Inspectors came and went from a Walmart-certified factory in Guangdong Province in China, approving its production of more than $2 million in specialty items that would land on Walmart’s shelves in time for Christmas.
Trouble Wi
th AuditsFactory monitoring companies have established a booming business in the two decades since Gap, Nike, Walmart and others were tarnished by disclosures that their overseas factories employed underage workers and engaged in other abusive workplace practices. Each year, these monitoring companies assess more than 50,000 factories worldwide that employ millions of workers. Walmart alone commissioned more than 11,500 inspections last year. Spurred by heightened demand for monitoring, the share prices of three of the biggest publicly traded monitoring companies, SGS, Intertek and Bureau Veritas, have all increased about 50 percent from two years ago.
The inspections carry enormous weight with factory owners, who stand to win or lose millions of dollars in orders depending on their ratings. With stakes so high, factory managers have been known to try to trick or cheat the auditors. Bribery offers are not unheard-of. Often notified beforehand about an inspector’s visit, factory managers will unlock fire exit doors, unblock cluttered stairwells or tell underage child laborers not to show up at work that week.
Unauthorized subcontracting, or farming work out, to an unapproved factory (as was the case for the Quaker Pet Group order in China), is “very, very common,” according to Gary Peck, founder and managing director of the S Group, a design and sourcing company based in Portland, Ore.
Though almost all retailers prohibit the practice in their contracts, suppliers still do it to save money, speed production and meet high-volume orders.
And even inspections conducted at authorized factories can be deeply flawed. When NTD Apparel, a contractor for Walmart that is based in Montreal, hired a firm to inspect the Tazreen factory in Bangladesh before 112 workers died in a fire in November, the monitors’ questionnaire asked whether the factory had the proper number of fire extinguishers and smoke detectors on each floor. But it did not call for checking whether the factory had fire escapes or enclosed, fireproof stairways, which safety experts say could have saved lives.
“If it’s a check-the-box inspection, you better have the right boxes to look at,” said Daniel Viederman, chief executive of Verité, a nonprofit monitoring group.
Sajeev Jesudas, president of UL Verification Services, which conducted the Tazreen audit, said inspecting for fire escapes and fireproof stairways was “the responsibility of the local building inspectors.” Bangladesh has been faulted for having far too few officials to inspect factories.
Greg Gardner, the chief executive of Arche Advisors, said Western retailers and brands often seek different levels of audits. Some, like Levi’s and Patagonia, want rigorous — and costly — audits, while others prefer limited, inexpensive audits that will not jeopardize relationships with favored suppliers.
Audits can be very brief. A single inspector might visit a 1,000-employee factory for six to eight hours to review all types of manufacturing issues, like wages, child labor or toxic chemicals. Some auditors receive only five days of training, whereas the federal Occupational Safety and Health Administration requires three years of training and experience assisting inspectors before employees can lead an inspection of a sizable factory in the United States.
In the Rosita case, after the workers went on their rampage, the Western companies that bought the factory’s knitwear grew alarmed. So Rosita’s owner, South Ocean, a conglomerate based in Hong Kong, commissioned a new inspection.
That inspection, conducted by Verité, which is based in Massachusetts, was a scathing broadside. Verité’s monitors found “ongoing physical abuse” and “verbal and psychological harassment,” with managers compelling workers who arrived late to stand for “many hours without rest.”
Verité’s three-day inspection found errors in calculating wages, chemical containers labeled only in English and unreasonably high production quotas for which workers were disciplined or fired for not meeting. The inspectors noted that workers “often face harsh treatment,” including jeering from managers if they requested sick leave or annual leave. The monitors also found that managers had fired employees for missing work because of a death in the family and that security guards had beaten workers involved in union and protest activities.
Mr. Viederman of Verité said the earlier inspection, performed by a major monitoring firm, SGS, demonstrated the shortcomings of checklist audits. The SGS inspection involved a one-day visit, largely seeking yes-no answers, probably for a modest fee.
He noted that SGS had interviewed employees only inside the factory, where workers were often unlikely to speak candidly, and not outside — for instance, at bus stops or at home, where workers might open up.
Charles Kernaghan, executive director of the Institute for Global Labor and Human Rights, was shocked when he read the SGS inspection report for Rosita. “The auditors were saying everything was in perfect order,” he said. “It shows how ineffective these monitoring organizations can be.”
Effie Marinos, sustainability manager at SGS, defended her company’s findings. She said SGS had followed the inspection protocol developed by the Business Social Compliance Initiative, a factory certification group for European businesses.
Ms. Marinos said the protocol for Rosita did not require interviewing workers outside the factory, a practice that she cautioned could undermine a relationship between a Western company and its suppliers.
“You don’t want to start the whole approach with a lack of trust, that they are trying to fool you, that they are behaving unethically,” she said. “It can sour an entire relationship.”
Bypassing Inspection Rules
The Walmart purchase orders read “Ethical Standards Required.”
In mid-2011, the Quaker Pet Group, whose biggest customer was Walmart, began looking for cheaper factories where its trendy dog clothes could be made, according to a former Quaker employee who requested anonymity for fear of reprisal from Quaker. The company has also sold its goods to Petco, PetSmart and smaller retailers.
Quaker settled on a plant called Jiutai Bag and Gift Factory in Dongguan, Guangdong. After visiting the site, Quaker’s president, Neil Werde, sent a note to a Jiutai representative in June 2011. “I was pleased with your factory,” Mr. Werde wrote, according to an e-mail shared by the former employee. “Good luck on the Walmart inspection.”
That inspection did not occur. Quaker officials became concerned that Jiutai would not be able to pass an inspection, the former employee said.
But there was a workaround. While Jiutai would make the garments, Quaker would fill out order forms to say that the items had been made by Ease Clever Plastic Manufactory, then an approved Walmart supplier. Ease Clever is an established manufacturer that ships products to Target and other large companies, according to the global trade database Panjiva. Jiutai, by contrast, had only one recent listing in the database, for a small shipment to Puerto Rico in 2011.
The stickiest issue was how to get the clothing made by Jiutai past Walmart inspectors. An inspection at Ease Clever was scheduled for September 2011, when the Walmart representatives would check that the dog outfits were being manufactured there, the former employee said.
Jiutai simply took the clothes to Ease Clever, according to the former employee. Those moves were outlined in a later e-mail from a Jiutai representative to Mr. Werde.
“The Walmart inspectors showed up and said, ‘Oh, they are being made here.’ It’s not as challenging as you would think,” the
former employee said. “You have your finished-goods area and just show them the cartons being packed out.”
In an e-mail to Mr. Werde, the Jiutai representative, identified as Mr. Hu, detailed how the setup had worked as he pushed Quaker for payment.
In July, Mr. Hu wrote, a company based in Hong Kong called KYCE, apparently acting as a liaison, helped arrange an order for the Christmas dog clothes. “JiuTai only make the clothes,” Mr. Hu wrote.
In September, “we hang the clothes” in display cases and “send to Ease Clever warehouse for Walmart during inspection,” Mr. Hu added, including photographs of the costumes. After the inspection, the clothes went back to Jiutai, and Jiutai, after making final adjustments, packed and delivered the clothes to the shipping terminal, Mr. Hu wrote. Mr. Hu and KYCE representatives did not respond to multiple e-mails seeking comment.
Throughout September, according to Walmart purchase orders, Quaker shipped $2.1 million worth of pet outfits from Yantian, China, to various American ports. The purchase orders list Mrs. Claus dresses, Santa suits and reindeer suits — the exact outfits Mr. Hu of Jiutai said he had made at his factory and then photographed. But the purchase orders list Ease Clever as the supplier, not Jiutai.
Contacted by telephone last month about the inspection and shipment, Jay Xie, a sales manager for Ease Clever, said the company had allowed the use of its Walmart certification. “His factory had not yet been audited — he used my factory because it was already audited,” Mr. Xie said of the Jiutai factory manager. Mr. Xie said this had happened only once, as a friendly act to help a fellow manufacturer.
The shipment, though, was late, according to the former employee and Mr. Hu’s e-mail. And soon after Walmart started selling these items, Quaker began receiving complaints, according to the former employee. When Walmart conducted a quality test on the Mrs. Claus dress, it found holes, and the outfit failed the test. Walmart executives then summoned Quaker employees to its sourcing office in Shanghai for an explanation, but Quaker did not disclose the subcontracting to Walmart at that time, the former employee said.
In March 2013, Walmart received a tip, via its global ethics hot line, about the unauthorized subcontracting and looked into it.
Kevin Gardner, a spokesman for the company, confirmed that subcontracting in this case occurred in 2011, and that Walmart officials “met with the supplier after the investigation to go through the findings and reinforce what our expectations are pursuant to subcontracting.”
Even though Walmart was alerted to the case nearly two years after the products were made and only after a hot line tip, the retailer pointed to the episode as an example of how its investigation and compliance system was working, not faltering.
“We investigated. We talked with the supplier. We think this does show the processes were in place,” Mr. Gardner said.
In January of this year, Walmart established a “zero tolerance” policy, saying it would drop suppliers who used subcontractors without the company’s approval. Walmart adopted the policy after garments headed to the company were found in the fire debris at Tazreen, an unauthorized factory.
Quaker and Mr. Werde declined to comment. The pet specialty company remains a Walmart supplier, Mr. Gardner said.
Cat-and-Mouse Games
The question-and-answer sheet that the factory’s managers distributed to all their employees was explicit: if an inspector ever asked, “Are there injury records?” they were to answer, “Have not heard of any work-related injuries.”
And if an inspector asked, “Any corporal punishment in the factory?” the employees were to reply, “No.” If monitors inquired about underage workers at the plant, employees were coached to respond, “Employment for those less than 16 years old is prohibited.”
This sheet, prepared by managers at a Chinese factory and obtained by The Times, had one purpose: to trick inspectors.
Supply chain experts and monitors say that far too often, factory managers play cat-and-mouse games with inspectors because they are desperate to avoid a failing grade and the loss of a lucrative stream of orders.
The experts provided real-life examples. To avoid appearing illegally overcrowded, one factory moved many machines into trucks parked outside during an inspection, a monitor said. Whenever inspectors showed up at certain plants in China, the loudspeakers began playing a certain song to signal that underage workers should run out the back door, according to several monitors. During inspections in India, some factories displayed elaborate charts detailing health and safety procedures that, like stage props, were transferred from one factory to another, another monitor said.
For monitoring companies with major retailing clients, the auditing regimen can be nonstop. The territory itself is daunting — 5,000 factories produce garments in Bangladesh alone. A retailer that uses 1,000 factories worldwide might want to pay no more than $1,000 an inspection — that could mean a one-day, check-the-box audit — instead of $5,000 for thorough, five-day inspections. That would cost $1 million instead of $5 million.
“You have this intense price pressure downward on these inspection firms, turning them into a commodity business,” said Mr. O’Rourke of the University of California, Berkeley.
Auret van Heerden, president and chief executive of the Fair Labor Association, a nonprofit group that Apple uses to monitor its Foxconn factories in China, said many inspectors were too rushed. “Many are doing a factory a day, and many auditors, more than one factory a day,” he said. “They’re on a plane and going to a new city the next day. They don’t have much time to think about it or dwell on it.”
Despite some improvements, many supply chain experts say monitoring has inherent shortcomings. Not long ago, Nike and other sporting goods companies were shaken by revelations that children, ages 5 to 14, toiled up to 11 hours a day making soccer balls for them in Sialkot, Pakistan.
A study found that half of Pakistan’s soccer ball workers were making less than the minimum wage, with many stitching the balls’ panels together at home, making it hard for factory monitors to unearth such violations.
Nike responded by requiring its main contractor there, Silver Star, to consolidate production in one big factory. Knowing how skilled many contractors have become at gaming the monitoring system, Nike took an unusual step and ordered Silver Star to set up a system of elected worker representatives who would be charged with speaking up about safety problems, wage violations or other issues.
“We’ve learned that monitoring alone isn’t enough,” said Greg Rossiter, Nike’s chief spokesman.
Mr. van Heerden said, “You can never visit facilities often enough to make sure they stay compliant — you’ll never have enough inspectors to do that. What really keeps factories compliant is when workers have a voice and they can speak out when something isn’t right.”
Still, after a string of fatal disasters and repeated failures in uncovering serious violations, many experts doubt that even a highly organized and supervised inspection industry can improve factory conditions in country after country. Heather White, a research fellow at Harvard and a longtime factory auditor, said, “It starts as a dream, then it becomes an organization, and it finally ends up as a racket.”
National Manufacturing Day Highlights Challenges and Opportunities
in UncategorizedLocalization barriers to trade pressure foreign enterprises to localize economic activity in order to compete in a country’s marketplace. Essentially, LBTs force U.S. manufacturers to produce locally in order to serve certain countries’ markets in sectors ranging from life sciences, clean energy, and automobiles to information and communications technology (ICT) products. LBTs include policies such as local content requirements (which mandate that a certain percentage of goods sold in a country must be produced using local content); local production as a condition of market access; forced technology or intellectually property (IP) transfer as a condition of market access; and forced offsets.
For example, India’s Preferential Market Access Mandate would require that at least 25 percent of the ICT goods sold in Indian public procurement markets be produced from local content by 2014, with this requirement rising potentially to 100 percent for some ICT products by 2020. Argentina, Brazil, Indonesia, Malaysia, Russia, and Vietnam are among the many additional countries that have introduced local content requirements seeking to force manufacturing activity from the United States to their nations. These policies affect as much as $1 trillion in total global trade and reduce the amount of global trade by almost $100 billion annually. Meanwhile, China has mandated joint ventures and technology transfer as a condition for U.S. enterprises to compete in its high-speed rail, steel, auto, and wind energy markets. And many countries, including Argentina, Japan, Israel, India, and Turkey, mandate “forced offsets” stipulating local production as a condition of both public (e.g., defense) and private (e.g., civil aviation) procurements.
The effects of these practices inflict significant damage on the U.S. economy, particularly to the U.S. manufacturing sector. LBTs raise production costs for the manufacturers affected by them (for if it made economic sense to localize production in the destination country, companies would have already done so) and this leads to lower profits for these enterprises and less investment in their home nations. Moreover, by forcing businesses to manufacture abroad instead of in the United States, LBTs lead directly to facility closures, cutbacks, or diminished expansion for U.S. manufacturers, and this can and has stifled economic and employment growth in the United States. Finally, these practices further the movement of IP and technical capacity out of the United States, which only enhances the deterioration of the U.S. industrial commons and inhibits domestic innovation.
Unfortunately, countries’ have been introducing LBTs with general impunity, while the global trade community has lacked the proper tools—and will—to combat the practice. It is incumbent upon the United States to take a leading role in countering the global spread of LBTs and to make clear to trade partners that continued use of such policies will not be tolerated.
First, the United States should bring more trade disputes before the World Trade Organization regarding LBTs, while making it easier for U.S. manufacturers to file such cases. Second, the United States should begin to review countries’ rights to participate in trade-preference initiatives such as the Generalized System of Preferences (GSP). This program benefits developing nations by allowing thousands of products to enter the United States duty free, but it’s not a right and this privilege should be revoked for countries that persistently use LBTs. Finally, in negotiating trade agreements such as the Transpacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (T-TIP), the United States must lead by example and push for the inclusion of strong and enforceable provisions against LBTs.
Localization barriers to trade represent one of the most insidious forms of protectionism in the modern global economy, and they are doing substantial damage to U.S. manufacturers and the broader U.S. economy. The U.S. must act or risk losing more manufacturing to our global competitors. The barriers American manufacturers face in global markets should not be forgotten on National Manufacturing Day.
Manufacturing Day 2013
in UncategorizedMFG DAY addresses common misconceptions about manufacturing by giving manufacturers an opportunity to open their doors and show, in a coordinated effort, what manufacturing is — and what it isn’t. By working together during and after MFG DAY, manufacturers will begin to address the skilled labor shortage they face, connect with future generations, take charge of the public image of manufacturing, and ensure the ongoing prosperity of the whole industry.
