I listened to the President SOTU and was heartened by the focus on calls for revitalizing the manufacturing industry and supply chain, including possible tax reform that would encourage corporate investment in reshoring American jobs. That bubble gets burst rather quickly when you consider the very real and difficult challenges that lie ahead before any of that transition can happen and your piece does a stellar job of spotlighting those challenges.
The question is what kind of infrastructure can Americans possibly create that could rival the economic advantages that a FoxConn city or government subsidiaries bring to the table making it such a fiscal no-brainer for companies like Apple to outsource overseas? There are no easy answers. With all the political jockeying, two of the most effective tools--corporate tax reform and our own government programs--don't stand a chance when up against an increasingly devisive Washington.
The structural steel modules (not just the raw steel, but finished bridge assemblies) for the new Bay Bridge in San Fransisco are being fabricated in China. California decided not to use federal funds so they could save $400 million dollars.
The cost impact is MUCH greater, and will get worse. It was a short-sighted, short-term savings by state government.
The ridiculous battle over the Air Force tanker program is another instance where the government decision to build domestically vs. internationally should never have gone as far as it did.
We have ONE large body aircraft manufacturer left in the country. To not use it for such a program, and keep tens of thousands of jobs (directly and indirectly involved with actual construction) is dereliction of our elected official's duties.
Actually, the EADS tanker was goning to be built in Mobile, AL. while not providing as many jobs as a Boeing win, it would have added an estimated 10K (I think that was the number). I'm not necessarily in favor of a "scarebus" based tanker, but how do you get competition to decrease the price when Boeing has a monopoly on large aircraft in the US?
DoD contracts, unlike commercial, can enforce how much of a product is made where and who gets the rights to design and manufacture. This is for national security reasons; we don't want to have to rely on others with possibly competing military interests (potential adversaries) during a conflict.
I beleive you are correct, Mobile was not going to be a full-up manufacturing facility. As a veteren and american, I would have gone with Boeing as well. But the counter-offer was used to keep Boeing honest and would have brought an appreciable number of jobs anyway.
Boeing's SC plant would probably be the second spot. That plant voted itself non-union around the time of the competition.
I also "enjoyed" the SOTU speach. It made me feel even worth from how I felt before the speach. Clearly the weather in Washington is too cloudy. The culture of "spend-spend and spend" on wrong things will not stop unless there is a cultural change. The division between parties is huge and i do not see a way for easy and fast fix.
Thanks to all who weighed in on this thread about the vital issue of reviving U.S. manufacturing.
On the issue of what we do to compete with the likes of Foxconn, we certainly can't replicate its model, nor would we want. We can fix our manufacturing problems while at the same time preserving the dignity of work. I believe we need to rebuild a flexible manufacturing base that can be quickly scaled up in order to compete with Asian manufacturers. The we leverage our unmatched worker productivity.
I'll next puruse other reader comments and respond where I can.
That's the bottom line, George: Building out, in the U.S., a flexible manufacturing base. I believe that many mid- and high-level managers at major manufacturing companies want to do this and know it needs to be done to remain competitive. It's also the case that many of these companies are sitting on piles of cash. It's Wall Street's contraints which are keeping them from investing this money on planting infrastructure in the U.S.-- there's no return during the quarter in which the money is spent.
Steve Jobs famously told President Obama that "those jobs aren't coming back," in reference to jobs lost to China. The economy is still in the midst of structural change, and hasn't settled yet, which makes long-term strategic planning difficult. Even more than that, the political reality is that many people are opposed to government setting and spending money on an industrial policy. At the same time, you have people like former Intel chairman Craig Barrett sounding the alarm about STEM, or lack thereof. I.e., the US needs to educate children so that they have a math and science basis from which they can progress to technical careers. I wish I knew what the solution was. The one bright spot is that all the US manufacturing executives I know wish they could spend money on upgrading plant infrastructure. So there's pent up demand and desire to move forward and become more competitive.
I'm afraid I agree with Jobs. Many manufacturing jobs -- especially the low-level ones -- aren't coming back. We can't compete with FoxConn City. But outsourcing of R&D? No way. With our university system, we should be leading the world in product innovation and in the creation of technical talent. And we should do whatever we have to in order to keep those jobs here. Our R&D, our engineering, and our ability to innovate should stay right here.
I completely with you, Chuck, and applaud your definite and passionate response to the idea of outsourcing R&D overseas. I think both Washington policy and corporate agendas have to do whatever it takes to foster R&D jobs and a culture of innovation right here on our own shores. Educational institutions have to step up promoting STEM curriculum and we have to make it a priority to introduce our next generation to the skills and training they will need to lead American innovation.
Regarding STEM, there's been a lot of executive support for improvements in both funding and process for K-through-12 science and math education. However, it doesn't seem to have had much effect, as of yet. I did an interview two years ago with former Intel chairman Craig Barrett, who is a major STEM advocate. You can read it here. I would add that the slow progress is partly the result of the fact that it's a multi-tentacled effort comprising government, academia, and titans of the tech industry. At the same time, the slow forward movement is, at this point, also indicative of a lack of collective well to break the logjam and just get it done.
I think you hit the nail on the head when you mention American innovation. That is something that I have just not seen from China, Mexico or India. They might be able to put the same screw in a machine a thousand times a day. But to come up with something out of the box just doesn't happen. But I still struggle with the idea that we have to train all of our children to obtain those skills. In some cases we have children that would make very good dirch diggers. And if ditch digging is what you're good at. I hope they will be able to find a job doing that so they can be happy. Rather than being forced to go into a profession that they will not be happy at because that's the job they can find here in America.
While it is disturbing to see Asian manufacturing take what used to be American jobs, manufacturing is still strong in North America. It's only been a couple years since China pulled ahead of the United States in manufacturing volume, and China's manufacturing is primarily high-volume consumer products. North America is still the leader in complex, high-cost manufacturing -- medical, military, etc.
US manufacturing does benefit from cheap labor in that some European companies source product here in the US to avoid high labor costs and stiff organized labor rules in Europe. Granted the copanies are not US based, but the jobs are here.
