Reading between the lines - a company returns to the USA

On the surface, it sounds like Generac is being patriotic and returning its manufacturing business to the United States from China but there is an aspect to this that does not bode well for the workforce.

First, the story from the Los Angeles Times:

After decades of exodus, companies returning production to the U.S.
In 2001, Generac Power Systems joined the wave of American companies shifting production to China. The move wiped out 400 jobs in southeast Wisconsin, but few could argue with management's logic: Chinese companies were offering to make a key component for $100 per unit less than the cost of producing it in the U.S.

Now, however, Generac has brought manufacturing of that component back to its Whitewater plant — creating about 80 jobs in this town of about ‎14,500 people.

The move is part of a sea change in American manufacturing: After three decades of an exodus of production to China and other low-wage countries, companies have sharply curtailed moves abroad. Some, like Generac, have begun to return manufacturing to U.S. shores.

Second - OK - 400 jobs lost, 80 returned. What happened? Automation became cheaper and better. Simple as that.

Those 80 people will be standing around feeding parts into rows of machines. They are custodians, not machinists. They will be earning close to minimum wage, not the $40+ a trained machinist would earn.

In addition, that $100 advantage the Chinese offered shrank bit by bit. The Chinese are not stupid and they knew that there was a lot of cream in that $100 that could be skimmed. They got a little bit too greedy and the numbers did not pan out after a while.

The world is full of unintended consequences...

Finally, I am betting that they are getting a sweet tax break -- States often offer tax breaks to companies planning to move to that state.

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This page contains a single entry by DaveH published on May 13, 2014 7:31 PM.

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