(FORTUNE Magazine) – IT'S BEEN a long time coming, but American manufacturers finally have reasons to be optimistic. Profits are rising, and so are exports. With the engines of many industries revved up to capacity, the makers of the nation's merchandise predict further dips in the trade deficit. The weak dollar is doing its bit, of course, but so is the high caliber of U.S. manufacturing output. That's right, the quality of U.S. goods -- so often deplored as fit only for the throwaway society that produced them -- is improving. Says Dana Cound, chairman of the American Society for Quality Control, an international organization devoted to the quality-related sciences: ''On virtually every front the quality of American products is better than it has ever been on an absolute scale.'' The image of American products is still that summed up by the common European attitude: You Americans don't make anything we want to buy. Or by the Japanese repairman who, when asked what was wrong with a garbage disposal machine he was fixing, replied, ''It's American.'' Last year a Roper poll of West Germans found that only 6% of them considered the tag line Made in America indicative of quality. Then the newspaper Frankfurter Allgemeine Zeitung salted the wound in an April editorial that asked, ''Which American products can a sensible European buy? . . . American industry really ought to get more innovative to interest our consumers.'' Unfortunately, the pursuit of quality has rarely ranked high among U.S. manufacturing objectives. Tom Peters, in Thriving on Chaos, quotes quality consultant W. Edwards Deming: ''Henry Ford made great contributions, but his Model T was not a quality car.'' In the years after World War II, there was so much pent-up demand for goods and services that U.S. consumers were often glad to take what they could get. Says Alexander Trowbridge, president of the National Association of Manufacturers and a former Secretary of Commerce: ''We were operating to some degree on a philosophy of planned obsolescence. In that sort of world, quality takes a back seat. Ultimately we got hurt by it.'' Today, with quality at the crux of global competitiveness, FORTUNE set out to determine which American products can be considered the finest of their kind. Examples exist in reassuring abundance, and a partial list is on page 54. Products were selected after consulting with quality experts, management consultants such as Arthur D. Little Inc., security analysts, academics, industry association representatives, Consumers Union, major customers, and other knowledgeable observers of the global manufacturing scene. To be included, an item had to be state of the art -- that is, at the height of innovation and technological advancement. It also had to be the most durable of its kind and provide good to great value for the price. In the cases of commodity items, where quality is tougher to judge, or of ties between competing products, the final selection was based on market share. The list turned out to be as heterogeneous as the society that manufactures the products: It is a mix of high and low tech, basic industrial and consumer goods. Making distinctions between U.S. and foreign goods is often hard. The global marketplace is characterized by out-sourcing, joint ventures, and foreign subsidiaries (see Competition). Caterpillar and Xerox have joint ventures in Japan, and Toyota builds cars in California arm in arm with General Motors. Steinway & Sons makes pianos in Hamburg, West Germany, and in Astoria, New York. By FORTUNE's definition, a Made-in-America product is assembled in the U.S. by a U.S. company and fabricated from at least 50% domestic parts. THE GLOSSIEST PAGES in the catalogue of America's best should be devoted to agricultural equipment, aerospace products, computers, and pharmaceuticals. The U.S. is the global leader in these industries, with many goods exemplary for their technological innovation and quality, and all four are big exporters. American know-how also knows how to manufacture excellent medical instruments. The magnetic resonance imaging (MRI) scanner looks for diseased tissue without surgery, and the laser angioplasty catheter heads upriver like an icebreaker, clearing a path through plaque-obstructed veins. In a less high-tech area, Minnesota Mining & Manufacturing conceives of an endless array of tapes, coatings, and abrasives (see box, page 45). The U.S. also gets A's for craftsmanship in luxury items as diverse as leather handbags, fly-fishing rods, and mink coats. Among the many products that restore the definition of quality to the words Made in America: -- F-16 aircraft. Wolfgang Demisch, director of research for UBS Securities and an aerospace analyst, describes General Dynamics' plane as ''the standard setter for combat aircraft . . . It keeps the peace and we sell a lot of them.'' F-16s are powered by General Electric or Pratt & Whitney jet engines, which are standard setters in their own right. They also come packed with the most advanced gadgetry, including guidance radar from Westinghouse. Now 14 years old and selling for $18 million, in its class the plane is still top gun in a dogfight. -- Computer workstations. Sun Microsystems makes what quality consultant A. Blanton Godfrey calls ''definitely the best workstations in the world. Even the Japanese use them.'' Engineers, scientists, and other technicians employ the machines for computer-aided design and desktop publishing, the development of artificial intelligence, securities trading, and scientific research.