I agree its probably unlikely that those jobs are coming back. Which is unfortunate because nearly every experience I have had with cheap labor, whether in Mexico or China has resulted in lower quality. Whether it be tools with the part numbers in backwords or having to nearly rebuild the entire tool when it gets back to the states. In the endm the cheap labor and quality that corresponds to it, is not worth it. There;'s something to be said for a worker that can read, think and alert you to a quality problem. And you can only find that in the United States. Too bad we won't build more stuff here.
There is a funny thing with the Chinese mold shops. I have toured multiple tool shops in China. Not one of the shops had any metal working machinery from China. They have some of the world's best equipment,and all of it was made in either the US or in Europe. The operators running the equipment were all trained internally, so the skill was only as good as the best instructor available.
Tim, I have seen the same exported factory machinery in China and other parts of Asia. In Indonesia, which touts itself as a lower cost alternative to China (imagine that!), nearly all the managers were ex-pats, mostly Americans.
We have spoken with U.S.-based companies like pc-board makers who say they have brought work back from Asia for the reasons jmiller has cited. Lower manufacturing costs in Asia were outweighed by low quality, logistics issues and communications problems. I'm guessing more of this type of mid-level, -volume manufacturing will come back from Asia.
Yes, George, I've been hearing from both manufacturers (TI for one) and component distributors (who know where their customers are moving) that there's a flow of manufacturers moving from Asia. There are a number of reasons -- for one, rising costs. The nascent trend is toward putting manufacturing near the market.
Unfortunately, we can't expect the engine of prosperity and growth to move along its track when it must stop every few miles to get bureaucrats and regulations out of the way. If I were to start a business today, I'd set it up in Australia, Hong Kong, Singapore or New Zealand; not here (USA). US businesses get burdened with ill-conceived regulations that help drive them overseas. I doubt many manufacturing jobs will return to the US, but by getting government out of the way we have a better chance to ensure R&D activities stay here and that corporations don't move off shore. Eliminating the tax on overseas profits would let companies bring profits back to the US and invest them. And repealing the stupid Sarbanes-Oxley Act would eliminate another noxious burden for companies. OK, you get the idea...
I would agree with Jon that there are serious domestic regulatory impediments, which put U.S. companies at a disadvantage. However, I find it illogical (in a Spock-like way, I guess) that a desired to dismantle onerous regulations has become joined at the hip (or, in our world, soldered) with the view that government can never invest in, nor support, any research, technology, or company. (Support for education is often, though not always, included in this bundle.) That linkage, I submit, is illogical. Firstly, the two issues are discrete and so one should have nothing to do with the other. Secondly, a cogent argument can be made the government financial support for, say, tech R&D in batteries, would help LEVEL the playing field with the likes of China.
Alexander, per my previous reply on battery power in respect to overland energy distribution and grid replenishment I should like to point out the sepecifics of public misconception and deliberate misinformation.
First as I previously stated the grid system itself is out dated and needs to be redisigned using new methods of modular fullment to reduce cost, improve relability and safety, eliminate high lines and reudce maintenance. Current build methodology will not hold up in bad iceing, floods, hurricanes, fires, or wars. In fact I question why the grid even exists other than thats how Mr. Westinghouse designed the first overland, overhead, distribution system out of Niagra Falls to distribut Mr. N. Tesla's multi-phase power. Markets exploaded and on going invention became suppressed or couldn't raise capital. Go see the orilional success it is still working.
Jumping to 2012, we are still using cross country distribution (thank God without Edison's and Wall Streets perfered DC telegraph method and designs) but, really havent moved forward. Why? We have stand-alone generation capability and know how to use it, or do we? Or are we reluctant to explore the true value of new technology fearing the selfish control methods applied by the J. P. Morgan's of the world and the fossil fuel community?
Truth-the fumes kill us but we need transportation and are willing to pay the up charge for exhaust converters, the fracing destroys our water supply but continues even as do the earth quakes it causes, yet we need to grow food. So grid loads continue to rise worldwide, but clean energy generation has been surpressed for??? shall I count the ways...
I believe a NEED prerequisit such as on a ship at sea is not there. Nor do we understand the alternates available to us. Thoes such as ZERO, COLD, FREE, FUSION or E-Cat technologies. And, why don't we undestand or use such technologies? Technologies that have been known and hidden away from the public for at least a century and are here NOW. These eneryg systems are safe, make NO polution, are very buildable, genrate limitless power, are afordable and provide the keys to safe tranmutation of spent fision fuel.
It is my contention that the R&D, Engineering, Scientific and ALL OTHER INTERESTED PARTIES should demand, world wide, patent restructuring and government coperation to make this happen! IF this happens we may truly look forward to a renaissance of new discovery and invention.
Should this happen it would require considerable reguatory changes but, the patent office MUST CHANGE FIRST. In reality, the U.S. Patent office at this time, in the history of the USA, to be seen by the public detramental to our common competive worldwide well being as a nation. Should this change; the virtues of free enterprise will again prosper and invigorate the populations of our planet.
There's an idea that reducing corporate taxes will increase corporate profits, and that increased profits will result in job creation. The problem with this is that -- as the article points out -- companies are under no obligation to create jobs in the U.S. They can invest their profits anywhere they want. And their allegiance is to their shareholders, not to the U.S. public. Reducing taxes may result in job creation, but there is no guarantee that the jobs will be here.
In fact, as long as China has a massive population of internal migrants from the countryside who are willing to work under poor conditions for little money, there's a good chance that the jobs won't be here. Why should the U.S. forgo tax revenue -- which could be used to finance research and development, education, and infrastructure projects in our own country, not to mention to pay down our massive debt -- simply so that companies can create additional low-paying jobs in other countries? This may be in the interest of these companies' shareholders, but it is clearly not in the long-term interest of the U.S.
As to the idea that regulation is what's keeping companies from creating jobs in the U.S., there ought to be some congnitive dissonance here. If companies are supposedly staying out of the U.S. because of excessive regulation, what on earth are they doing in China -- which is, after all, a socialist country?
