 "US firms 'reshore' manufacturing as costs rise in China, India")
New York: A growing number of American companies are moving their manufacturing back to the US, in a strategy known as “reshoring.” Master Lock, in Milwaukee, landed a visit from President Barack Obama after bringing manufacturing jobs back from China.
Allison Transmission, a former General Motors unit, shifted the manufacturing of double disc grinders from an Indian manufacturer in Chennai to a factory in the US. Whirlpool is now building a $200 million plant in Tennessee rather than sending 1,500 jobs overseas.
What’s the main driver behind the renaissance in American manufacturing? Rising production costs in countries like China, India and other developing countries, including labor and energy costs, is making manufacturing in the US less expensive for American companies.
[caption id=“attachment_678614” align=“alignleft” width=“380”]  Rethink’s user-friendly $22,000 Baxter robot helps US manufacturers compete in a global economy. AP[/caption]
The financial crisis reduced real wages in US manufacturing which have declined by 2.2 percent since 2005. By contrast, pay for the average Chinese factory worker shot up to 19 percent a year between 2005 and 2010. The US is also emerging as an energy superpower thanks to its shale oil and gas revolution. The glut of inexpensive natural gas from use of hydraulic fracturing, or fracking, has driven down energy costs for US manufacturers.
Last year, Boston Consulting Group (BCG), surveyed 106 companies with annual sales of $1 billion or more and found that 37 percent planned to reshore or were “actively considering” it. Of the biggest firms, with sales above $10 billion, 48 percent came out as reshorers. Manufacturing and supporting jobs are tipped to grow by 5 million over the next decade. BCG previously projected a gain of 2 to 3 million jobs by 2020.
Impact Shorts
More ShortsThe Reshoring Initiative, an organization that promotes US manufacturing, says 50,000 jobs have come back to America over the past three years. General Electric and Caterpillar Inc are among the large US firms known to have “reshored” some manufacturing to America.
“It’s more than a trickle,” Harry Moser, president of the Reshoring Initiative, said of the jobs returning from places like China.
“But we’ll admit that it’s less than a torrent.”
The reshoring movement has to be kept in proportion. Most of the US multinationals involved are bringing back only some of their production. The Times of India reported that Ford Motor would be moving some work from Japan, Mexico and India to the US. Despite shifting auto work involving steel forging from India back to America, Ford India will continue to build its $1 billion factory in Sanand in Gujarat which will produce 2,40,000 vehicles and 2,70,000 engines a year. The first vehicles and engines are due to come off the Gujarat factory line in 2014.
Some foreign companies have also been stepping up their US manufacturing. Japan’s Yaskawa Electric plans to make a new line of electrical motor controls for heating and ventilation equipment at its plant in Buffalo, rather than in China. French airliner, Airbus, has committed to building its first factory on US soil.
“Against all odds, our nation held the global lead over China in manufacturing output until 2009. What’s extraordinary is that our aggregate output remains competitive with China’s, even though the sector constitutes only 10 percent of our economy compared to nearly 40 percent of theirs,” says Stanford Economics professor Ro Khanna in his book “Entrepreneurial Nation.''
“We are a global leader, in part, because our labor productivity (the value that a worker produces annually) is more than six times as large as China’s or India’s and significantly larger than Japan’s or Germany’s. Strong productivity has enabled the United States to increase its manufacturing output over the past 30 years to a greater extent than any other developed nation, more than doubling in size,” adds the book.
Cheaper and more user-friendly robots are currently spreading into factories around the world, and they cost just the same in America as they do in China or India. Rethink’s $22,000 Baxter robot works at a plant outside Philadelphia helping to stack Super Mario toys and send them to China.
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