“We can produce them better, faster and cheaper,” said Bison Chairman Ronald Bullock.
While data is scant, manufacturing experts say the number of companies shifting production to the U.S. will increase over the next five years as Chinese wages continue to increase at the same time transportation costs soar. A Boston Consulting Group report released last week predicts that by 2015 it will become cheaper to produce certain products in the U.S. that are sold to American consumers. The products, the report said, would span a half-dozen industries and include everything from machinery to electronics to furniture.
According to the Boston Consulting report, the shift to U.S. manufacturing, combined with an increase in exports due to improved U.S. competitiveness, will create 2 million to 3 million jobs. President Barack Obama is seeking to accelerate the shift by proposing a 20 percent income tax credit for companies that bring jobs back to the U.S.
Reshoring, as the move back to the U.S. is called, is the opposite of what had been a decade-long trend that accelerated in 2001 when China became a member of the World Trade Organization.
“China was an incredible deal for everybody because the government made it easy to put a plant there,” said Harold Sirkin, co-author of the Boston Consulting report “U.S. Manufacturing Nears the Tipping Point: Which Industries, Why, and How Much?”
Companies looking to cut costs were lured into outsourcing parts production to China or building plants. Attractions included cheap land, a fixed currency, financial incentives, government-funded infrastructure improvements and wages of less than $1 per hour, according to the report.
“Those wages that were dirt cheap grew by 15 to 20 percent per year,” Sirkin said, adding that as labor costs grew, companies were saddled by rising transportation costs and higher utility rates as well as costs related to supply disruptions and quality issues. After a while, some companies began to take note that real manufacturing costs in China started to get closer to those in the U.S.
Moreover, in the last decade U.S. companies have found ways to make products faster and with higher quality, mainly through improved automation. At the same time, U.S. wages have declined or have gone up only moderately, making homegrown companies more competitive globally.
For example, the most recent contract between Ford Motor Co. and the United Auto Workers allows the company to hire entry-level workers for $15.78 an hour, which is about half of what veteran union workers are paid. As a result, Ford committed to add 5,750 jobs. In total, Ford plans to add 12,000 jobs by 2015. A portion of those jobs will be in-sourced from Mexico, China and Japan.
Moving production to the U.S. isn’t always so easy, however. Jeff Bollengier, president and co-founder of California-based Simple Wave LLC, which makes a nonspill bowl called CaliBowl, said for his company it meant having to ship machines across the ocean.
“There were major delays in getting our tools crated up and moved and dealing delicately with the manufacturers so that we didn’t run into a situation where we couldn’t get our tools out of China,” Bollengier said. “We heard some nightmares of what could happen, like sometimes your tools could be cracked.”
The move was completed in October, but his plant wasn’t fully operational until late February — two months later than expected. In the interim, the company lost customers because it couldn’t fill orders while the tools were being shipped. Sales plummeted, Bollengier said.
“You take a big hit to do the right thing,” he said, adding that the company’s decision to shift production followed encouragement from distributors. “They were saying they would go gangbusters for this if the bowls were USA,” Bollengier said. “The bulk of our business is international, and consumers around the world trust American-made.”
Some companies have moved back to the U.S. because of Chinese firms ripping off their designs.
That’s the case for Peerless Industries Inc., which decided in 2009 to buy equipment to make in-house its aluminum mounts that are used to fix flat-panel televisions to walls. The move followed nearly a decade of dealing with Chinese companies copying their products, said Michael Campagna, the company’s president and chief operating officer.
To make the shift, Peerless moved in 2010 from Melrose Park to a bigger plant in Aurora and spent a year learning how to make the mounts. The state helped with the move by pledging $2.9 million in training funds and tax credits over the next decade. The company promised Illinois it would retain 253 workers and create at least 85 full-time jobs.
Campagna said the company retained the workers it agreed to. But as a result of the slow economy, Peerless hasn’t hired all the full-time workers it expected to add. Its 480-person workforce includes 170 temporary workers.
If sales rise to the point where the Aurora plant can’t meet demand, Campagna said he would expand the company’s manufacturing plant in Mexico rather than increase production in the U.S. or return to China. “China is not as competitive as it was 5 to 10 years ago,” he said, adding that Mexico, once again, seems more attractive.
Experts say the big caveat in reshoring is that some companies will still find it much cheaper to produce products in Asia geared for that market. And, to grow market share in Asia, some companies will have to make products there or align themselves with Asian manufacturers.
Josh Bivens, an economist at the Economic Policy Institute, a labor-oriented think tank based in Washington, also notes that the number of companies shifting production to the U.S. is not big enough to be considered a real trend.
Moreover, the U.S. manufacturing base has shrunk significantly, and some experts say some work can’t be brought back because remaining plants can’t take on production or workforce skills are lacking.
Bruce Kaminstein, founder and chief executive of Casabella, a Congress, N.Y.-based designer of mops, brushes and bakeware, said it’s difficult to find U.S. plants to manufacture its items.