Supported by a group of industry sponsors and co-producers, MFG DAY is designed to amplify the voice of individual manufacturers and coordinate a collective chorus of manufacturers with common concerns and challenges. The rallying point for a growing mass movement, MFG DAY empowers manufacturers to come together to address their collective challenges so they can help their communities and future generations thrive.
ATTEND AN EVENT IN YOUR AREA
As of today, there are 806 MFG DAY events planned for tomorrow! Find an event to attend in your area. ATTEND MFG DAY EVENT
A Wave of Sewing Jobs as Orders Pile Up at U.S. Factories
in UncategorizedThe issue was finding workers.
“The sad truth is, we put ads in the paper and not many people show up,” said Mike Miller, Airtex’s chief executive.
The American textile and apparel industries, like manufacturing as a whole, are experiencing a nascent turnaround as apparel and textile companies demand higher quality, more reliable scheduling and fewer safety problems than they encounter overseas. Accidents like the factory collapse in Bangladesh earlier this year, which killed more than 1,000 workers, have reinforced the push for domestic production.
But because the industries were decimated over the last two decades — 77 percent of the American work force has been lost since 1990 as companies moved jobs abroad — manufacturers are now scrambling to find workers to fill the specialized jobs that have not been taken over by machines.
Wages for cut-and-sew jobs, the core of the apparel industry’s remaining work force, have been rising fast — increasing 13.2 percent on an inflation-adjusted basis from 2007 to 2012, while overall private sector pay rose just 1.4 percent. Companies here in Minnesota are so hungry for workers that they posted five job openings for every student in a new training program in industrial sewing, a full month before the training was even completed.
Like manufacturers in many parts of the country, those in Minnesota are wrestling with how to attract a new generation of factory workers while also protecting their bottom lines in an industry where pennies per garment can make or break a business. The backbone of the new wave of manufacturing in the United States has been automation, but some tasks still require human hands.
Nationally, manufacturers have created recruitment centers that use touch screens and other interactive technology to promote the benefits of textile and apparel work.
Run by a coalition of manufacturers, a nonprofit organization and a technical college, the program runs for six months, two or three nights a week, and teaches novices how to be industrial sewers, from handling a sewing machine to working with vinyl and canvas.
Eighteen students, ranging from a 22-year-old taking a break from college to a 60-year-old former janitor who had been out of work for three months, enrolled in the inaugural session that ended in June. The $3,695 tuition was covered by charities and the city of Minneapolis, though students will largely be expected to pay for future courses themselves.
After the course, the companies, which pay to belong to the coalition, sponsored students for a three-week rotation on their factory floors and a two-week internship at minimum wage. Then the free-for-all began as the members competed to hire those graduates who decide to pursue a career in industrial sewing.
“We need to think practically about getting skilled labor,” said Ms. Guarino, a founder of the training effort, known as the Makers Coalition. “The growth is there but we’re going to be in trouble if we don’t have a pool to draw from.”
Last year, there were about 142,000 people employed as sewing machine operators in the United States, according to the Bureau of Labor Statistics. In the Minneapolis-St. Paul metro area, which had almost 1.75 million workers last year — and where the unemployment rate as of July was 4.9 percent — only 860 were employed in 2012 as machine sewers..
Airtex had room for 50 of them. “We are looking for new sewers every day,” said Mr. Miller, the Airtex executive.
Wooing Immigrant Workers
Airtex’s roots in Minneapolis date to 1918, when Mr. Miller’s grandfather started the Sam Miller Bag Company, specializing in potato and feed bags. In the 1980s, Susan Shields founded a baggage company, and the two combined in 2000 as the Airtex Design Group, producing home textiles for companies like Pottery Barn and Restoration Hardware.
Soon after the merger, the company began producing in China, first in the Dongguan area, then Wuxi and Shanghai. Today, it still employs about 100 Chinese workers through a partner factory in Dongguan, but production there is no longer the bargain it once was, said Ms. Shields, Airtex’s president.
Initially Airtex paid $3 an hour on average for its Chinese workers; now, it pays about $11.80 an hour, including benefits and housing.
Its American factory-floor workers make about $9 to $17 an hour, though Airtex estimates benefits add another 30 percent to those figures.
As costs were rising in China, Airtex was also getting a new message from some of its clients: They wanted more American-made products.
Health care clients wanted medical slings and other sensitive medical products made domestically to ensure quality. Retailers did not want to pay overseas freight costs to import bulky items like pillows, and they wanted more flexibility in turning around designs quickly. As Airtex considered production in Vietnam and elsewhere, it became concerned about safety and quality issues — and increasingly interested in the American alternative.
“The opportunity for domestic business right now is unbelievable,” Ms. Shields said. “Either we start to bring it back here, more of it, or we start going to places that are marginally unsafe.”
But the lack of workers here in Minnesota made shifting business back home frustrating.
It had gotten to the point where new business sometimes felt like
a head
ache, not an opportunity. As Mr. Miller was headed to Chicago for a sales pitch in February, for instance, he was more worried than excited about landing a new contract.
“What concerns me is, if I get it,” he said, “where are we going to find the people?”
In the various waves of American textile production, dating to the 1800s, the problem of an available and willing work force solved itself.
Little capital was required — the boss just needed sewing equipment and people willing to work. That made it an attractive business for newly arrived immigrants with a few dollars to their name and, often, some background in garment work. Typically, the mostly male factory owners would recruit female workers from their old countries for the grunt work.
From the 1840s until the Civil War, it was new arrivals from Ireland and Germany. From the 1880s through the 1920s, it was Russian Jews and Italians, who would buy newly mass-produced Singer sewing machines and often set up shops in their tenement apartments with wives, daughters and tenants making up the initial work force, said Daniel Katz, provost of the National Labor College and author of a book about the garment industry.
Puerto Ricans, who were given citizenship on the eve of American entry into World War I, and black migrants from the South rounded out the work force until the 1960s, when Chinese and Dominican laborers took over, Mr. Katz said.
In San Francisco and New York, a small number of Chinese women came to the United States despite the Chinese Exclusion Act in 1882 barring Chinese laborers, making up a base of garment workers. After 1965, when immigration restrictions eased and Chinese were allowed to join family members, greater numbers of women came and that pool of workers grew.
“It was pretty well known that basically the day after you landed, you’d be taken to a factory by a relative to learn how to use an industrial sewing machine,” said Katie Quan, associate chair of the Labor Center at the University of California, Berkeley. In Los Angeles, Latinos made up much of the work force. And in the Carolinas, Hmong immigrants filled textile manufacturing jobs well into the 1990s, halting — or at least delaying — the migration of jobs overseas, said Rachel Willis, an American studies professor at the University of North Carolina.
Now, here in Minnesota, immigrants are once again being seen as the new hope.
Wanted: English and Math
Last fall, Lifetrack, a nonprofit group in St. Paul that helps immigrants, people on welfare and those with disabilities, began screening clients for possible admission to the sewing training program. Inside a gray-green room in a building on the edge of a four-lane road, people gathered around three tables: Burmese women at one of them, Ethiopian men at another, and at the back of the room an African-American woman, then 61, and a white man, 60, both born in America.
The first task was for students to test their English and math proficiency. Language skills are essential so workers can communicate with their bosses, but math skills are just as important in textile work because sewing requires precise measurements. As the students worked on the proficiency tests, Tatjana Hutnyak, Lifetrack’s director of business development, went over the basics.
Starting wages: $12 and $16 an hour. Transportation: The college, Dunwoody College of Technology, is on a bus line, but if students interview with a company not on a bus line, Lifetrack will help them get there. After passing career-readiness tests, students could qualify for the course, which would give them a certificate in industrial sewing — and, ideally, a job.
“They want to have a career rather than packaging, assembling, cleaning jobs,” said a Lifetrack manager, Dagim Gemeda, explaining why clients were interested in the sewing certification.
The Burmese women had come to Minnesota after spending time in refugee camps in Thailand. Paw Done had done piece work, sewing at home while she watched her children. The others had little sewing experience.
The Ethiopian men, who ranged in age from 21 to 42, had been in this country several years. A couple were students, one was a former custodian who had moved from another state to be close to his college-bound son, and a fourth, Abdulhakim Tahiro, had been laid off from his job at an airport car rental kiosk.
“It’s good, for my level it’s good,” Mr. Tahiro said of the starting wages.
Mr. Tahiro and Ms. Done enrolled in the course that started last January, when about half of the class were immigrants. Another student in the course, Patricia Ramon, 56, was an entrepreneur in Mexico with sewing experience. Ms. Ramon already had a job as a sewer at J. W. Hulme, but quit to take the course with the goal of obtaining certification. She wanted proof, she said, that she had technical skills.
“I am not like an old-time seamstress,” Ms. Ramon said. She expects to sew as a career, and said that making $16 an hour with health insurance would be enough to live on.
The students who were not immigrants often had difficult work histories or other problems. One of them was Lawrence Corbesia, the man sitting at the back table during the screening session. He was a former machine operator and custodial worker who had been looking for work for three months.
Another was Edward Johnson, 44, who was homeless when the course started. After food service and call-center jobs, he went to prison for felony assault, and had a tough time finding a job when he got out in 2009. He moved to Wisconsin to pick fruit, moved back to Minneapolis because he hated picking fruit, and was living on the streets and selling watercolor paintings when a homeless-center counselor hooked him up with the sewing program.
Until now, the only sewing experience Mr. Johnson had was sewing on buttons — a punishment meted out by his mother when he misbehaved. To save money, Mr. Johnson walked the 45 minutes to and from the college.
The program was overwhelming at first, he said, “so frustrating that sometimes I’d go home crying.” But he spent days at the library, watching YouTube videos on sewing techniques and studying terms used by the industry. By the end, it had gotten easier, he said, making pajamas, tote bags and aprons.
So many people are on government assistance, he said. “I’d rather learn a trade and go to work — and work,” he said.
A Long-Term Solution
Manufacturers elsewhere are also trying to build a new labor pool.
In a former glove factory in Conover, N.C., the Manufacturing Solutions Center has touch screens showing the technologies that textile manufacturers use today, while new machines spool out printed fabric. In Pennsylvania, a work force investment board has started a program with plant tours, YouTube videos of workers and a Web site promising that “contrary to popular opinion, many good jobs in manufacturing are still available.”
Other industry groups have created a curriculum for high schools on manufacturing, including Manufacturing Day, with factory tours for school groups.
Still the difficulty attracting young people frustrates Debra Kerrigan, a dean at Dunwoody overseeing the Minnesota program.
“I think it’s just the idea of, ‘Oh, I’m a sewer,’ that doesn’t thrill the average young individual today,” she said. “Skills for a lot of different industries are coming back now, machinists and automotive workers and sewers. I think if you have a skill when the economy gets bad, you’re more likely to succeed than someone who doesn’t.”
Compared with the other courses Dunwoody offers — graphic design, Web programming, robotics — sewing can seem a little old school, students say. But Elizabeth Huber, 22, who took a break from the University of Minnesota to take the sewing course, said that can also be a selling point.
As the sewing course drew to a close, members of the Makers Coalition were jostling for the 18 graduates. Don Boothroyd at Kellé, a firm that makes dance costumes, hoped to snag 10 of them. J. W. Hulme wanted five, and was considering covering a student’s tuition for another course exchange for a contract promising that the student would work at Hulme for one year. Airtex hoped for five to 10 students.
But only nine students completed the course — many dropped out for personal reasons, or decided they just weren’t interested in the work — and eight got jobs. The coalition is now revamping the curriculum to focus more on hands-on work and machine maintenance.
“I had a guy driving me to the airport the other day,” Mr. Miller said, “and he mentioned he knows a lot of people in the Cambodian community and I should call his pastor.”
Finally, Airtex decided it had to pay for training itself, even if that meant the company was less profitable for a while. It trains workers for a few hours a week, with a technical-college instructor and existing employees instructing new ones on topics like ergonomics and handling tricky materials. Airtex has since made 10 new hires for floor jobs, none of whom were highly experienced.
“The reality is, if we want good workers we know we have to train them and bring them in ourselves,” Ms. Shields said.
The factory floor now seems less barren because there are 25 sewing stations (there is still room for another 25). And most significantly, the additional workers mean the company can take on new work: Airtex has tripled its capacity, and is now making about 70 percent of its products in the United States.
Smithfield Agrees To Takeover By China’s Shuanghui
in Food ProductsWASHINGTON (AFP) – Shuanghui International won the largest ever Chinese takeover of a US company Tuesday when shareholders of pork giant Smithfield Foods approved its $7.1 billion offer. The deal locks in for Shuanghui and the giant Chinese market a strong supply from the world’s largest pig raiser and pork processor.
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Rich-Poor Employment Gap Now Widest On Record
in UncategorizedU.S. households with income of more than $150,000 a year have an unemployment rate of 3.2 percent, a level traditionally defined as full employment. At the same time, middle-income workers are increasingly pushed into lower-wage jobs. Many of them in turn are displacing lower-skilled, low-income workers, who become unemployed or are forced to work fewer hours, the analysis shows.
“This was no `equal opportunity’ recession or an `equal opportunity’ recovery,” said Andrew Sum, director of the Center for Labor Market Studies at Northeastern University. “One part of America is in depression, while another part is in full employment.”
The findings follow the government’s tepid jobs report this month that showed a steep decline in the share of Americans working or looking for work. On Monday, President Barack Obama stressed the need to address widening inequality after decades of a “winner-take-all economy, where a few do better and better and better, while everybody else just treads water or loses ground.”
“We have to make the investments necessary to attract good jobs that pay good wages and offer high standards of living,” he said.
While the link between income and joblessness may seem apparent, the data are the first to establish how this factor has contributed to the erosion of the middle class, a traditional strength of the U.S. economy.
Based on employment-to-population ratios, which are seen as a reliable gauge of the labor market, the employment disparity between rich and poor households remains at the highest levels in more than a decade, the period for which comparable data are available.
“It’s pretty frustrating,” says Annette Guerra, 33, of San Antonio, who has been looking for a full-time job since she finished nursing school more than a year ago. During her search, she found that employers had become increasingly picky about an applicant’s qualifications in the tight job market, often turning her away because she lacked previous nursing experience or because she wasn’t certified in more areas.
Guerra says she now gets by doing “odds and ends” jobs such as a pastry chef, bringing in $500 to $1,000 a month, but she says daily living can be challenging as she cares for her mother, who has end-stage kidney disease.
“For those trying to get ahead, there should be some help from government or companies to boost the economy and provide people with the necessary job training,” says Guerra, who hasn’t ruled out returning to college to get a business degree once her financial situation is more stable. “I’m optimistic that things will start to look up, but it’s hard.”
Last year the average length of unemployment for U.S. workers reached 39.5 weeks, the highest level since World War II. The duration of unemployment has since edged lower to 36.5 weeks based on data from January to July, still relatively high historically.
Economists call this a “bumping down” or “crowding out” in the labor market, a domino effect that pushes out lower-income workers, pushes median income downward and contributes to income inequality. Because many mid-skill jobs are being lost to globalization and automation, recent U.S. growth in low-wage jobs has not come fast enough to absorb displaced workers at the bottom.
Low-wage workers are now older and better educated than ever, with especially large jumps in those with at least some college-level training.
“The people at the bottom are going to be continually squeezed, and I don’t see this ending anytime soon,” said Harvard economist Richard Freeman. “If the economy were growing enough or unions were stronger, it would be possible for the less educated to do better and for the lower income to improve. But in our current world, where we are still adjusting to globalization, that is not very likely to happen.”
The figures are based on an analysis of the Census Bureau’s Current Population Survey by Sum and Northeastern University economist Ishwar Khatiwada. They are supplemented with material from the Massachusetts Institute of Technology’s David Autor, an economics professor known for his research on the disappearance of mid-skill positions, as well as John Schmitt, a senior economist at the Center for Economic and Policy Research, a Washington think tank. Mark Rank, a professor at Washington University in St. Louis, analyzed data on poverty.