China has all kinds of laws and regulations affecting foreign investments. On the World Bank's list of 183 countries for ease of doing business, China ranks 91st. For comparison, the United States is number four (behind Singapore, Hong Kong, and New Zealand). Foreign companies don't go to China because of the business environment, but in spite of it. They are willing to put up with the many restrictions which the Chinese government places on them in exchange for access to cheap labor and a rapidly developing economy.
Companies are in business to make money, not to promote the general welfare. If you recall your U.S. history, that's what we formed a government for. Unquestionably, private enterprise excels at creating economic growth. Government has an important role to play in making sure that growth translates into prosperity.
Jon has identified the problem in spades. I live in Pennsylvania which is gifted with unnamed tons of iron oxide. --Not the iron oxide ore that you mine to create steel, but the iron oxide that was once steel and has now been reclaimed by the environment. Billy Joel laments Allentown, my wife recalls the teaming mills of Pittsburgh, and my family and I now enjoy bike rides as a benefit of our Rails to Trails program which permits us to pedal past scores of abandoned manufacturing campuses around Valley Forge -- the same railroad beds that previously transported the products of enterprising american workers.
Let us academics argue over how to get all of the toothpaste back in the tube. Manufacturing is gone. Corporate taxes, Environmental Regulations, Arbitration, Pension Obligations, Healthcare, Political Contributions, Multilingual Signage...these are the only structures that remain after manufacturing has departed. Pouring more money into STEM to produce more scientists and engineers would only serve to feed the structures I listed above. I'm all for raising domesticated livestock for food, but as an educator, I'm not for educating humans so they can be consumed by the Federal Behemoth.
Something very magic happened in 1776 after legions of free thinkers escaped the onerous regulations of old Europe for the New World. The Founders were mortally afraid of handing too much power over to an all-knowing Federal Government. And now, some 235 years later, we spend our energy arguing over where to focus the powers of the Federal Government to best solve the problem. In the present crisis, government is not the solution to our problem; government is the problem.
williamlweaver; So, to compete with China, are you wiling to send your children to work in factories for $17 per day, live in dormatories, and face the real threat of death from corporate safety cost-cutting / profit maximization ? Part of your "Government is the problem" includes the minimum wage, OSHA regulations, regulations restricting the cockroach content of peanut butter, etc, etc. Another poster stated that corporations' motivation is profit (dare I say at the expense of the worker ?) while it falls to the government to (at least partially) rein-in the corporations. Unions (and Guilds) began as a necessity to offer some protections to workers. Many people are calling for a return to the 'good old days' of no minimum wage, no OSHA, back to the 1800's when child labor was the norm, and there were two classes = the rich and the (working-) poor. When this suceeds, and there is no 'middle class', who will there be to buy those iPhones ? When corporations kill the middle class, they will have killed the goose that laid their golden egg. Government is not the problem, Corporate Regulation by the Government is a necessary evil.
@GlennA - Our form of government and the freedom we had as individuals is what created the largest middle class in the history of the world. Your examples, while somewhat hysteric, are of questionable benefits to our society.
The minimum wage was originally designed to artificially inflate labor, to deincentivize employers from using unskilled labor.The "unskilled labor" that was the initial target was poor blacks in the south taking white construction jobs.Were the minimum wage to go away today, we would likely see more young people employed and gaining experience instead of floundering and contributing to our criminal justice system.
OSHA regulations have become completely absurd.The original regulations did have some benefits such as "don't kill your employees".But today it is all about revenue. Get a papercut and don't report it - that's a fine. Don't wear safety glasses in a manufacturing area even though no one is performing a task that requires said glasses - that's a fine.Employees have always had the personal responsibility for their actions.Much of the regulations OSHA enforces is not because employers risk the safety of employees; it is because the employees choose to risk themselves. I wish I had a dollar for every time I heard someone complain about how safety equipment looked or felt!
Not that I prefer the taste of cockroaches, but bulk manufacturing of food products almost necessarily exposes some very nasty ingredients to foods.Note that you said "restrict the content of"; unfortunately in some processes "you have to break a few eggs to make the omelet". No one would question that regulation simply based on gut-feel, but what was the issue exactly?At some level protein is protein and unless an illness can be traced back to the source the term "crunchy" peanut butter may work on several levels.
As far as child labor, that is the parent's responsibility to decide when a child is ready and for what kind of work.I have worked since I was 12 and it was the early exposure to the concept of work that developed my work ethic.If kids earned their own money in high school instead of having mommy and daddy benefactors, maybe they would appreciate thing more.
I work with several Korean companies that still use company provided housing.For a young person, that is not a bad deal (although they make much more that $17 per day).After a few years, the young engineers move out to their own apartments/houses, usually with a little nest egg.We have become a bit spoiled in the US and may have to look at doing things differently to reclaim an advantage.With our great income mobility and inbred sense of freedom things like dorms are a bit farfetched.But if the a company could cover living expenses cheaper than an individual, making a smaller hit as a percentage of a person's pay, young workers could and probably would take advantage of the opportunity.
Any band-aid government applies to the problem that does not address the fundamental issues will be ineffective. Throwing public money at R&D or education (which is not permitted under the constitution) is a short-sighted, reactionary response.
An engineering analysis of the issue would require that we deconstruct the entire problem to its fundamental elements (void of emotion), write a base set of requirements, and find the best way to satisfy the requirements.
The biggest issue we face in the US is the requirements creep from regulators that has come to a critical mass. Although well intentioned, for the most part, safety and health regulations have become ubsurd. It is now to the point that crony capitalists (those pushing health and safety products) and political special interests ("Green" movement) are the ones influencing the regulators. While some profit from industry's demise, others seek simply to take freedom from individuals and give it to a strengthening central authority (tyranny). not to be mean, of course, just for our own good; because the prosparity that our constitution has provided was not fair to the less enlighten nations of the world.
I would take issue with the assertion that elimination of the tax on overseas profits would result in greater investment in the U.S. Many multinational companies are sitting on piles of cash now and have shown no inclination to invest in workers, infrastructure or innovative products. Moreover, many benefit from the U.S. R&D tax credit, but you'd be hard pressed to find a single innovation since this "tax incentive" was created in 1981.
