Olympia Business Watch

Brunell: Good news, bad news about cars

Today's cars are safer, more fuel-efficient and emit fewer greenhouse gases than ever before. That's the good news, AWB President Don Brunell writes in his weekly column.

The bad news is that the state's highway system has relied for decades on gas taxes to pay for construction and maintenance.

When cars got 10 or 12 miles per gallon, there was plenty of money to pay for projects, Brunell writes. But now that they're more efficient, they use less gas -- so there is less coming in to pay for highway projects.

And the problem will only grow as alternative fuel vehicles become more popular.

So what's the answer?

First, alternative fuel vehicles must pay their fair share. Tolls and special HOT (high occupancy tolls) lanes must also be part of the equation. Finally, transit schedules need to be adjusted so that buses and ferries no longer run at times when they are virtually empty.

"The good news is we have the technology," Brunell writes. "The bad news is we take too long to study, approve and build anything."

Dreamliner passes with flying colors

The first commercial flight of the new 787 drew high praise from passengers traveling from Tokyo to Hong Kong yesterday. 

According to USA Today:  "ANA Flight 7871 departed Tokyo at 12:23 p.m. local time today, landing in Hong Kong about 4 hours later. The flight was feted by inaugural ceremonies in both cities, including a "dragon dance" performance upon landing in Hong Kong." 

ANA CEO Shinichiro Ito was among the roughly 240 passengers on the flight, and he walked back the aisles to personally thank some of those on board for their business. More than 25,000 people applied for the 100 seats ANA opened to the public. Another six business class seats were auctioned off for charity, with one bidder paying more than $33,000 to secure a seat on the flight.

Boeing's 787 is the new carbon-fiber aircraft which is revolutionizing commercial aviation.  Boeing 787 production is ramping up in Everett and Charlston, SC, as they are coming into service.  Boeing has nearly 800 orders and most recent production figures show that a dozen are complete and in the process of being delivered and put into service.  All were assembled at Everett's Paine Field. 

This is great news for Boeing and Washington.

Gregoire lays out $2 billion in possible cuts, kicking off difficult budget debate

Gov. Chris Gregoire introduced a list of possible state budget cuts Thursday totaling a little more than $4 billion, including some $2 billion that she has tentatively chosen to include in her upcoming supplemental budget proposal.

They range from eliminating the Basic Health Plan and the Disability Lifeline medical program to cutting 15 percent from higher education and increasing class size by two students in Grades 4 through 12.

Gregoire made it clear she didn't like any of the options, but she also said lawmakers are running out of choices. The $2 billion in needed cuts must come from just $8.7 billion of the state's total $32 billion budget, Gregoire said, echoing what she told AWB members last month at our Policy Summit.

Critics attacked the governor's proposal, saying it should have included options for new taxes in addition to proposed cuts. Gregoire said she will turn her attention to revenue next, but she correctly noted that despite showing some signs of life, consumers and businesses both remain nervous about the economy.

"We need to restore consumer confidence in our state so people will spend," she said. "We need to restore business confidence so they will hire."

Future workforce focus

The Association of Washington Business and the State Board for Community and Technical Colleges are conducting employer focus groups across the state during October and November to target training needs particularly for small businesses.  AWB is working with local chambers to bring representatives of small business together to identify training needs.

The first two session were yesterday in Vancouver and Tacoma.  The other four will be in Spokane, TriCities, Seattle and Everett in November.  Following the focus groups, we will aggregate the input and develop a series of recommendations.

Amy Johnson is coordinating for AWB.

Brunell: Deadbeat Illinois serves as a warning

The budget crisis is so bad in Illinois that the state has simply stopped paying its bills, AWB President Don Brunell writes in his weekly column. And this is after lawmakers pushed through huge tax increases.

Why should we care what happens in Illinois? Because it's a warning to us all.

Illinois is by no means alone in its fiscal crisis. The recession revealed systemic weaknesses in cities and states across the nation -- weaknesses that were masked initially by a strong economy and later by federal stimulus money.

Still, the borrowing and spending continues. And it's largely our fault. "We all want cuts, but not to our program," Brunell writes. "We call for fiscal restraint from our elected leaders but howl when our ox gets gored."

