The good news is the U.S. economy goes through high-low cycles about every 10 years, Jeff Loberbaum, Mohawk Industries Chairman and CEO told Chamber of Commerce and community members in his State of the Industry address Friday, Aug. 26.
The bad news is, this time, the “credit cycle got really crazy,” he said.
Banks gave credit to “companies who almost couldn’t afford it” during the early part of the decade, he explained, and around 2007, the economy “started to unravel.”
The recession, he pointed out, has affected areas of the market that have, in turn, had a negative impact on industry, changing the way companies, Mohawk included, approach implementation of procedures and standards.
One of those changes has been a downsize in the company, as a whole.
“It’s been a painful process,” he said. “Nobody likes to shrink.”
A coagulation of financial factors has made manufacturing more difficult in the U.S.
Loberbaum cited a rise in oil prices as a contributing factor, along with the rising cost of raw materials. Mohawk increased the prices of some products twice in 2011 to keep up with these rising costs, he said.
The fact that consumers have less money to spend has resulted in a redesign of some product lines to provide more value, he said. Also, a need for efficiency has necessitated the implementation of more automated processes throughout Mohawk’s plants.
“We have to be much more efficient and much more automated,” to compete with international locations with lower labor costs, he said.
In other locations around the world, the economy has not suffered as much, he said, causing Mohawk to create niches in those places. The Mexican economy is actually expected to grow as much as 5 percent this year, he said, and Mohawk will be opening a plant in Mexico City.
The company already has its wood laminate headquarters in Belgium. Europeans, he pointed out, tend to use less credit than Americans; therefore there is not as much debt, and the economy there has not seen “as significant a decline.”
Manufacturing could benefit from consistent legislation, Loberbaum said.
He contended that the American government system is working, even though it looks broken to most citizens. In general terms, he said, citizens are still voting, and lawmakers are still working, although legislators typically wait until the last minute to make major decisions.
Government attention to situations in industry before they become dire would be welcome, he said; consumers are spending less because they feel fear about government upheaval.
“We need the government to help us with consistent policies and create comfort in everybody,” he said.
Reduced government costs in relation to running businesses would also help, he said. If the initial cost of production can be brought down through adjustment of government requirements, the cost of the final product could, in turn, be reduced, encouraging consumers not to purchase from companies outside the U.S.
Loberbaum said he expects the economy to swing back and recover in the next few years.
Overall, the key in a recovering economy is to create jobs, he said, and part of this depends on controlling spending in both private sector and government.
“You can’t do the same thing you did last year and before,” he said.
The State of the Industry address was part of the Gordon County Chamber of Commerce Existing Industries Committee’s debut State of the Industry event at Georgia Northwestern Technical College Aug. 26. Speakers also included Georgia Chamber of Commerce President and CEO Chris Clark and John Watson of TPA Realty Services. The speakers also participated in a question-and-answer session with the audience monitored by David Repp. Check today's edition of the Calhoun Times for more.