Lets trust our American instincts and evaluate our work ethics when thinking about why we don't want to work 12 hour shifts and live in a dormitory-style housing, ala, FOXCONN.Remember, FOXCONN was forced to put up jump-nets around the dormitory perimeters to catch all the suicidal jumpers off the rooftops.
Meanwhile, just about every design engineer I know DOES work 10-12 hours fairly regularly, and always to the unhappiness of their spouse. It s the nature of our development work coupled with the nature of the design engineer.We put in the long hours when we are fascinated with our work, as opposed to being driven by an oppressive force.Think of the carrot vs. the stick mentality.
I agree with JimT. FOXCONN is not the model to follow. Those workers are not well paid, work in substandard conditions and have little skill. Don't forget, the per capita income in China is still below that of Jamica (last I heard). While they have hundreds of millions of people wanting to improve themselves, they will be willing to work in these conditions.
But the thing to remember is that China was not a high tech manufacturing country just a short while ago. We previously lost out to Japan, which was also not a high tech powerhouse, initially. Now, look at Japan. With NAFTA, wasn't Mexico going to be the low cost manufacturing center for the US? We talk about China, but it was floods in Thailand that disrupted hard disk drive production just a couple of months ago.
Setting up high tech manufacturing is not a function of the people, it is a function of social and government policy. As US workers become more flexible, they can get back manufacturing jobs. I believe it is Nissan that is ramping up its manufacturing in the US to where it will be larger than the output of their Japanese factories. This is driven by exchange rates, not supply chains. Caterpillar is considering bringing jobs to the US from Canada because of union intransigence there and more flexibility here.
These jobs can come back in an instant. Becuase they are contract jobs, Apple, or whoever, can contract with someone else at any time. This is the original motivation for outsourcing of manufacturing. If you follow the logic of the article, then the auto industry shoud go back to their original model. At one time Ford and GM took in raw materials (iron ore, rubber, etc.) and made cars in an integrated industrial enterprise. I don't see that happening.
naperlouRE: These jobs can come back in an instant. Becuase they are contract jobs.....
The TV news in San Antonio yesterday reported that Caterpillar, who just recently built a plant in Seguine TX, is being investigated for UNDER minimun wage pay to (employees?). This problem continues to skew the numbers especially along our southern border with Mexico. One wonders if the "drug war" (sic) is not raelly the only thing in the comerce numbers we see that need to reassesed at this point in time.
This is a great essay but the Titile is a day late and a dollar short.
Obama, the only one speaking on this issue with any precision is speaking correctly and this underscores his efforts on our behalf.
Nixon opened the door to china and Boeing and containerships have brutalized us along with the penchant of buying imported cars, thinking that they are superior.
It's really Congress that has sought to undermine and destroy our country through all sorts of absurdities and ghastly statements.
That Mitt Romney would have said let GM and Chrysler go under is mind boggling. A friend commented yesterday that 30% of Ameica is actually either stupid, in denial, or insane.
We had better start taking care of ourselves or it's game over, we will become a 3rd World Country.
And the irony is that the basic research was done here. I believe that it was the University of Cincinatti where much of the research was done on LCD displays yet it was Samsung in Korea that became the major force in that technology as well as giving Whirlpool a huge jolt at Best Buy.
Steve said it in his Biography... it's the Product that counts.
Now Bob Lutz has come up with something new and we shall see how that pans out.
We must think of Home first and cut this crap about foreign entanglements.
I've seen this trend for almost 20 years. Global outsourcing is the wave of the future. It's ok, we'll be a nation of consultants, we don't want low-paying menial jobs. Well, two (possibly three) economic crises later, we're seeing the fruits of this corporate empty-headedness. Bottom line is I completely and wholeheartedly disagree with the notion that Apple doesn't have the obligation to bring work back to the US when they can get it more cheaply overseas. They ABSOLUTELY have the obligation to do so. Like all American companies, they DO! We're so afraid of a trade war that we don't realize that the war was already started 15 years ago. We're losing that war. Badly. Look around!? The easiest solution is to do what all other countries in Asia and Europe do. High protective tarriffs against imports, high taxes against companies that have more than 10% of their workforce overseas, and finally lush government subsidies to support strategic industries back into the US for good. We HAVE to level the playing field. We're already in crisis! the government is already going broke. Let's spend what's left on us to try to save OURSELVES! It's too late for soft measures.
Interesting thought: What if Apple did open a FoxConn-type of plant here in the US? Given the widespread poverty and desperation for jobs, there would be a line around the block to apply for a live-in factory job. 12 hours shifts? No problem! Go to Detroit. Go to Kansas City. Go to any major city over 500,000, and you will have unskilled laborers in droves. It's time to break the mold of conventional thinking about what American's will and won't do. China wants us to keep doing what we're doing. Nothing. Roll over quietly, let them take all of the jobs, take all the know-how and factories, and one day a few years from now, the country is a third-world country. It's not too late. Stop this foolishness now!
We do NOT want this kind of manufacturing here in the U.S. and it wouldn't fly here anyway. We should be investing time, money, and training in automation. I would venture to guess that much of what these $17/day workers do can be handled by automated manufacturing. The problem with AM is that there is a big upfront investment and U.S. corporations are too busy whining and complaining about taxes and regulations while they collect interest on mountains of cash. There is no incentive for them to invest in anything. That has to change. The U.S. has a long history of automated manufacturing and yes, it elimnates some jobs as it is implemented but it can be argued that it creates just as many or more for the businesses that make the machines. We have to raise the techinical ability of the average worker in the U.S. and this is VERY achievable. Young people today are very tech-savvy but they need to be led away from video games and into the world of designing and engineering useful and needed products.
It starts with us, you know. Everyone in this discussion group enjoys the challenges of their career. How are YOU going to communicate that to the next generation?
I am not suggesting that we abandon automation but it should be recognized that mass production and automation is in some ways responsible for the problem we have. It takes fewer and fewer people to design, manufacture and deliver what we now consider the necessities of life. That is a GOOD thing as long as there is an environment that allows and encourages real diversity in the economy. We don't have that.