The overall rise in both the unemployment rate and low-wage jobs due to the recent recession accounts for the record number of people who were stuck in poverty in 2011: 46.2 million, or 15 percent of the population. When the Census Bureau releases new 2012 poverty figures on Tuesday, most experts believe the numbers will show only slight improvement, if any, due to the slow pace of the recovery.
Overall, more than 16 percent of adults ages 16 and older are now “underutilized” in the labor market – that is, they are unemployed, “underemployed” in part-time jobs when full-time work is desired or among the “hidden unemployed” who are not actively job hunting but express a desire for immediate work.
Among households making less than $20,000 a year, the share of underutilized workers jumps to about 40 percent. For those in the $20,000-to-$39,999 category, it’s just over 21 percent and about 15 percent for those earning $40,000 to $59,999. At the top of the scale, underutilization affects just 7.2 percent of those in households earning more than $150,000.
By race and ethnicity, black workers in households earning less than $20,000 were the most likely to be underutilized, at 48.4 percent. Low-income Hispanics and whites were almost equally as likely to be underutilized, at 38 percent and 36.8 percent, respectively, compared to 31.8 percent for low-income Asian-Americans.
Loss of jobs in the recent recession has hit younger, less-educated workers especially hard. Fewer teenagers are taking on low-wage jobs as older adults pushed out of disappearing mid-skill jobs, such as bank teller or administrative assistant, move down the ladder.
Recent analysis by the Associated Press-NORC Center for Public Affairs Research shows that whites and older workers are more pessimistic about their opportunities to advance compared to other groups in the lower-wage workforce.
Eric Reichert, 45, of West Milford, N.J. Reichert, who holds a master’s degree in library science, is among the longer-term job seekers. He had hoped to find work as a legal librarian or in a similar research position after he was laid off from a title insurance company in 2008. Reichert now works in a lower-wage administrative records position, also helping to care for his 8-year-old son while his wife works full-time at a pharmaceutical company.
“I’m still looking, and I wish I could say that I will find a better job, but I can no longer say that with confidence,” he said. “At this point, I’m reconsidering what I’m going do, but it’s not like I’m 24 years old anymore.”
SOURCE: Huffington PostThe 'Clean' Truth About Manufacturing in the U.S.
in UncategorizedWill it be possible to fill this gap? If we are struggling to find skilled people today, where will we find them in the future, as the problem magnifies? How do we fix this problem? There is a lot of talk about STEM education as the solution. Many people wonder, “What the heck is STEM?” They are then told it means, “Science, Technology, Engineering, and Math.” But that’s not really a sufficient explanation.
Frankly, STEM starts with the basics that all people should master in a rudimentary education. The ability to read, write, do math, and think critically are all key pillars, complimented by the ability to show up on time, communicate effectively, and work in teams. People with these skills can be developed and trained to pursue a menagerie of career pathways. Without those foundational skills, the future is bleak.
Click Bond is the global leader in the design and manufacture of adhesive-bonded fasteners and whether we’re talking about an entry level accountant, assembly technician, a quality inspector, a top design engineer or the people who package and ship our product across the globe, all aspects of our operation require these foundational skill sets on a daily basis. Unfortunately, even with record unemployment numbers, it remains challenging to find people who can demonstrate these basic, fundamental skills.
Some allege that this gap isn’t real and that’s it’s just an acute problem: manufacturers are just too picky. Others say manufacturers don’t pay enough or contend that manufacturing just represents dirty, low-level jobs.
On the notion that we are too selective –the ability to read, write, do math, problem-solve, show up on time, communicate effectively and work in teams isn’t some outrageous litmus test for employment; it’s the minimum threshold to have a chance at a future on any career path.
As for the argument that our pay is too low — in 2011, the average manufacturing worker in the United Sates earned $77,060 annually, including pay and benefits. The average worker in all industries earned $60,168. Additionally, manufacturing has the highest multiplier effect of any economic sector ($1.48 for every $1 spent).
With respect to our factories being dirty and our jobs being low level — people are constantly impressed with how clean and high tech manufacturing operations are in the 21st century. We sit at the forefront of environmental, safety, technology, security and quality standards. We can’t compete globally otherwise.
Beyond these misperceptions, the reality is, the greatest asset we have is our people. This explains why the vast majority of manufacturers fund robust training and education programs in partnership with our local high schools, community colleges and universities.
In Nevada we are engaging with leaders in higher education — especially our community colleges — to ensure that their investments in facilities and curriculum are worthwhile. Last year, we helped deploy a training program that, in just 16 weeks, takes people from the unemployment lines to full time jobs as machine operators. Well over 90% of the graduates achieved full time employment with benefits!
We also partner with workforce development leaders to ensure that training dollars are aligned with the current and future needs of the marketplace. When these needs are aligned with nationally portable, industry-driven credentials, everyone wins. The training provider gains absolute clarity on the quality of instruction necessary for a successful program, and the student earns a viable credential that proves mastery of a skill.
Further, through proactive engagement with our community and by opening the doors of our factories to students, teachers, parents and the broader community, we are dispelling antiquated stereotypes and, once again, getting people excited about “Made in the USA”.
The parts we make at Click Bond help make our fighter jets safer and ensure that millions of people can travel safely around the world without incident. Our colleagues are developing exciting technology and products that are achieving remarkable breakthroughs in medicine, renewable energy, IT, transportation, logistics and so much more. The reality is: manufacturing makes America strong. And all of us must work together to keep it that way.
A U.S. Manufacturing Comeback Won't Rebuild The Middle Class
in UncategorizedDuring the first half of this year, the trade deficit on trade of manufactured goods narrowed to $225 billion from $227 billion a year ago, the Manufacturers Alliance for Productivity and Innovation reported Tuesday. While small, the Arlington, Va.-based research group considers the development a positive sign, especially after years of steep deficits.
The report follows another one released Tuesday, which expects U.S. manufacturing to make a comeback — potentially creating 2.5 million to 5 million factory and service jobs associated with more U.S. manufacturing over the next seven years. Boston Consulting Group says the shift is being driven by a variety of factors: Lower costs of natural gas and electricity have given U.S. manufacturers an advantage over other countries; so has the rising cost of labor in China, where the U.S. had lost many manufacturing jobs to.
One other factor — indeed, a big one — that deserves extra attention is the decline of labor costs in the U.S.
While cheaper labor has made manufacturers more likely to hire, it also means less income and spending power for workers.
Understandably many people get nostalgic whenever Washington policymakers and corporate America talk about reclaiming all that was good about U.S. manufacturing during its heyday. It takes us back to a time when the average American could buy a house and raise a family by working at the local factory until retirement. In some ways, the Obama Administration has indulged this vision of America; it has made a manufacturing recovery a top priority.
And yet, it’s hard to get that excited when we look at wages today and where they could go years from now.
A mediocre job is better than no job at all, especially at a time when so many struggle to find work. Manufacturing may create more jobs than it had in recent years, but it won’t renew America’s shrinking middle class so long as wages continue to stagnate.
The reality is U.S. factories rely more on machines than actual workers, says Jesse Rothstein, public policy and economics professor at University of California Berkeley. Machines produce more for less, and with bargaining powers of U.S. unions not being what they once were, it becomes less likely workers will earn more.
In a 2012 study, Rothstein found that hires by manufacturers of durable goods (items lasting three years or more) were paid an average of 0.3% less in 2010 and 2011 than workers newly hired in 2007 and 2008.
A similar trend plays out if we look at manufacturing overall: The average hourly earnings of production and nonsupervisory employees were $8.43 for 2012, lower than $8.70 in 2009 and $8.75 in 2003, according to data from the U.S. Bureau of Labor Statistics. To be sure, some higher-skilled manufacturing jobs, such as welding, have seen wages rise.
The Boston Consulting Group notes the U.S. is steadily becoming one of the cheapest places in the developed world to manufacture. By 2015, average labor costs will be about 16% lower in the U.S. than in the U.K., 18% lower than in Japan, 34% lower than in Germany, and 35% lower than in France and Italy.
If the firm is right, it’s likely that many more manufacturers will return jobs to the U.S., as it predicts. However, if trends in pay continue, it probably won’t rebuild the middle class.
USW Confirms NY State Meeting on Buy America Infrastructure
in UncategorizedNEW YORK, Sept. 24, 2013 /PRNewswire-USNewswire/ — Top leaders of the United Steelworkers (USW) confirmed being joined by the Alliance for American Manufacturing (AAM) and steel bridge fabricators in a meeting this past week led by the New York governor’s office, plus public authority transportation officials to consider ways to support sourcing American-made steel and domestic construction products in upcoming infrastructure projects.
“So we welcomed a face-to-face agenda on what to do about it.”
USW leaders in the meeting were Tom Conway, international vice president from Pittsburgh; and John Shinn, director of USW District 4 in New York, who also represents the union membership in New Jersey and the New England states. Participating for NY State were MTA Chairman Tom Prendergast, State Deputy Secretary Karen Rae, and NY-NJ Port Authority Executive Director Pat Foye. Senior officers of the Washington-based AAM made presentations.
USW Vice President Conway said, “Meeting with MTA and the Port Authority was a good start, but actions speak louder than words. We’ll need to see better results in the future when MTA makes sourcing decisions on major infrastructure projects.”
Shinn of USW District 4 added: “We had a productive meeting with the top decision makers from the governor’s office and both the MTA and Port Authority. We came away encouraged by their willingness to share information and their offer to meet on a regular basis.”
The USW regional director, who served with the governor’s ‘New York State 2100 Commission’ on infrastructure, emphasized there were challenges ahead. “Supporting a domestic supply chain of American workers that are not dependent on offshore labor or materials for bridge projects needed by the two agencies in the northeast corridor may require changes in the procurement process.”
According to the USW, the NY officials responded to criticism of the Verrazano Bridge contract with China steel by expressing interest in reevaluating and strengthening the Buy America steel preference used by MTA, which has not changed since its adoption in 1983. There was also broad agreement that the unreasonable agency cost waiver – currently available when domestic steel is six percent more expensive – needs to be increased.
“This would be an important step in leveling the playing field for the U.S. industry and workers in their competition with foreign state-owned enterprises that benefit from generous government subsidies,” Conway said. “We intend to hold them to their word that real reforms will be made both to their internal practices and with respect to state-level laws. Their public support for such reforms will be necessary to ensure that no more bridges or public works are outsourced.”
In mid-July, U.S. Senators Charles Schumer (D-NY) and Sherrod Brown (D-OH) urged the MTA: “If we continue to source to Chinese companies based entirely on bid pricing, they will always win – with the level of government support and overproduction, it’s impossible to beat their prices. This is causing a global race to the bottom on steel prices, a budding environmental catastrophe and the threatening of steel production not just in the U.S., but worldwide.”
New York State AFL-CIO President Mario Cilento and USW Director Shinn wrote to state legislators and affiliate unions, “It is beyond disappointing that a New York State public authority would undermine our economy and jobs by offshoring our major infrastructure needs, which should be American made, to China.
“Our state has lost nearly half its manufacturing capacity in the past twenty years. The consequences have been job loss, decreased economic opportunity and competitiveness. Irresponsible actions by public agencies like the MTA will only make things worse.”
In the coming weeks and months, AAM will be convening meetings in Washington, DC, and in New York with the goal of supporting a more proactive approach to infrastructure projects involving American workers and manufacturers. For more information: www.americanmanufacturing.org/.
The USW is the largest industrial union in North America, representing 850,000 workers employed in the manufacturing, service and resource sectors of steel, mining, concrete, paper, rubber, chemicals, metal fabrication, transportation and energy sources that include oil refining and renewables. For more information: www.usw.org/.
The Honey Launderers: Uncovering the Largest Food Fraud in U.S. History
in UncategorizedOn March 24, 2008, von Buddenbrock came to the office around 8:30 a.m., as usual. He was expecting a quiet day: It was a holiday in Germany, and his bosses there had the day off. Giesselbach was on holiday, too; she had returned to Germany to visit her family and boyfriend. Sometime around 10 a.m., von Buddenbrock heard a commotion in the reception area and went to have a look. A half-dozen armed federal agents, all wearing bulletproof vests, had stormed in. “They made a good show, coming in with full force,” he recalls. “It was pretty scary.”
The agents asked if anybody was hiding anywhere, then separated von Buddenbrock and his assistant, the only two employees there. Agents brought von Buddenbrock into a conference room, where they questioned him about ALW’s honey business. After a couple of hours they left, taking with them stacks of paper files, copies of computer hard drives, and samples of honey.
Giesselbach returned from Germany three days later. Her flight was about to land at O’Hare when the crew announced that everyone would have to show their passports at the gate. As Giesselbach walked off the plane, federal agents pulled her aside. She, too, answered their questions about ALW’s honey shipments. After an hour, they let her leave. The agents, from the U.S. Department of Commerce and the Department of Homeland Security, had begun to uncover a plot by ALW to import millions of pounds of cheap honey from China by disguising its origins.
Von Buddenbrock and Giesselbach continued to cooperate with the investigators, according to court documents. In September 2010, though, the junior executives were formally accused of helping ALW perpetuate a sprawling $80 million food fraud, the largest in U.S. history. Andrew Boutros, assistant U.S. attorney in Chicago, had put together the case: Eight other ALW executives, including Alexander Wolff, the chief executive officer, and a Chinese honey broker, were indicted on charges alleging a global conspiracy to illegally import Chinese honey going back to 2002. Most of the accused executives live in Germany and, for now, remain beyond the reach of the U.S. justice system. They are on Interpol’s list of wanted people. U.S. lawyers for ALW declined to comment.
In the spring of 2006, as Giesselbach, who declined requests for an interview, was preparing for her job in Chicago, she started receiving e-mail updates about various shipments of honey moving through ports around the world. According to court documents, one on May 3 was titled “Loesungmoeglichkeiten,” or “Solution possibilities.” During a rare inspection, U.S. customs agents had become suspicious about six shipping containers of honey headed for ALW’s customers. The honey came from China but had been labeled Korean White Honey.
The broker, a small-time businessman from Taiwan named Michael Fan, had already received advice from ALW about how to get Chinese honey into the U.S. ALW executives had told him to ship his honey in black drums since the Chinese usually used green ones. And they had reminded him that the “taste should be better than regular mainland material.” Chinese honey was often harvested early and dried by machine rather than bees. This allowed the bees to produce more honey, but the honey often had an odor and taste similar to sauerkraut. Fan was told to mix sugar and syrup into the honey in Taiwan to dull the pungent flavor.
After Fan’s honey shipment was confiscated, an ALW executive wrote to Giesselbach and her colleagues: “I request that all recipients not to write e-mail about this topic. Please OVER THE TELEPHONE and in German! Thank you!”
Nonetheless, Giesselbach and executives in Hamburg, Hong Kong, and Beijing continued to use e-mail for sensitive discussions about the mislabeled honey. When Yan Yong Xiang, an established honey broker from China they called the “famous Mr. Non Stop Smoker,” was due to visit Chicago, Giesselbach received an e-mail. “Topic: we do not say he is shipping the fake stuff. But we can tell him that he should be careful on this topic + antibiotics.” E-mails mention falsifying reports from a German lab, creating fake documents for U.S. customs agents, finding new ways to pass Chinese honey through other countries, and setting up a Chinese company that would be eligible to apply for lower tariffs. Giesselbach comes across as accommodating, unquestioning, and adept.
ALW relied on a network of brokers from China and Taiwan, who shipped honey from China to India, Malaysia, Indonesia, Russia, South Korea, Mongolia, Thailand, Taiwan, and the Philippines. The 50-gallon drums would be relabeled in these countries and sent on to the U.S. Often the honey was filtered to remove the pollen, which could help identify its origin. Some of the honey was adulterated with rice sugar, molasses, or fructose syrup.
In a few cases the honey was contaminated with the residue of antibiotics banned in the U.S. In late 2006 an ALW customer rejected part of Order 995, three container loads of “Polish Light Amber,” valued at $85,000. Testing revealed one container was contaminated with chloramphenicol, an antibiotic the U.S. bans from food. Chinese beekeepers use chloramphenicol to prevent Foulbrood disease, which is widespread and destructive. A deal was made to sell the contaminated honey at a big discount to another customer in Texas, a processor that sold honey to food companies. According to court documents, ALW executives called Honey Holding the “garbage can” for the company’s willingness to buy what others would not. Giesselbach followed up with Honey Holding, noting “quality as discussed.” The contaminated container was delivered on Dec. 14, 2006.