“I try to make products here in the U.S., and there are no factories around to do it with,” Kaminstein said. “Any time there’s some assembly work, there’s absolutely no factories to make it.”
Dan Swinney, executive director of the Chicago Manufacturing Renaissance Council, said the U.S. needs to put a lot more effort into training people so they can do the work. “As a country, manufacturing is fundamental to the future. We still have a competitive advantage in advanced manufacturing. We ought to recognize that instead of denying it.”
Chicago officials used to have a perception that there was no future in manufacturing, but there is now a desire to be helpful and be part of the conversation about careers in the industry and the quality of the
workforce, Swinney said.
To try to close the gap in Illinois, manufacturers are partnering with the state and manufacturing associations to improve education in science, technology, engineering and mathematics, which are key to landing jobs in manufacturing.
Still, an estimated 600,000 manufacturing jobs have gone unfilled nationwide, according to a survey by Deloitte and The Manufacturing Institute published last year. Manufacturers expect the shortage to worsen in the next three to five years as older workers retire.
Bullock, Bison’s chairman, said his company decided to buy motors from a Chinese supplier to keep prices low, but he acknowledged he was never happy with the quality.
In the mid-2000s Bullock started to reconsider his decision to move production overseas. He hired engineers and worked on a plan to slowly shift production to the St. Charles plant. The company hired 10 workers, Bullock said, and began producing half the motors in the U.S. and half in China. He lost a few customers, but they are talking to him again.
Bullock is passionate about his products. As he led a reporter on a tour of his St. Charles plant, he grabbed two round steel parts a bit smaller than a jar lid, calling the raw one an “ugly duckling” and the one transformed into a gear “a beautiful swan.”
Bison makes about 350,000 gear motors a year, Bullock said. Sales dwindled in 2009, but he said his company caught up to 2008 levels in 2010. Last year, sales increased by about 20 percent to close to $100 million.
Aside from pride in selling an American product, Martin Swarbrick, Bison’s president and CEO, said making motors in-house allows him to quickly respond to changes in demand. Another upside: He can make design changes within weeks instead of months, as was the case with the Chinese supplier.
“The communication was a lot more difficult because you had three to four points of communication all the way to China and back,” Swarbrick said.
Alejandra Cancino is a Tribune reporter, [email protected]
Cheryl V. Jackson is a freelance writer, Twitter @WriterAlejandra
4 Lessons from the U.S. Manufacturing Revival
by MAM TeamOver the last two decades, thousands of U.S. manufacturers have set up overseas operations meant to take advantage of cheap foreign labor and permissive regulations. The offshoring trend has eliminated millions of American jobs and generated a lot of political pressure for new policies that protect the ones that are still available. President Obama has made a stronger manufacturing sector the centerpiece of his proposal for “an economy built to last.”
A combination of factors is now making the United States a far more attractive place to build factories and assemble products. For one thing, wages are quickly rising in China and other overseas manufacturing hubs, narrowing the wage gap that once made those countries so appealing. At the same time, U.S. manufacturers have become extremely efficient, largely because they’ve had to adapt in order to remain competitive. A relatively weak U.S. dollar (sorry, Rick Perry) draws foreign firms to the United States, since it can be cheaper to build stuff here than in their home countries. And American consumers, though pinched by the recent recession, remain an economic power worth sidling up to.
The net result may be a manufacturing boom that reverses much of the outsourcing of the last 20 years. Boston Consulting Group predicts an upturn that will create two-to-three-million new jobs by 2020, add between $20 billion and $55 billion to annual economic output and bring several industries that have migrated overseas back home to America. “The tide is starting to turn,” BCG analysts wrote in a recent report. “The implications are likely to be profound.” Companies already planning to move overseas production back to the United States include NCR, Ford, Coleman and All-Clad, along with many smaller firms. Few economists or business leaders anticipated this imminent revival, which makes it worth plumbing for insights. Here are four lessons from manufacturing’s unexpected change of fortune:
Government policies are a minor factor. The weak dollar, which is partly a byproduct of the Federal Reserve’s low interest rate policy, has helped lure more foreign firms to the United States. But other than that, it’s mostly market forces—not Washington policies—that are helping bring back the industrial sector. That doesn’t mean Washington should sit on its hands. But it suggests that instead of trying to rebuild the economy with highly ambitious policies—which often can’t get through a gauntlet of opposition in Congress anyway—Washington’s efforts would bear more fruit if they complement positive trends already underway. This isn’t a liberal or conservative view. Rather, it’s pragmatic: First do no harm, then see if assistance from the government can check negative trends or amplify positive ones.
[See why the party is ending for the rich.]