The problem is legal and regulatory, mostly at the state and local level but also at the Federal. We've been in this represive environment so long that most people think it is normal and wonder what the heck I'm talking about.
Great discussion, and it's about time. Focusing on China and Asia in general completely misses the point as far as finding functional examples of properly functioning manufacturing countries.
Switzerland has at least two manufacturing plants in every little town. Think of Germany, Sweden, Norway, and so on. If it's "in your blood" you will do it even without double and triple digit profit margins. This used to describe the U.S., as for the most part we are really just transplants from the above mentioned list.
How to re-discover that gene? Forget about consumer electronics made by slave labor in quantities of multi-millions. If that's what you want, then move there.
However, if you can engender the spirit of quality products with a tangible "feel" then start making them here and slowly rebuild the chain - interested young people wanting to participate in something more fulfilling than video games and hacking, vocational training centers that really teach actual skills, and people willing to pay a premium for something that has a quality look and feel and is made as much as possible in the U.S.A.
At the present, none of those links exist. We've got to start somewhere, as some of us know that manufacturing = freedom and consumerism = slavery.
The argument that U.S. companies are moving manufacturing to China because there is too much government interference in the U.S. simply doesn't hold water. If you think U.S. bureaucrats are bad, try dealing with Chinese bureaucrats. In spite of Deng Xiaoping's reforms, China still has a planned economy. Government plays a role in the Chinese economy which is almost unimaginable in the U.S. Major sectors of the Chinese economy are still state-owned, and foreign investors face significant regulatory hurdles which are intended to benefit Chinese nationals. If the real problem were regulation, these companies would be going to places like New Zealand, not China.
U.S. companies are moving manufacturing to China because of low labor costs and access to a rapidly developing economy. On the other hand, they are moving manufacturing back to the U.S. because of quality and manufacturing agility. These are the things we should focus on.
I might add that relatively higher labor costs tend to incentivize quality. Chinese manufacturers are willing to accept levels of scrap and rework which would be unacceptable in the U.S., because the labor costs associated with scrap and rework are relatively low for them. Higher labor costs encourage U.S., Japanese, and European manufacturers to develop more efficient, higher quality manufacturing processes.
I agree with those who point out that the U.S. has an edge when it comes to innovation, but I wouldn't count on this lasting forever, unless we are willing to make it a policy priority. China is educating large numbers of scientists and engineers -- including in U.S. universities -- and is spending huge sums of money on research and development. They are also doing a much better job in ensuring that the vast majority of their population is numerically literate. (This is at least as much of a function of culture as it is of government policy).
I disagree. The combination of high wages (including all the goodies like health care, vacation, disability, etc), high corporate taxation, high litigation rates and over regulation all conspire to drive companies off shore. To minimize the effect of the plethora of regulations imposed on companies from the alphabet soup of federal and state regulators such as the EPA, OSHA, EEOC, NLRB, etc. is a fool's game. Currently, approx. 12% of our GDP goes to compliance, i.e. meeting regulations. The problem is, if you say we are overregulated, you get the specious argument "well, do you want to go back to Sinclair's "The Jungle" days, when things were unregulated...?!". thinking that if some regulation is necessary and beneficial, more regulation is better, ad naseum.
Obama can authorize all the R&D investment and training he wants, it will not stem the bleeding of jobs to places that have a more fertile climate for business, which America certainly is not. While clamoring for business postive actions with one voice, he argues for higher taxes, more union control, more regulations (ala E. Warren as the poster child...), and more intrusion of the government into our lives. Here's the simple formula to entice business back:
1. Lower taxes- (implies reduced debt and government programs, including reining in public service unions)
2. Reduce regulations
3. Tort reform
Do these three (3) simple things, and jobs will return. Omit any of these, and continue to watch this nation's fortunes decline.
The other aspect of this dynamic is that buyers have a choice. I buy Made in USA whenever I can, and I pay mightily for it at times. Most Americans are living in cognitive dissonance, arguing for BHO to bring jobs back here, but personally unwilling to pay more for the items those workers would make. A nation of hypcrites does not deserve to prosper.
@Ollie Prophet: The World Bank rates the U.S. as the fourth easiest country in the world to do business. China is rated 91st out of 187. You can argue that the U.S. could improve its business climate to become number one on the list, but the fact remains that companies are leaving the U.S. for a country with a much worse business climate. The main reason is -- as you correctly point out in the beginning of your comment -- the far lower living standard of Chinese workers.
Companies already have $$ they aren't investing in jobs - and it's not because of taxes! It is because there are no customers! Get the customers back in paychecks and they'll begin to buy again (it was the consumer drawback that started the recession).
The difference between no regulations (right wing crazies) and all regulations (left wing nuts) - just to insult both flanks ;-) SHOULD be enough to discourage the lazy thinkers that can only imagine a rapacious activity and the timorous who won't admit do-nothing is only a short-term solution. THEN - encourage the company and all activists with a stake in the area to back up all environmental concern, either with proof or money.
It's an open economy. Those who will work by the rules get the profit, those who grumble at the sidelines about 'strangling regulations' get to bribe their favorite politician to stack the rules their way. The U.S. doesn't owe anyone the right to plunder our resources.
Oh, yeah - and tort reform will protect the sloppy from payouts for recklessness. Torts are rigorously examined in courts; this ain't a one-armed bandit with huge jackpots.
Dave, do you really think those Chinese factories are manually reworking a lot of defective iPhones & iPads from poor workmanship? I'm not even sure that's possible, let alone practical. Poor build quality from China is not something I hear a lot of complaints about. (But I did hear a lot of squaking about the US designed iPhone antenna : )
If you have ever tried to start up a small company (actually tiny in my case) that was too small to attract help or incentives from government, you would never think that regulation here is not a problem. It would have been much easier to bribe a government worker in China to grant the permits needed than to go through what I did here. This in addition to the liability situation. One lawsuit (even if unfounded and unsuccessful) would be fatal to companies the size I am talking about. Mega companies will never get us out of the situation we are in anyway.
@Tcrook: I don't have any expertise about electronic components, but when it comes to mechanical components sourced from China, I'd say that poor quality and manual rework are serious problems.