The solution, he writes, is to once again audit tax incentives and eliminate the ones that aren't paying for themselves, attracting new investments or creating or preserving jobs. Next, lawmakers need to jettison non-essential services or turn them over to the private sector.

And most importantly, lawmakers must streamline Washington's costly, complex and overlapping regulations.

"Simply put," Brunell writes, "the cost of permits is out of whack in Washington state and it is killing employers in the private sector, non-profit groups -- even other essential services like first responders, hospitals and schools."

How about energy independence, more revenues for our government and thousands of new jobs?

From the American Petroleum Institute:

A recent New York Times article provides an insight into developments that are dramatically altering the energy-supply picture for the Western Hemisphere. In the article, Pulitzer Prize-winning historian Daniel Yergin says that “we’re going to see a new re-balancing, with the Western Hemisphere moving back to self-sufficiency.”

Among the developments cited are U.S. oil and natural gas shale plays and Canada’s oil sands, which could help make Yergin’s prediction become a reality. A study by the international consulting firm Wood Mackenzie outlines how increased U.S. production, Canada’s oil sands and the growing domestic biofuels industry would mean 100 percent of our liquid fuels needs could be met by North American supplies in 15 years.

Wood Mackenzie’s analysis found that U.S. policies which encourage the development of new and existing resources could, by 2030, increase domestic oil and natural gas production, support an additional 1.4 million jobs, and raise over $800 billion of cumulative additional government revenue. Whereas increasing regulatory burdens on the oil and gas upstream sector will result in higher development costs, which can potentially hinder the growth of production, tax revenues, and job creation.

Take a minute to look at this video and see what I mean.

Finally, Some (Dick's Deluxe) Good News!

Who's hungry for some good news -- and maybe a Dick's Deluxe? 

Congratulations to the Spady family on the successful launch of their newest DIck's Drive-In store in Edmonds. As you can see from the photo above, the iconic Seattle business continues to attrract fans of their famous hamburgers, fries and shakes. About 1,000 people showed up yesterday to participate in the grand opening. One woman reportedly camped out at 3 a.m. to be among the first in line.

The Edmonds drive-in is Dick's sixth restaurant, the first new Dick's restaurant in 37 years and the first to open in Snohomish County.The store is expected to bring new jobs to the area, which is always good news -- but even better in a lagging economy.

In addition to the store's pop culture status, the Spadys have also gained notariety for their commitment to their employees and their families with great benefits and educational scholarships. AWB's Daniel Brunell profiled the Spadys last fall in this What's Working feature in Washington Business magazine.

"Taking care of our employees is one of the key foundations of our business," Dick Spady, president and co-founder, told Brunell. "We're grateful to be in a position where we can create more jobs during a time when good jobs are hard to find."

If you can't make it there in person, you can always follow the restaurant chain on its Facebook page or Twitter account. (It's not as tasty, but still likely to be fun.) The restaurant has used social media actively during the construction of the new restaurant, hosting contests and encouraging fans to share photos of themselves at one of the existing stores. The new store's location was even decided in an online poll.

Jim Spady, Dick's vice president and son of namesake and founder Dick Spady, told the Seattle Weekly, "The outpouring of support and enthusiasm from the community for our local family business has been humbling and overwhelming. We could not have picked a better place to add 35 new jobs and to start building new friendships and memories."

With so much bad news dominating the news these days, it's easy to see why a $1.25 hamburger can evoke such positive feelings and enthusiasm in people of all ages these days. It's also a testament to the good will the Spady family has built with its customers, employees and the community since the first DIck's Drive-In opened in 1954 on NE 45th St., a mile west of the University of Washington. 

Congraulations again to AWB member Dick's Drive-Ins and to the Spady family for this exciting -- and mouthwatering -- grand opening event. 

Washington private forest landowners reverse image with long, hard work

I recently saw a 1988 video of then Washington Forest Protection Association President Stu Bledsoe addressing students at Business Week and talking about the good that business does and the need to communicate the positives. 

