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U.S. Competitiveness Stages a Comeback : Manufacturing: Many industries have revived by increasing productivity, modernizing factories and slashing payrolls.


WASHINGTON — American manufacturers--written off by many commentators in the 1970s and '80s as dinosaurs doomed to succumb to Japanese and other foreign rivals--have staged a remarkable comeback, reviving American competitiveness in many industries.

Xerox Corp. has halved the cost of producing a copier, and has steadily increased its share of the U.S. market since the mid-1980s. General Electric Co.'s exports have grown more than 20%, to $6 billion, in the past two years. Cummins Engine Co., the largest American manufacturer of heavy-duty diesel truck engines, has doubled its output per worker since 1985 and cut prices of its engines by nearly a third.

Henry B. Schacht, president of Cummins, predicted in a recent interview that after the current recession ends, "the U.S. will be ferociously competitive in manufacturing. . . . It's a great place to be in business, a marvelously competitive base."

Such euphoria is not universal, and U.S. firms still face daunting competition from Europe, Japan and new economic powerhouses such as South Korea and Taiwan. Recent studies of technological competition predict that Japanese firms will continue to chip away at the American lead in many key markets.

The determination of firms such as Cummins to stay competitive internationally has cost a lot at the bottom line; profits have been down in recent years, and nonexistent since mid-1990, as a long-running slowdown for truck makers tooks its toll.

But a five-year growth of American exports is strong evidence of restored competitiveness, according to many economists and business leaders. In the latest figures, released last week, U.S. sales overseas rose in March to their third-highest monthly level ever.

Part of the surge in exports can be explained by a dramatic lowering of the dollar's value, compared to currencies in Japan and Europe. Engineered in 1985 by the Reagan Administration amid a crisis for American manufacturers, the change provided U.S. producers the opportunity to cut prices sharply on goods sold abroad.

Exchange rate adjustments alone do not explain improving performance by U.S. firms, however. According to foreign and American business executives and experts, many U.S. companies have radically improved the quality of their products, cut costs and improved efficiency, and generally shown a willingness to learn lessons taught to them painfully by Japanese, German and other competitors.

The Cummins story, and others like it, suggest that some American companies have made headway in honing their competitive edge in the past few years.

"The fears of deindustrialization--the notion that our ability to produce goods has diminished--were exaggerated," said Robert Z. Lawrence, an economist at the Brookings Institution and an authority on international competition.

Statistics show that U.S.-based manufacturing companies remain highly competitive in a wide range of products, including diesel engines, heavy construction equipment, computer software, high-speed computers, medical instruments, aircraft, chemicals and pharmaceuticals. Many of the success stories suggest that U.S. companies have learned from their mistakes.

Xerox, for example, regained lost ground by improving quality. When low-cost, high-quality Japanese producers began cutting into Xerox's sales of small office copiers in the United States, Xerox officials embarked on a worldwide effort to improve the quality of their products--reducing defects that slow down production lines, raising the performance of equipment and making goods that are more in tune with the needs of customers.

To get ideas on how to do this, they studied the way Ford Motor Co. lays out its assembly lines, how General Electric Co. uses robots and how American Hospital Supply tracks its inventory. They sent dozens of managers to Japanese companies, including their affiliate Fuji Xerox, to study how Japanese firms improve quality and work closely with suppliers to reduce the number of defective parts.

The efforts paid off. In 1980, the firm found 97 defects for every 100 copiers rolling off its assembly line. Now it finds 12. In one piece of the market for copiers used in small businesses, it has built back its share of the market to 20% from barely 1% in the mid-1980s.

"It's a new Xerox today," said industry expert Lynn Ritter of Dataquest Inc., a San Jose research firm. In other sectors of the economy, some of the toughest critics acknowledge that American firms have improved quality.

During a 1985 interview, Tadashi Sasaki, then a high-ranking official of Japan's Sharp Corp., had a low opinion of American-made silicon chips, the tiny circuits at the heart of Sharp's computers, calculators and other electronic products.

"When we take components from a U.S. company, we are very nervous," he said.

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