As far as obstacles to starting small businesses, here is what Business Week has to say about starting a small business in China: "Registering a company is typically a 25- to 30-step process, the nation's legal system is unreliable, and government regulations are vague and often subject to bureaucratic whims. [...] For most multinationals, all of this is simply part of the cost of doing business in China. Big companies can afford to pour a continual stream of capital and manpower into their China operations until they finally achieve profitability. But the little guys have no such luxury."
Your mention of bribery actually reinforces my point. If you need to violate criminal laws and face potentially severe penalties (including death) in order to do business, I'd hardly say the business environment is good.
As far as small business in the U.S. is concerned, it's true that the rate of small business employment is significantly lower here than in other industrialized countries. Even though over half (51.2%) of all manufacturing jobs in the U.S. are in companies with fewer than 500 employees, this is low compared to Sweden (56.7%), Denmark (65%), or Norway (72.2%). These countries have higher effective tax rates and more regulation than the U.S.
The report which I've linked to attributes the relatively low rate of small business employment to the lack of government-subsidized health care in the U.S., but I don't necessarily agree with this. Some of the countries with the highest rates of small business employment (Greece, Portugal, Spain, and Italy) are hardly economic role models. Although it's undoubtedly true that small businesses are important, too large a proportion of small businesses may be a sign of trouble: if the economy is working well, more small businesses should be growing into mid-sized businesses.
My point is not that the U.S. is perfect -- far from it -- simply that it's a better environment for business than China or many other countries, and therefore that the reasons why companies go to China have nothing to do with the business environment.
I'd add to the list of negatives a long lead time. Which translates into non-flexibility. A quality improvement or cost savings can't be put into affect as soon because of the weeks or months worth of inventory.
Dave, The half dozen machine tools in my shop are all Chinese. They did not require rework but admitedly are less precision than those made by Bridgeport. The thing is, I could not have afforded to buy those American tools and start my business. 15 years later those Chinese and Taiwan tools are still doing the job.
I am turning the tables on Asia though. The American products I make are lower in cost than what is available anywhere else. I still think the US vs Them picture is the wrong way to look at it.
@Tcrook: I agree that an "us vs. them" attitude can be counterproductive. I just wanted to point out the fallacy of thinking that regulations are driving U.S. companies to go to China. Some regulations can and do hurt business, but the Chinese government's level of intervention in the economy dwarfs that of the U.S, so an aversion to regulation is clearly not the driving force. As your example suggests, the real driving force is access to cheap goods and services produced by cheap labor.
As your example also shows, the idea that the U.S. can't compete with China in manufacturing is also false. In spite of our flaws, I think we actually have a lot of good things going for us. With smart government policy, combined with private initiative and technological innovation, we can have a bright future.
@Dave, Yeah, I agree with your accessment of doing business in China although I bet the Chinese pave the way for companies like Foxcon. It's no doubt a nightmare for little startups.
My point was that it's also harder for small startups here. And unlike very large companies, small startups in the US would not even THINK of locating in China. So which should we be doing more to encourage?
Dave Palmer you would be pleased at the last 10 years record, implementation, and use of Grant money at several of our Community Colleges. Some Universities as stated in your last paragraph are very heavy on foreign BORN students. There is hope, however!
In TX at Collin County Community College Distric under direction of (origionally) Dean Ann Beheler a new type of engineering school was started. It advocated Convergence Technology which has today populated an entire new campus, has a student entrance backlog and post graduate EMPLOYED engineer applications for career direction retraing. So successful is the program it has expanded coast to coast and Ann B. now is offically an employee of Orange County CA.
The organization of the School was unique. A team of 15 educators and 5 large/5 medium/5 small assorted advisory technical corporations met over the period of several months to design the program. Today, ten years latter, is has most of the same advisory board members and highly reconized support of the engineering community.
Some key people involved at CCCCD also have applied lessons learned to benefit larger institutions via ACE at UT Dallas to add a Systems Engineering BS up course of studies to the well established Eric Johnson School of Engineering and Computer Sciences. These programs have been so successful that a verysenior chinese born multi-degreed and talented, was induced to return to China to build one their universities as its' president.
These foreign buy-in actions of US trained educational professionals coupled with our governments unnessary enforcement of entrance application acceptance based on "diversity" over weighting, especially as it applys to grad stundents, needs to be limited and favor native americans in my opinion. Conversly this could be useful overseas for America corporations.
The US Federal government has no business investing taxpayers' money in business ventures. Last week, lithium-ion battery maker Ener1 filed for bankruptcy. The company, financed with a $55 million grant from the Department of Energy, burned through enough of this money and money from the investors to rack up a loss in 2010 of $165 million. As far as I can tell, nothing in the Constitution gives government the power to load money to, or guarantee loans to, businesses. Venture-capital groups invest their own money in high-risk ventures and don't commit taxpayers to paying for their losses due to poor investment choices. Government should stay out of the business of businesses and let companies and their private investors sink or swim on their own. --Jon Titus
For more than two years, every month, US manufacturing has increased. We are making more in the US every month. This article has a certain "the US is useless when it comes to manufacturing and doesn't really make anything anymore" attitude that I find rather arrogant and uninformed. Thank you Apple execs for sounding the gun officially starting the race to the bottom. At least we will all have cheap iphones. Apple execs should go live in the barracks like slaves, I prefer to live with my family, thank you.
When I had to ship the automated manufacturing lines that my engineers and I developed to other countries, first I was told we were saving direct labor. Then I was told the engineers and the assembly workers over there were way harder workers than Americans. Not true. When I arrived in this unnamed country, I found out the real reason. Their engineers made 5% of what my American engineers made. If you make 5% of what the American makes, my company can hire 4 of you for what 1/5 of me costs. My company execs are of course modern business geniuses. Four of their guys have some chance to outengineer my guy or me. One of them has zero chance to outengineer my guy or me.
What manufacturer wouldn't want free manufacturing facilities, free engineers, production workers getting slave wages and working in slave conditions, coupled with huge scale up and down exercises with no economic consequences? I always had to deal with tradeoffs, these guys don't seem to have that burden. What arrogance these Apple execs show by stating that America just can't get it done. I read a similar article a few months ago marvelling at the scale of Chinese sock manufacturing, how we could never do that in the US.