Bledsoe was a World War II fighter pilot, Ellensburg rancher, former state legislator and state agriculture director under Gov. Dan Evans.  In the late 1980s, Bledsoe recognized private forest landowners were losing ground with the public because people only saw them as "clearcutters" and "slashburners."

So Bledsoe got the WFPA board to authorize a comprehensive public opinion survey and low and behold his members learned that no only did people not understand logging, but didn't like them or the landowners and thought they were harming forests, streams and wildlife.

Before Bledsoe could see the fruits of his vision, he died in 1989 of cancer.  However, the foundation was laid and today the "Forests and Fish" communications campaign is paying huge dividends. 

It didn't start so well. In October 1990, Moore polling found just 37% of Washington State’s voters approved of forest products companies’ actions, while 51% disapproved.  Our data revealed the public’s negative reaction was due, in large part, to companies not communicating their story, Bob Moore said at the time.

Today, Moore, the highly respected northwest public opinion pollster, released the results of the latest public opinion survey.  The results would warm Bledsoe's heart and no doubt he is grinning from ear to ear in another world.

In a Moore Information statewide survey of likely voters in Washington, 70% said they believed private forest landowners protect wildlife habitat on their forest land “very” or “fairly” well.  In addition, 66% said they thought private forest landowners protect fish habitat in streams “very” or “fairly” well and 64% said they thought water quality in streams on private forest land was “very” or “fairly” well protected.  

Further, there was widespread agreement throughout the state among all voter subgroups that habitat and water quality on private forest land was “very” or “fairly” well.

The resources which WFPA members have dedicated to communicate what they do and how they do it ought to be a lesson for us all.  We have to tell our story and make the long term commitment to let people know what we do in business is important to them.  When you have the public on your side it is hard for the politicans to argue against your position.   Many battles are won in the court of public opinion.

 Are Private Forest Landowners Doing
a Good Job Protecting Wildlife Habitat, Fish Habitat and Water Quality?

  

 

Brunell: Are we near the tipping point on minimum wage?

With Washington's minimum wage set to go above $9 next year, AWB President Don Brunell wonders in his weekly column whether it's about to reach the tipping point where it does more to harm workers than help them.

Ensuring that people can support themselves is a laudable goal. But as economics professor Bradley Schiller wrote recently in The Wall Street Journal, there is overwhelming evidence that higher minimum wages reduce the availability of jobs at the lowest end of the job market.

Part of the debate over minimum wage is about its purpose, Brunell says. Should it be high enough to support a family? Or is it a floor -- a minimum -- for unskilled people entering the job market?

Research suggests it's the latter. Most adults work at minimum wage jobs only for a short time; more than 70 percent of workers Dr. Schiller studied had moved onto higher paying jobs within two years.

That's similar to Brunell's own experience. He recalls busing tables and scrubbing pots for $1 an hour in the summer of 1963.

It may not have been a lot of money, but the family that owned the restaurant struggled at times to pay him.

"Eventually, they hit a tipping point," Brunell writes. "When they could no longer absorb additional costs they lost their business."

US gov't runs $1.3 trillion budget deficit in 2011

According to the Associated Presss today, the government ran a $1.3 trillion for the budget year that ended last month.  It is the third straight year it has operated more than $1 trillion in the red bringing the nation's debt to $14.8 trillion.

The 2011 budget deficit was the second highest on record. It's slightly ahead of the previous budget year's $1.29 trillion deficit but below the $1.41 trillion imbalance record in 2009. Our record debt is making it difficult for the U.S. government to borrow.

A decade ago, the government was running surpluses and trillion-dollar deficits seemed unimaginable. But those deficits now loom over tense negotiations in Washington.

Congressional lawmakers, led by Washington's Sen. Patty Murray (D), are under pressure to agree by Thanksgiving on where they can cut $1.2 trillion over the next decade. If they cannot, automatic cuts to Medicare, defense spending and other critical areas of the budget would go into effect in Jan. 2013.

As of this very minute, according to the federal debt ceiling clock, each U.S. citizen owes $47,508.  Even more troubling is that each taxpayer owes a whopping $132,165.

