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NAM to Congress: Reverse Costly Tax Policy

With many manufacturers relying on financing to expand their businesses and hire workers, Congress should reverse a stricter limitation on interest deductibility that went into effect in 2022, the NAM told policymakers last week.

What’s going on: The stricter limitation is effectively a tax on investment, NAM Senior Director of Tax Policy David Eiselsberg said at a briefing last Thursday hosted by Sens. Shelley Moore Capito (R—W.VA) and Kyrsten Sinema (I—AZ) on the American Investment and Manufacturing Act.

  • “The stricter limitation makes it more expensive for capital-intensive companies—which many manufacturers are—to finance critical purchases, grow their businesses and hire new workers,” Eiselsberg said. “Failing to reverse this harmful change could cost the U.S. economy 467,000 jobs and reduce U.S. GDP by $43.8 billion,” he added, citing a 2022 EY study prepared for the NAM.

The background: Before last year, manufacturers were allowed to deduct 30% of their earnings before interest, tax, depreciation and amortization (known as EBITDA). The 2022 tax change limits that deduction to earnings before interest and taxes (EBIT).

  • The AIM Act, which was introduced in April by Capito and Sinema, would permanently reinstate the EBITDA standard.

Financing growthand competitiveness: Reversing the stricter limitation would safeguard manufacturers’ ability to finance growth, which is particularly important “ at a time when the cost of capital itself has increased due to rising interest rates,” Eiselsberg said.

  • The current policy puts the U.S. at a global disadvantage, since, he continued, “of the more than 30 [Organization for Economic Cooperation and Development] OECD countries with an earnings-based interest limitation, the U.S. is the only one that employs an EBIT standard.”

NAM in the news: POLITICO highlighted the AIM briefing.

Learn more and take action: Visit the NAM’s Full
Expensing Action Center
, which features a tool that lets manufacturers to send customized messages directly to Congress.

Input Stories

Husco Cracks the Employee-Retention Code

For Husco—a family-owned manufacturer of hydraulic and electro-mechanical control systems—building a strong, cohesive culture is the key to retaining talent.

The Waukesha, Wisconsin, company is among the many manufacturers that find retention to be a top business challenge, as the NAM’s quarterly Manufacturers’ Outlook Survey shows. So how do they create this cohesion?

It all starts at the top: Angela Stemo, vice president of global human capital at Husco, says the company has always prioritized trust and communication between employees and their managers.

  • “Our retention has grown and strengthened because of the emphasis we place on our leaders having strong relationships with their employees—get to know who they are, find out what their interests are,” said Stemo.
  • The company also lays the groundwork for strong bonds between coworkers, which often flourish outside of work as well. “Once they feel connected to people within the organization, they’re going to want to stay,” explained Stemo. “They’ve built friendships, they’ve built connections, and they feel really tied to the organizational culture.”

How they do it: Husco conducts employee engagement surveys once a year and holds occasional in-person focus group discussions to get feedback from employees.

  • “As our organization becomes more diverse, we are offering surveys in more languages,” said Stemo. “We have a large Afghan population on our shop floor as well as many Burmese workers, so we’ve had our surveys translated into various languages for all employees to participate.”
  • “For us, we really try to listen to what people say and what their suggestions are,” said Stemo. “If it’s something feasible and we can implement it, we try to figure out how to do so.”

Read the full story here.

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Maersk Introduces First Green-Methanol Container Ship

In a milestone for the logistics sector, Danish shipping firm Maersk recently unveiled “its first container vessel moved with green methanol,” CNBC reports.

What’s going on: “The new container ship, ordered in 2021, has two engines: one moved by traditional fuels and another run with green methanol—an alternative component, which uses biomass or captured carbon and hydrogen [for] renewable power. Practically speaking, the new vessel emits 100 tons of carbon dioxide fewer per day compared to diesel-based ships.”

  • The ship is the first of a larger order of 25 due for delivery next year.
  • Other shipping firms have placed orders for similar vessels.