Von Buddenbrock’s introduction to the honey-laundering scheme came months after he’d settled into Chicago. In the spring of 2007 he was getting ready to take over the U.S. operation from a university friend, Thomas Marten. They talked about the business every other
week f
or a couple of hours over dinner. One night at an Italian restaurant near their office, Marten told von Buddenbrock about ALW’s mislabeling Chinese honey to avoid the high tariffs. “The conversation started normally,” says von Buddenbrock. “Then he started talking about honey. I always took notes in all our meetings, and I tried to take notes then. He told me I shouldn’t. I was surprised and a bit shocked about what I was hearing. We were talking about something criminal, and some people imagine meeting undercover, in a shady garage.” They were out in the open, eating pasta. Marten could not be reached for comment.
Von Buddenbrock took over from Marten in August 2007. The raid on the ALW office on North Wabash Avenue occurred seven months later, after U.S. honey producers had warned Commerce and Homeland Security that companies might be smuggling in cheap Chinese honey. Low prices made them suspicious. So did the large amount of honey suddenly coming from Indonesia, Malaysia, and India—more, in total, than those countries historically produced.
Although the illicit honey never posed a public health threat, the ease with which the German company maneuvered suggests how vulnerable the food supply chain is to potential danger. “People don’t know what they’re eating,” says Karen Everstine, a research associate at the National Center for Food Protection and Defense. The honey business is only one example of an uncontrolled market. “We don’t know how it works, and we have to know how it works if we want to be able to identify hazards.”
After they were questioned in March 2008, von Buddenbrock and Giesselbach continued to work for ALW. “We didn’t know what direction this was going to go,” says von Buddenbrock. “I was considering leaving, but I thought this might actually be a good opportunity for me.” If ALW got out of the honey business, he could focus on selling the products he knew more about. The ALW executives in Hamburg, he notes, kept in touch by e-mail but for obvious reasons no longer traveled to the U.S. Giesselbach, meanwhile, arranged to return to ALW’s Hamburg office; it’s not clear if she was being sent home by the company. Her flight to Germany was on Friday, May 23.
Von Buddenbrock drove her to O’Hare, hugged her goodbye beside the curb, and got back in his car. It was late afternoon, the beginning of Memorial Day weekend, and he called his assistant to see if he needed to return to the office. While he was on the phone, an unmarked Chevy Impala drove up behind him. Officials shouted for him to pull over, arrested him, and drove him to a downtown Chicago courthouse where Immigration and Customs Enforcement (ICE) agents, federal prosecutors, and his lawyer were waiting. About 20 minutes later, Giesselbach was brought in. She had been arrested before she checked in for her flight. “We were not allowed to talk, but I could see on her face that she was shocked,” says von Buddenbrock. “We were both in complete disbelief.”
Von Buddenbrock had also booked a flight to Germany for the following week; he planned to attend a friend’s wedding and return to Chicago. “I think that made the agents nervous,” he says. “At that point they didn’t know the complexity of the scheme. They probably thought No. 1 and No. 2 are leaving the country.”
He and Giesselbach were charged with conspiring to import honey from China that was mislabeled and adulterated. They were taken next door to the Metropolitan Correctional Center, where they turned over their belongings, put on orange jumpsuits, and waited. “I was tense and nervous,” says von Buddenbrock. “But I managed to get along. I speak Spanish. I like soccer.” He played Monopoly with someone’s contraband dice. He got to know Joey Lombardo, the mafia boss. “He gave me a recommendation for an Italian restaurant.”
Back in Hamburg, Wolff told local newspaper Abendblatt: “The accusations against us are unfounded, and we will fight them with every legal means.”
On Monday, June 2, agents seized thousands more files from ALW’s office. Later that month, Giesselbach and von Buddenbrock were released after posting bond and continued to cooperate. “At first we didn’t have any clue how big it was,” says Gary Hartwig, the ICE special agent in Chicago in charge of the investigation.
Giesselbach and von Buddenbrock each pleaded guilty to one count of fraud in the spring of 2012. According to Giesselbach’s plea agreement, between November 2006, when she arrived in Chicago, and May 2008, when she was arrested, as much as 90 percent of all honey imported into the U.S. by ALW was “falsely declared as to its country of origin.”
In February 2010, Wolff & Olsen, the century-old conglomerate that owned ALW, sold it to a Hamburg company called Norevo. According to an affidavit by one of the ICE agents, the sale was a sham; a former ALW executive assured customers in the U.S. by e-mail that after the sale was complete it would be “business as usual.” The transaction price was not disclosed. Norevo replied to a request for comment with a statement that had been posted on its website in March 2010. It concludes: “Within the frame of this acquisition, as legally required, the whole staff [of ALW] was taken over by Norevo, allowing for the business continuity of the company.”
Giesselbach went to jail. For one year and one day, she was Prisoner 22604-424 at Hazelton, a federal penitentiary in Bruceton Mills, W. Va. In a sentencing memo, Giesselbach’s lawyer wrote of his client: “She was living her youthful dream of international travel and business; under those circumstances she ignored her good judgment and went along with her predecessor’s scheme knowing it was wrong.” Giesselbach was released on Sept. 8 and is being deported. Von Buddenbrock was put under home confinement in Chicago for six months. His last day in an ankle bracelet was Friday, March 8. On the Monday after that, he self-deported. “I was relieved and happy, but I wasn’t sure what’s going to come,” he says. He’s settling back into life in Germany. “At the beginning it was a bad, lone wolf, so to speak,” he says. “Later, digging deeper the government found it was more than just ALW. A lot of people were doing it. It was an open secret.”
A second phase of the investigation began in 2011, when Homeland Security agents approached Honey Holding, ALW’s “garbage can,” and one of the biggest suppliers of honey to U.S. food companies. In “Project Honeygate,” as agents called it, Homeland Security had an agent work undercover for a full year as a director of procurement at
Honey Holding.
In February 2013, the Department of Justice accused Honey Holding, as well as a company called Groeb Farms and several honey brokers, of evading $180 million in tariffs. Five people pleaded guilty to fraud, including one executive at Honey Holding, who was given a six-month sentence. Honey Holding and Groeb Farms entered into deferred prosecution agreements, which require them to follow a strict code of conduct and to continue cooperating with the investigation.
When it announced the deferred prosecution agreement, Groeb Farms, which is based in Onsted, Mich., said it dismissed two executives who created fake documents and lied to the board of directors even as the company’s own audits raised concerns that honey was being illegally imported. “Everything we are doing at Groeb Farms this year has been to ensure the integrity of our supply chain,” Rolf Richter, the company’s new CEO, said via e-mail. Groeb Farms paid a $2 million fine.
In a statement on its website, Honey Holding says it accepted full responsibility and that in its settlement “there will be neither admission of guilt nor finding of guilt.” The company, now called Honey Solutions, is paying its $1 million fine in installments.
Made in America Revival Gathers Pace
in UncategorizedBoston Consulting Group said its survey found most large U.S. companies now plan to move some production to America from China, or are “actively considering” the move.
The number of firms that have shifted manufacturing to the U.S. from China, or will do so in the next two years, has nearly doubled over the past 18 months.
The survey found the three main drivers of the trend are labor costs, product quality and a desire to be closer to customers.
As lower energy prices and declining labor costs make America a cheaper place to manufacture goods, China’s dynamics are also changing.
Once a source of cheap labor, the country is seeing its advantage squeezed by rising wage costs and an impending labor shortage.
More than 200 U.S.-based manufacturing companies with annual sales topping $1 billion took part in the Boston Consulting Group study.
A pick-up in manufacturing is a crucial plank in the American recovery story.
Already, several technology giants have shifted production back to the U.S. Google chief Eric Schmidt said it costs about the same to produce its Texas-made Moto X device locally as it would in Asia.
But a stronger push by technology firms to manufacture in the U.S. is unlikely. Most component suppliers for tech companies are based in Asia, while China has far more skilled engineers needed to meet swelling global demand for smartphones and devices than the United States.
US Manufacturers ‘Reshoring’ From China
in UncategorizedRecent examples of companies announcing plans to shift production from China to the US include K’Nex, the toy manufacturer, Trellis Earth Products, which makes bioplastic goods such as bags and utensils, and Handful, the bra manufacturer.
The Boston Consulting Group survey found 21 per cent of a sample of 200 executives of large manufacturers were either already relocating production to the US, or planning to do so within the next two years. A further 33 per cent said they were considering it, or would consider it in the near future.
Those figures are sharply increased from a similar BCG survey early last year, which found 10 per cent of respondents moving production to the US, and a further 27 per cent considering or close to considering it.
Labour costs were the factor most commonly cited by executives as determining location decisions, and China’s advantage has been slipping. Wage inflation has been running at about 15-20 per cent per year. Average hourly earnings in US manufacturing have risen just 1.6 per cent per year since 2011.
So far there has been little sign in the employment data of the improvement in the competitive position of US manufacturing. After bouncing back strongly from the trough of the recession, US manufacturing employment has stagnated for the past year at just under 12m.
However, Hal Sirkin of BCG said he expected the effect of reshoring would begin to show in the data over the next few years.
“These are leading indicators,” he said. “If you are going to have a plant up and running in 2015, you have to start planning in 2011, or 2012 at the latest.”
BCG is predicting that, by the end of the decade, reshoring and rising exports will have created 0.6m-1.2m new manufacturing jobs in the US.
The effect will vary across industries, BCG says. Prime candidates for reshoring are industries that have relatively lower labour costs, and relatively higher transport costs or other reasons to be close to their customers.
The US shale boom is also stimulating investment in industries that have high energy costs, particularly petrochemical production.
U.S. Textile Plants Return, With Floors Largely Empty of People
in UncategorizedIt headed to China, India, Mexico — wherever people would spool, spin and sew for a few dollars or less a day. Which is why what is happening at the old Wellstone spinning plant is so remarkable.
Drive out to the interstate, with the big peach-shaped water tower just down the highway, and you’ll find the mill up and running again. Parkdale Mills, the country’s largest buyer of raw cotton, reopened it in 2010.
Mr. Winthrop says American manufacturing has several advantages over outsourcing. Transportation costs are a fraction of what they are overseas. Turnaround time is quicker. Most striking, labor costs — the reason all these companies fled in the first place — aren’t that much higher than overseas because the factories that survived the outsourcing wave have largely turned to automation and are employing far fewer workers.
Instead, he said, the road to Gaffney was all about protecting his bottom line.
That simple, if counterintuitive, example is changing both Gaffney and the American textile and apparel industries.
In 2012, textile and apparel exports were $22.7 billion, up 37 percent from just three years earlier. While the size of operations remain behind those of overseas powers like China, the fact that these industries are thriving again after almost being left for dead is indicative of a broader reassessment by American companies about manufacturing in the United States.
In 2012, the M.I.T. Forum for Supply Chain Innovation and the publication Supply Chain Digest conducted a joint survey of 340 of their members. The survey found that one-third of American companies with manufacturing overseas said they were considering moving some production to the United States, and about 15 percent of the respondents said they had already decided to do so.
Beyond the cost and time benefits, companies often get a boost with consumers by promoting American-made products, according to a survey conducted in January by The New York Times.
The survey found that 68 percent of respondents preferred products made in the United States, even if they cost more, and 63 percent believed they were of higher quality. Retailers from Walmart to Abercrombie & Fitch are starting to respond to those sentiments, creating sections for American-made items and sourcing goods domestically.
Now, companies that want to make things here often have trouble finding qualified workers for specialized jobs and American-made components for their products. And politicians’ promises that American manufacturing means an abundance of new jobs is complicated — yes, it means jobs, but on nowhere near the scale there was before, because machines have replaced humans at almost every point in the production process.
Take Parkdale: The mill here produces 2.5 million pounds of yarn a week with about 140 workers. In 1980, that production level would have required more than 2,000 people.
Curse of Long Distance
When Bayard Winthrop founded American Giant, he knew precisely what he wanted to make: thick sweatshirts like the one from the Navy that his father used to wear.
They required a dry “hand feel,” so the fabric would not seem greasy to the touch, and a soft, heavily plucked underside. Mr. Winthrop had already produced sportswear overseas, so he looked there for the advanced techniques and affordable pricing he needed.
He wanted to sell his hooded sweatshirt for around $80, between the $10 Walmart version, made in China, and the $125 Polo Ralph Lauren version, made in Peru. He was insistent on cutting and sewing the sweatshirts in the United States — a company called American Giant couldn’t do that part overseas, he felt — but wasn’t picky about where the fabric came from.
With the help of a consultant, he settled on a mill in Haryana, India, that could make the desired fabric. After several months of back-and-forth, Mr. Winthrop was ready to ship his first sweatshirts in February 2012.
“We just avoid so many big and small stumbles that invariably happen when you try to do things from far away,” he said. “We would never be where we are today if we were overseas. Nowhere close.”
The pro
blems in India were cultural, bureaucratic and practical.
There were also communication issues. Mr. Winthrop would send the Indian factory so-called tech packs that detailed exactly what kind of fabric he wanted and what variations he would allow. But even with photos and drawings, the roll-to-roll variance was big. And he couldn’t afford to fly to India regularly, or hire someone to monitor production there.
He also found that suppliers deferred to his wishes, rather than being frank about some of his choices, which weren’t, he conceded, always good ones.
“I’m a supporter of outsourcing when it makes sense,” he said. But it had stopped making sense.
Now that production has shifted to the United States, Mr. Winthrop says those problems have disappeared. Mr. Winthrop and his team visit Carolina Cotton Works and Parkdale whenever they want, check on quality and toss ideas around with the managers. And, he says, the cost is less than in India.
That’s when its clients started fleeing the United States.
The North American Free Trade Agreement in 1994 was the first blow, erasing import duties on much of the apparel produced in Mexico. The Asian financial crisis in the late 1990s, when currencies collapsed, added a 30 to 40 percent discount to already cheaper overseas products, textile executives said. China joined the World Trade Organization in 2001 and quickly became an apparel powerhouse, and as of 2005, the W.T.O. eliminated textile quotas.
In 1991, American-made apparel accounted for 56.2 percent of all the clothing bought domestically, according to the American Apparel and Footwear Association. By 2012, it accounted for 2.5 percent. Over all, the American manufacturing sector lost 32 percent of its jobs, 5.8 million of them, between 1990 and 2012, according to Bureau of Labor Statistics data. The textile and apparel subsectors were hit even harder, losing 76.5 percent of their jobs, or 1.2 million.
“With all the challenges that we’ve had with cheap imports, we knew in order to survive we’d have to take technology as far as we could,” said Anderson Warlick, Parkdale’s chief executive.
The company began meeting with machine manufacturers, doing trial runs of equipment and offering feedback and debugging, so it got dibs on the newest technology. It looked for business opportunities in the countries where its customers were heading, those in Central America in particular, and now 75 percent of its business is in exports.
Over all, the company employs 4,000 people, its biggest work force ever, but it is technology that has made it competitive.
“We’ve been able to be effective here because we invested in our manufacturing to the point that labor is not as big of an issue as far as total cost as it once was,” Mr. Warlick said. “It’s allowed us to be able to compete more effectively with foreign countries that pay, you know, a fraction of what we pay in wages. We compete with them on technology and productivity.”
Back From the Dead
All that automation has made working in the mill — which once meant mostly dead-end jobs for people with no other options — desirable for many people.
Howard Taggert, 86, got his first mill job in 1948 after high school. “By being a color, yeah, you’ve got the worst jobs there was in textile,” said Mr. Taggert, who is African-American. “It was rough, but it was a living. We made a living.”
He started by opening cotton bales, which involved striking an ax onto a metal tie around the bales — a dangerous job, given that a spark from metal striking metal could ignite a room full of cotton. The dust was so thick that he couldn’t see to the next aisle, he said. He was paid 87 cents an hour.