-- Biotechnological drugs. At the heart of this industry is the ability to synthesize in the lab substances that are normally manufactured by the body to fight disease. Genentech's t-PA, a clone of one of the body's own enzymes, dissolves blood clots in the treatment of severe heart attacks. Last December, t-PA broke first-month sales records throughout the world for the launch of a pharmaceutical product. Says Peter Drake, director of equity research at Vector Securities International: ''Here is an industry where we are long on brains, money, and implementation.'' -- Pacemakers. The device made by Medtronic of Minneapolis leads in world market share. Says Dr. Mark Sherrid, a cardiologist at St. Luke's-Roosevelt Hospital Center in New York: ''We use Medtronic's pacemakers because we think they're at the leading edge of the technology. The company has a wide variety of pacemakers that enable a physician to choose one suitable for each patient. The physician can program them from the outside and adjust them to the patient's needs.'' -- Satellites. Of the 345 satellites in space, 148 belong to the Soviets, 136 to the U.S. The rest are distributed among 13 other countries and international organizations. American-made satellites have longer operational lives than satellites built in other countries. In 1989, Hughes Aircraft will finish building Intelsat VI, commissioned by a 114-country consortium for international usage. Intelsat VI will be the largest telecommunications satellite ever, capable of carrying 120,000 telephone calls and three television broadcast signals simultaneously. It will have greater coverage of eastern North America and wider communication with Europe. -- Stereo speakers. The best-selling speakers are medium-priced products that cost $400 to $600 a pair. Of all the mid-range speakers sold in America and ranked by Consumer Reports, the Advent, Allison, and Infinity brands take top honors, scoring 92% in fidelity of sound out of a perfect 100%. -- Towels and bed sheets. Take it from Stanley Marcus, former head of Neiman- Marcus: ''The Italians make beautiful linen bed sheets for the luxury market, and silk bed sheets that are even fancier, but in the broad category of cotton percales, nobody does it as well as the Americans.'' The U.S. advantages lie in design, color coordination, and the quality of this tightly woven cotton -- still grown better in California and Texas than anywhere else in the world.

The manufacturers of these products have created goods that meet or even exceed worldwide standards of excellence; more than that, these standards are maintained year after year. No one holds a monopoly on quality. It is an attainable goal for every manufacturer. Says Stephen Cohen, co-director of the Berkeley Roundtable on the International Economy and co-author of Manufacturing Matters: ''I don't believe quality is any cultural secret. I think there are learnable things to do to achieve it.'' The best products are designed not so much to meet specifications and fulfill customer requirements as they are to match or surpass customer expectations. Steinway & Sons likes to say it builds pianos to a standard, not to a price. The company refuses to skimp on materials, labor, and effort in the construction of a musical instrument that is as close to perfection as the hand and cunning of man can make it. Though the Hamburg factory puts mahogany and red beech in its piano rims, the New York factory uses the denser maple to give the American Steinway a brighter, more powerful tone. Says Larry Fine, author of The Piano Book: ''To put it simply, either one buys a piano or one buys a Steinway.'' The form of an excellent product suits its function, and its innovation is evident. Last year Cameron Iron Works of Houston, Texas, won an engineering innovation award for an economical new piece of oil field equipment. The company created a pipeline connector that allows offshore tankers to cap a well temporarily in the event of a hurricane or other severe weather conditions. Cameron is betting there will be growing demand for the connector as oil companies move farther offshore in the search for new oil fields. Processed-food companies have always been extremely innovative about packaging, not only to attract the consumer who wants convenience but also to win the fight for shelf space. Now that two-thirds of American households have microwave ovens, both Hormel and General Foods are bringing out new microwavable meals -- called, respectively, Top Shelf and Impromptu. By virtue of packaging processes that pressurize, seal, and steam the meal in a plastic container, the food requires no refrigeration and can sit on a shelf without spoilage for up to 18 months. Innovation can occur by serendipity: In fact, it usually does. Engineers from 3M and Boeing, looking for aerospace applications for a new drag- reduction coating, tested the material for the fun of it on rowing shells in Puget Sound. The results were so impressive that last year the coating, inscribed with tiny grooves that replicate sharkskin, was used on the hull of Stars & Stripes in its successful bid for the America's Cup. Crew members credited the coating with increasing the yacht's speed two-tenths of a knot and cutting ten seconds off its finishing time. 3M now sells the coating to sailors.