Cost cutting is a major factor. And “cost cutting” means the pay and benefit reductions that have been painful for many blue-collar workers. In a recent report heralding a new “industrial revolution,” Bank of America Merrill Lynch pointed out that since peaking in the 1980s, U.S. labor costs have fallen by about 50 percent, compared to costs in other developed nations. That has come from difficult concessions by unions, the rise of non-union factories, and new technology that has reduced the need for workers. Yet it has also allowed the United States to evolve from an overpriced market to a highly competitive one.
That doesn’t mean pay cuts and reduced living standards are a necessity in the manufacturing sector. But it does mean that old sinecures like automatic pay raises and guaranteed minimum pay levels can hamper competitiveness, and aren’t healthy in the long run.
[See why women will rock the economic recovery.]
There’s a strong upside to globalization. Stephen Gray, CEO of Gray Construction in Lexington, Kentucky, says the outlook for the next 12 to 24 months is the strongest it’s been in years. One of the biggest reasons is an influx of foreign firms such as Siemens, Volkswagen and Hyundai. “I see continuing opportunity,” he says. “In the construction market, we are seeing a definite trend of foreign companies locating to the United States.” Data backs that up. Merrill Lynch reports that the United States is still the world’s top recipient of foreign direct investment, by far. And the latest numbers show FDI in manufacturing rising by double digits.
Many Americans have bemoaned globalization, since it seemed to suck jobs out of the United States with little tangible benefit. But the same market forces have made U.S. manufacturing more efficient and set the stage for the return of sustainable, high-paying blue-collar jobs.
America’s demise is greatly exaggerated. The U.S. economy, including manufacturing, still faces a lot of challenges. America’s infrastructure, for instance, is old and creaky and ranks far below average, which is a competitive disadvantage. But many people underestimate the resilience of the U.S. economy, and its ability to heal itself. Sometimes it takes longer than anybody would like, but the gloom in Washington doesn’t always extend to America’s towns and factories. Now if only we could make Washington more productive.
Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success, to be published in May.
Follow him on Twitter: @rickjnewman
Why the Party Is Ending for the Rich
by MAM TeamSince 2001, high earners have enjoyed the best of all worlds. Tax rates at the top of the income ladder have drifted down to the lowest levels since World War II. Incomes have stagnated for the middle class, but they’ve continued to rise for the wealthy. And recent policies meant to combat the recession and the 2008 financial crisis have benefited the wealthy more than others.
President Obama has been hammering at this theme since his first presidential campaign in 2008, arguing that taxes should rise for those who earn more than $250,000. His latest plan involves the “Buffett Rule,” which would set a minimum effective tax rate of about 30 percent for those with incomes of $1 million or more, who usually pay a lower rate.
It’s hardly surprising that a Democratic president would push for higher taxes on the wealthy. But look what else is happening: Obama’s most likely opponent in this year’s election, Mitt Romney, has suggested that he’d reduce or eliminate some generous tax breaks for the wealthy, as part of his plan to fix Washington’s broken finances. From the perspective of the person paying the taxes, a tax hike and a reduced tax deduction are effectively the same thing, since both lower your after-tax income.
Romney made those suggestions during a speech in front of a private audience with supporters, which the general public wasn’t supposed to be privy to. His campaign is downplaying Romney’s suggestions, saying the candidate was just free associating during a candid Q&A. But Romney, like anybody else who understands the government’s messed-up finances, knows that a huge reckoning is coming, and it’s inevitable that the wealthy are going to have to pay more.
Simple math dictates that Washington’s debt-fueled spending binge of the last decade has to end. If Washington doesn’t pre-emptively reduce the nation’s $15 trillion debt, global financial markets will force it to happen, in a messy and disruptive way. Any politician who says it can be done by simply raising taxes on the wealthy, or cutting spending, is lying. The size of the problem is so large that fixing it will require a combination of higher taxes and reduced government benefits that will affect most Americans.
Since it’s an election year, no candidate is going to tell voters the truth about what really needs to be done. It’s even less likely that Congress will pass any meaningful new laws this year to address the problem. But the starter proposals floated by both Obama and Romney signal a dawning awareness that Washington’s budget woes need to be addressed soon.
Romney, of course, has proposed a tax cut for most Americans, without explaining how he would deal with the even deeper hole that it would put Washington in. But his not-ready-for-prime-time remarks show that he has at least sketched out a few ideas on a cocktail napkin. As Romney explained in the “off-the-record” session with supporters, he’d consider eliminating the mortgage-interest deduction on second homes and limiting the deductibility of property taxes for the wealthy. He also said he’d shrink the Education Department and perhaps eliminate the Dept. of Housing and Urban Development.
Conservatives may howl, but Romney would actually enhance his credibility if he officially proposed some tangible ideas for raising government revenue. The idea that simply cutting taxes will magically make the economy grow and plug the holes in Washington’s finances has been thoroughly disproved. George W. Bush tried that with his 2001 and 2003 tax cuts, and the result was hardly utopian free enterprise; instead, it was a bubble-and-bust cycle culminating in a deep recession.
