Crimped by the tattered automobile industry, the manufacturing sector in the Midwest continues to struggle. The Federal Reserve Bank's Chicago Fed Midwest Manufacturing Index (CFMMI) decreased 0.8 percent in May to a seasonally adjusted level of 104.8 (2002=100). Revised data show the index decreased 1.8 percent in April, to 105.7.

The Federal Reserve's industrial production index for manufacturing (IPMFG) was unchanged in May. Regional output in May was 2.8 percent lower than a year earlier, below the 0.1 decrease in national output.

All four of the regional industry sectors decreased in May: auto sector production fell 1.7 percent; machinery sector output moved down 1.0 percent; resource sector output declined 0.8 percent; and steel sector output edged down 0.1 percent. The Midwest's auto sector production fell 1.7 percent in May after dropping 5.2 percent in April. The Midwest's automotive output was down 14.8 percent in May relative to its year-ago value, while the nation’s auto output was down 5.8 percent.

The pain in the automotive sector is being acutely felt in Wisconsin, where Delphi Corp. closed its plants in Oak Creek, eliminating 1,000 jobs, and General Motors Corp. recently announced plans to close its production plant in Janesville, eliminating 2,400 jobs.

Bill Testa, vice president of regional programs in the research department at the Federal Reserve Bank of Chicago, says states in the Midwest are grappling with the realities confronting their manufacturers.

"In the face of such stark declines, the question arises as to whether the region must look beyond manufacturing and toward new industries. As the U.S. economy evolves toward advanced services, should the Midwest be following suit at an accelerated pace? And if so, how should the region go about it? For example, should the region’s policy focus on improving the quality of life features to attract highly skilled workers for business services and related industries? Or should the region cultivate new technology and entrepreneurial behavior in an effort to grow new industries?" Testa recently wrote. "Arguably, policymakers in the region should pursue all such avenues toward redevelopment and reinvention that are within the bounds of reason and with careful cost–benefit consideration. But there are also reasons to believe that traditional manufacturing can continue to play an important role in the Midwest economy. Significant opportunities remain for manufacturing enterprises that are both extant and emerging here."

Pentair Inc. and GE Water & Process Technologies, a unit of the General Electric Co., announced they will locate the global headquarters of their drinking water quality joint venture business in the Milwaukee area. The companies will combine Pentair's global water softener business with GE's residential water filtration business.

Golden Valley, Minn.-based Pentair and Trevose, Pa.-based GE Water & Process Technologies both already have some operations in the Milwaukee area. GE spokeswoman Ellen Mellody said she could not be more specific about the location of the joint headquarters or how many jobs would be created in southeastern Wisconsin.

Under the terms of the agreement, Pentair has an 80-percent ownership stake and GE has a 20-percent stake of the joint venture, which will be called Pentair Residential Filtration. With the formation of the joint venture, Pentair and GE will be better-positioned to serve residential customers with industry-leading technical applications in the areas of water conditioning, whole house filtration, point-of-use water management and water sustainability, said Randall Hogan, chairman and chief executive officer of Pentair.

"Further, this joint venture advances Pentair's current residential filtration strategy for growth. We believe we will accelerate revenue growth by selling GE's existing residential conditioning and treatment products through Pentair's sales channels, and by gaining access to some of GE's current and emerging filtration technologies," Hogan said.

In 2007, the combined residential and commercial net sales of the parent companies were approximately $450 million. "We are excited about the growth opportunities this unique partnership brings our business," said Jeff Garwood, president and CEO of GE Water & Process Technologies. "Partnerships such as this one create an excellent opportunity to develop and introduce new technologies that will meet the needs of both developed and emerging markets. It is also another example of how GE continues to partner with industry leaders to drive growth while meeting the world's most pressing water needs."

Pentair Residential Filtration will serve as the primary sales channel for Pentair's and GE's respective global residential water filtration and water softener businesses. It will also serve as the manufacturing arm for residential and commercial tanks, valves and some limited filtration products for the parent companies.

