Illinois Manufacturers' Association: Executive Memo

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EXECUTIVE MEMO

June 27, 2007

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BRIEFLY:

Employee Free Choice Act fails to pass

The Employee Free Choice Act has been stopped! The Senate, on Tuesday,

June 26, failed to invoke cloture on HR 800, the Employee Free Choice Act, by a vote of 51-48 (60 votes needed).

This is a major victory for employers, one for which manufacturers deserve great credit and thanks. The workplace secret ballot has been preserved and forced unionization against unwilling employees prevented.

Although there is satisfaction in a job well done, the fight is not over, according to the National Association of Manufacturers. Organized labor and their congressional allies promise to keep bringing the card-check issue back and will make it a major issue in the 2008 campaigns.

Nussle to be White House budget chief

Jim Nussle, son of former IMA Board member Mark Nussle, has been chosen to be Director of the White House Office of Management & Budget for the remainder of President Bush's term. Nussle, 46, is a former U.S. representative from Iowa and one-time chairman of the House Budget Committee. Jim's first job in high school was with Oakley Millwork, Inc. in Frankfort. Oakley Millwork's president is current IMA Board member Glen A. Johnson.

"I intend to live up to the distinction of serving in the President's Cabinet if I should be fortunate enough to be confirmed by the Senate for this role," said Nussle. "I know there are challenges, and I'm excited to tackle them."

Three important trends in industrial networking and control

Several new market and technology trends are changing the world of industrial networking and control. These trends are putting pressure on automation device suppliers for increased functionality, higher levels of control and advanced networking capabilities.

Detailing these trends and their impact on the automation industry is the subject of two podcasts available on http://www.rtaautomation.com. In the podcasts, issues discussed include the latest technologies that are making their way to the factory floor, the background on the rush to Ethernet and how open control technologies like IEC1131 are changing the face of industrial control.

Survey indicates positive growth for small, middle-market companies

The manufacturing and wholesale distribution segments in the United States continue to see positive growth across several industry segments, according to the RSM McGladrey 2007 Manufacturing and Wholesale Distribution National Survey, released June 14th.

Conducted this spring, the second annual RSM McGladrey survey provides insights into what CEOs, CFOs, and other senior industry executives are thinking, doing and planning to grow their businesses in an increasingly competitive marketplace. Participants were asked questions about cost structure, profitability, technology initiatives, operations, globalization and more.

A total of 947 surveys were completed, representing a strong cross sample of U.S. companies in varying industry segments and revenue size.

Business conditions for most industries responding to the survey remained essentially unchanged from the 2006 survey. Half of small to middle-market manufacturers and distributors describe themselves as "thriving and growing." However, respondents in four industry segments, including transportation, building materials, plastics and industrial equipment, reported their outlook on business worsened over the last year, weighting down the overall percentage of companies who said their companies are "thriving and growing" from 58 percent in 2006, to 48 percent in 2007.

For the second year in a row, survey responses indicate companies prefer domestic growth strategies over international. More than half (57 percent) of all companies surveyed indicated they are relying on domestic sales of existing products. Only 36 percent reported they are relying on international sales of existing products.

"If they haven't already, small to middle-market companies should consider global opportunities for cost reduction and revenue growth," said Tom Murphy, RSM McGladrey's executive vice president of manufacturing and wholesale distribution.

Survey respondents indicated the leading barrier to pursuing international growth was obtaining financing, suggesting that banks may consider it higher risk to lend funds to small and middle-market companies trying to expand overseas.

According to the survey, small to middle-market companies have a strong need for workers with a variety of skill sets and experience levels. Workforce shortages will continue to strain resources as 63 percent of survey respondents plan to expand their workforce within the next 18 months. While some might believe unskilled labor is easier to come by than skilled labor, the need for entry-level jobs is nearly equal to the need for engineers and sales people.

Many companies are clearly not instituting the appropriate risk management components. Over half of companies (54 percent) indicated they have not implemented any of the three following critical risk management components:

Independent audit committees to oversee risk management activities;
Corporate risk assessment process to manage and prioritize high risk areas; and
Internal audit function to manage the organization's risk.

"A surprisingly high percentage of companies don't have in place any risk management components," said Murphy. "These companies are susceptible to risks such as fraud, non-compliance to state and federal regulations, and the lack of preparedness for catastrophic disasters."

