Manufacturers are leaving China and bringing jobs back to the States
The Brisker is one of those high-end kitchen gadgets that bespeak luxury and moneyed prosperity. Retailing for $150, it’s an attractive metal box that plugs in to keep bread, crackers and cookies fresher longer. For 10 years it was made in China, where cheap labor kept production costs low.
But problems arose. The Brisker was supposed to be made of brushed stainless steel, but the Chinese manufacturer substituted cheaper chrome-plated steel. Lighter plastic was substituted for the end pieces, so cheap that when the Brisker heated up, they gave off a vague burning odor.Dealing with these problems across 12 time zones and in translation from Chinese to English and back proved to be so difficult that the Brisker’s owner returned its manufacturing to the States. The Brisker is now Made in the USA – at the West Chester plant of Long-Stanton Manufacturing.
After flirting with low-cost Chinese labor for several years, manufacturers in Greater Cincinnati, the Midwest and the nation are beginning to bring work back to the U.S. At its low point, the U.S. was a country that bought everything but made little of it. That’s starting to change. The trend is at an early stage, and the number of jobs “reshored” or “insourced” is still small. But the investment can be substantial, creating a ripple effect that generates jobs in other areas.
With the pieces in place, for a sustained rebound in U.S. manufacturing, policy makers could recognize the need for changes to encourage more investments to return the U.S. to manufacturing eminence.
After decades of decline in manufacturing jobs, a fledgling rebound is taking place as some manufacturers once again see the U.S. as an attractive place to make things. Some companies have moved work back to the States from China as China’s labor costs grow and quality problems become apparent. Big manufacturers like GE are beginning to do this, as are small ones, like Long-Stanton.
Long-Stanton, a 151-year-old manufacturer, made the move to China to capitalize on extraordinarily low labor costs. But China’s labor costs are rising rapidly. Combined with other rising costs, fuel, electricity, long shipping time and language barriers, manufacturers are taking another look at the States.
- Freeman Schwabe assembles and sells die-cutting presses in Union Township. When CEO Greg DeFisher and partners bought the Schwabe machinery brand in 2002, the decision was made to assemble the presses, which had been made in the U.S. since 1935, in Taiwan. Quality suffered, lead time to customers lengthened and communication was difficult. The work was brought back to Clermont County, and the company hired more than a dozen new workers, including engineers and assemblers. “People want made-in-the-USA quality goods,” DeFisher says.
- GE Aviation plans to spend $200 million in Ohio over the next three years, including on new engine-testing facilities at the Evendale complex. A second engine test facility is being built in Peebles, in Adams County. The engine maker will open three U.S. facilities in 2013, including factories in Ellisville, Miss., and Auburn, Ala., and a major research and development center on the University of Dayton campus. In June, the company will announce the U.S. location for a new ceramic matrix composites factory.
- Ford in February announced it will move the production of a popular engine from Spain to its Brook Park facility near Cleveland. The move will initially mean 450 new jobs in Cleveland, and the promise of more.
- The most well-known is General Electric’s project to make dishwasher, water heaters and refrigerators again at its Louisville Appliance Park. In February 2012, it opened a water heater manufacturing facility there, the first to open in Louisville since 1957. It was a $38 million investment and was the first milestone in GE’s plan to invest $1 billion ($800 million of it in Louisville) and create more than 1,300 new jobs in the U.S. by 2014. The Louisville project is being lead by GE Appliances CEO Chip Blankenship, a former senior executive at GE Aviation in Evendale. On Monday, GE announced it would begin making washers and dryers there, the first time GE has made front-loading washers and dryers in the U.S.
- Manufacturers across the country are taking another look at the U.S. A survey conducted by the Massachusetts Institute of Technology in January found that 15 percent of the manufacturers surveyed “definitively” planned to reshore jobs. Nearly 34 percent said they were considering it.
Rapidly rising wages in China are one of the key factors. From 2005 to 2010, wages rose an average of 19 percent a year in China, found Harold Sirkin of the Boston Consulting Group. Granted, wages in China started very low, but the gap is narrowing enough to persuade U.S. manufacturers to reconsider.
Long-Stanton opened two plants in China in 2005. “The whole decision was cost-related,” says president Marvin Cunningham. In 2006, labor at the China plants accounted for only 10 percent of Long-Stanton’s costs there. By 2012, it was up to 32 percent, Cunningham says.
The rising labor costs made the other problems of manufacturing in China less tolerable. “There were all these costs that cheap labor doesn’t make up for,” he said.
For Long-Stanton, the “aha” moment came when a customer asked the company to speed up a shipment of parts it needed to meet an increased demand in orders. But the parts were literally on a slow boat from China, making the two-week journey across the Pacific, where they would be unloaded onto a train in Long Beach, Calif., shipped by rail to Chicago, and then by truck to West Chester. The entire shipping process took a month. Now, it’s a day.
Congress and state legislators have an opportunity to encourage this young trend and make good on their promises to create jobs. Congress could make the research and development tax credit permanent to encourage certainty among business. Manufacturers are among the main beneficiaries of the tax credit, which is scheduled to expire at the end of this year.
Long-Stanton and other manufacturers say it is still tough to find skilled workers to run the high-tech equipment in today’s factories. The Alliance for American Manufacturing recommends expanding investment in vocational and technical education and rewarding employers who make a commitment to investing in training programs for their workers. The group also recommends expanded investment in infrastructure – roads, bridges and high-speed rail, financed by fuel taxes.
Long-Stanton’s Cunningham says policy makers should act for the long-term rather than react to crises.