Liberals worry that a President Romney, possibly backed by a Republican Congress, would offer the rich even more breaks, while loading Washington’s debt burden onto the already-aching backs of working people. But with tension already building over income inequality and the outsized privileges of the one percent, it strains credulity that any politician or party could survive for long by overtly catering to the wealthy.
What is most likely to happen is a gradual increase in the overall tax burden, and a decline in government benefits, that works its way down the income scale. Taxes on the middle class almost certainly have to go up, since there’s not enough money at the top to solve the whole problem. But there is no way, politically, to raise the burden on middle-income earners unless the rich go first. Lucky for them, they’ve had a good 10 years to get ready for it.
Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success, to be published in May.
Follow him on Twitter: @rickjnewman
Why Women Will Rock the Economic Recovery
by MAM TeamMitt Romney generated buzz recently by claiming that women have accounted for 92.3 percent of all jobs lost since President Obama took office in 2009. That’s technically true, given the selective way Romney chose his numbers and the context he chose to leave out. But Romney’s startling factoid distorts the role women play in the economy and it especially misrepresents the strides women are likely to make over the next several years—which will significantly outpace the gains made by men.
But women tend to be better educated than men, with more relevant skills, which means economic power will continue to shift toward women, as it has been for the last 20 years. The unemployment rate for women, for example, is 8.1 percent, while it’s 8.3 percent for men. During the recession, the gap was much bigger, favoring women by more than two percentage points for many months. That overall trend is likely to persist throughout the recovery. “Women are uniquely positioned to take advantage of jobs in tomorrow’s growth industries,” Bank of America Merrill Lynch wrote in a recent report, “and tend to enjoy stronger earnings growth relative to men.”
The educational advantage women have is striking. Women will earn 55 percent of all bachelor’s degrees conferred this year, according to the Department of Education, plus 60 percent of all master’s degrees and 53 percent of all medical degrees. By 2020, those proportions are projected to be even higher. Men today earn a slightly higher portion of professional degrees, such as M.B.A.s, but women will outnumber men in those, too, by 2020.
Education is still highly correlated with future earnings, despite mitigating factors like the mounting debt load some graduates have. So women will get ahead simply by virtue of their knowledge and credentials. Women also tend to have training in fields projected to grow the most. Merrill Lynch points out that in the fields likely to add the most jobs through 2018—including nursing, other medical sectors, accountanting, and post-secondary teaching—women have a growing proportion and in many cases a majority of the jobs.
Many men, by contrast, work in fields that are shrinking or being dramatically transformed. Manufacturing has rebounded from the lowest points of the recession, for example, and some analysts think a healthy revival is under way. But if so, the growth will mostly entail a smaller number of technical jobs, with overall employment levels unlikely to ever return to the peaks of the 1990s. Construction could take a decade to recover. And while big Fortune 500 companies with legions of gray-flannel-suiters are generally healthy, they’re doing far more white-collar hiring overseas than here in the states.
Women still face barriers, such as the career disruption caused by having and raising kids, and pay that’s still not equal, despite years of gains. Yet women have become an economic force anyway, and policy decisions in Washington have had practically nothing to do with it. In a new book, The Richer Sex, journalist Liza Mundy predicts that women will soon be the primary breadwinners in the majority of U.S. families, a status that suggests women will increasingly dominate decisions over how money gets spent in America, and therefore how the whole economy evolves. That’s likely to happen no matter who’s president. But don’t tell Mitt Romney.
Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success, to be published in May.
Follow him on Twitter: @rickjnewman
San Francisco Subway System Adopts 'Buy American' Policy
by MAM TeamBy Claudia Cowan | Published April 18, 2012 | FoxNews.com
“We have the oldest cars that are currently running in the country,” says Dick Wieczorek, head of BART’S procurement department.
“We are instituting a ‘Buy American’ policy so that we can help put America back to work,” says BART board president John McPartland.
BART is the first transit agency in the nation to give preference to companies that manufacture most of their trains in the U.S., a move that makes it eligible for federal funds. At a recent press conference hailing the policy, California Congressman John Garamendi said BART’s choice was simple: “It can support our foreign competitors, or help create thousands of jobs for American workers and signal to the world that American manufacturing is back in business.”
Ironically, BART is looking at three foreign train makers, all with assembly plants in the eastern United States.
The one that uses the most American-made components, from engine parts to seat cushions, will stand a better chance of winning the lucrative bid.
“If somebody offers us more than 60 percent, in terms of domestic components, we can give them a bid preference in recognition of the fact that they may be spending more money to buy those U.S. components,” explains Wieczorek.
John Lohnas is among the 370,000 passengers who commute on BART each day. “Any time a company, especially a tax-supported organization, buys American-made products it’s wonderful,” he says.
But San Francisco economist James Forcier contends doing business in America isn’t always cheap, and the result will be higher fares for passengers.