 

Small business outlook for U.S. economy slides again

The latest Harris Interactive survey of 1,330 small businesses nationwide shows that the outlook for the U.S. economy continues to erode.  Among those businesses with fewer than 500 employees and with annual revenues less than $25 million, nine-of-ten small business owners believe the U.S. economy is on the wrong track while only a third believe their local economy is headed in the right direction.  Meanwhile, two-of-out three believe their own business is headed in the right direction.

The Harris Interactive survey is conducted quarterly for the U.S. Chamber of Commerce with the participation of state chambers such as the Association of Washington Business.

Along with the right direction-wrong direction question, small business owners were asked about economic uncertainty.  Over 86% of those polled said they would rather have more certainty about the direction of our economy than more help from the President, Congress or government.

Worries about the impact of passage of the Patient Protection and Affordable Care Act (Obamacare) continue to grow with 41% of those surveyed indicating it is a top concern.  That is up from 39% last quarter.

Regarding the President's jobs plan which is languishing in the U.S. Senate, more than three-out-of-four have an unfavorable opinion about it and two-out-of-three have a strongly unfavorable view.  Meanwhile, the U.S. Chambers plan to revitalize the economy and create jobs is viewed as favorable.  In head-to-head tests, small business owners prefer the Chamber's plan by 85% while only 15% like President Obama's proposal.

Finally, most employers are not in the hiring mood.  They report that economic uncertainty is the greatest obstacle to hiring new employees. 

Lack of sales is a problem as well and low consumer confidence is having a dramatic impact.  Consumer confidence drives the U.S. economy and it is shaky at best.

The Harris Interactive survey findings correlate with what AWB is hearing from our members as our staff travels around the state. AWB has 7,600 members and more than 95% of our members employ fewer than 250 people and 86% employ fewer than 50 so the Harris Interactive survey fits right into AWB's membership.

Don C. Brunell, President (DonB@awb.org)

 

AWB pays tribute to Washington's top manufacturing companies

Sure, the housing market is lousy, but that hasn't stopped Monroe's Canyon Creek Cabinet Company from figuring out how to strengthen itself as a company -- and continue contributing to the community.

The company, named AWB's 2011 Manufacturer of the Year, has expanded into new product lines, including closet and storage products, continued its emphasis on green manfucaturing, and donated time and money to Snohomish County during the last few years.

All this at a time when the depressed housing market has forced other manufacturers to exit the industry.

Canyon Creek was recognized Tuesday during an awards ceremony in Spokane, along with six other manfacturing companies from around the state: Hobart Machined Products; Longview Fibre Paper and Packaging, Inc.; HOTSTART, Inc.; Spectralux Avionics; Sonderen Packaging, Inc.; and The Bogert Group.

The awards presentation was done in conjunction with the first-ever Inland Manufacturing Expo, sponsored by Greater Spokane Incorporated. McGladrey and UPS joined AWB as sponsors of this year's awards program.

More on the winners:

Brunell: Will America still aspire to space greatness?

Given the country's $14 trillion budget deficit, coming up with the $18 billion needed to launch a test flight of NASA's new space launch system could be a challenge, AWB President Don Brunell writes in his weekly column.

And that's just the beginning. The total price tag for the rocket program that would eventually carry U.S. astronauts to Mars is currently estimated at $35 billion, and it could cost more than $60 billion for an accelerated program.

Why spend the money?

For starters, the U.S. space program has solidified America's leadership role in the world, fostered incredible advances in science and technology, produced thousands of innovations and products we use in our daily lives, and inspired millions of American youth to pursue careers in science and math, Brunell writes.

In addition, we have a clear lead in space. So as other nations emphasize innovation as they attempt to attract research and development, America already has the space technology and R&D here.

Finally, reaching beyond our planet to the stars has long been part of our greatness as a nation.

Our struggles with debt and China's ambitious space agenda are prompting Brunell to wonder, "Do we as a nation still aspire to greatness in space and beyond?"

Thinking BIG about manufacturing and the economy

Don't you wish you had one of these for the drive home on I-5?

 

The team at Lampson International was kind enough to let AWB's Gary Chandler, Kris Johnson and Amy Johnson kick the tires of this crawler for a 3,000-ton capacity crane this morning.