Similar to last year's findings, companies continue to miss cost savings opportunities by not applying for qualified tax credits. According to the survey, manufacturers employed research and development (R&D) credits and the Domestic Manufacturers' Deduction at rates of 58 percent and 43 percent, respectively. The Domestic Manufacturers' Deduction continues to be one of the most underutilized tax credits.

Overall, more than half of respondents use no government programs. Utilization of government programs is fairly consistent across all size companies, with smaller companies only slightly more likely to use them. According to the survey, the most commonly used program is the Small Business Administration's PRO-Net and various state funding programs. Some of the top reasons that companies do not utilize government programs are due to unfamiliarity with such programs and lack of interest in government involvement.

Source: RSM McGladrey, a professional services firm providing accounting, tax and business consulting. For more information, visit http://www.rsmmcgladrey.com.

Energy issues legislative and regulatory update as of June 26
provided by Constellation NewEnergy

Legislative
ComEd, Ameren, the Illinois Attorney General, and key legislative leaders continue to discuss details of a rate relief package for consumers. The rate relief package would take the place of a threatened reinstatement of the bundled rate freeze. To date, no specific details have emerged regarding the specifics of this agreement. It has been reported that the rate relief package is in excess of $1 billion. The specifics could have a significant impact on the future structure of the competitive electric market in Illinois.

Regulatory
In addition to the legislative activity, there is also a steady flow of activity before the Illinois Commerce Commission (ICC) and the Federal Energy Regulatory Commission (FERC) regarding matters related to the Illinois electric industry. Here is an update on issues that may relate to Illinois manufacturers.

ComEd Transmission Rate Case — FERC has provided ComEd with conditional approval to implement an increase in its Transmission Service Charge effective as of May 1, 2007. According to ComEd, retail customers will see the increased Rider TS rates during their July billing cycle.

ComEd Hardship Funds — As part of ComEd's efforts to provide rate relief to consumers, they are making $64 million in rate relief available for eligible non-residential customers. One-time bill credits up to $5,000 are available to small business customers (which may include manufacturers), not-for-profit organizations, religious institutions, schools and senior centers to address financial hardships resulting from changes in ComEd's rates earlier this year. To be eligible, non-residential customers must be experiencing at least a 30 percent increase in their ComEd bill in 2007 and the amount of the increase over 30 percent must be at least $100. Program applicants will be evaluated by the Community Energy Cooperative to determine if they meet the program criteria and will be ranked based on the hardship experienced as a result of higher electricity bills. Other requirements apply.

Control your electric costs
If you want to get your energy budget back in control compare your electric supply options at http://www.electricityIQ.com/illinois. Many Illinois manufacturers have already locked-in multi-year savings and are protecting their budgets from volatile energy prices by switching to Constellation NewEnergy for their electric supply. Constellation NewEnergy is the endorsed electricity and natural gas supplier for the IMA and the choice of over 14,000 businesses, including two-thirds of the FORTUNE 100. For questions contact Denise Haggerty at 312-704-8525.

SBA/BSA partnership to provide software strategies and copyright compliance tools for small businesses

The U.S. Small Business Administration (SBA) and the Business Software Alliance (BSA), an organization dedicated to promoting a safe and legal digital world, recently announced a partnership to educate nearly 100,000 small businesses on proper software management and the risks associated with the use of unlicensed software.

Coined "Software Strategies for Small Businesses," the multi-year partnership will provide small businesses and SBA resource partners — including SCORE "Counselors to America's Small Business," Small Business Development Centers, Women's Business Centers and SBA district offices — with a set of software asset management tools and educational materials that will help small businesses establish, communicate and enforce policies that ensure copyright compliance in the work force.

In the United States, small businesses face the greatest risk for software piracy due to their lack of established software management practices.* Furthermore, small businesses are less likely to recognize the benefits a software policy affords. According to the BSA, small businesses paid over $11.4 million in fines to settle software piracy claims in 2006 alone. An independent study** shows that 21 percent of software in the United States is unlicensed. Last year, the United States lost $6.9 billion as a result of software piracy.

"This exceptional partnership with the BSA will help small businesses be smart about software use, and protect themselves against the risks of unlicensed software," said SBA Administrator Steven C. Preston.

For more information about SBA and BSA's "Software Strategies for Small Businesses" partnership, please visit http://www.smartaboutsoftware.org.