“They [BART] already admit in their paperwork that the cost is going to be 5 percent to 10 percent greater as a result of this process than it would have been otherwise,” Fortier says. “Those dollars have to come from somewhere, and most likely they’re going to come from the riders.”
In the next few weeks, BART will decide which foreign company will be the winner of this ‘Buy American’ policy, with the first new trains rolling out by 2017.
Recent China Currency and Trade Moves ‘Significant’
by MAM TeamBy Howard Schneider for The Washington Post Business Sectionn
Published: April 18
Chinese leaders have moved to free up trading of their currency, the renminbi, and offered high-level criticism of state-owned banks. At the same time, China has seen a sharp reduction in the surplus its runs with the rest of the world in trade and financial flows.
Analysts at the International Monetary Fund have also been struck by the recent drop in China’s traditionally vast current account surplus with other countries. In a recent study, the IMF said that some of the factors behind this change are likely to be long-lasting and suggest that China is undergoing an economic evolution similar to those in other industrializing countries. For instance, as the Chinese economy develops, its products are becoming more expensive on world markets, reducing the country’s edge as an exporter.
“Domestic costs are rising, the costs of imported inputs have risen, and the effects on trade created by China’s accession to the [World Trade Organization] may be waning,” IMF analysts concluded.
China’s steps to revise its currency and other financial policies would mark a significant step in U.S.-China economic ties. U.S. officials have long complained that China’s practice of pegging the value of its currency to the dollar at an artificially low level gives Chinese exporters an unfair advantage while undercutting U.S. imports to the country.
But U.S. exports to China, whose growing affluence has increased the appetite for American goods, are now reaching record levels.
U.S. businesses, however, continue to cite a long list of problems and unmet expectations in China, and the IMF said some of the recent progress may be illusory. Part of the decline of China’s current account surplus, for example, can be traced to a rise in state spending on infrastructure and investments in manufacturing or other plants rather than an increase in household spending. An increase in household spending would indicate that power and money were shifting to individuals.
“What we care about is whether China is adopting policies to rebalance its domestic economy, and the answer is, not yet,” said Derek Scissors, a China analyst at the Heritage Foundation. Enriching Chinese households and opening its economy to more investment would, it is argued, be a boon to U.S. companies hoping to sell more goods there.
But if recent steps are followed by other changes, it could mark an important turn. Premier Wen Jiabao earlier this month signalled there may be more to come when he said the “monopoly” of state-owned banks needed to be dismantled so more capital could flow through private hands. The privatization and free movement of capital into and out of China has long been a goal of U.S. economic officials.
A change in the tenor of China-U.S. economic ties could be politically significant as well. Republican presidential candidates have been highly critical of China and of President Obama for not taking a more hard-line approach toward the rising Asian power.
While the administration has taken a number of high-profile steps to counter alleged unfair trading practices, it has also placed faith in quiet negotiations on core issues such as reform of a financial system that is geared to benefit state-owned companies at the expense of households and private businesses.
Geithner and other outside analysts have often argued that China would eventually change some of those policies out of self-interest. Maintaining a peg between the renminbi and the U.S. dollar may help exporters, for example, but it feeds inflation and makes it impossible to set monetary policy and interest rates independent of decisions made by the U.S. Federal Reserve.
Although change has been gradual, the renminbi has appreciated about 14 percent against the dollar since 2010, and last weekend Chinese officials said they would allow it to rise and fall even more freely. The country is loosening some of its strict controls on the movement of capital into and out of the country; allowing retail investors to begin buying and selling some types of investments through Hong Kong; and allowing the sale of renminbi-denominated bonds in London.
There have been other such flurries of activity — often timed around international meetings where China hoped to either appear conciliatory or avoid expected criticism. The recent widening of the Chinese currency’s trading band comes ahead of IMF meetings in Washington this week and just two weeks ahead of the latest high-level economic talks with the United States.
Become an Advocate for The Made in America Movement in Your Community
by MAM TeamLet’s continue this amazing momentum we have going on. Let’s continue to build upon what we already have. Let’s all join together and begin to build Made in America Movement communities throughout our Country.
How can YOU become an advocate of The Made in America Movement in your town/village/community? Let us know of your interest so we can get you started!
Summer is around the corner and I have some fantastic ideas! If anyone is on Twitter, follow our discussions via #TheMIAMovement hashtag.
Let’s continue to use our voices. Let’s make some noise. Let’s get LOUD. Let’s be HEARD!
Tool and Die Makers Desperately Casting for Workers
by MAM TeamBy Paul Davidson, for USA TODAY
But the strength of that revival could be threatened by the challenges facing a small and beleaguered sector of manufacturing that evokes images of a quainter, more labor-intensive era: the tool and die industry.
These skilled manufacturers are vital. They produce tools, dies and molds that other makers use to shape products — from car fenders and dashboards to shampoo bottles and cellphones.
“It’s unquestionably a problem” and could slow reshoring, says Harry Moser, founder of the Reshoring Initiative.
