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The manufacturing sector has been among the hardest hit during the recession, with some companies still suffering double-digit sales declines. John Engler, who represents manufacturers on Capitol Hill as president and CEO of the powerful National Association of Manufacturers, whose members include Cargill, Ford and General Electric, was in the Twin Cities this week to touch base with Minnesota companies.

A former Republican governor of Michigan, Engler, who also serves on the board of Delta Air Lines, sat down for breakfast Wednesday in Minneapolis with leaders of 3M, Apogee and other Minnesota businesses. He talked with manufacturing reporter Liz Fedor about issues facing the industry, including health-care reform, whether a recovery is in sight and how many of the 2.1 million manufacturing jobs lost during the recession might be regained.

Q Manufacturing output has increased slightly in the United States in the past few months. What kind of recovery do you envision in the manufacturing sector during 2010?

A I hope that there continues to be a recovery. I expect it unfortunately will be slower than we would like. There is some inventory rebuilding underway now. We would really get a lift if the housing sector were clearly stabilized. Even as we look at some manufacturing growth, we still have a question of where is the demand going to be. It doesn't look like it is going to come from the consumers.

Q In the U.S., manufacturing employment has fallen by 2.1 million workers since December 2007. Your association's chief economist found that about 40 percent of those jobs may be regained. What kinds of training and business development are needed to get other unemployed manufacturing workers into new jobs?

A Productivity seems to be rising rapidly. When you couple that with the fact that our factory utilization rate is about 67.5 percent, there is a lot of production that can be achieved without very much hiring.

We've got a lot of workers in manufacturing who are retiring. They've seen technology and quality control come to play a very key role. The new worker coming in has got to be able to use it on day one. So they certainly have got to have the right kind of math and communication skills.

A I think it does. While we are developing the technology that may support thousands of green jobs in the future, it's important to keep track of the red, white and blue jobs we've got today.

Right today, there are lots of jobs that are going to be necessary in the energy industry. Also, if we look around America we've fallen way off pace on infrastructure [projects], and we need to pick that up. That's actually one of the ways that you do create demand and get the economy moving again.

Q Many Minnesota-based manufacturers are supplying products for a global marketplace. As a former governor of Michigan, are you concerned that U.S. manufacturers could locate an increasing number of their jobs overseas?

A I want the United States to be the best place in the world for a company to be headquartered. I want it to be the best place in the world for the company to do the bulk of its research and development.

It ought to be a great place to do a lot of manufacturing, supply certainly your North American market and to export as much as you can.

Q Your association has been critical of the health care reform bill that passed the U.S. House. Where do you think Congress should go from here? If Congress cannot produce reform that reduces costs and preserves what's working in the current system, would you rather see no changes to our existing health care system?

A Manufacturers long have been interested in health care reform because we thought it was an opportunity to reduce costs.

The health care system we've had has been constantly changing. We now have some wonderful success stories backed up with four and five years of data where companies have been able to keep their health care costs pretty flat.

They've done this by being very creative. Normally they are self-insured. They really stress an array of preventive services. They are managing chronic disease when that happens and they are doing a lot of things very, very well.

We started off with two objectives: Let's preserve the gains that have been hard won, and let's see what we can do to reduce costs.

There ought to be a way to do this. What's emerged from these debates in Washington is unrecognizable as reform. Now it's coming across as one of the largest tax increases we've ever faced.

At the end of the day, I oppose the House bill. We haven't seen the Senate bill. [Engler spoke as Senate Democrats were about to release their version.] At this point, doing nothing might be preferable to doing a terribly wrong thing which burdens us with a lot of debt for the future.

Q People are very polarized on the health care issue. As Michigan's governor, you had to carve out compromise solutions to get something accomplished. What advice do you have for President Obama and congressional leaders in shaping health care reform?

A Early on, the president had a health care meeting at the White House and brought in about a hundred different people. [Engler was among them.] There were many members of Congress from both parties, business leaders, union leaders and health care experts. The dialogue that was held that day was quite constructive.

Now, what you've got in Congress is they are back to their old habits, and whoever is in charge is shutting the door on those not in charge.