Some OEMs decide to desert manufacturing in the USA

By: 
March 17, 2010

Last November, the CEO of Emerson Electric Co., David Farr, made remarks at a Baird Industrial Outlook conference in Chicago that are now being echoed by others in manufacturing: “Washington is doing everything in their manpower, capability, to destroy U.S. manufacturing. Cap and trade, medical reform, labor rules.”

Emerson, headquartered in St. Louis, MO, is a major OEM that makes a variety of electrical products, including industrial equipment, power supplies, power transfer equipment, compressors, and appliances such as garbage disposals and cooktops—electrical and electronic products for nearly every industry segment. It’s a global company with manufacturing around the world. Shortly before Farr made his remarks in Chicago, Emerson announced a US$35 million expansion of its manufacturing and offices in Soracaba, the state of São Paulo, Brazil. It will be company’s Brazilian headquarters.

It’s a company on the move. But if Farr has his way, it won’t be expanding in the United States. As the Brazilian expansion announcement showed—and as Farr stated—the company will focus its growth on “emerging markets.” According to a Bloomberg.com report, Farr’s presentation showed that about 36% of Emerson’s manufacturing is now done in “best-cost countries,” up from 21% in 2003.

Emerson employs approximately 125,000 people worldwide, but has eliminated more than 20,000 since the end of 2008 as a cost-cutting measure. And Farr has no plans to hire in the U.S. “I’m moving,” Farr stated. “[The U.S. government] is doing everything possible to destroy jobs.”

That’s pretty much the way that Evergreen Solar’s CEO Rick Feldt thinks. According to a report in Manufacturing & Technology News (March 5, 2010), Feldt recently went to Washington, DC to meet with Energy Secretary Steven Chu and Commerce Secretary Gary Locke, and told them that “Chinese government policies made U.S. production uncompetitive.”

Unless the U.S. government responds in some meaningful way “to counter competitive forces working against domestic production, we are going to China as quickly as we can,” Feldt told the analysts. 

Currently, Evergreen Solar’s Massachusetts plant is producing solar panels at $2.05 per watt, down from $2.24 per watt in Q3 2009. However, said Manufacturing & Technology News, “the 100-megawatt Chinese facility will produce panels for $1.25 per watt, going down to $1.00 per watt by the end of 2012 including wafer costs of about $0.30 per watt.” And, “Virtually all of the company’s new hires are taking place in China.”

That pretty much says it all. For all the talk from Washington about creating millions of “green” jobs to improve the economy and the air quality, it will never happen with a Congress and White House working against U.S. manufacturers that, as other reports have recently shown, are reducing America’s competitiveness. The new jobs are being created in Brazil and China, and even in Mexico, where new plants are being opened up by U.S. companies every month.

The latest issue of MexicoNow (Jan/Feb 2010) shows IBM investing US$20 million in Guadalajara to maximize “high-tech manufacturing capacities on their Guadalajara Informatics Campus, which is already exporting US$1 billion in highly complex technological products to the entire world.” And Ford Motor Co. just opened a second plant in Chihuahua “with the capacity to produce 200,000 diesel engines per year to be exported to the U.S. and Great Britain.”

Even Magna International is slated to double the number of jobs in Saltillo, Mexico, when its Cosma International Div. joins that of the Powertrain Div. And the company will generate 300 new jobs with the expansion of its Ramos Arizpe Plant this year, doubling the workforce there to 600.

I’m disappointed in both Farr and Feldt that they feel so strongly about taking manufacturing offshore to enrich other countries. But, I can’t blame them. As Farr stated in his remarks that appeared in Bloomberg.com, “My job is to grow that top line, grow my earnings, grow my cash flow, and grow my returns to the shareholders. My job is not to shrink and roll over for the U.S.”

If those in the molding and moldmaking industry want to stay in business, it’s imperative that we keep the big OEMs growing their businesses—and creating jobs—in the USA. That means electing people to congressional seats who are committed to implementing business-friendly policies with regard to taxation, healthcare, labor rules, and monetary and trade policies that will result in jobs and a strong middle-class in the United States. Otherwise, it will be U.S. citizens slipping across the Mexican border looking for work. Clare Goldsberry

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