Among the world's best-selling drugs are a pair of billion-dollar-a-year U.S. entries for high blood pressure: Capoten from Squibb and Vasotec from Merck. Capoten resulted from the research of Squibb scientists who noticed that the venom of the Brazilian pit viper killed its victim by lowering its blood pressure. They found a way to synthesize the venom free of its terminal side effects. The U.S. is world renowned in medicine and the applied sciences in part because industry recruits the top international scientists, and many go on to develop new products. American companies have historically led the world in the number of drugs introduced each year, and are especially good at converting research into prescription products. They maintain their edge because they are willing to finance research and because they can raise capital for R&D from venture entrepreneurs and the public market and, like Merck, from the sales of successful drugs. Between innovation and production comes product design. That's where the engineer is supposed to build in ease of use and aesthetics. Historically, that's also the place where American manufacturers have cut corners to save money. Companies that do design products properly consult the consumer to find out how he uses the item before contriving the design. For example, Apple Computer organizes focus groups of five to ten users to get customer comments before and during the design stage. Apple calls the procedure a ''reality check.'' In the design process engineers also try to minimize the number of parts required to make the item. The fewer the parts, the smoother the assembly process and the more reliable the final product. ONCE THE ITEM is ready to move onto the assembly line, the quality effort takes on a different complexion. The hunt has already begun for the best raw materials and the most dependable suppliers. Take the example of fly-fishing rods: Walt Carpenter, an artisan in Chester, New York, spends 30 to 100 hours making superb rods that sell for up to $1,500. Carpenter uses a bamboo called Tonkin cane (Arundinaria amabilis) from Southern Asia. As Peter Passell writes in The Best, ''Tonkin cane is not as light as graphite, but it is stronger . . . ((It)) imparts a very consistent, predictable feel that makes it the material of choice for expert flycasters.'' Levi Strauss continues to produce 80% of its jeans from 100% cotton denim, a lightweight durable fabric. Cone Mills, Levi's exclusive supplier of denim for the basic 501 jeans, can weave the fabric with only four or five defects per 100 square yards -- a ratio Cone's foreign competitors cannot match. Upgrading quality on the factory floor requires that manufacturers ride herd on their suppliers to improve the parts they deliver. Faced with competition from Toyota, Tennant Co. (see box, page 48), which makes industrial floor sweepers and scrubbers, enlisted the help of its suppliers to upgrade the parts. The company's purveyor of hydraulic cylinders reduced the number of defective cylinders from 6.4% of each shipment to 0.8%, and a supplier of small motors decreased his defect rate from 8.8% to 2.3%. Once the parts are on hand, the assembly process must be done correctly from start to finish, with little or no tolerance for the post-assembly repairs known as ''rework.'' Boeing employs a humdrum concept called ''system integration'' to build 747s that should last about 20 years. Computer bar coding helps the company keep track of 500,000 types of parts, ranging in size from a 3/16-inch rivet to a 103-foot-long wing section, that arrive from some 1,600 subcontractors in 44 states and 13 countries. Then workers aided by sophisticated software make sure that all the parts fit together to form one 747 in a mammoth factory in Everett, Washington. A.T. Cross urges production workers to toss off the assembly line any pens or mechanical pencils they suspect are flawed. The company unconditionally guarantees its products against defects and does repairs free for the life of the pen or pencil. Fewer than 2% of Cross writing instruments have ever been returned for repairs. At other companies, like Xerox and Tennant, line employees chart their defect rates and set goals for the workers to reduce them. At Tennant, one assembly worker has been so successful eliminating problems in the floor sweeper he puts together that the company stopped regular inspections of his machines three years ago. Quality-oriented manufacturers understand that it costs less to make the product right the first time. Says Philip Crosby, an independent quality consultant: ''I see few companies where the pretax profit is as big as the price of not conforming to specifications.'' A tradition of craftsmanship endures in many smaller businesses. At Crane & Co. (see box, page 52) the borders on the sheets of stationery are hand- etched, and the bows that hold the writing paper and envelopes in the box are still hand-tied. The world's best-tailored mink coats have traditionally come from Manhattan's Seventh Avenue. The furriers, many of them immigrants from Southern and Eastern Europe, use a secret solution for dressing the skins. Then in a process known as ''letting out'' they cut, stitch, and stretch the pelts before sewing the long strips together into a coat. Jill Vander Putten, head of fur design at the Fashion Institute of Technology, explains