The past few years, companies such as General Electric, Caterpillar and Ford Motor have brought some production back to the U.S. They cite rising wages in China, overseas shipping costs and the need to hasten deliveries to U.S. customers.
That, along with soaring auto sales and the improving economy, has lifted tool and die makers. Last year, the number of workers in the sector jumped 7% to 98,000, while total payrolls for all manufacturers rose 2% to 11.8 million, according to the Bureau of Labor Statistics.
Eighty percent of the USA’s 5,800 tool and die firms — small firms with an average 30 employees — are seeking one to five workers, estimates Dave Tilstone, head of the National Tool & Machining Association.
Fledgling workers typically complete four-year apprenticeships, after which they can make $60,000 a year. “Johnny and Mary don’t have to go to college to make a decent living,” Tilstone says.
Unlike manufacturing workers who run mass-production machines, tool and die makers take months to create a single, custom-designed part that’s used to crank out hundreds of thousands of a product’s components. Dies, for example, are steel forms that stamp out metal components such as car fenders and washing machine panels. Molds shape plastic and ceramic parts such as dashboards and hairbrush handles.
Most basic parts are now made in computerized machines. But workers must design and piece together the parts to form dies and molds, often manually, relying on an unusual level of judgment and precision.
Ron Overton, president of Overton Industries in Mooresville, Ind., has been trying in vain to hire about 10 engineers, machinists and tool and die specialists so he can ramp up production. “We lose a lot of work because we can’t turn it around quick enough,” he says.
He’s seeking employees with good math and science skills who can work with their hands. Yet many such candidates perceive manufacturing as a dying field. The tool and die industry is working with community colleges to offer training and helping high school students build robots that battle in competitions.
The industry’s heavy reliance on labor led to its decline. Labor makes up 26% of costs vs. 18% for manufacturers overall, according to Tilstone and research group MAPI. As a result, the sector was hit much harder when manufacturers began off-shoring work to low-wage countries such as China. From 1998 to 2010, 36% of tool and die firms closed, twice the rate of all manufacturers, the Congressional Research Service report notes. Employment fell 45%, vs. 35% for manufacturers.
Tool and die shops were further hammered by auto industry downturns in the early 2000s and in the 2008-09 recession. The auto industry traditionally has made up a majority of sales.
Besides benefiting from an auto turnaround, tool and die makers are reaping new business as the manufacturing of sophisticated dies and molds for aerospace and medical devices shifts back to the U.S. Some foreign-made products were of lesser quality, Tilstone says.
More advanced vehicle and appliance-making is also returning to the USA. General Electric recently moved production of an energy-efficient water heater and refrigerator from overseas plants to Louisville. That’s been a boon for Madison, Ind.-based Millennium, which is making dies and molds for GE. Its staff, which fell from 25 to 10 in the recession, is now at 30, with 17 new workers dedicated to GE, says Millennium General Manager Jeremy Dykes.
The industry also has diversified beyond the auto sector. In the early 2000s, Overton began making dies and molds for defense and heating and air conditioning manufacturers. Revenue fell 25% in 2009, but in 2010 and 2011, “We just had two of (our) best years,” he says.
Ann Arbor Firm Constructing Homes with Products Made in America
by MAM TeamAs Ann Arbor Builders Inc. hops aboard the slow train to economic recovery, the company wants to bring along other American businesses.
It’s been a tough four or five years, admitted Betsy de Parry, vice president of Ann Arbor Builders. The 40-year-old home construction company saw business drop from 20 to 30 new home starts a year to three or four since 2007.
But as the phone begins to ring again with inquiries and there is a growing number of signed contracts, de Parry said she and her husband, Alex de Parry, company president, are focusing on building homes with products made in America — with a special emphasis on products from Michigan and Washtenaw County companies.
The family’s four-bedroom Dexter house will be the first new project built under Ann Arbor Builders’ focus on using American-made goods. Except for the granite countertop, the microwave oven and the recessed lighting, everything will be made in America, down to the nails. Construction started in January, and the family expects to move in this summer.
The project won a few seconds of national attention this week when it appeared on an ABC network news segment about the economy heating up, adding 52,000 new construction jobs in the past two months, compared to 32,000 new jobs in all of 2011.
While the de Parrys had paid little attention to the sourcing of their home building products until a few month ago, it turned out many items already came from the U.S. Still, they knew they could do better.
After they learned from the Boston Consulting Group that 220,000 more new jobs would be created if every builder in the country increased American-made products by 5 percent, they decided to make the effort.
“If everyone did it, it would add up to be a pretty big thing,” Betsy de Parry said.
Alex de Parry, who also serves as vice president of the Builders and Remodelers Association of Greater Ann Arbor and was previously involved in the development of the controversial City Place project on South Fifth Avenue, created a comprehensive list of all the materials that went into building his houses and turned to his suppliers to find out where the materials were made.