* "Software Management Survey," conducted by Yankelovich Partners for the Business Software Alliance

**"Global Software Piracy Study," conducted by Interactive Data Corp. for the Business Software Alliance

The Business Software Alliance (www.bsa.org) is dedicated to promoting a safe and legal digital world. BSA programs foster technology innovation through education and policy initiatives that promote copyright protection, cyber security, trade and e-commerce.

The U.S. Small Business Administration is the nation's largest financial backer of small businesses. America's 25 million small businesses employ more than 50 percent of the private work force, generate more than half the nation's gross domestic product, and are the principal source of new jobs in the U.S. economy.

SBA and BSA's "Software Strategies for Small Businesses" partnership encompasses the following:

Developing "best practices" publications that communicate guidelines for small businesses on implementing software asset management programs;
Producing and disseminating educational materials such as a guide to software management, "Ten Steps for Software Compliance" fact sheet, "Software Piracy and the Law" fact sheet and software audit tools;
Creating an interactive Web page to include free software audit tools, fact sheets, topical software management articles and above-mentioned educational materials;
Developing a software management article for placement in SBA's Small Business Success magazine;
Creating software asset management content for SBA e-newsletters;
Hosting an interactive Webinar with SBA and its resource partners; and
Conducting an educational media outreach program to help promote this significant campaign.

Illinois' minimum wage increase effective July 1

Effective July 1, 2007, Illinois' minimum wage increases from $6.50 to $7.50 per hour. The minimum wage will subsequently increase by 25 cents per hour in each of the next three years, rising to $8.25 per hour by July 1, 2010.

The new statute also regulates the pay for new employees and those under the age of 18 to no more than 50 cents less than the hourly minimum. Additionally, employees who earn tips may be paid 60 percent of state minimum wage. Compensation for overtime is set at time and one-half for certain employees working more than 40 hours in a normal workweek.

The Illinois Department of Labor has issued updated posters available in English, Spanish, and Polish to display in the workplace. More information is available at www.state.il.us/agency/idol or by calling the Minimum Wage Hotline at 800-478-3998.

To view and print the new poster in English, visit http://www.ima-net.org/EnglishOnly.pdf.

For the Spanish version: http://www.ima-net.org/SpanishFlyer.pdf; or for a Polish version: http://www.ima-net.org/PolishFlyer.pdf.

Make workforce development a priority

High quality human resources have always been an important component to workforce development and are essential to economic vitality. In this fast-changing, technology-driven economy, workforce issues are an integral part of positioning a company for sustainable economic growth. As change and restructuring become more commonplace, all levels of workers need ongoing training opportunities to ensure that they have the skills and experience to support company growth. A strong emphasis on, and strategic investment in workforce development will lead to success.

In response to this growing need, the Illinois Manufacturers' Association has expanded their training program. The Manufacturers' Institute for Training (MIT) is dedicated to providing quality training solutions. MIT's local and national trainers are highly regarded for their technical and professional expertise. Whether you choose a customized, on-site program, or one of many open-enrollment workshops held around the state, you will benefit from years of experience as presenters share their knowledge, tips and tricks on countless issues confronting industry today.

Visit http://www.ima-net.org/MIT today to find out how the IMA-MIT programs can help your company succeed.

Small businesses optimistic, but concerned about rising costs of energy, healthcare and taxes

A new small business spending report released recently by Visa USA indicates that, while small businesses remain relatively bullish about revenue growth, increasing expenditures on energy, healthcare and taxes are pressing concerns for small business owners. The "Visa Small Business Spend Insights," will be published quarterly and provides a comprehensive view of the U.S. small business climate.

"More than most, small business owners are susceptible to the effects of rising costs and fluctuations in the economy. As such, they need to hedge against spending increases and economic uncertainty by making smart IT investment decisions and utilizing cash management tools such as payment cards," said Wayne Best, senior vice president, Business and Economic Analysis, Visa USA.

Small business spending outlook — The report identified the following four key spending areas that are currently of top concern among small businesses:

Energy — Seventy-five percent of the small business owners surveyed believe that energy spending will increase over the next six months.

The average spend per transaction on Visa Business cards for energy-related expenditures increased 18 percent for the 12 months ending February 2007.

Healthcare — Thirty-four percent of respondents expressed concern that cost of health care insurance will increase over the next six months, with this concern being the highest among small businesses with two or more employees.

The average spending on Visa Business cards on healthcare-related expenditures increased 17 percent for the 12 months ending February 2007.