that it takes years of apprenticeship to learn these techniques. Says she: ''In Asia and Europe they don't have the necessary experience, but they are improving.'' NEW STANDARDS of quality keep surfacing in manufacturing. What leads today risks obsolescence tomorrow. Author and consultant Tom Peters calls this sad pattern the ''champ to chump syndrome.'' The color television, the video recorder, the computer memory chip, textile machinery -- all are regrettable examples of products the U.S. created only to let the competitive advantage slip offshore. Xerox, once the uncontested leader in photocopiers, saw its world market share drop from 82% to 41% in six years as a result of Japanese inroads into the copier business. The achievement of quality, the experts will tell you, must be an ongoing process. Says Blanton Godfrey: ''Look how fast products are improving, both in technology and quality. There is no just maintaining the lead. You have to be on a fast track, constantly improving at a good rate, or you will be overtaken.'' To avoid that fate in the midsize part of the copier market where it still leads, Xerox today makes a habit of competitive benchmarking. Company engineers pull apart competing products to see how they are made and then estimate the costs of production in a search for new, cheaper, and better ways to make their own copiers. Even a product as basic as Levi's jeans has been adapted and improved to stay competitive since its invention in 1853 by a Bavarian immigrant for the miners in the California gold rush. ''Over the years we have made in excess of 20 fundamental changes in our basic jeans,'' says Peter Thigpen, president of the Jeans Co., a division of Levi Strauss. ''And I don't mean fashion changes. I mean changes like increasing the overlap on the fly from 3/8 of an inch to 5/8 of an inch. There is a constant drive around here for self-renewal.'' Boeing, too, renews itself. Since the 747's introduction in 1970, its flying range has increased from 5,200 miles to 8,500. In January the company introduced the 747-400: sticker price, $120 million. By slashing the number of lights, gauges, and switches on the instrument panel from 971 to 365 and by using digital electronics, Boeing was able to reduce from three to two the number of pilots needed to fly the plane. The company also made the 747-400 some 13% more fuel efficient and added a six-foot winglet at the tip of each wing to help eke out an extra thousand miles. Factory automation is a popular response to the competitive pressures of staying ahead, but by itself it does little to solve the quality problem. You just get the same quality articles more quickly. Says quality authority Armand Feigenbaum of General Systems Co.: ''The notion of trying to achieve quality leadership by managing through robots rather than through people is specious.'' Maintaining excellence boils down to managing -- managing the technology, the labor force, the managers themselves. THE COMMITMENT of the senior people to the quality process is unquestioned at the companies that make the best products. Executives field customer complaints on hot lines, personally test the products, and meet at least weekly to address quality issues. Quality becomes, in Feigenbaum's words, ''an ethic.'' The last ingredient for maintaining quality -- and the single most important one -- is that sales-force bromide: Know your customer. There is a better-educated, more cynical buyer out there with little patience for poor quality. He wants products that work the first time and is willing to pay for them. To respond to customers' changing needs and expectations, the manufacturer must be nimble. Flexible manufacturing helps. Companies like Deere and Tennant can customize a product to a buyer's specifications. Even a venerable producer of commodity items like Levi Strauss knows it must keep up , with its customers. The story of the copper crotch rivet on the 501 jeans is a case in point. According to company lore, copper rivets were added to the Levi jeans pockets and seams in 1873 to protect the pants from ripping under the weight of a miner's tools or, in the words of a Virginia City prospector, ''nuggets bigger than your thumb.'' But when jeans became fashionable in the 1930s, the denim-clad smart set discovered that the rivets on the back pockets scratched chair backs, the paint on the hood of a car, and anything else the wearer sat on. The back-pocket rivets were removed, but despite occasional complaints from cowboys, the crotch rivet remained. In the late 1930s, Walter Haas Sr., the company president, went on a fly-fishing trip wearing a pair of 501s. One night he squatted close to the campfire, which heated the rivet. In the whooping war dance that followed, Haas the president met Haas the customer. A week later the board of directors abolished the copper crotch rivet by unanimous vote. As the copper rivet anecdote suggests, the achievement and preservation of product excellence take common sense, diligence, and attention to details -- as they always have. What is different today is that the pursuit of quality, whether in planes, pacemakers, percales, or pianos, is no longer voluntary. If U.S. industry expects to win still more customers and market share, it has no choice but to improve its products. For the customer, quality is irresistible. For industry, it is essential.