I thought I lived in the country that won World War II, invented modern electronics, and sent a man to the moon. We are now unable to build a tall and strong enough levee to keep New Orleans from going under water, we are unable to make socks, and unable to make iphones and ipads? Are you kidding me? I find it interesting how all of these large product companies who like to wring their hands at the unavailability of American engineers and technicians are the same ones who laid off the last generation of American engineers and technicians. They are actually wringing their hands that Americans aren't available for slave wages. Americans are available for American middle class wages but they don't want to spend that.
One thing that could begin to turn this situation around overnight is a substantial tariff on imported goods. There, I said it: the "T" word.
Adherents to free-market religion are no doubt clutching their pearls at this moment. But the U.S. blatantly and unapologetically used tariffs to jump-start our industrial economy in the 19th century (and it worked brilliantly). As Oxford economist Ha-Joon Chang has pointed out, this was before we hypocritically began lecturing other developing countries about the evils of protectionism.
Let's call the U.S. a "redeveloping" country instead of a "developing" one, and get busy.
I have to confess that I am as guilty as the big corporations - my wife and I buy from China and Taiwan. We utilize machine shops and PC board houses in China and now have our own buyer in Nanjing. For now this is the least expensive way for us to start a cottage-based business. My background is electrical engineering and I have always had a drive to manufacture our own products. The reason is that I can invest my time in the design of products and receive a return on my invested time several fold compared to a fixed hourly billable rate.
Last year my wife and I invested half of our life savings in SMT assembly equipment (pick & place, automatic & manual stencil printers, IR reflow oven and air drier) in spite of news that large companies would never consider using us as a US-based manufacturer. The SMT line was made in China and I am not thrilled about that but it allowed us to get started without borrowing hundreds of thousands for better supported and more reliable equipment. The SMT line is located in our basement because the lease is very affordable: $0. One of the first visitors to our home facility said "I hope OSHA does not find out about this". I quickly invited our guest to go away. I was looking for a comment like wow, this looks great and not watch out for the government.
My wife and I have done away with niceties years ago to prepare for the creation of our business. We do not have cable, I drive a 16 year old car with 195k miles and my mower should have stopped working long ago. Our primary overhead is our mortgage and utilities. We don't owe money for cars or credit cards.
We do struggle with our small manufacturing business. We use licensed electricians, trucking companies to deliver equipment, etc. and not to leave out our accountant who provides legal advice on what is acceptable this year to keep us in a low-risk tax audit category. It has been and still is very frustrating. My specialty is design and NOT taxes, business management or law. But I do need to be somewhat of an expert in all of these areas to minimize lawsuits, audits and visits from OSHA/EPA to invite themselves into our basement business. Despite believing that I can do anything, I cringe at the thought of hiring employees for all of HR red tape and legal administration it comes with. All of this is needed to support me, a part-time start up designer and fledgling manufacturer, a single person. I know this is in our future so we still forge on. We are looking to invest in better SMT equipment and a precision PC board manufacturing line with the intent of being competitive in today's world market.
So what is my message? Do the best you can to be world competitive and not reliant on foreign labor and goods. Enacting more legislation to disrupt or tax international trade is not the solution.
SMTbuilder, Thanks for sharing your story. It sounds almost identical to my own and supports my suspicion that there is enormous potential in small cottage industries if only the legal and regulatory environment was more suitable.
Because of the factors you pointed out, I have no desire to expand beyond the 5 employees (all family members) that I have now. I make less than I did at one of the largest defense industry contractors but the job satisfaction and other benefits means I've never looked back.
We made a serious mistake when we did not allow Hong Kong citizens to immigrate to the US. China gained loads of experience and tech knowledge in an instant which allowed them to build and man plants right away. Now we have an unusual situation and we just can't get out of it. Cheap technology is the only thing keeping inflation from getting out of hand. A false economy indeed but what can you do? If we had not exported all of our technology to China inflation would have gone up , interest rates would have gone up. Is that so bad? Cheap money would not have driven the prices of homes out of the roof perhaps. But the worst of it is that we are supporting a communist country which has nukes and wants to take back Taiwan. Now the Chineese can bring our and other countries to a stand still by stopping their exports any time they think it is necessary to get what they want. Seems like the tail wagging the dog. A solution could be to gradually move some operations to the US and Mexico as contracts run out. The jobs in Mexico, we used to produce lots of integrated circuits there and other stuff, would help our immigration problems perhaps and keep some of the prices down somewhat as well as providing employment of US managers and engineers in those plants. Help our neighbors and ourselves.
If you've weighed in here, please take our Quick Poll on "Should the government support the return of manufacturing jobs to the US?" It's on the lower right side of the Design News home page. Results so far are here. The answer options are:
a) Yes, by funding research, education, and tax credits
b) Yes, in principle, but without spending taxpayer money
c) No, the government shouldn't pick winners and losers
Virtually every great advancement in history has had some sort of governmental backing.
If the banks can't see their way to help and are more interested in distributing the monies as bonuses to their top echelon then the government has to step in as the bank of last resort.
And it's awfully obvious that the great successes at Chrysler and GM have quickly benefitted from "gonvernment interference".
Jefferson used governmental power to secure some great advances.
The firking accountant president (beancounter) of Chrysler the first time around did not know what he was doing and ran it into the ground. So in came Iacocca who turned it around with Governmental assistance.
Lutz is right about Iacocca establishing confidence in the public domain. Sergio is doing it where the German's from Mercedes couldn't.
It's crap that we are being regulated to death. And it is true that foreign kids do get preferential treatment and then turn against us in a most condescending and demeaning way.
The great American Standards that technological groups have come up with are distributing themselves world wide and I am not talking about toilets.
Ever ride a Mitsubishi elevator? Nice acceleration curve. They took it farther.
How about the Washers and Dryers at Best Buy? LG and Samsung, stuff developed here but vastly improved over there because the top execs here were fat and sassy and remain so.