Why it’s important: Because it’s a global industry—with approximately 90% of the world’s traded products traveling by sea—ocean shipping has typically been less receptive to transitioning to new energy sources, Danish Minister of Industry Morten Bodskov said, according to the article.

  • For example, “[i]n June, a group of 20 nations supported a plan for a levy on shipping industry emissions. But China, Argentina and Brazil were among the nations pushing back against such an idea.”

Climate goals: Maersk aims to be “climate neutral” by 2040, making the green-methanol vessels a key part of its approximately 700-ship fleet.

However … “[A]nalysts are worried that Maersk and its competitors might struggle to find enough supply of green methanol. The fuel is scarce and costly to transport.”

The last word: “Manufacturers are leading the way on developing and scaling up new clean energy sources,” said NAM Vice President of Domestic Policy Brandon Farris. “The NAM continues to advocate for policies and programs that foster and encourage that innovation.”

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UAW Sets New Strike Deadline

The United Autoworkers union set a new strike deadline late last night, according to The Street.

What’s going on: In a video post on X, “UAW president Shawn Fain said [the union] would unveil more strike targets, with more union members participating, by noon eastern time Friday failing significant progress in talks with Ford, General Motors and Chrysler-owned Stellantis.”

  • After negotiations for a new four-year labor contract failed late last Thursday, the UAW—which represents almost 150,000 U.S. autoworkers—ordered a walkout from vehicle plants belonging to the “Big Three” carmakers in Michigan, Missouri and Ohio.
  • About 12,700 workers are now picketing assembly lines throughout the Midwest.
  • Each of the vehicle manufacturers has put forth offers in recent days, and each has been rejected by the union, the demands of which include a sizable wage raise and a 32-hour workweek at 40-hour-a week pay.

Why it’s important: A 10-day strike of 143,000 UAW members against the three vehicle manufacturers could mean an economic loss of $5.617 billion, according to a recent report by Michigan-based consultancy Anderson Economic Group.

  • A protracted strike this year would put “the state of Michigan and parts of the Midwest … into a recession,” Anderson Group CEO Patrick Anderson told the news outlet.

Our take: “ The economic harm produced by a strike goes well beyond GM, Ford and Stellantis,” said NAM Vice President of Domestic Policy Brandon Farris.

  • “Numerous small and medium-size manufactures are already feeling the effects. The NAM encourages a swift resolution. Let’s get everyone back to work building products that our country relies on.”
Input Stories

Preparing the Supply Chain for Future Pandemics

Manufacturers can take specific steps to improve the resilience of the health care supply chain, the NAM’s latest health care study found.

What’s going on: The study—conducted by the Manufacturing Policy Initiative at Indiana University—analyzes data from the COVID-19 pandemic, when manufacturers in the U.S. had to produce large quantities of critical health care equipment under difficult, fast-evolving conditions.

Building resilience: The study found that to prepare the supply chain for a future disruption of similar magnitude, manufacturers should focus on seven areas:

  • Speed: Manufacturers must be able to satisfy demand quickly.
  • Information: Manufacturers require timely access to accurate information.
  • Cost: Firms face the costs of taking action within the supply chain, as well as the costs of managing market unpredictability and policy environment uncertainty.
  • Networks: Partnerships can support information sharing and networks to help manufacturers navigate the disruption.
  • Size: Supply chain challenges can look different for small, medium-sized and new manufacturers than for larger, established firms.
  • Technology: Tech can help manufacturers increase production, improve efficiency and speed up innovation.
  • Flexibility: Responses can come from unexpected sources and need a flexible policy environment.

The NAM says: “Policymakers should utilize these lessons to bolster our supply chain for the next disruption,” NAM Chief Economist Chad Moutray said. “This analysis … reveals that there are key policy actions needed to strengthen the manufacturing supply chain. Research shows a more balanced regulatory agenda, with an emphasis on clarity, predictability and coordination, will help mitigate the effects of the next disruption.”

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  House Passes Emissions-Rules Measure 

In a victory for manufacturers, the House yesterday passed an NAM-backed bill that would prohibit states from banning the sale of new gas-powered vehicles, the Washington Examiner reports.