“I had to. I didn’t have no other choice,” he said of working in the mills.
The work was so bad that Mr. Taggert refused to let his children go into mill work. He might be surprised to hear about Donna McKoy, who went back to work in a mill even after earning an associate degree in criminal justice.
Ms. McKoy, 47, lost her job at Continental Fabrics in North Carolina in the early 2000s, “when everything was downsizing and going over to China.” In 2001 alone, textile plants in the Carolinas eliminated 15,000 jobs. The sense of desperation was palpable, Ms. McKoy said.
“Now what?” she remembers asking herself before she decided to go to college.
After a headhunter contacted her in 2007, she became a supervisor at Parkdale, overseeing a night shift of 11 workers. The work — and the workplace — are barely recognizable compared with her job a decade ago. A couple of things struck her right away. First, the mill was clean. “Most open-end spinning plants that have the older model spinning frames in them are really dirty and dusty and not fun to be around,” she said. Thanks to the new technology, “my plant is always clean.”
Second, Ms. McKoy got training. For her first eight months, Parkdale paid for hotels, food, dry-cleaning and gas for trips home as she rotated around different factories and learned all of the jobs. And there were fewer people. Ms. McKoy now works at a plant in Walnut Cove, N.C., which she described as a smaller version of the Gaffney plant. On a typical 12-hour shift, Ms. McKoy said, two of the 11 people on her team fix the spinning machines about 4,000 times, with robots’ help.
She earns $47,000 a year and says the perks are good, like health care, an in-house nurse and monthly management classes for supervisors. She recently bought a three-bedroom house and owns a car.
“I have a comfortable life,” she said. “With this recession that we just had, I didn’t feel it.”
Scott Symmonds, 40, of Galax, Va., works as a technician for two plants in the area. He never planned on manufacturing work, but after time in the National Guard in Iraq, his home went into foreclosure and he had trouble getting work because of his low credit score and lack of a college degree. As a teenager in rural Iowa, he knew people who worked in manufacturing and watched two plants go out of business.
“I saw how they would come home dirty, smelly and often injured,” he said. “I didn’t want that.”
But he needed a job, and Parkdale was hiring. Mr. Symmonds started as a spinner, then got a job on the packing line, and then snagged a technician’s job after a technical-aptitude test. He earns $15 an hour, which he says is better than what competitors pay. He fears, though, that his higher pay could become a liability.
“We are making far more money than our counterparts in China or other nations,” he said. “We can’t afford to take a big enough cut in pay to be on an even level with those places.”
"Made in America" Is Back in Style
in UncategorizedThe story
Around 1990, China opened its doors to the global marketplace. By 2002, the U.S. Bureau of Labor Statistics estimated that China’s hourly manufacturing wage was only 1.68% of America’s hourly rate. In 2009, Chinese manufacturing labor costs were only 5.19% America’s costs.
Given this data, it is no wonder why my teacher’s family had such a difficult time finding inexpensive goods. American companies were quickly outsourcing work to China, saving boatloads of cash. But now the tide is turning.
With rising global fuel prices and labor prices rapidly increasing in China, American firms have been reassessing opportunities. We’re now beginning to see some of the results of their decisions.
Consider tech giants Google and Apple. They seem to have answered the nation’s plea to bring manufacturing jobs back to America. For example, Apple plans to invest $100 million to build Macs in America, while Google-owned Motorola Mobile is investing in U.S. manufacturing jobs. Regarding Motorola’s newest smartphone, Mark Randall, Motorola Mobile’s senior vice president of supply chain and operations, said:
We’re proud that Moto X is designed, engineered and assembled in the USA, but our decision to assemble here was also rooted in providing the best possible experience for consumers. … Assembling in the USA enables consumers in the USA to design their customized Moto X smartphones online and receive them in just a few days.
Other than running on Google’s newest Android operating system, the Moto X is customizable. As with building a custom vehicle, users can choose from nearly 2,000 combinations of features for the phone before it is assembled in Texas. As an added bonus, it is shipped free of charge within four business days of the order.
To be fair, many of the phone’s internal components are still made overseas. Regardless, Google is establishing a precedent, and consumers seem to like the results.
A recent Harris poll concluded that about 75% of consumers are willing to spend more money on American-made products while Gallup released a similar report in May that suggested only 60% of America’s population will pay more for U.S. products. Even with different results, we see a common thread: Americans will invest more if they think a product is made in America. Moreover, as the American economy improves, that increased production should boost stock prices for U.S. companies.
This phenomenon is even occurring within the automobile industry, where foreign automakers have dominated the market in recent history. For example, American car company Tesla Motors‘ stock has soared about 390% since April 2012. In the same time, Ford has jumped nearly 40%, while General Motors is up about 39%. But foreign manufacturer Honda has only increased about 1.9% in that time frame. Increasing consumer confidence, rising housing and auto markets, and improving economics — notably more comparable international manufacturing wages — all added to these firms’ stock price increases.
All things considered, though, the American automakers’ performance is exemplary. Ford now seems to have recovered from the 2008 crisis and has been profitable for 16 consecutive quarters. In fact, it is adding 1,400 manufacturing jobs in Detroit. Ford also plans to hire more than 6,000 employees to support its new products, growth, and long-term investments.
It is important to note, though, that like Google and Apple, most auto manufacturers are global firms. And given our globalized economy, it’s tough to draw clear comparisons between American carmakers and their foreign counterparts or to attribute the success of U.S. automakers to their U.S. operations.
That said, Tesla is making big waves. Tesla is stealing market share from foreign luxury auto-manufacturers like Mercedes and BMW. While it does not consider itself a luxury car manufacturer, Tesla is now the third-best-selling luxury car in California, America’s largest auto market. And although I question the firm’s ability to stabilize growth and anticipate a market correction, given its rapid market-share gains (in part because it has received government subsidies and because California residents receive subsidies if they purchase a Tesla made vehicle), Tesla is nonetheless further evidence that American-made goods are finding ample domestic interest.
In fact, American labor costs are comparable to, or lower than, some countries, especially after fuel and transportation costs are considered. As a result, foreign automakers are investing more capital in the U.S. Honda, for instance, operates nine manufacturing plants and 14 research and development facilities in America. Now, it is investing another $215 million in Ohio. Overall, it has $14 billion of capital tied up in the U.S.
Due to changing global conditions, U.S. labor costs are becoming more appealing, especially to companies headquartered in America. And many Americans seem to be interested in purchasing goods made domestically. Maybe my history teacher will be able to find American-made goods at comparable prices. I’ll be sure to ask the next time we correspond.
Profit From Global Growth
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Longaberger Effort to Buy U.S.-Made Pottery Hits a Snag
in UncategorizedLongaberger Co. is making alternative plans to obtain pottery after word came this week that the U.S. supplier it chose in the spring is shutting down.
The interim measures, however, mean that the Newark-based basket and decor company will source some of its goods from abroad, a departure from a recent buy-American initiative.
Niagara Ceramics, Longaberger’s Buffalo, N.Y., pottery supplier, filed notice on Monday with New York state’s Labor Department announcing that it will close, putting 110 employees out of work.
The move comes only a few months after a ribbon-cutting ceremony at the 300,000-square-foot facility that was to be known as Longaberger Pottery Works. The ceremony, on May 20, was to be one of the first steps toward Longaberger’s goal of selling only U.S.-made pottery.
The closing of the Buffalo facility comes as it was “just in the early stages” of manufacturing pottery, Longaberger spokesman Russell Mack said. The plant had yet to produce much.
Longaberger announced in 2012 that it would focus on returning to U.S.-made products in a strategy known as Project Eagle. The company’s pottery line — Longaberger Woven Traditions Pottery — was launched in 1992 and was made by suppliers in the United States until 2005, when pottery-making was moved abroad.
At the time that President and CEO Tami Longaberger announced the Buffalo partnership, company officials said it was possible that Longaberger would make pottery at its campus in Dresden in Muskingum County.
The availability of the Dresden facility means the Buffalo closing shouldn’t be hard for Longaberger to handle, said retail consultant Chris Boring, principal of Boulevard Strategies.
“I can’t imagine it would be that difficult to find another supplier,” Boring said. “Muskingum County has always been a hotbed of pottery. There’s really no reason they can’t set up pottery-making right here in Ohio.”
The closing could indeed mean more work for Ohio, Mack said, “because as we continue our ongoing search for the best ways to obtain the pottery our customers want, one of the options could be setting up our own facility here at our Ohio location at some point. We continue to look at that as an option.”
Mack said: “We always knew this transition to 100 percent American-made would take time. Tami said a year ago when she announced it that it would take three to five years and that there would be bumps along the way, but that it would be worth it, and we would get there as fast as we possibly can.”
Longaberger initially expected to make about 1 million pieces a year at the Buffalo plant.
Longaberger is switching to “alternative suppliers, both in the U.S. and internationally sourced,” to fill orders, Mack said. “We are also talking with the potential new owner of that Buffalo plant, so there are possibilities there as well.”
Finding the Finest Products Made in the USA Becomes Simpler
in NewsNow patriotic Americans looking to support the “Buy American” movement can shop a wide variety of products made in the USA from NoCargo, a new ecommerce business with the goal of supporting the American economy. NoCargo’s ecommerce web site, ShopNoCargo.com, is fast becoming the “go to” online marketplace for shoppers to buy cool, hip and high quality American made products all in one place.
Inspired by a World News segment about how the news team fulfilled a college freshman’s wish to decorate her dorm room with all American made products after her search for such products came up empty, Jamie Levine founded NoCargo as a one stop online destination for high quality products made in the USA. What she learned along the way, she found simply refreshing.
“The beauty of American made products is in the craftsmanship,” Jamie affirms. “While researching American brands, I learned a lot about manufacturing. It amazed me to see the artistry and brilliance in the details. From the meticulous selection of the components like wood for a piece of furniture to French seams (which hide the edges for a neat finish) on a garment, the fine points are actually what make the USA made products that we carry so special.”
When you buy products made in the USA, you know you are getting the highest quality because manufacturers adhere to the USA’s high-level environmental standards. The American government also doesn’t tolerate child labor or unsafe working conditions. Plus, avoiding overseas shipments reduces our global carbon footprint for a healthier environment. (The connotation behind NoCargo‘s brand name.)
Surprisingly, the World News report tracked the college freshman’s purchases compared with her roommates, whose side of the room was decorated with products from abroad and found there was actually $100 in total savings in buying the products made in the USA versus the products made abroad.
Jamie points out that “economists say that if every one of us just spent an extra $3.33 on American made products every year, it would create nearly 10,000 new jobs in America. Think what it would do if you were to spend that little every month. Not only would you be helping the commonwealth, you would also be enjoying the benefits of a superior made product.”
Just like NoCargo‘s tagline says, “American makes pretty neat stuff.”
For more information, contact Jamie Levine at jamie@shopnocargo.com.
Visit NoCargo:
Website: www.shopnocargo.com
Facebook: NoCargo
Pinterest: NoCargo
Twitter: @ShopNoCargo
U.S. Manufacturing is Back – But Can Americans Do The Job?
in UncategorizedOn the surface, evidence of the rebound is everywhere. Apple Inc., well known for its large number of factories in China, recently announced – with little fanfare – that it would soon start producing one of its Mac computer lines in the United States. In the past three years, 500,000 new manufacturing jobs have been created, and the deficit in manufacturing trade is finally starting to decline after years of sharp increases. The sector will never likely match the 17 million people it employed a couple of decades ago – employment is currently about 12 million – but at least manufacturers are finally taking on additional workers instead of posting layoff notices.
What has happened to a sector that many economists had written off? One key issue, according to Time magazine, is the shale oil and gas boom. Some U.S. manufacturers now have access to less expensive energy, while high world oil prices have made it more expensive to ship goods from low-cost plants in China and other countries in Asia.
It is not only cheap domestic energy that has encouraged some manufacturers to reconsider offshoring. For many years American manufacturers could not reduce the wage gap between the United States and developing countries. But as emerging countries such as China continue to grow, wages inevitably start to increase.
The gap between wages in China and the United States will never likely be entirely closed – currently American workers earn 7.4 times more than their Chinese counterparts – but other factors also come into play. The higher productivity of American workers compared with Chinese workers, the flexibility of the American work force, and the benefits garnered from locating production closer to customers imply that the outsourcing phenomenon may have peaked.
While the return of manufacturing to the U.S. is welcome news for American workers, the factory floor is taking on an entirely new look. The days when a teenager could drop out of school and pick up a well-paid factory job for life are gone – for good. Today’s factories have far fewer workers and many more complex machines. A lot of manufacturing jobs require at minimum a two-year tech degree, to complement skills such as welding. In the near future, the need for a four-year degree is not out of the question.
This dramatic change on the factory floor could prevent U.S. industry from taking advantage of improved domestic manufacturing conditions. Many American workers simply don’t have the skills to work in today’s modern factory. Even in an economy with an unemployment rate above 7 per cent, the Wall Street Journal has reported that manufacturers are encountering difficulties finding qualified workers to operate and repair sophisticated computerized machinery.
Education and skills training is widely considered the key element to addressing the worker shortage. But the U.S. education system has been falling behind the standards set in other developed countries; The Conference Board of Canada’s How Canada Performs: Education report card ranked the United States 11th out of 16 countries – Canada, by contrast, ranked second.
President Obama has identified education as a key to America’s future competitiveness. A failure on the part of U.S. policy makers to reform education could cause the manufacturing sector to fizzle, just when this long maligned sector is on the verge of a dramatic turnaround.
Vending Machine Dispenses 'FREE' T-shirts Made From Recycled Plastics
in UncategorizedFor three days during New York Fashion Week, anyone on midtown 8th Avenue can “buy” a limited edition designer T-shirt made with recycled plastic fabric from a new vending machine by Plastics Make it Possible®—using a plastic bottle as currency. Passersby can simply deposit a plastic bottle into the machine and—voila! Out pops a beautiful new garment made with recycled plastics, underscoring how everyday plastics can live on as “eco-chic” fashion.
The new vending machine is designed to celebrate the growing role of recycled plastics in fashion during New York Fashion Week. Visitors to the Plastics Make it Possible® website also will have a chance to win one of the limited edition T-shirts (see below).
Parris is one of a growing number of designers who have embraced recycled plastics as one of the new go-to materials for creating stylish clothing and accessories. To help create the T-shirt material, plastic bottles are cleaned, melted, and stretched into a fine thread, which then is woven into soft, comfortable fabrics. Thanks to the versatility of recycled plastics, these fabrics can be manufactured with a variety of weights and textures for a wide range of uses. Both high-end designers and mainstream brands today use recycled plastics to make everything from stylish party dresses to on-trend shoes to rugged outdoor jackets.
So the next time you recycle a plastic bottle, you just may be contributing to the next big thing in fashion.
ENTER FOR A CHANCE TO WIN
Each day during Fashion Week (September 5–12), five visitors to the Plastics Make it Possible® website will win a limited edition Allison Parris T-shirt made with recycled plastics. To enter for a chance to win, website visitors simply leave a comment on the Plastics Make it Possible® article about what plastics they recycle. Click here for the official rules.
To learn more about how recycled plastics are used in fashion, click here.
Abbott and Costello Explain Unemployment
in UncategorizedReposted from Coalition for a Prosperous America:
ABBOTT: Good Subject. Terrible Times. It’s 9%.
COSTELLO: That many people are out of work?
ABBOTT: No, that’s 16%.
COSTELLO: You just said 9%.
ABBOTT: 9% Unemployed.
COSTELLO: Right 9% out of work.
ABBOTT: No, that’s 16%.
COSTELLO: Okay, so it’s 16% unemployed.
ABBOTT: No, that’s 9% .
COSTELLO: WAIT A MINUTE. Is it 9% or 16%?
ABBOTT: 9% are unemployed. 16% are out of work.
COSTELLO: IF you are out of work you are unemployed.
ABBOTT: No, you can’t count the “Out of Work” as the unemployed. You have to look for work to be unemployed.