Lots of places to take potshots at, not just the government.
And excellence here means work here. Anybody want work here?
I agree with a lot of what everyone here has to say. It is important that we do reverse unemployment and get jobs back for many Americans. The task though is no longer bringing back jobs to America, the way we have structured the global marketplace today could simply not support it. Instead we must create new jobs to support and give structure to the jobs we have moved oversees. Yes, bringing back jobs would result in a few more Americans getting back jobs, but if we can build a stronger support network for the future, we will have created a strong enough infrastruture if or when jobs are to come back to America.
By the way, it is amazing the way everyone discusses things here unlike yahoo and other ridiculous sites that simply post racist, religious, and outrageous things that are most likely due to a lack of education.
The US can't compete on a cheap mass production basis. I think we should instead be concentrating on high tech, unique products that can't be manufactured cheaper elsewhere. Also, we should be emphasising our attributes, precision manufacturing, instant feedback, short lead times and the creation of jobs in the US.
I disagree that the U.S cannot compete on the mass production platforms. The only thing worse than a low labor cost production line making one mistake is one that makes thousands of the same mistake a day because they do not have the knowledge to correct the issue. I really do believe American pride in workmanship can compete. Now what I don't know is if there is a CEO with the guts to try it.
@Jmiller, The United States actually is becoming competitive again, due to a number of factors. Asian labor is becoming more expensive, U.S. plants are becoming efficient, and energy costs are increasing the price of shipping. Thus there is the beginning of a trend to manufacture goods close to their markets.
I hope that as companies move back American manufacturers understand what drove jobs overseas in the first place. The only thing that stinks more than making one mistake is not learning from it and making the mistake again.
In the case of manufacturing, it will be interesting to see if unions are part of the plan when jobs come back to the U.S. Or will manufacturers take such good care of their employees that unions won't really be necessary.
Yes, why did so many manufacturers move their production to China? I've talked with component distributors who helped their manufacturing customers shift to China. While it's hard to believe, they insist many of these manufacturers did not gain from the move. The distributor executives said it was a follow-the-crowd mentality that sent so much U.S. manufacturing overseas.
And I think final product manufacturers drove companies overseas because of all of their initiatives to purchase companents from "low cost" countries. I wish they would have included the "low qualiy" part in that country's label. But the didn't and so many companies have gone overseas getting components that do not meet the quality requirements that we have grown accustomed to. Rather frustrating.
You know the odd thing, Jmiller, is that many of the manufacturers were still buying their components from the same suppliers they used when their manufacturing was done in North America. The major component suppliers shipped product to Asia and managed inventory on site. There wasn't much of a shift to local components. That had to eat into profits, shipping components to Asia, then shipping finished product back, just for the cheap labor.
I hope that as companies move back American manufacturers understand what drove jobs overseas in the first place. The only thing that stinks more than making one mistake is not learning from it and making the mistake again.
In the case of manufacturing, it will be interesting to see if unions are part of the plan when jobs come back to the U.S. Or will manufacturers take such good care of their employees that unions won't really be necessary.
A great deal of the problem is a blind rush to the bottom by the greedy who are only chasing short-term profits. This does not mean we should only build unique luxury devces, it means we should put quality into our product and its sales will support the manufacturing effort. Look at Bic lighters, for example. Best almost-free product around, #1 lighter worldwide. I can buy one for a buck anywhere, and they are made in factories in France and the USA.
Another flaw in short-sighted rushing to the lowest common denominator is in tech investment. If you are ever around Dr. James Truchard of NI, ask him how much pressure he had to overcome from money people when he was devloping LabView, an industry-leading product that would have never existed had money people made the decisions about its development. That product is also made in the USA, BTW. There are many other examples, but I think you get my point.
You make a good point about the eye on short-term profits and the pressure NI felt while working on a long-term project. For public companies, the pressure is on quarterly performance. And if a CEO and CFO do not focus on the short term, they get threatened with removal.
Gorski, what do you call the iPhone? Is it not high tech, unique?? The real money in any endeavour is volume. That's why sports stars, movie personalities and large manufacturers make lots of money.
One of my uncles has a factory in New England. He had a product he had designed himself. When that whole category went out of favor he went to contract machining with a couple of CNC machines. It kept him afloat. I will bet, though, that I made more working for large company selling software. When he found an overseas market for his orignal product tough, he started that back up. What we need to do is to recapture the market for high capacity manufacturing.
Yes, similar products are available and cheaper from off-shore. But, when a customer is 'educated' about the differences between import quality and domestic, we are able to make a nice profit while operating a safe, environmentally responsible manufacturing plant. AND, our workers enjoy good wages, including retirement and health-care benefits. As the old adage goes, sell on price, and the customer is yours only until the next low price; sell on quality, and you have a customer for life!
It is the lack of quality that is bringing at least some production back to the U.S. But the biggest opportunity for U.S. manufacturers seems to be in ramping up to higher volume production where they can compete in terms of flexibility and higher quality. Still, the cost of pulling up stakes in Asia may be prohibitively high or simply impractical for many.
The manufacturing move to Asia did not happen overnight and as the dynamics of the markets change - wages, transportation, the environment, technology, timing - opportunities for US manufacturers, at all levels, will become available.
free trade or globalization with a trading partner, china, who pay their slaves 1 dollar for every 38 dollars an american worker makes, is slavery, unconstututional but through lobbie bribery it is overlooked as our manufacturing infrastructure is stolen, and small family bisinesses closed in the face of slave goods super stores, stealing the accrued taxation required to maintian our infrastructure---our lawmakers permitting the end of an independent america for the cash in their sleazy pockets
he is inelgible, he listed himself as indonesian when he entered occidental, there is no real evidence proving his place of birth in the USA. Most states have laws, which criminalize homosexuality, he has after the election admitted he is a homosexual, he has committed many acts of treason, treason should be punished, ruling our nation by executive order, ignoring the elected bodies is against the constitution, the number of deaths he is responsible for is continuing to mount...we don't need a criminal as presidentespecially one who absolutely does not understand economics are is actually trying to destroy our nation. if he et al commit anothe relection fraud there will be civil war, or worse
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