Reshoring — some manufacturing heads back to USA

Faced with rising costs, General Electric is moving production of its new energy-efficient water heater halfway around the world. The country it’s leaving? China. The one it’s bringing 400 jobs and a newly renovated factory? The United States.

A small but growing band of U.S. manufacturers — including giants such as General Electric, NCR and Caterpillar — are turning the seemingly inexorable offshoring movement on its head, bringing some production to the U.S. from far-flung locations such as China. Others that were buying components overseas are switching to U.S. suppliers.

Ford Motor said Wednesday that it’s bringing nearly 2,000 jobs to its U.S. plants by 2012 from suppliers, including those in Japan, Mexico and India.

Experts say the initiatives could moderate job losses that have dramatically shrunk the U.S. manufacturing industry. “I think we’re going to start to see a slowing of lost jobs, and we’ll see some jobs coming back,” says Simon Ellis, an analyst for IDC Manufacturing Insights. “At some point, it will balance out, and we’ll reach an equilibrium…”

“A lot of companies who have gone there to take advantage of cheap labor are starting to tell us that if you (calculate) total … cost and don’t just look at wages, it’s actually not worth it,” says Jeremy Leonard, consultant for Manufacturers Alliance/MAPI, an industry-funded research group…

Products that are labor-intensive and churned out in high volumes, such as apparel, textiles and TVs, will likely continue to be made overseas. So will those that are relatively inexpensive to ship but high-priced, such as laptops and cellphones, Ellis says. Goods are increasingly being made near customers, a trend that’s driving U.S. makers to build factories in fast-growing China.

Still, says Jim Campbell, CEO of GE’s appliance unit: “The biggest difference is the U.S. is in the game now.”

RTFA, Long and detailed – and I don’t agree with the priority of reasons assigned by the authors; but – so what? The facts remain the same. Many significant industrial firms are moving back to the United States from China, Mexico, Japan, India and elsewhere in developing nations.

Most often – IMHO – the cost of shipping finished goods back to the US is key. The arguments about wages pale when you compare American industry with nations like Germany and Japan which are important leaders in big ticket exports. Their industrial workers earn 25-50% more than American workers. You won’t find anyone in the Republican Party or the Chamber of Commerce who will admit that – but, it’s the fact.

About these ads

One comment

  1. moss

    Americans are as ignorant as their politicians and media barons prefer. I doubt if they often reach out to access news sources that pay attention to the truth. Especially economic truths.

    Example? Take the China whine. Take Apple’s iPhone as the target of wibble-wobble student activists. All 10 of them. Who’s making the profits from production?

    The sum of Chinese labor = <4%. The sum of Chinese-made components = ~16%. the remaining 80% for components goes to Korea, Taiwan and Japan.

    Yes, we went through the whines over those countries 30-40 years ago – mostly because of the incompetence of competing American companies. And it was easier for beancounters to make a fast buck by offshoring then – as opposed to building something advanced in the US.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s