COSTELLO: BUT THEY ARE OUT OF WORK!!!
ABBOTT: No, you miss my point.
COSTELLO: What point?
ABBOTT: Someone who doesn’t look for work, can’t be counted with those who look for work. It wouldn’t be fair.
COSTELLO: To whom?
ABBOTT: The unemployed.
COSTELLO: But they are ALL out of work.
ABBOTT: No, the unemployed are actively looking for work. Those who are out of work stopped looking. They gave up. And, if you give up, you are no longer in the ranks of the unemployed.
COSTELLO: So if you’re off the unemployment roles, that would count as less unemployment?
ABBOTT: Unemployment would go down. Absolutely!
COSTELLO: The unemployment just goes down because you don’t look for work?
ABBOTT: Absolutely it goes down. That’s how you get to 9%. Otherwise it would be 16%. You don’t want to read about 16% unemployment, do ya?
COSTELLO: That would be frightening.
ABBOTT: Absolutely.
COSTELLO: Wait, I got a question for you. That means there are two ways to bring down the unemployment number?
ABBOTT: Two ways is correct.
COSTELLO: Unemployment can go down if someone gets a job?
ABBOTT: Correct.
COSTELLO: And unemployment can also go down if you stop looking for a job?
ABBOTT: Bingo.
COSTELLO: So there are two ways to bring unemployment down, and the easier of the two is to just stop looking for work.
ABBOTT: Now you’re thinking like an economist.
COSTELLO: I don’t even know what the hell I just said!
ABBOTT: Now you’re thinking like a politician
Thanks to Robert Johns, CPA Board member and founder of Romar Consulting.
Will Obama Trade American Jobs for His War on Syria?
in UncategorizedCan you say “quid pro quo”?
We need not rely on a single source. Before jetting to the summit, President Obama phoned Prime Minister Abe to invite him to his war party. The Wall Street Journal described their chat:
Presidents of both parties have long subordinated the interests of American workers and small businesses to the Great Game of Geopolitics. Former Senator Fritz Hollings of South Carolina summed it up: “the State Department continue to try winning friends by encouraging the export of American technology and productive capacity – that means loss of jobs here at home.”
Giving away entire industries – from apparel and textiles to consumer electronics – became a form of foreign aid to shore up allies during the Cold War.
Clyde Prestowitz discovered this when, as a trade enforcement official for the Reagan Administration, he targeted the European Union’s heavy subsidies for Airbus, a clear violation of international trade rules and a threat to our own aeronautics industry:
Coincidentally, negotiators from countries with a stake in the TransPacific Partnership meet in Washington this month.
The president says American ground troops will not be enlisted in the war on Syria.
But can he – will he – assure us that Americans who make automobiles, clothing, footwear and a thousand other things will not be sacrificed?
Don’t count on it.
I’ll let Clyde Prestowitz have the last word:
“America systematically subordinates its economic interests to achieve geopolitical objectives. What it should do is give back the military bases and go for the exports, and for greatly increased domestic production.”
Are Robots Hurting Job Growth?
in UncategorizedAs we reported earlier this year, at the vanguard of this new wave of automation is the field of robotics. Everyone has a different idea of what a robot is and what they look like but the broad universal definition is a machine that can perform the job of a human. They can be mobile or stationary, hardware or software, and they are marching out of the realm of science fiction and into the mainstream.
The age of robots has been anticipated since the beginning of the last century. Fritz Lang fantasized about it in his 1927 film “Metropolis.” In the 1940s and 50s, robots were often portrayed as household help.
And by the time “Star Wars” trilogy arrived, robots with their computerized brains and nerve systems had been fully integrated into our imagination. Now they’re finally here, but instead of serving us, we found that they are competing for our jobs. And according to MIT professors, Erik Brynjolfsson and Andrew McAfee, one of the reasons for the jobless recovery.
Andrew McAfee: Our economy is bigger than it was before the start of the Great Recession. Corporate profits are back. Business investment in hardware and software is back higher than it’s ever been. What’s not back is the jobs.
Steve Kroft: And you think technology and increased automation is a factor in that?
Erik Brynjolfsson: Absolutely.
The percentage of Americans with jobs is at a 20-year low. Just a few years ago if you traveled by air you would have interacted with a human ticket agent. Today, those jobs are being replaced by robotic kiosks. Bank tellers have given way to ATMs, sales clerks are surrendering to e-commerce and switchboard operators and secretaries to voice recognition technology.
Erik Brynjolfsson: There are lots of examples of routine, middle-skilled jobs that involve relatively structured tasks and those are the jobs that are being eliminated the fastest. Those kinds of jobs are easier for our friends in the artificial intelligence community to design robots to handle them. They could be software robots, they could be physical robots.
Steve Kroft: What is there out there that people would be surprised to learn about? In the robotics area, let’s say.
Andrew McAfee: There are heavily automated warehouses where there are either very few or no people around. That absolutely took me by surprise.
It’s on display at this huge distribution center in Devens, Mass., where roughly 100 employees work alongside 69 robots that do all the heavy lifting and navigate a warehouse maze the size of two football fields — moving 10,000 pieces of merchandise a day from storage shelf to shipping point faster and more efficiently than human workers ever could.
Bruce Welty: We think its part of the new American economy.
Bruce Welty is CEO of Quiet Logistics, which fills orders and ships merchandise for retailers in the apparel industry. This entire operation was designed around the small orange robots made by a company outside Boston called Kiva. And can now be found in warehouses all over the country.
Steve Kroft: Now this is the order that she is filling, right, on this screen.
Bruce Welty: Yes, in a typical warehouse, she’d have to walk from location to location with a number of totes. And that’s the innovation here is that the product comes to her.
Steve Kroft: And all of this is preprogrammed? Nobody has to sit there and tell these robots where to go?
Bruce Welty: No, no, it’s all done with algorithms. A lot of mathematics, a lot of science that went into this.
Customer orders are transmitted from a computer to wifi antennas that direct the robots to the merchandise, guiding them across an electronic checkerboard with bar codes embedded in the floor panels. Once the robot arrives at its destination, it picks up an entire shelf of merchandise and delivers it to the packing station. It then speeds off to its next assignment.
Bruce Welty: They know if they need to get from point A to point B and they are not carrying anything , they can go underneath the grid. We call that tunneling. So they are very smart.
Steve Kroft: You’d think they’d run into each other.
Bruce Welty: Yeah, you’d think that but it never happens.
Steve Kroft: If you had to replace the robots with people, how many people would you have to hire?
Bruce Welty: Probably one and a half people for every robot.
Steve Kroft: So it saves you a lot of money?
Bruce Welty: Yes.
And it’s not just going on in warehouses. El Camino Hospital in California’s Silicon Valley has a fleet of robots called tugs that ferry meals to patients, medicines to doctors and nurses, blood samples to the lab and dirty linen to the laundry.
A hospital spokesman told us the tugs are supposed to supplement nurses and hospital staff – not replace them. But he also believes that robots and humans working together is the beginning of a new era.
Robots are now wielding scalpels for surgeons, assisting in the most delicate operations — allowing them to see and snip their way through prostate surgeries with minimal damage. And they have begun filling prescriptions in hospital dispensaries and local pharmacies.
Economic evolution has been going on for centuries and society has always successfully adapted to technological change creating more jobs in the process. But Erik Brynjolfsson and Andrew McAfee of MIT think this time may be different.
Erik Brynjolfsson: Technology is always creating jobs. It’s always destroying jobs. But right now the pace is accelerating. It’s faster we think than ever before in history. So as a consequence, we are not creating jobs at the same pace that we need to.
Andrew McAfee: And we ain’t seen nothing yet.
The changes are coming so quickly it’s been difficult for workers to retrain themselves and for entrepreneurs to figure out where the next opportunities may be. The catalyst is something called computer learning or artificial intelligence — the ability to feed massive amounts of data into supercomputers and program them to teach themselves and improve their performance.
It’s how Apple was able to create Siri the iPhone robot and Google its self-driving car.
Erik Brynjolfsson: We’ve been amazed at how rapidly this has been happening.
[TV clip from “Jeopardy:” This is Jeopardy!]
Erik Brynjolfsson: IBM’s deep QA system that plays “Jeopardy,” we had a contest here that played against our best MIT students, the best Harvard students we could put it up against. And not surpris
ing
ly, Watson won. And it’s being used in real practical applications now on Wall Street and in call centers. Siri — millions of people are using that every day.
Andrew McAfee: The fact that computers can now understand and respond to human speech, the fact that they can actually generate prose of decent quality, they can drive cars, they can win at Jeopardy. We’re seeing technology demonstrate skills that it’s never, ever done before.
And it is putting new categories of jobs in the sites of automation — the 60 percent of the workforce that makes its living gathering and analyzing information. This piece of software called e-discovery is now used by law firms in the discovery portion of legal proceedings, a job that used to require hundreds of people sifting through boxes and boxes of documents.
We now have robots gathering intelligence and fighting wars, and robot computers trading stocks on Wall Street.
It’s all part of a massive high tech industry that’s contributed enormous productivity and wealth to the American economy but surprisingly little in the way of employment.
Andrew McAfee: We absolutely are creating new jobs, new companies, and entirely new industries these days. When Erik and I go out to Silicon Valley and look around, the scale and the pace of creation is astonishing. What these companies are not doing, though, is hiring a ton of people to help them with their work.
Steve Kroft: Because they don’t have them? Because they can’t find them? Because they don’t need them?
Andrew McAfee: Because they can’t find everyone they need, but they don’t need that many people to work in these incredibly large and influential companies. To make that concrete, Apple, Amazon, Facebook and Google are now all public companies. Combined, they have something close to $1 trillion in market capitalization. Together, the four of them employ fewer than 150,000 people, and that’s less than the number of new entrants into the American workforce every month.
And it’s roughly half the number of people that work for General Electric.
Ironically, one of the few bright spots is a modest rise in U.S. manufacturing: an early casualty of automation that is making a comeback because it. This Tesla factory in California turns out battery-powered cars, using state-of-the-art robots that can change tools and perform a multitude of different tasks negating some of the advantages of moving jobs offshore.
Annual investment by U.S. manufacturers in new technology has increased almost 30 percent since the recession ended, and research institutions and robotics companies, funded by venture capital, are constantly searching for innovations like the Roomba vacuum cleaner.
That was the brain child of Rodney Brooks, a pioneer who ran the artificial intelligence lab at MIT, before launching iRobot one of the most successful robotics companies in the U.S. this is his latest progeny, a friendly, affordable chap named Baxter.
Rodney Brooks: It’s meant to be able to go in a factory where they don’t have robots at the moment. And ordinary workers can train it to do simple tasks.
Steve Kroft: Uh-huh. Such as?
Rodney Brooks: Well, a simple one is just– for instance, picking stuff up off a conveyor belt. So it’s going to go down and find the object and grab it and bring it over and put it to another spot.
Baxter costs $22,000, and can be trained to do a new task by a coworker in a matter of minutes. It can also be upgraded like an iPad with new software as new applications are developed.
[Rodney Brooks: And when you’re training it…]
Brooks and investors in his new startup, Rethink Robotics, see a potential market worth tens of billions of dollars, and believe that Baxter can help small U.S. manufacturers level the playing field against low cost foreign competitors.
Rodney Brooks: If you’re using robots to compete with a simple task that a low-paid worker does in a foreign country you can bring it back here and do that task here.
Steve Kroft: Baxter costs 22 grand?
Rodney Brooks: Yep.
Steve Kroft: How long does he last?
Rodney Brooks: It lasts three years.
Steve Kroft: Three years?
Rodney Brooks: So you can think that as 6,500 hours.
Steve Kroft: I think it works out to about $3.40 an hour?
Rodney Brooks: About that yeah.
Steve Kroft: $3.40, that’s probably the wages of the Chinese worker, right?
Rodney Brooks: It’s just about right there now.
Steve Kroft: So here you could buy one of these robots and it would be like getting a Chinese worker?
Rodney Brooks: In a manner of speaking.
That strategy has already had some success at Adept Technology, the largest manufacturer of industrial robots in the country with a wide and varied product line.
John Dulchinos: So this is our flagship product. This is our Cobra robot. This is the class of robot that was used to automate Philips electric shavers.
The robots at the Dutch company’s factory in the Netherlands proved to be so efficient and economical, that Philips decided to move its main shaver assembly line out of China and back to Holland.
Erik Brynjolfsson: I think that those workers in China, in India, are more in the bullseye of this automation tidal wave that we are talking about than the American workers.
But even if offshore manufacturing returns to the U.S., most of the jobs will go to robots.
Andrew McAfee: When I see what computers and robots can do right now, I project that forward for two, three more generations, I think we’re going to find ourselves in a world where the work as we currently think about it is largely done by machines.
Steve Kroft: And what are the people going to do?
Andrew McAfee: That’s the $64,000 question.
Andrew McAfee: Science fiction is actually my best guide because I think we are in that time frame going to be in a very weird, very different place.
It brings to mind Stanley Kubrick’s “2001: A Space Odyssey,” and the rebellious computer robot “HAL”. Technologically speaking, we are just about there.
[Dave Bowman: Open the pod bay doors, HAL.
HAL: I’m sorry, Dave, this mission is too important for me to allow you to jeopardize it.]
Everyone agrees that it’s impossible now to short circuit technology. It has a life of its own and the world is all in for better or for worse.
[HAL: Stop, Dave.]
We wanted to leave you on this positive note.
Erik Brynjolfsson: One thing that Andy and I agree on is that we’re not super worried about robots becoming self aware, and challenging our authority. That part of science fiction, I think, is not very likely to happen.
Manufacturing in U.S. Expands at a Faster Pace Than Forecast
in UncategorizedThe Institute for Supply Management’s index rose to 55.7, the strongest since June 2011, from 55.4 a month earlier, the Tempe, Arizona-based group’s report showed today. Readings above 50 indicate growth. The median forecast in a Bloomberg survey of economists was 54.
The Institute for Supply Management’s index rose to 55.7, the strongest since June 2011, from 55.4 a month earlier, the Tempe, Arizona-based group’s report showed today. Readings above 50 indicate growth. The median forecast in a Bloomberg survey of economists was 54.
American producers are leading a global manufacturing recovery that stretches from China to Europe as their economies improve. Resilient U.S. demand for motor vehicles is prompting companies such as Ford Motor Co. (F) to expand, while further strides in construction are bolstering orders for building materials, appliances and furniture.
“It’s going to be a solid quarter for U.S. manufacturing,” said Brian Jones, a senior economist in New York at Societe Generale, who projected a reading of 55.8. “Businesses are expanding production not only to meet demand but to also build inventories. Manufacturing worldwide is impressing to the high side.”
Another report showed construction spending increased in July to the highest level in four years. Outlays climbed 0.6 percent to a $900.8 billion annual rate, the strongest since June 2009, after little change in June, the Commerce Department said.
Economists’ Estimates
Estimates for the ISM factory index from 85 economists in the Bloomberg survey ranged from 51 to 55.8. Manufacturing accounts for about 12 percent of the economy.
Stocks rose, following the worst month since May 2012 for the Standard & Poor’s 500 Index, as investors weighed the better-than-forecast economic data against possible military action against Syria. The S&P 500 climbed 0.4 percent to 1,639.77 at the close in New York.
Today’s U.S. supply managers’ report follows figures yesterday showing a pickup in other parts of the world. In China, manufacturing strengthened in August, with one gauge posting the biggest jump in three years. Euro-area factory output expanded last month at a faster pace than initially estimated, driven by a resurgence in Italy and Spain as the 17-nation currency bloc’s recovery started to build momentum.
The ISM’s U.S. new orders measure advanced to the highest level since April 2011, while the group’s gauge of export demand rose to a five-month high. The index of orders waiting to be filled also climbed.
Factory Inventories
At the same time, the report showed factory inventories contracted for a second month in August, while customer stockpiles shrank at the fastest pace since November.
“The combination of strong orders growth with weak inventory-building augurs well for future increases in industrial production,” Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, said in an e-mail to clients.
