A president's State of the Union address in an election year is about as political as a speech can get. Always is, always will be.
One proposal offered by President Obama in his Jan. 24 address calls for rewarding U.S. manufacturers that keep jobs in this country, and punishing those that close American factories and/or move jobs overseas. He called for tax breaks for the former, and eliminating tax incentives for the latter.
How would that play in the rubber industry? Probably a mixed bag.
The rubber manufacturing sector could be a poster child for the phenomena of companies building factories abroad while closing them in the U.S. Just look at employment.
The U.S. Department of Labor's statistics—which lumps rubber in with plastics manufacturing—show that at the start of the George W. Bush presidency in 2001, the sector employed 932,000. That number tumbled to 665,000 by the time Obama became president, and has fallen another 37,000 in the past three years.
At lot of factors were at work in this employment decline: the economy, global competition, changes in demand, growth of the markets in Asia, lower production costs abroad, the age of U.S. plants.
A basic tenet for manufacturers is they must produce the best possible product at the lowest possible cost. If they don't, competitors will eat their lunch.
The major multinational companies, mostly in the tire sector or involved in automotive components, followed their customers to places like China and Brazil, where costs are lower but, of equal importance, the markets are growing. That won't change, no matter what tax penalty or incentives are imposed concerning U.S. job creation.
But at the same time they were building production abroad and eliminating U.S. jobs, many of these firms invested in American operations. Companies must serve the customer, and for a number of products, that means U.S. manufacturing is a must.
All the major tire makers, for example, have invested heavily in their U.S. facilities in recent years, some with new plants. Modern, automated tire factories don't require the staffing needed in older facilities, so fewer jobs are created, a contributor to the net loss in employment.
That doesn't mean companies aren't interested in tax breaks. Most of those, however, have come from state and local governments, locked in battle to get investment, and jobs, in their own communities.
A federal incentive would be tossed into the mix when a rubber company considers where to put its investment. Can't hurt, might help, but it won't be a game changer.