Pentair and GE will continue to serve existing municipal, commercial and industrial water treatment customers separately, sourcing select products from the joint venture as needed. Pentair Residential Filtration will bring together approximately 1,100 employees from Pentair and GE in 15 facilities in the United States, Europe and China.

The joint venture coming to southeastern Wisconsin is another win for the region's growing identity as the "Silicon Valley of water technology." The Milwaukee 7 and Milwaukee Mayor Tom Barrett are promoting the region as the "Fresh Coast."

"It's absolutely true that there is a growing need around the world in advanced drinking water quality," Mellody said. "Water scarcity is increasing. Water quality is decreasing."

Direct Supply has completed the construction of the first building in its previously announced $85 million expansion project at 6767 N. Industrial Road in Milwaukee. The company is planning a 10- to 15-year expansion of its current headquarters, linking its nine existing buildings with seven multi-story connectors and adding more than half a million square feet of office space for up to 2,500 additional employees.

Direct Supply is a privately held, employee-owned company started in 1985.  The company is the largest supplier of equipment for nursing homes, assisted living centers and retirement communities in the U.S.  It also operates the nation’s largest supply chain eCommerce network for those customers. 

Milwaukee-based JNA Staffing has been named 2008 Employer of the Year by UMOS (United Migrant Opportunity Services) for its commitment to reducing poverty and facilitating the transition of recipients of public assistance into permanent jobs. UMOS cited JNA Staffing for driving strategic alliances with partner corporations and educational institutions. JNA currently places 580 workers per week in the manufacturing sector. UMOS will present Manuel Perez of JNA Staffing with the award at a luncheon on Friday, July 25.

Twelve provosts from the Big Ten universities and the Midwest region say they will work together on efforts to make the Midwest's economy more competitive and are calling on governors to join them in the effort. The provosts from the Committee on Institutional Cooperation (CIC), a consortium of the Big Ten universities plus the University of Chicago, signed a resolution during an economic summit convened by the provosts at the Federal Reserve Bank of Minneapolis on Friday.

University leaders, leaders of regional banks, chief executive officers, government leaders, economists, researchers and professors participated in the summit in an effort to find ways to break down barriers that prevent them from effectively working together to build a vital Midwest economy. The summit, "Developing a Regional View of the Midwest Economy: Breaking Down Barriers That Impede Regional Progress," was sponsored by the University of Minnesota, the CIC and the Federal Reserve Bank of Minneapolis.

The summit concluded that the region already possesses vitally important assets, including the Great Lakes, significant industrial and corporate entities, world-class research universities, dynamic cities and agricultural resources - all of which are central to a vibrant Midwest economy.

"There has to be a better partnership - public-private partnership between the political leadership of each state and the business and corporate leaders, to be able to understand that they need a closer relationship with the universities that are literally in their back door and have all the talent to educate and to train the next generation of workers," said University of Minnesota provost Thomas Sullivan.

"The Midwest economy is undergoing an uneven transition to a new economic model propelled by knowledge based industries. While cities such as Chicago and Minneapolis have prospered by reinventing themselves and becoming meccas for new industries and talented workers, other parts of the region struggle with moving up the economic food chain. What is clear is that the production and retention of skilled human capital will have to be at the center of any regional plan to promote economic vitality," said Richard Mattoon, senior economist and economic advisor, Federal Reserve Bank of Chicago.

The region has strengths to build on, but it is losing ground as other regions make a more compelling case for where investment should go.

"The Midwest is failing the challenge of globalization, largely because it's so balkanized, with each state trying to compete in the global economy. Midwestern states are simply too small, too incompetent, too obsessed with the wreckage of the industrial economy, to deal with the problems of the future, like education. It's time for other players - cities, businesses, especially universities - to come together in a concerted regional approach that would leverage the Midwest's strengths, not undermine them," said Richard Longworth, senior fellow, Chicago Council on Global Affairs and author of the new book, "Caught in the Middle: America's Heartland in the Age of Globalism" (Bloomsbury).