Automobile purchases, which are on track for the best year since 2007, are helping power gains in manufacturing.
Dearborn, Michigan-based Ford, the second-largest U.S. automaker, is expanding output of its Fusion sedan, and said its factory in Flat Rock, Michigan, could produce another model as demand grows. The additional shift of 1,400 new workers at the plant will boost Fusion capacity more than 30 percent.
“We expect the sales momentum to stay here in the U.S. and around the world,” Joe Hinrichs, Ford’s president of the Americas, told reporters on Aug. 29.
Housing Market
The recovery in housing also is spurring demand for construction materials and encouraging consumers to remodel and spend on appliances, benefiting home-improvement retailers such as Atlanta-based Home Depot Inc. and Lowe’s Cos. (LOW), based in Mooresville, North Carolina. The companies each reported second-quarter profit that topped analysts’ estimates and raised their annual forecast.
The Commerce Department’s construction report showed private homebuilding outlays increased 0.6 percent in July to the highest level since September 2008. The gain included a 0.8 percent advance in home improvement spending. Non-residential projects also picked up.
Construction helped the economy pick up steam in the second quarter. Gross domestic product increased at a more-than-expected 2.5 percent annualized rate after a 1.1 percent gain in the first three months of the year, the latest Commerce Department figures show.
Age Gap Revealed in Made-in-USA
in NewsReposted from Refinery29:
This could be worrisome for domestically-produced apparel brands that target Millennials and charge more accordingly. Will this generation, accustomed to fast fashion and a global mentality, be willing to spend the extra few bucks for a “Made in the USA” tag? Once again, the unavoidable quality versus quantity debate surfaces — as does another: Are younger Americans simply less inclined to see the link between patronage and patriotism? And does it really matter?
“Older people tend to be more patriotic,” Gallup managing editor Jeffrey Jones told WWD. “Could it be that older Americans have witnessed the erosion of the U.S. manufacturing base and are paying more attention to questions about country of origin? Perhaps.”
On a positive note, while “patriotism” isn’t necessarily everyone’s motivation for buying stateside-manufactured goods, 64% of those interviewed for the April Gallup poll still say they’d be willing to pay more for American items — even those who don’t currently make a special effort to do so. Additionally, when you bring e-commerce into the equation, the numbers are more optimistic: Over 60% in a WWD/American Giant survey say they use the Internet to find and purchase American-made merchandise.
Ultimately, none of these figures definitively mean that young people don’t care about where or how their purchases are made. Locavore and eco-conscious consumption movements — largely youth-fueled — continue to steadily grow. In fact, green fashion now generates over $5 billion in revenue a year — up 1000% from a decade ago. Generational shifts in attitude towards commerce and country are bound to evolve, but it seems whether or not we were born pre or post 1980, we’re mostly on the same page when it comes down to doing the responsible thing. (WWD)
Fast and Flawed Inspections of Factories Abroad
in ManufacturingArticle reposted from The New York Times:
But unknown to the inspectors, none of the playful items, including reindeer suits and Mrs. Claus dresses for dogs, that were supplied to Walmart had been manufactured at the factory. Instead, Chinese workers sewed the goods — which had been ordered by the Quaker Pet Group, a company based in New Jersey — at a rogue factory that had not gone through the certification process set by Walmart for labor, worker safety or quality, according to documents and interviews with officials involved.
To receive approval for shipment to Walmart, a Quaker subcontractor just moved the items over to the approved factory, where they were presented to inspectors as though they had been stitched together there and never left the premises.
Soon after the merchandise reached Walmart stores, it began falling apart.
Fifteen hundred miles to the west, the Rosita Knitwear factory in northwestern Bangladesh — which made sweaters for companies across Europe — passed an inspection audit with high grades. A team of four monitors gave the factory hundreds of approving check marks. In all 12 major categories, including working hours, compensation, management practices and health and safety, the factory received the top grade of “good.” “Working Conditions — No complaints from the workers,” the auditors wrote.
In February 2012, 10 months after that inspection, Rosita’s workers rampaged through the factory, vandalizing its machinery and accusing management of reneging on promised raises, bonuses and overtime pay. Some claimed that they had been sexually harassed or beaten by guards. Not a hint of those grievances was reported in the audit.
As Western companies overwhelmingly turn to low-wage countries far away from corporate headquarters to produce cheap apparel, electronics and other goods, factory inspections have become a vital link in the supply chain of overseas production.
An extensive examination by The New York Times reveals how the inspection system intended to protect workers and ensure manufacturing quality is riddled with flaws. The inspections are often so superficial that they omit the most fundamental workplace safeguards like fire escapes. And even when inspectors are tough, factory managers find ways to trick them and hide serious violations, like child labor or locked exit doors. Dangerous conditions cited in the audits frequently take months to correct, often with little enforcement or follow-through to guarantee compliance.
Dara O’Rourke, a global supply chain expert at the University of California, Berkeley, said little had improved in 20 years of factory monitoring, especially with increased use of the cheaper “check the box” inspections at thousands of factories. “The auditors are put under greater pressure on speed, and they’re not able to keep up with what’s really going on in the apparel industry,” he said. “We see factories and brands passing audits but failing the factories’ workers.”
Still, major companies including Walmart, Apple, Gap and Nike turn to monitoring not just to check that production is on time and of adequate quality, but also to project a corporate image that aims to assure consumers that they do not use Dickensian sweatshops. Moreover, Western companies now depend on inspectors to uncover hazardous work conditions, like faulty electrical wiring or blocked stairways, that have exposed some corporations to charges of irresponsibility and exploitation after factory disasters that killed hundreds of workers.
The Rana Plaza factory collapse in Bangladesh, which killed 1,129 workers in April, intensified international scrutiny on factory monitoring, and pressured the world’s biggest retailers to sign on to agreements to tighten inspection standards and upgrade safety measures. While many groups consider the accords a significant advance, some longtime auditors and labor groups voice skepticism that inspection systems alone can ensure a safe workplace. After all, they say, the number of audits at Bangladesh factories has steadily increased as the country has become one of the world’s largest garment exporters, and still 1,800 workers there have died in workplace disasters in the last 10 years.
“We’ve been auditing factories in Bangladesh for 20 years, and I wonder: ‘Why aren’t these things changing? Why aren’t things getting better?’ ” said Rachelle Jackson, the director of sustainability and innovation at Arche Advisors, a monitoring group based in California.
Even with American and European companies appointing executives this summer to put in place a stricter regimen of inspections and safeguards under the new agreements, these efforts are limited to Bangladesh. Other leading garment-producing nations, like China, Honduras, Indonesia, Pakistan and Vietnam, are not getting such stepped-up attention or expanded inspections. Thousands of factories in those countries will no doubt continue to be reviewed through the perfunctory “check the box” audits.
th AuditsFactory monitoring companies have established a booming business in the two decades since Gap, Nike, Walmart and others were tarnished by disclosures that their overseas factories employed underage workers and engaged in other abusive workplace practices. Each year, these monitoring companies assess more than 50,000 factories worldwide that employ millions of workers. Walmart alone commissioned more than 11,500 inspections last year. Spurred by heightened demand for monitoring, the share prices of three of the biggest publicly traded monitoring companies, SGS, Intertek and Bureau Veritas, have all increased about 50 percent from two years ago.
The inspections carry enormous weight with factory owners, who stand to win or lose millions of dollars in orders depending on their ratings. With stakes so high, factory managers have been known to try to trick or cheat the auditors. Bribery offers are not unheard-of. Often notified beforehand about an inspector’s visit, factory managers will unlock fire exit doors, unblock cluttered stairwells or tell underage child laborers not to show up at work that week.
Unauthorized subcontracting, or farming work out, to an unapproved factory (as was the case for the Quaker Pet Group order in China), is “very, very common,” according to Gary Peck, founder and managing director of the S Group, a design and sourcing company based in Portland, Ore.
Though almost all retailers prohibit the practice in their contracts, suppliers still do it to save money, speed production and meet high-volume orders.
And even inspections conducted at authorized factories can be deeply flawed. When NTD Apparel, a contractor for Walmart that is based in Montreal, hired a firm to inspect the Tazreen factory in Bangladesh before 112 workers died in a fire in November, the monitors’ questionnaire asked whether the factory had the proper number of fire extinguishers and smoke detectors on each floor. But it did not call for checking whether the factory had fire escapes or enclosed, fireproof stairways, which safety experts say could have saved lives.
“If it’s a check-the-box inspection, you better have the right boxes to look at,” said Daniel Viederman, chief executive of Verité, a nonprofit monitoring group.
Sajeev Jesudas, president of UL Verification Services, which conducted the Tazreen audit, said inspecting for fire escapes and fireproof stairways was “the responsibility of the local building inspectors.” Bangladesh has been faulted for having far too few officials to inspect factories.
Greg Gardner, the chief executive of Arche Advisors, said Western retailers and brands often seek different levels of audits. Some, like Levi’s and Patagonia, want rigorous — and costly — audits, while others prefer limited, inexpensive audits that will not jeopardize relationships with favored suppliers.
Audits can be very brief. A single inspector might visit a 1,000-employee factory for six to eight hours to review all types of manufacturing issues, like wages, child labor or toxic chemicals. Some auditors receive only five days of training, whereas the federal Occupational Safety and Health Administration requires three years of training and experience assisting inspectors before employees can lead an inspection of a sizable factory in the United States.
In the Rosita case, after the workers went on their rampage, the Western companies that bought the factory’s knitwear grew alarmed. So Rosita’s owner, South Ocean, a conglomerate based in Hong Kong, commissioned a new inspection.
That inspection, conducted by Verité, which is based in Massachusetts, was a scathing broadside. Verité’s monitors found “ongoing physical abuse” and “verbal and psychological harassment,” with managers compelling workers who arrived late to stand for “many hours without rest.”
Verité’s three-day inspection found errors in calculating wages, chemical containers labeled only in English and unreasonably high production quotas for which workers were disciplined or fired for not meeting. The inspectors noted that workers “often face harsh treatment,” including jeering from managers if they requested sick leave or annual leave. The monitors also found that managers had fired employees for missing work because of a death in the family and that security guards had beaten workers involved in union and protest activities.
Mr. Viederman of Verité said the earlier inspection, performed by a major monitoring firm, SGS, demonstrated the shortcomings of checklist audits. The SGS inspection involved a one-day visit, largely seeking yes-no answers, probably for a modest fee.
He noted that SGS had interviewed employees only inside the factory, where workers were often unlikely to speak candidly, and not outside — for instance, at bus stops or at home, where workers might open up.
Charles Kernaghan, executive director of the Institute for Global Labor and Human Rights, was shocked when he read the SGS inspection report for Rosita. “The auditors were saying everything was in perfect order,” he said. “It shows how ineffective these monitoring organizations can be.”
Effie Marinos, sustainability manager at SGS, defended her company’s findings. She said SGS had followed the inspection protocol developed by the Business Social Compliance Initiative, a factory certification group for European businesses.
Ms. Marinos said the protocol for Rosita did not require interviewing workers outside the factory, a practice that she cautioned could undermine a relationship between a Western company and its suppliers.
“You don’t want to start the whole approach with a lack of trust, that they are trying to fool you, that they are behaving unethically,” she said. “It can sour an entire relationship.”
Bypassing Inspection Rules
The Walmart purchase orders read “Ethical Standards Required.”
In mid-2011, the Quaker Pet Group, whose biggest customer was Walmart, began looking for cheaper factories where its trendy dog clothes could be made, according to a former Quaker employee who requested anonymity for fear of reprisal from Quaker. The company has also sold its goods to Petco, PetSmart and smaller retailers.
Quaker settled on a plant called Jiutai Bag and Gift Factory in Dongguan, Guangdong. After visiting the site, Quaker’s president, Neil Werde, sent a note to a Jiutai representative in June 2011. “I was pleased with your factory,” Mr. Werde wrote, according to an e-mail shared by the former employee. “Good luck on the Walmart inspection.”
That inspection did not occur. Quaker officials became concerned that Jiutai would not be able to pass an inspection, the former employee said.
But there was a workaround. While Jiutai would make the garments, Quaker would fill out order forms to say that the items had been made by Ease Clever Plastic Manufactory, then an approved Walmart supplier. Ease Clever is an established manufacturer that ships products to Target and other large companies, according to the global trade database Panjiva. Jiutai, by contrast, had only one recent listing in the database, for a small shipment to Puerto Rico in 2011.
The stickiest issue was how to get the clothing made by Jiutai past Walmart inspectors. An inspection at Ease Clever was scheduled for September 2011, when the Walmart representatives would check that the dog outfits were being manufactured there, the former employee said.
Jiutai simply took the clothes to Ease Clever, according to the former employee. Those moves were outlined in a later e-mail from a Jiutai representative to Mr. Werde.
“The Walmart inspectors showed up and said, ‘Oh, they are being made here.’ It’s not as challenging as you would think,” the
former employee said. “You have your finished-goods area and just show them the cartons being packed out.”
In an e-mail to Mr. Werde, the Jiutai representative, identified as Mr. Hu, detailed how the setup had worked as he pushed Quaker for payment.
In July, Mr. Hu wrote, a company based in Hong Kong called KYCE, apparently acting as a liaison, helped arrange an order for the Christmas dog clothes. “JiuTai only make the clothes,” Mr. Hu wrote.
In September, “we hang the clothes” in display cases and “send to Ease Clever warehouse for Walmart during inspection,” Mr. Hu added, including photographs of the costumes. After the inspection, the clothes went back to Jiutai, and Jiutai, after making final adjustments, packed and delivered the clothes to the shipping terminal, Mr. Hu wrote. Mr. Hu and KYCE representatives did not respond to multiple e-mails seeking comment.
Throughout September, according to Walmart purchase orders, Quaker shipped $2.1 million worth of pet outfits from Yantian, China, to various American ports. The purchase orders list Mrs. Claus dresses, Santa suits and reindeer suits — the exact outfits Mr. Hu of Jiutai said he had made at his factory and then photographed. But the purchase orders list Ease Clever as the supplier, not Jiutai.
Contacted by telephone last month about the inspection and shipment, Jay Xie, a sales manager for Ease Clever, said the company had allowed the use of its Walmart certification. “His factory had not yet been audited — he used my factory because it was already audited,” Mr. Xie said of the Jiutai factory manager. Mr. Xie said this had happened only once, as a friendly act to help a fellow manufacturer.
The shipment, though, was late, according to the former employee and Mr. Hu’s e-mail. And soon after Walmart started selling these items, Quaker began receiving complaints, according to the former employee. When Walmart conducted a quality test on the Mrs. Claus dress, it found holes, and the outfit failed the test. Walmart executives then summoned Quaker employees to its sourcing office in Shanghai for an explanation, but Quaker did not disclose the subcontracting to Walmart at that time, the former employee said.
In March 2013, Walmart received a tip, via its global ethics hot line, about the unauthorized subcontracting and looked into it.
Kevin Gardner, a spokesman for the company, confirmed that subcontracting in this case occurred in 2011, and that Walmart officials “met with the supplier after the investigation to go through the findings and reinforce what our expectations are pursuant to subcontracting.”
Even though Walmart was alerted to the case nearly two years after the products were made and only after a hot line tip, the retailer pointed to the episode as an example of how its investigation and compliance system was working, not faltering.
“We investigated. We talked with the supplier. We think this does show the processes were in place,” Mr. Gardner said.
In January of this year, Walmart established a “zero tolerance” policy, saying it would drop suppliers who used subcontractors without the company’s approval. Walmart adopted the policy after garments headed to the company were found in the fire debris at Tazreen, an unauthorized factory.
Quaker and Mr. Werde declined to comment. The pet specialty company remains a Walmart supplier, Mr. Gardner said.
Cat-and-Mouse Games
The question-and-answer sheet that the factory’s managers distributed to all their employees was explicit: if an inspector ever asked, “Are there injury records?” they were to answer, “Have not heard of any work-related injuries.”