Staff from AWB are in the Tri-Cities today to meet with manufacturers like Lampson (featured here in the spring 2011 edition of Washington Business magazine), Areva and The Bogert Group to hear what they think are the biggest barriers to job growth, expansion and innovation in our state.

Attendees also discussed workforce development and training issues, regulatory concerns and of course, the current state of the economy. The group met at the Port of Pasco's new Osprey Pointe Business Park.

As we've previously noted in this blog, manufacturing is still one of the better paying industries in the state and nation, though it has not been immune to the Great Recession and other economic fluctuations. Still, as Jay Timmons, president and CEO of the National Association of Manufacturers, pointed out this summer,  "manufacturers want to create jobs."

Today's meeting is a continuation of a manufacturing listening tour started in August with a stop in Moses Lake. Tomorrow, we'll be meeting with other manufacturing businesses in Vancouver. Future meetings are also set for Everett and Mount Vernon. 

 

 

 

 

 

 

As American gears down in space, China blasts off!

Last week, while in Florida I visited the Kennedy Space Center at Cape Canaveral.  I've been there before while the Space Shuttle was flying and it was a beehive of activity. 

Today, it seems more like a museum for America's past space greatness.  It really is an empty feeling as though time has stopped and the world is moving on without us.

When I returned home, the weekend China Daily, USA, was sitting in my mailbox.  The headline read:  "Tiangong-1 blasts off---Lanch declared a success as space state era beckons."  To me, a space junkie since 1957 when the Soviets successfully put the Sputnik into orbit, it said that we have ceded the next round of innovations in research and science to China. Some would argue that is not the case, but it certainly seems to be the perception.

Space exploration has provided millions of new products and techniques which have made all of our lives better. As an American, it was a proud moment when we landed on the Moon and Neil Armstrong took the first human steps on the lunar surface; when we assembled the International Space Station; and, we launched and fixed the Hubble telescope.

Now the Jiuquan Launch Center in China's Gobi Desert is the beehive of space activity because the launch paves the way for China's first rendezvous and docking mission. An unmanned Shenzhou VIII spaceship will be launched in November to dock with Tiangong-1.Two more missions are scheduled for next year and astronauts will board Tiangong-1, which can also function as a space lab.

China is now in the second phase of its manned space program. The goal of the program, which has three steps, is to build a 60-ton space station around 2020. It focuses on mastering four key technologies for assembling a space station.The third technology involves cargo spaceships ferrying supplies to a space lab. The fourth tackles problems concerning the prolonged sustaining of life on a space lab, especially recycling air and water---sound familiar?

China has invested 35 billion yuan ($5.47 billion) in total on its manned space program since 1992.  Meanwhile, America's space program seems like it is in limbo and given the current federal deficits, it is hard to imagine that NASA will be able to spend any money on the manned space program.  So while the United State retired its space shuttles ending our manned space program for the foreseeable future, China is gearing up fast.

With all of the innovations and all we have learned from our manned space program, it is sad to see it fade into the dark skies like Space Shuttle Atlantis did on July 21, 2011.  Hopefully, America won't continue to cede outer space to other nations, but it appears that is the way we are headed---and for a space junkie like me, it is a sad time.  Selfishly, I'd like my grandchildren and great grandchildren visiting a working space center, not a museum, and I'd like to have the benefits of further research from our space program. 

Talk about a real downer!

Don C. Brunell, President (DonB@awb.org)

Brunell: The reality of world competition for America's factory owners

The story of FormFactor, a one-time California company that moved to Singapore in order to survive, illustrates the challenges facing businesses in today's cut-throat global competition.

The company founder didn't want to move his operation out of America, where he made his fortune, but he found himself competing with a Korean company that copied his device and started making it cheaper, AWB President Don Brunell writes in his weekly column.

When Singapore's Economic Development Board offered tax holidays, free property for a plant and headquarters and substantial grants for equipment and materials, he had little choice but to accept the deal.

His company was rapidly headed toward extinction and U.S. officials brushed him off his request for assistance.

As U.S. officials look for ways to restore jobs, they need to consider the reality of today's global economy, Brunell writes. And they need to make decisions carefully, based on economics not politics.