What’s going on: “Lawmakers voted 222–190 to pass the Preserving Choice in Vehicle Purchases Act, which would amend federal law to block state attempts to eliminate the sale of vehicles with internal combustion engines as well as prohibit the Environmental Protection Agency from issuing waivers that ban such sales.”

The background: In recent months, the EPA, National Highway Traffic Safety Administration and state of California have all proposed measures to limit emissions from light- and medium-duty vehicles.

Why it’s important: The range of frequently conflicting regulations is creating confusion and regulatory uncertainty for manufacturers.

  • The Preserving Choice in Vehicle Purchases Act would eliminate that confusion by “harmoniz[ing] vehicle emissions standards,” NAM Managing Vice President of Policy Chris Netram told lawmakers. “When manufacturers have regulatory clarity, we can focus on what we do best—innovating, creating jobs and investing in America.”

What’s next: The measure now moves to the Senate.

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Workers Stage Walkout at Detroit’s “Big Three”

The United Auto Workers union went on strike for the first time at all the Detroit “Big Three” carmakers early this morning, according to The Wall Street Journal (subscription).

What’s going on: “UAW officials initiated the walkout after failing to clinch new labor deals with General Motors, Ford Motor and Jeep-maker Stellantis for about 146,000 U.S. factory workers. Bargaining went late into the night, but the two sides remained too far apart to avoid a walkout at the 11:59 p.m. ET deadline.”

  • Workers at a Ford Bronco plant in Detroit, a GM pickup-truck factory in Missouri and a Stellantis Jeep plant in Ohio were told to leave their posts.
  • The three targeted facilities make some of the firms’ most popular vehicles. 

Why it’s important: Automotive manufacturing in the U.S. is among the most productive industries in the world, underpinning the American economy as a whole.

  • In fact, a strike of 143,000 UAW members against GM, Ford and Stellantis could lead to an economic loss of $5.617 billion after just 10 full days, according to a recent report by Anderson Economic Group.
  • In 2019, a 42-day strike at one of the three vehicle manufacturers put the state of Michigan into a quarter-long recession and resulted in an economic loss of $4.2 billion, according to The Detroit News.  

Our response: “The impact of this strike will echo far beyond the city of Detroit, as multiple economic analyses have demonstrated,” NAM President and CEO Jay Timmons said this morning. “The small and medium-sized manufacturers across the country that make up the automotive sector’s integrated supply chain will feel the brunt of this work stoppage, whether they are a union shop or not.”

  • “American families are already feeling economic pressures from near-record-high inflation, and this will only inflict more pain. We urge a swift resolution to end this strike and avoid further undermining the strength of our industry and harming our broader economy.”

NAM in the news: Bloomberg (subscription),  POLITICO, Reuters (subscription) and Bloomberg Law (subscription) all covered the NAM’s response to the walkout.

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Judge Rules DACA Illegal

A federal policy that prevents the deportation of thousands of immigrants brought to the U.S. as children was deemed illegal for a second time on Wednesday by a federal judge, according to Reuters (subscription).

What’s going on: “The decision by Texas-based U.S. District Court Judge Andrew Hanen deals a fresh setback to the program, called Deferred Action for Childhood Arrivals (DACA), and its 579,000 enrollees and other immigrants who might have hoped to be approved.”

  • In 2021, Hanen found the policy unlawful, and in his decision this week found that a 2022 regulation issued by the Biden administration had not fixed the “legal deficiencies” he’d found the year before.

What it means: The Department of Homeland Security will be able to renew the immigration status of those enrolled in DACA before Hanen’s 2021 ruling, according to Reuters.

  • This week’s ruling—a response to a suit brought by Texas and eight other states that say the policy breaches federal regulatory law—doesn’t require U.S. immigration officials “to take any immigration, deportation or criminal action against any DACA recipient, applicant or any other individual that would otherwise not be taken,” Hanen wrote.

The administration responds: The White House responded that in keeping with the order, it would continue to process renewals for current DACA enrollees.