Taxes — Twenty percent of respondents expressed concern about rising taxes in the next six months.

The average spending on Visa Business cards on tax preparation services and tax payments increased by 80 percent for the 12 months ending February 2007.

Attracting customers — Twenty-two percent of small businesses surveyed expressed concerns about attracting new customers over the next six months.

The average spending on Visa Business cards for advertising, management consultants/public relations, publishing and related expenses increased by 56 percent for the 12 months ending February 2007, twice the growth rate of expenditures in all categories.

Small business profit and loss overview — The report results indicate that the future outlook for both small business revenue and profits is positive based on the following key findings:

Nearly half (45 percent) of small business owners surveyed expected an increase in revenues over the next six months, compared with only 11 percent who expected a revenue decrease over the same period.

Thirty-nine percent of small business owners surveyed expected an increase in profits over the next six months, compared with 19 percent who expected lower profits over the same period.

In terms of cash flow, only 17 percent of those surveyed expect that they will need to borrow more money in the next six months, while just 18 percent expect to have issues collecting payment in the same timeframe.

"Visa, as a leading provider of small business payment products and processor of financial transactions, has a unique window into the spending habits of U.S. small businesses," said Raghav Lal, senior vice president, small business, Visa USA. "By comparing small business attitudes with current Visa spending, we can provide insights into small business confidence and outlook. This analysis enables Visa and our member financial institutions to deliver services to small businesses with payment solutions tailored more closely to their needs."

For more information on Visa Small Business Solutions or to view the complete Visa Small Business Insights newsletter, go to www.usa.visa.com/business.

Visa Small Business Spend Insights is a quarterly survey to monitor the relative economic confidence of small businesses. More than 600 small businesses are included in the quarterly survey.

Orders for durable goods fall in May

On June 27, the Commerce Department reported that new orders for manufactured durable goods in May decreased $6.1 billion or 2.8 percent to $213 billion. This followed three consecutive monthly increases including a 1.1 percent April increase. Excluding transportation, new orders decreased 1.0 percent. Excluding defense, new orders decreased 3.2 percent. The figures throw some cold water on the theory that business investment will be strong enough to power the U.S. economy out of a slow patch that's lasted more than a year.

Shipments up
Shipments of manufactured durable goods in May, up three consecutive months, increased $0.9 billion or 0.4 percent to $214.4 billion. This followed a 2.0 percent April increase.

Unfilled orders
Unfilled orders for manufactured durable goods in May, up twenty-four of the last twenty-five months, increased $5.8 billion or 0.8 percent to $725.3 billion. This was at the highest level since the series was first stated on a NAICS basis in 1992 and followed a 1.9 percent April increase.

Inventories
Inventories of manufactured durable goods in May, up fifteen consecutive months, increased $0.7 billion or 0.2 percent to $313.2 billion. This was at the highest level since the series began and followed a 0.4 percent April increase.

Capital goods industries

Nondefense
Nondefense new orders for capital goods in May decreased $6.5 billion or 8.3 percent to $71.8 billion.

Defense
Defense new orders for capital goods in May increased $0.5 billion or 6.7 percent to $8.2 billion.

Invest in your future with the IMA's Recycling Expansion and Modernization (REM) grant . . .

Recent reports (Wall Street Journal, 5/3/07, Al, Naik) indicate that there is growing scientific evidence linking high levels of carbon dioxide to the dramatic rise in allergies and asthma in the Western world. Other reports (Christian Science Monitor, 5/3/07, Spotts) warn that we won't be able to keep up with the expected rise in greenhouse-gas emissions over the next several decades."

"The case for sustainable business is compelling; social and environmental initiatives often lead to enhanced worker morale and retention, cost savings are significant, and in terms of longevity, well, we simply don't have the resources to continue on our current path." (www.thegreenguide.org, Tara Wesely)

The Illinois Department of Commerce and Economic Opportunities is doing its part to help Illinois companies deal with these issues through the Recycling Expansion and Modernization (REM) Grant Program. As a recipient of a REM multi-company grant, the Illinois Manufacturers' Association can offer your company a solid-waste assessment at 25 percent of the actual cost; the grant pays the remaining 75 percent.

Our environmental engineers possess a unique mix of experience and training that enables them to investigate and solve a variety of business problems. By working closely with participants, they will identify opportunities to improve efficiency by reducing raw materials utilization and wasteful practices.