“It was a team effort,” he said. “There was no resistance. Everyone knew it was about jobs.”
The nails had come from China, but they found an Illinois company called Maze Nails. Most of the silt (fabric) fencing temporarily installed around the perimeter of the lot to thwart erosion comes from China. But the de Parrys found a company on the west side of the state that manufactures it.
They looked to Ann Arbor’s Fingerle Lumber Co. in Ann Arbor to source U.S. fasteners. While most electrical panels are made in the Dominican Republic, their contractor found a source that uses mostly American-made products. Lumber was a challenge. Most of it came from Canada. But the de Parry’s eventually found a source close to home, buying from a Michigan supplier with Michigan lumber.
Still, a few items were impossible to find. All microwaves, Betsy de Parry said, are made in South Korea. There are no American-made recessed lights. And most granite comes from abroad, mostly from Brazil and Italy.
But there are made-in-America alternatives for countertops, such as Corian by DuPont and Cambria quartz, she said. “If a house doesn’t have a microwave, granite countertops or recessed lights, it can be 100 percent American-made,” she said.
About 95 percent of the materials going into the Schutte house are made in America, Alex De Parry said, with between 20 and 30 percent made in Michigan. Sticking to U.S. products increases costs between 3 and 5 percent, he said, a cost the company absorbs.
The project found its way to a segment by David Muir on Diane Sawyer’s “World News Tonight” after an ABC producer contacted Betsy de Parry via her company’s Facebook page Tuesday afternoon. ABC asked if it could make a “Just Hired” sign and shoot video footage of Alex standing in front of Schutte’s house.
Three hours later, he was on national television. “That kind of national exposure doesn’t do anything for you locally,” Betsy de Parry said. “But he had his nanosecond of fame.”
Janet Miller is a freelance reporter for AnnArbor.com.
Those Manufacturing Jobs Aren't Coming Back You Know, Not Ever
by MAM TeamI write about business and technology.
That those who use this argument would be horrified to find themselves on an assembly line for $12-$14 an hour (which is what electronics manufacturing currently pays in the US for those thinking that Apple should bring everything back from Foxconn) doesn’t seem to change their support for trying to make other people do it.
As this very interesting graph points out:
More Manufacturing Work Returns to U.S. Shores
by MAM TeamBy Alejandra Cancino and Cheryl V. Jackson, Chicago Tribune
The Bison Gear & Engineering Corp. workers inserted copper wires, tested the assembly and then readied them for the next step, the addition of a gearbox. The end products, gear motors, are used in everything from ice machines to solar panels. At one time it made sense for Bison to import motors from China, but no longer.
While data is scant, manufacturing experts say the number of companies shifting production to the U.S. will increase over the next five years as Chinese wages continue to increase at the same time transportation costs soar. A Boston Consulting Group report released last week predicts that by 2015 it will become cheaper to produce certain products in the U.S. that are sold to American consumers. The products, the report said, would span a half-dozen industries and include everything from machinery to electronics to furniture.
According to the Boston Consulting report, the shift to U.S. manufacturing, combined with an increase in exports due to improved U.S. competitiveness, will create 2 million to 3 million jobs. President Barack Obama is seeking to accelerate the shift by proposing a 20 percent income tax credit for companies that bring jobs back to the U.S.
Reshoring, as the move back to the U.S. is called, is the opposite of what had been a decade-long trend that accelerated in 2001 when China became a member of the World Trade Organization.
“China was an incredible deal for everybody because the government made it easy to put a plant there,” said Harold Sirkin, co-author of the Boston Consulting report “U.S. Manufacturing Nears the Tipping Point: Which Industries, Why, and How Much?”
Companies looking to cut costs were lured into outsourcing parts production to China or building plants. Attractions included cheap land, a fixed currency, financial incentives, government-funded infrastructure improvements and wages of less than $1 per hour, according to the report.
“Those wages that were dirt cheap grew by 15 to 20 percent per year,” Sirkin said, adding that as labor costs grew, companies were saddled by rising transportation costs and higher utility rates as well as costs related to supply disruptions and quality issues. After a while, some companies began to take note that real manufacturing costs in China started to get closer to those in the U.S.
Moreover, in the last decade U.S. companies have found ways to make products faster and with higher quality, mainly through improved automation. At the same time, U.S. wages have declined or have gone up only moderately, making homegrown companies more competitive globally.
For example, the most recent contract between Ford Motor Co. and the United Auto Workers allows the company to hire entry-level workers for $15.78 an hour, which is about half of what veteran union workers are paid. As a result, Ford committed to add 5,750 jobs. In total, Ford plans to add 12,000 jobs by 2015. A portion of those jobs will be in-sourced from Mexico, China and Japan.
Moving production to the U.S. isn’t always so easy, however. Jeff Bollengier, president and co-founder of California-based Simple Wave LLC, which makes a nonspill bowl called CaliBowl, said for his company it meant having to ship machines across the ocean.
