Made in America – With Pride
Karen is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
American factory and manufacturing jobs are coming home after being overseas for far too long.
China and India in particular are seeing American job orders canceled and contracts not renewed due to changing socioeconomic conditions. Outsourcing to China has become increasingly expensive to the point that it no longer makes financial sense. In India, high employee turnover and widespread customer dissatisfaction are the primary reasons call center jobs are being brought back.
Since 2001, Chinese labor costs have been rising 20-50% per year. In large cities like Shanghai, Chinese workers earn only 30% less than their American counterparts in Mississippi, South Carolina and Alabama. American employees on the whole are a better educated work force and are 3.2 to 3.4 times more productive than Chinese workers.
In the past four years, shipping costs have risen 71% as oil prices increased which further eroded outsourcing advantages. Since 2000, the cost of shipping a container from China to the U.S. by water has increased by 150%.
Other hidden costs of doing business overseas must be factored in. Production and global supply chain delays or interruptions can dramatically increase costs. Shipping delays are expensive as inventory sits waiting in warehouses for days. The poor quality of goods made overseas further eats into profits through customer refunds for returned items.
Companies are responding to the financial realities of higher overseas costs and widespread customer dissatisfaction. Last year Caterpillar (NYSE: CAT) announced the expansion of their U.S. operations with construction of a new 600,000 square foot hydraulic excavator manufacturing plant in Victoria, Texas. The new plant will employ over 500 Americans and will more than double U.S.-based excavator production.
NCR (NYSE: NCR), a Fortune 500 company best known for making ATM machines and cash dispensers, announced in late 2009 that they were bringing back production of their ATM machines to Columbus, Georgia. The move created 800 jobs in an area hit hard with high unemployment. The company plans to add another 370 jobs by 2014.
The Ford (NYSE: F) plant in Avon Lake, Ohio is getting back jobs lost to Mexico. Ford F-650 and F-750 trucks will be produced at Avon Lake and will provide over 1,400 new jobs for unemployed Americans.
General Electric (NYSE: GE), another Fortune 500 company, is renovating a plant in Louisville, Kentucky that was closed for decades. The company plans to hire at least 1,300 people to produce hot water heaters. An existing plant at the same location will be used to build refrigerators.
Even call center jobs are returning to the United States. Carbonite (NASDAQ: CARB), a computer back-up firm, is moving its New Delhi, India call center operations to Lewiston, Maine. The Indian call center suffers from a 100% yearly employee turnover rate along with equally high customer dissatisfaction. As a comparison, Carbonite’s Boston call center enjoys an employee turnover rate under 10% and receives very high marks in customer service and satisfaction. The company brought back about 150 jobs last year and is bringing back another 100 jobs this year.
Small companies are also abandoning their overseas production. Wham-O brought back half their Frisbee and hula-hoop production to the U.S. from Mexico and China in 2010. Suarez Corporation, a space heater manufacturer, already brought back 250 jobs from China and Mexico.
The number of jobs returning represents a tiny fraction of those lost overseas, but steadily increasing production costs will continue pressuring companies to reassess the financial wisdom of outsourcing. And as more jobs return home, Americans will once again be able to purchase goods with “Made In America” proudly printed on the package.
kprogers has no positions in the stocks mentioned above. The Motley Fool owns shares of Ford. Motley Fool newsletter services recommend Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.