I am subscriber to a trade magazine titled Inbound Logistics which is dedicated to all aspects of the logistics profession and industry. I just finished an article about a possible manufacturing renaissance in the US due to the rapidly increasing wage rates in China. One interesting paragraph states: “Global technology and energy company GE has put reshoring to work. In early 2011, GE moved production of its energy-efficient water heater from Chinese contractors to its own factory in Louisville, KY, in order to accelerate cycle-times and speed new product launches. The company took advantage of a 2005 labor contract under which Louisville plant employees are paid $13/hour, down from $22/hour prior to the agreement.”
So, Obama’s favorite company is bringing some manufacturing work back to the US, a southern state, and to a plant with a UAW workforce because the UAW agreed to take a near 50% wage reduction. Where is the outrage from the unions directed at Immelt?
GE also benefitted from local tax credits of $25 million over 10 years and federal incentives that encourage the manufacture of energy-saving products. So in a nutshell taxpayers are subsidizing GE’s US production of energy-efficient water heaters. A company that paid, legally, no income taxes last year is getting taxpayer subsidies to make water heaters.
The article also includes the following reshoring activity:
Nissan to shift LEAF battery production from Japan to TN (Red state)
- NCR is opening a new plant in GA (red state) bringing work back from China, India, and Hungary.
- Yamaha shifted production of ATVs from all overseas facilities to GA (red state)
- Ford is bringing some work back to the US and exceeding a commitment made to the UAW. (No state mentioned)
- opened its first US manufacturing facility in FL (reddish state)
- Electrolux shifting work from Canada to TN (red state)
- Sleek Audio shifting work from China back to FL (reddish state)
As a mechanical engineer whose original career plan was to be in manufacturing I see these as very positive developments and as a Southerner I enjoy the delicious irony of all this work coming to the South. The only risk to this renaissance is Obama and the unions. It is not solely due to wages, as the unions and the Left claim, that manufacturers migrated out of the US, although that was the primary early driver for the trend. The primary driver now is the US regulatory burden. It can easily take twice as long to build a manufacturing facility in the US and at twice the cost than it does outside the US due to the alphabet soup of regulatory agencies, their regulations, their paperwork and the higher cost of construction labor. Especially union labor. Another factor that may put this renaissance at risk is the price of oil. If the price of oil falls by half or more then the reduced transportation costs may be enough to offset the increase in labor costs in China and other offshore nations.