“There were major delays in getting our tools crated up and moved and dealing delicately with the manufacturers so that we didn’t run into a situation where we couldn’t get our tools out of China,” Bollengier said. “We heard some nightmares of what could happen, like sometimes your tools could be cracked.”
The move was completed in October, but his plant wasn’t fully operational until late February — two months later than expected. In the interim, the company lost customers because it couldn’t fill orders while the tools were being shipped. Sales plummeted, Bollengier said.
“You take a big hit to do the right thing,” he said, adding that the company’s decision to shift production followed encouragement from distributors. “They were saying they would go gangbusters for this if the bowls were USA,” Bollengier said. “The bulk of our business is international, and consumers around the world trust American-made.”
Some companies have moved back to the U.S. because of Chinese firms ripping off their designs.
That’s the case for Peerless Industries Inc., which decided in 2009 to buy equipment to make in-house its aluminum mounts that are used to fix flat-panel televisions to walls. The move followed nearly a decade of dealing with Chinese companies copying their products, said Michael Campagna, the company’s president and chief operating officer.
To make the shift, Peerless moved in 2010 from Melrose Park to a bigger plant in Aurora and spent a year learning how to make the mounts. The state helped with the move by pledging $2.9 million in training funds and tax credits over the next decade. The company promised Illinois it would retain 253 workers and create at least 85 full-time jobs.
Campagna said the company retained the workers it agreed to. But as a result of the slow economy, Peerless hasn’t hired all the full-time workers it expected to add. Its 480-person workforce includes 170 temporary workers.
If sales rise to the point where the Aurora plant can’t meet demand, Campagna said he would expand the company’s manufacturing plant in Mexico rather than increase production in the U.S. or return to China. “China is not as competitive as it was 5 to 10 years ago,” he said, adding that Mexico, once again, seems more attractive.
Experts say the big caveat in reshoring is that some companies will still find it much cheaper to produce products in Asia geared for that market. And, to grow market share in Asia, some companies will have to make products there or align themselves with Asian manufacturers.
Josh Bivens, an economist at the Economic Policy Institute, a labor-oriented think tank based in Washington, also notes that the number of companies shifting production to the U.S. is not big enough to be considered a real trend.
Moreover, the U.S. manufacturing base has shrunk significantly, and some experts say some work can’t be brought back because remaining plants can’t take on production or workforce skills are lacking.
Bruce Kaminstein, founder and chief executive of Casabella, a Congress, N.Y.-based designer of mops, brushes and bakeware, said it’s difficult to find U.S. plants to manufacture its items.
“I try to make products here in the U.S., and there are no factories around to do it with,” Kaminstein said. “Any time there’s some assembly work, there’s absolutely no factories to make it.”
Dan Swinney, executive director of the Chicago Manufacturing Renaissance Council, said the U.S. needs to put a lot more effort into training people so they can do the work. “As a country, manufacturing is fundamental to the future. We still have a competitive advantage in advanced manufacturing. We ought to recognize that instead of denying it.”
Chicago officials used to have a perception that there was no future in manufacturing, but there is now a desire to be helpful and be part of the conversation about careers in the industry and the quality of the
workforce, Swinney said.
To try to close the gap in Illinois, manufacturers are partnering with the state and manufacturing associations to improve education in science, technology, engineering and mathematics, which are key to landing jobs in manufacturing.
Still, an estimated 600,000 manufacturing jobs have gone unfilled nationwide, according to a survey by Deloitte and The Manufacturing Institute published last year. Manufacturers expect the shortage to worsen in the next three to five years as older workers retire.
Bullock, Bison’s chairman, said his company decided to buy motors from a Chinese supplier to keep prices low, but he acknowledged he was never happy with the quality.
In the mid-2000s Bullock started to reconsider his decision to move production overseas. He hired engineers and worked on a plan to slowly shift production to the St. Charles plant. The company hired 10 workers, Bullock said, and began producing half the motors in the U.S. and half in China. He lost a few customers, but they are talking to him again.
Bullock is passionate about his products. As he led a reporter on a tour of his St. Charles plant, he grabbed two round steel parts a bit smaller than a jar lid, calling the raw one an “ugly duckling” and the one transformed into a gear “a beautiful swan.”
Bison makes about 350,000 gear motors a year, Bullock said. Sales dwindled in 2009, but he said his company caught up to 2008 levels in 2010. Last year, sales increased by about 20 percent to close to $100 million.
Aside from pride in selling an American product, Martin Swarbrick, Bison’s president and CEO, said making motors in-house allows him to quickly respond to changes in demand. Another upside: He can make design changes within weeks instead of months, as was the case with the Chinese supplier.
“The communication was a lot more difficult because you had three to four points of communication all the way to China and back,” Swarbrick said.
Alejandra Cancino is a Tribune reporter, [email protected]
Cheryl V. Jackson is a freelance writer, Twitter @WriterAlejandra