Join the growing number of companies that are on the path to becoming green. Find out how easy it is to participate in the Illinois Manufacturers' Association REM multi-company grant by contacting Judy Parker at 800-875-4462, ext. 3036, or email: jparker@ima-net.org today.

It's an investment in your future — one that will reap perpetual rewards for your business and your community.

For more information, contact Judy Parker, IMA Director of Training, 217-522-1240, ext. 3036, or email jparker@ima-net.org.ꆱ

Invest in your future with the IMA's Recycling Expansion and Modernization (REM) grant . . .

It's an investment in your future — one that will reap perpetual rewards for your business and your community.

For more information, contact Judy Parker, IMA Director of Training, 217-522-1240, ext. 3036, or email jparker@ima-net.org.

ETIP grants reimburse companies for employee training

The Employer Training Investment Program (ETIP) supports Illinois companies' efforts to upgrade workers' skills in order to remain current in new technologies and business practices. The ETIP grant will reimburse Illinois companies for up to 50 percent of the cost of eligible employee training taken between July 1, 2006 and June 30, 2007.

Illinois companies that are retraining/upgrading the skills of their existing workforce may be eligible for ETIP grant money if they meet certain criteria.

Apply for training funds today! For details, contact Judy Parker, IMA Director of Training at 217-522-1240, ext. 3036, or email jparker@ima-net.org.

NEW Website offers outstanding training opportunities:

http://www.ima-net.org/MIT/

Training is no longer a luxury, but a basic ingredient in the development of a business. In today's economy, with companies struggling to prevent lay-offs and closure, it is vital to maintain a competitive high performance workforce.

In response to this growing need, the IMA has launched a new service — the Manufacturers' Institute for Training (MIT). We have expert trainers in the fields of safety, quality, leadership/management, communications, lean manufacturing, project management, IT, and much more. Customized, on-site sessions can also be arranged to address your company's specific needs or issues. Visit http://www.ima-net.org/MIT/ on the Web or contact Judy Parker, IMA Director of Training, at 217-522-1240, ext. 3036, or email jparker@ima-net.org.

Order the IMA's 2007-2008 Benefits Report at https://www.ima-net.org/ben_report_order.cfm

Order the IMA's 2006 Annual Compensation Report at http://www.ima-net.org/reportorder/login.cfm

For more information, go to one of the links above, or contact Janie Stanley at 800-875-4462, ext. 3020, or email: jstanley@ima-net.org

DATES OF NOTE:

More events may be found at http://www.ima-net.org/calendar.cfm

July 19, 2007
IMA-MIT Event: Project Management for Non-Project Managers —
DePaul University's O'Hare Campus, 3166 River Road, Des Plaines

Learn project management skills, tools and techniques to make the transition to a project leadership role and ensure optimum project execution. This one-day workshop provides increased competence to manage a project through all project stages: initiating, planning, delivering, monitoring, and completing.

Registration deadline: July 3, 2007.

Contact Judy Parker, 800-875-4462, ext. 3036, email: jparker@ima-net.org, or visit https://www.ima-net.org/MIT/pmn.cfm.

July 24, 2007
IMA-MIT Event:
Lean Manufacturing: Quick Start
952 E. Eldorado, Suite 102, Decatur

Designed to help participants quickly initiate team oriented on-going lean activities, this workshop includes instruction on lean terms and definitions, waste identification and analysis, team organization and choosing lean tools for waste-free processes. Registration deadline: July 10, 2007. Contact Judy Parker, 800-875-4462, ext. 3036, email: jparker@ima-net.org.

July 25, 2007
IMA-MIT Event:
Lean Manufacturing: Quick Start
DePaul University, 150 W. Warrenville Road, Room 228, Naperville

(See program description above)

Registration deadline: July 10, 2007. Contact Judy Parker, 800-875-4462, ext. 3036, email: jparker@ima-net.org.

July 31–August 1
IMA-MIT Event:
Project Management Fundamentals
Oak Brook Executive Plaza Conference Center, 1225 W. 22nd St., Ste. 140, Oak Brook

This two-day real-world workshop is perfect for people who are looking to get a solid understanding of project management, and for those who wish to get their current projects back on track. Registration deadline: July 16, 2007. Contact Judy Parker, 800-875-4462, ext. 3036, email: jparker@ima-net.org.

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