BOX: 100 Products That America Makes Best

All-electric plastics injection-molding machine Cincinnati Milacron Aluminum foil Reynolds Metals Atomic clock Frequency Electronics, Hewlett-Packard Ball point pens A.T. Cross Balloon and laser angioplasty catheters C.R. Bard, Eli Lilly, Trimedyne Bamboo fly-fishing rods Walt Carpenter Bed sheets and towels Burlington Industries, Dan River, Dundee Mills, Fieldcrest Cannon, J.P. Stevens, Springs Industries, West Point-Pepperell Biotech drugs: t-PA Genentech Bobcat skid-steer loaders Melroe Boots and hunting shoes Timberland, L.L. Bean Brain electrical activity mapping system Nicolet Instrument Camera film (color) Eastman Kodak Central office switching equipment AT&T Charcoal briquettes Kingsford Products Charge couple device image sensor Eastman Kodak Clothes dryers Whirlpool Combines Case IH, Deere Computer operating systems software: MS-DOS, Unix, VM, VMS Microsoft, AT&T, IBM, Digital Equipment Copiers Eastman Kodak, Xerox Cotton denim Cone Mills Cruising sailboats, 37 feet and under Pacific Seacraft Crystal Steuben Glass Data parallel supercomputers Thinking Machines Digital plotters Hewlett-Packard Dishwashers General Electric Distributed database management technology Tandem Computers Ditch Witch trenchers Charles Machine Works Drugs: Capoten and Vasotec Squibb, Merck Dustbuster Plus hand-held cordless vacuum cleaners Black & Decker Electrodeposition primers PPG Industries Electrohydraulic servo valves Moog F-16 jet fighters General Dynamics Fast food: hamburgers McDonald's Financial, engineering, and scientific hand-held calculators Hewlett-Packard 501 jeans Levi Strauss Flashlights Mag Instrument Flutes Wm. S. Haynes FM two-way radios Motorola Frequency and time interval analyzers Hewlett-Packard Fur coats Peter Dion, Goldin-Feldman, Ben Kahn, Maximilian, Louis Milona Glass fiber for communications Corning Glass Works Gore-Tex waterproof breathable fabric W.L. Gore Handbags Coach Leatherware Hay and forage equipment Ford New Holland Heating controls Honeywell Heavy earthmoving equipment Caterpillar Ice cream and sorbet New York Fruit Ice Industrial and commercial floor sweepers and scrubbers Tennant Instant camera films Polaroid Integrated voice and data communications systems (T-1 multiplexers) Network Equipment Technologies Intelsat VI satellite Hughes Aircraft Ion chromatographs Dionex Jazz music Jet aircraft: 747 family of planes Boeing Jet engines General Electric Kevlar fiber Du Pont Loader/backhoe Case IH Locomotives General Electric Longwall mining systems Joy Technologies Lycra spandex fiber Du Pont Magnetic resonance imaging scanners General Electric Marlboro cigarettes Philip Morris Mass spectrometers Finnigan Men's ready-to-wear suits Oxxford Clothes Micro-precision machine and measuring tools Moore Special Tool Microprocessors: Motorola 68000 family, Intel 80X86 family Motorola, Intel Microwavable food in shelf-stable packaging: Impromptu, Top Shelf General Foods, Geo. A. Hormel & Continental Can % Microwave ovens Litton Industries Minicomputers Digital Equipment, Hewlett-Packard, IBM Minisupercomputers Alliant Computer Systems, Convex Computer Multimeters Hewlett-Packard, John Fluke Mfg. Offshore drilling equipment Cameron Iron Works Oscilloscopes Tektronix Pacemakers Medtronic Paper towels Procter & Gamble, Scott Paper Personal computer applications software Lotus Development, Microsoft, WordPerfect Personal computers Apple Computer Pianos Steinway & Sons Post-it note pads 3M Powerboats Cigarette Racing Team, Donzi Marine Pressure transmitters for industrial process plants Rosemount Row-crop planters Case IH Scotch S-VHS videotape 3M Scotchcal drag reduction tape 3M Sheet and strip stainless steel Allegheny Ludlum Soft drinks Coca-Cola Stationery Crane Stereo loudspeakers International Jensen, Allison Acoustics, Infinity Systems Sunglass lenses Corning Glass Works Supercomputers Cray Research Symbion J-7 and Thoratec artificial hearts Symbion, Thoratec Medical Tampax Tambrands Technical workstations Apollo, Silicon Graphics, Sun Teflon Du Pont Telephone sets AT&T Thermos vacuum containers Halsey Taylor/Thermos Thin film hard disks Komag, Seagate Technology Tillage equipment Krause Plow Tractors, 100 hp and over Deere Washing machines Maytag, Whirlpool