  • Department of Homeland Security Secretary Alejandro Mayorkas said in a separate statement that the ruling “undermine[s] the security and stability of more than half a million Dreamers who have contributed to our communities.”

Why it’s important: Ending the DACA program—particularly at a time when there is an acute worker shortage—does a tremendous disservice to U.S. manufacturing competitiveness, according to the NAM, which has long advocated fixing the broken American immigration system.

  • This week’s ruling “only underscores the need to protect those who have never known a home other than the U.S.,” the NAM said Wednesday. “Manufacturers urge Congress to reform our immigration system, using the principles laid out in … ‘A Way Forward,’” the NAM’s immigration-policy blueprint.
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Chevron Now Majority Stakeholder in Hydrogen Project

Chevron Corp. has bought a majority stake in a federal government–supported “green” hydrogen project in Utah that, once completed, will “produce massive volumes” of the renewable energy source, according to E&E News’ ENERGYWIRE (subscription).

What’s going on: Chevron said on Tuesday that it had completed a deal with fuel-storage developer Magnum Development LLC to take over full ownership of the Utah salt caverns where green hydrogen production and storage is set to take place.

  • This purchase gives the energy giant “a majority interest in the joint venture that is developing the [Advanced Clean Energy Storage] project.”
  • ACES—in which Mitsubishi Power Americas Inc. and private-equity firm Haddington Ventures LLC are also partners—won a $504 million loan guarantee from the Department of Energy in 2022.
  • The project is part of a larger effort by Chevron to develop emerging energy technologies through 2028.

Why it’s important: “We seek to leverage the unique strengths of each partner to develop a large-scale, hydrogen platform that provides affordable, reliable, ever-cleaner energy and helps our customers achieve their lower carbon goals,” Chevron New Energies Vice President Austin Knight said in a statement.

  • The plan is to make the hydrogen in the salt caverns in Delta, Utah, “for use at a nearby power plant” looking to diversify its energy mix—and aiming to run entirely on hydrogen by 2045.

Another effort: In partnership with ExxonMobil Corp. and Shell PLC, Chevron is also part of a Texas industry group asking for $1.25 billion in 2021 Bipartisan Infrastructure Law funds to construct hydrogen “hubs,” large-scale demonstrations of hydrogen production, transportation, usage and storage.

A model project: “Currently under construction, the ACES project could become one of the western U.S.’s most important demonstrations of what a low-carbon hydrogen industry might look like,” ENERGYWIRE reports.

The NAM’s take: “Manufacturers view clean energy solutions, such as hydrogen, as an important part of our country’s energy present and future—and the industry is used to leading the charge in developing and scaling hydrogen projects for widespread use,” said NAM Vice President of Domestic Economic Policy Brandon Farris.

  • “The NAM is committed to ensuring that the hydrogen tax credit and other incentives help build the appropriate market conditions for hydrogen projects to succeed.”
Input Stories

Producer Prices Rise

A measurement of wholesale inflation rose more than expected in August, according to data from the Bureau of Labor Statistics

What’s going on: The Producer Price Index for final demand goods and services rose a seasonally adjusted 0.7% last month, and 1.6% on a year-over-year basis.

  • The increase was the strongest monthly gain since June 2022.
  • Core producer prices rose 3.0% year-over-year, an increase from July’s 2.9%.

Final demand goods: Producer prices for final demand goods jumped 2.0% in August, buoyed largely by a 10.5% rise in energy costs.

  • Excluding food and energy, producer prices for final demand goods inched up 0.1% last month.

Final demand services: Producer prices for final demand services, meanwhile, increased 0.2%, with transportation and warehousing prices rising 1.4%.

Our take: “Despite the uptick in wholesale inflation in August, the overall trend remained encouraging,” said NAM Chief Economist Chad Moutray. “The data continue to reflect moderation in pricing pressures year to date, particularly as core producer prices continued to moderate. The deceleration in producer prices will likely take some pressure off the Federal Reserve, even as it remains concerned about lingering inflationary pressures overall.”

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