And if an inspector asked, “Any corporal punishment in the factory?” the employees were to reply, “No.” If monitors inquired about underage workers at the plant, employees were coached to respond, “Employment for those less than 16 years old is prohibited.”
This sheet, prepared by managers at a Chinese factory and obtained by The Times, had one purpose: to trick inspectors.
Supply chain experts and monitors say that far too often, factory managers play cat-and-mouse games with inspectors because they are desperate to avoid a failing grade and the loss of a lucrative stream of orders.
The experts provided real-life examples. To avoid appearing illegally overcrowded, one factory moved many machines into trucks parked outside during an inspection, a monitor said. Whenever inspectors showed up at certain plants in China, the loudspeakers began playing a certain song to signal that underage workers should run out the back door, according to several monitors. During inspections in India, some factories displayed elaborate charts detailing health and safety procedures that, like stage props, were transferred from one factory to another, another monitor said.
For monitoring companies with major retailing clients, the auditing regimen can be nonstop. The territory itself is daunting — 5,000 factories produce garments in Bangladesh alone. A retailer that uses 1,000 factories worldwide might want to pay no more than $1,000 an inspection — that could mean a one-day, check-the-box audit — instead of $5,000 for thorough, five-day inspections. That would cost $1 million instead of $5 million.
“You have this intense price pressure downward on these inspection firms, turning them into a commodity business,” said Mr. O’Rourke of the University of California, Berkeley.
Auret van Heerden, president and chief executive of the Fair Labor Association, a nonprofit group that Apple uses to monitor its Foxconn factories in China, said many inspectors were too rushed. “Many are doing a factory a day, and many auditors, more than one factory a day,” he said. “They’re on a plane and going to a new city the next day. They don’t have much time to think about it or dwell on it.”
Despite some improvements, many supply chain experts say monitoring has inherent shortcomings. Not long ago, Nike and other sporting goods companies were shaken by revelations that children, ages 5 to 14, toiled up to 11 hours a day making soccer balls for them in Sialkot, Pakistan.
A study found that half of Pakistan’s soccer ball workers were making less than the minimum wage, with many stitching the balls’ panels together at home, making it hard for factory monitors to unearth such violations.
Nike responded by requiring its main contractor there, Silver Star, to consolidate production in one big factory. Knowing how skilled many contractors have become at gaming the monitoring system, Nike took an unusual step and ordered Silver Star to set up a system of elected worker representatives who would be charged with speaking up about safety problems, wage violations or other issues.
“We’ve learned that monitoring alone isn’t enough,” said Greg Rossiter, Nike’s chief spokesman.
Mr. van Heerden said, “You can never visit facilities often enough to make sure they stay compliant — you’ll never have enough inspectors to do that. What really keeps factories compliant is when workers have a voice and they can speak out when something isn’t right.”
Still, after a string of fatal disasters and repeated failures in uncovering serious violations, many experts doubt that even a highly organized and supervised inspection industry can improve factory conditions in country after country. Heather White, a research fellow at Harvard and a longtime factory auditor, said, “It starts as a dream, then it becomes an organization, and it finally ends up as a racket.”
Made in America not just a slogan anymore
in UncategorizedLet us celebrate that this Labor Day 2013 is trending toward its home-grown meaning.
No offense to American union workers, but we don’t exactly have to look for the ladies’ garment workers label to determine whether our clothing is made in the good ol’ U.S. of A.
Labels on garments that are branded by Reebok (Thailand), Old Navy (Indonesia, Cambodia and Madagascar) and Target’s Mossimo (Egypt) remind us why bathing beauties this summer might have preferred and looked so enticing in made-in-America Longitude swimwear.
But there appears to be several reasons why a manufacturing trend is on the horizon — and if a resurgence in U.S.-manufactured goods and exports continues, well, that will bode well for the U.S. economy in general and U.S. jobs in particular.
Here’s some background, courtesy of an dailyfinance.com article posted Friday.
“Just a few years ago, you likely wouldn’t have believed an article touting American manufacturing as a growing force in the global economy — and for good reason. For much of the past 15 years, U.S. exports and our manufacturing sector have been on the decline. But that trend appears not only to be slowing, but reversing. The data is driven by America’s increasing oil production, a commitment from retailers to buy more domestic goods, and other companies bringing their previously offshored manufacturing back home — a trend called ‘reshoring.’ “
And here’s the not-made-in-America skinny: “U.S. manufacturing accounted for 19 percent of global exports in the year 2000. By 2011, that number had shrunk to 11 percent. During that same time, Chinese manufacturing surged from 7 percent to 21 percent of global exports. For the American factory and its workers, not to mention the economy, these were troubling numbers,” as dailyfinance.com reported.
Corporate America, the 1 percenters being ripped to shreds by Big Labor and their bed partners — liberals and progressives — are seemingly flipping the well-scripted criticism of greed.
Analysts say that with manufacturers currently employing 12 million Americans, a U.S. export boom could push down our unemployment rate by 2 to 3 points to 5.4 percent — relief worth praying for.
The dailyfinance.com article said Chinese manufacturing is maturing and explained it this way: “According to the Boston Consulting Group, the U.S. is becoming one of the least expensive places in the developed world for manufacturing. We’ve got cheap domestic sources for energy (thanks to the shale gas production boom), as well as relatively low wages. These cost advantages make U.S. manufacturing more akin to China or India just a couple of years ago. BCG projects that by 2015, U.S. labor will cost between 8 percent and 18 percent less than in the other five major export economies (Germany, Japan, France, Italy, and Great Britain).”
Companies banking on “Made in America” labels include Brooks Brothers, which bought a plant in Haverhill, Mass., a few years ago to make suits here instead of offshore, and Caterpillar opened a $200 million plant in Texas a year ago.
And the No. 1 brand in motorcycling, Harley-Davidson, the 110-year-old stalwart of “Made in America,” is even reworking its management-labor relations by renegotiating with unions and granting workers more flexible job classifications and duties.
“[T]he combination of reshoring and building out new manufacturing facilities in the U.S. could create as many as 5 million new jobs here,” dailyfinance.com said.
So, see. It’s all good.
The dreamers in and around the comprehensive immigration-reform movement are having their say about being “Born in the USA.” Well, corporate America is retrending toward having its say, too.
“Made in America?”
Hard-working Americans should bet on it.
Happy Labor Day.
The Dirty Job America Must Now Embrace — Closing the Skills Gap
in UncategorizedRowe traveled the world for the past six years taking on jobs with people that were dangerous or just plain disgusting that Americans do every day to make a living.
Personally learning how to make snakes vomit for science or having an angry African monkey named ‘Patty’ stare you down while creating livable space for her and 24 of her friends were two of my favorites!
SkillsUSA was awesome! Awesome! G-d’s work and I don’t say that lightly. They have over 340,000 youth in our schools learning trades and many are STEM trades such as: Digital Marketing, Robotics, Inventions, Electrical Engineering and also Welding, Motorcycle Repair, Automotive, Criminal Justice and more! There were 10,000 at the conference and some very very proud CTE (Career & Technology Education teachers). They boast 98 percent high school graduation rates from their research. WOW! The national average is just over 70 percent.
Walking around the huge Expo center with Edie Fraser, our dynamic CEO at STEMconnector watching kids compete for their destinies (most competitions were at 8 hours long!) was mesmerizing.
Now I hate to be crude, but at least 8 board member plus 100 more corporate and education leaders asked me if this was my ‘first time,’ at the conference with such zeal it was like the Madonna song — you know which one I’m referring to…
“Whatever Kool-Aid they are manufacturing and mixing, that’s a promising skill into itself,” I mused. How do we bottle more of that to build our workforce?!
Rowe with his signature baseball cap and jeans pointed out that in the ’70s, colleges created a poster campaign that told us to work smarter not harder, and the campaign was spectacularly successful! Rowe also shared his view that this campaign was the worst advice ever given. Why?
Because…
Out went vocational education and skills-based learning for jobs.
In came college, college, college-bound, NCLB, college loans, and over a trillion in debt.
We shifted focus off of skills and trade and the great equalizer of our country became to get kids college bound and degreed.
We became a country where testing scores are currency and not whether a child can show up on time, a positive mental attitude, focused resume and a work ethic to become an expert in a craft or skill.
We forgot how to just make something that America could sell and many ‘dirty jobs’ were viewed as beneath us in our quest to work smart but not necessarily hard.
Mike and others have pointed out time and time again to us that most jobs require a two-year degree (yeah, community colleges!) or less, and technical training and certifications. Also pointed out is that many of these jobs, especially if technology or engineering are involved, can start with salaries in the late 40’s and 50’s. The U.S. Department of Labor shares that only 18 percent of jobs require a 4-year college degree.
“We must be prepared with the skills for America so America will be prepared,” said the dynamic youth president on the podium at opening night. The event resembled a Junior Olympics or rock concert with “America Needs Me” posters abound.
I spoke to him afterwards and he would like very much to be a STEM teacher in Automotive Technologies for a few years once he finishes his two-year degree and he plans to continue his education from there.
Rowe suggests that the new motto should be to ‘Work Smart and Hard.’ That’s a campaign we can all get behind. Whether you go to a 4-year college, or a 2-year college, or get some vocational training, know what the jobs you want requires education-wise and what jobs pay to help you map out your decisions and training. Now that’s smart!
I hope you will also be touched for the very first time by SkillsUSA and groups like 4H, Girls Scouts, DECA, YearUp, Invent.org, Youthbuild, NFTE and more that teach real deal skills.
And companies… if you haven’t already and your struggling to hire…
Get dirty and get out there meeting your education institutions to make sure you have a pipeline. Make sure your industry standards are being met and begin mentoring kids in schools and after school on these skills. Judge competitions. Build partnerships. Send equipment they can learn on. Build a school to hire internships and apprenticeship program.
When you go out there and meet rock star workers like the ones we met in Kansas City, consider hiring them. Let them know what training they need now to work for you and hopefully reach them before they rack up hundreds of thousands of dollars in debt.
Putting America Back to Work: 5 Ways Made in USA Is Staging a Comeback
in American Made, Consumer Products, Domestic Sourcing, Jobs, Made in USA, ManufacturingGood news: Americans are making things again, from cars to watches to socks. What’s behind the manufacturing upswing—and what it means for American labor.
More Reform, Fewer Rules Will Help U.S. Manufacturing
in UncategorizedDallas Fed President Richard Fisher has long complained that U.S. politicians have undermined the economic recovery, and he reiterated that message in a speech that nonetheless remained hopeful that American manufacturers could yet become the “most efficient operators in the world.”
A policy hawk who has said the central bank will likely trim its bond-buying program next month, Fisher said little about Fed policy on Thursday except that companies in general have benefited from the monetary accommodation.
In a speech where he compared U.S. manufacturing to the race horse Secretariat, Fisher said the sector could be helped by “throwing out old, counterproductive fiscal and regulatory policies” that would allow manufacturers to outpace their global competition.
“American companies … have taken advantage of the cheap and abundant money made available by the Fed’s very accommodative monetary policy to create lean and muscular balance sheets,” he told a manufacturing conference, according to prepared remarks.
“While there are many risks in the policy that the Fed has been pursuing … every manufacturer of goods in America has been given a great gift by your central bank,” Fisher said.
The Fed has kept interest rates near zero since 2008 and more than tripled its balance sheet to some $3.6 trillion in an unprecedented effort to lower borrowing costs and encourage investment, hiring and growth.
But the recovery has been erratic and growth has remained below 2 percent this year thanks in part to tighter fiscal policies.
While U.S. manufacturing production took a beating in the 2007-2009 recession, it has rebounded in recent years and the latest monthly data show factory activity jumped to a two-year high in July.
“The remaining obstacle to being the absolute best economy for manufacturers and other businesses, bar none,” Fisher added, “has been fiscal and regulatory policy that seems incapable of providing job-creating manufacturers and other businesses with tax, spending and regulatory incentives to take advantage of the cheap and abundant fuel the Fed has provided.”
'Made in USA' On The Rise As Manufacturing Costs Drop
in UncategorizedAccording to the Boston Consulting Group (BCG), the U.S. is fast becoming one of the lowest-cost countries for manufacturing in the developed world. BCG argues that average manufacturing costs in Germany, Japan, France, Italy, and the U.K. will be 8 to 18 percent higher than in the U.S. by 2015.
The report states that export manufacturing in the U.S. is a unsung hero of the economic recovery, noting: “Despite all the public focus on the U.S. trade deficit, little attention has been paid to the fact that the country’s exports have been growing more than seven times faster than GDP since 2005.”
BCG found that the U.S. is increasingly attractive for businesses due to lower costs of labor, (adjusted for productivity), natural gas, and electricity.
U.S. manufacturing activity hit a five-month high in August as hiring picked up and new orders increased at their fastest pace since January, a Markit report showed last Thursday.
However, BCG’s report argues that we are currently just witnessing the beginning of a major shift in global manufacturing.
“Over the past 40 years,factory jobs of all kinds have migrated from high-cost to low-cost countries,” said Harold L. Sirkin, co-author of the report. “Now, as the economics of global manufacturing changes, the pendulum is finally starting to swing back. In the years ahead, it could be America’s turn to be on the receiving end of production shifts, as more companies use the U.S. as a low-cost export
BCG believes the U.S. will capture between $70 billion and $150 billion in annual exports from other nations by 2020, with two-thirds of these export gains emanating from production shifts to the U.S. from leading European nations and Japan.
Furthermore, by 2020, with more production work shifting back to the U.S. from China, between 2.5 million and 5 million American factory and service jobs could be created. BCG believes that would mean the U.S. unemployment rate could drop by up to three percentage points from its current rate of 7.4.
Chris Williamson, chief economist at Markit, agreed with the BCG’s findings, though questioned the reliability of the time-frame of when America would emerge once more as a cheap,manufacturing powerhouse, and the precise effect it would have on the wider economy.
“It’s difficult to gauge the extent to which the U.S. economy will benefit and over what time scale,”he said, adding, “It is becoming increasingly evident that many companies are shifting production back to the U.S. from low-cost countries, notably China, as the advantages of having a production base in these countries fades or are re-evaluated.”
The BCG’s report references a number of foreign companies, such as Toyota, Airbus, Yamaha, Siemens and Rolls-Royce, who have already started to move more of their production facilities to the U.S.
While BCG cited low labor, natural gas and electricity costs, Williamson emphasized lead-times. “Before, a lengthy, six-month transport time for goods to be shipped from Asia could be tolerated given the cost advantage,” Williamson said. “But,as the cost advantage fades, the trade-off between cost and timeliness works in the latter’s favor. With the increasing use of 3-D printing, this trade-off will of course work even more in favor of localized production.”
Indeed, Mary Anne Greczyn, a spokesman for Airbus, said this was why the aircraft manufacturer was opening a factory in Mobile, Alabama.
“As you would imagine, for an airline such as JetBlue or American Airlines to have to come to Europe every time they get an aircraft delivered can be time- and resource- consuming,” Greczyn said. “When the new facility in Mobile is up and running, they will need only to travel to Alabama for their A320 Family aircraft.”
Greczyn added that Airbus was not moving, shifting or reshoring construction to America, but simply expanding its production facilities.
Williamson broadly agreed with the BCG report, but warned that it would be many years before the “renaissance” of the goods-producing sector in the U.S.
PR Ploy Or Not, Walmart’s ‘Made In America’ Push Means Something
in Economy, Jobs, Made in USA, Manufacturing, Reshoring, WalmartLast week, Walmart expanded on the $50 billion Buy American pledge it made last January with a full-fledged Made-in-America summit.
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Why America Needs a National Manufacturing Strategy
in UncategorizedUnfortunately, manufacturing in the United States has lost competitive advantage in the last 15 years and unless this turns around significantly it will continue to be a drag on our efforts to fully recover from the Great Recession.
There is no inherent reason the United States could not run a significant trade surplus in manufacturing. America possesses the tools, talent, and resources to revive industrial production and our innovation economy.
Read the rest of the article here: http://www.industryweek.com/competitiveness/why-america-needs-national-manufacturing-strategy?goback=.gde_4765254_member_267015572#%21