, lithium—a crucial EV component—has become harder to get, leading car companies to start investing directly in mining.
What it means: The project will now be able to start construction and production at Thacker Pass.
The bigger picture: Interior’s announcement comes amid a larger debate about the need for legislation to address the Rosemont copper mine case.
- In that situation, a district court judge in Arizona vacated the U.S. government’s approval of a proposed copper mine outside of Tucson “after finding that regulators had failed to validate Canadian firm Hudbay Minerals Inc.’s unpatented mining claims on federal land, including the 2,447-acre site where the company planned to store 1.9 billion tons of mining waste.”
- In the past few weeks, bipartisan groups of lawmakers in the House and Senate have offered measures to address the issue of mine waste. One, the Senate’s Mining Regulatory Clarity Act, would allow entities with claims on public land to mine, process and discard waste prior to proving the presence of valuable underground minerals.