Who Will ‘Make it in America’? | DCR Workforce Blog

Who Will ‘Make it in America’?

Numbers, even in percentages, have a way of projecting hard information, which even a thousand words may fail to convey. The commerce department’s report released on Thursday is a case in point: Orders for durable or long-lasting consumer goods fell by 13.2% (against an expected drop of 5%) from July 2012 to Aug 2012! (It is worthy to note that this monthly decline is the biggest seen in the last 3 years). This news is bleak when taken together with the report that the GDP grew at 1.3% against an estimated 1.7% – falling well below expectations considering the 2% growth witnessed in the first quarter. This contraction in orders reflects not just upon aircraft and automobiles, but also household items like televisions and toasters.

The economy at the moment seems to be beset with slow growth, higher taxes and reductions in government services, with the continuing debt issues faced by many European countries affecting global demand. Domestic business is hampered by low incentives to production. High levels of unemployment and slow growth in jobs continues. The job market is expected to further slow down, with employers being reluctant to hire or invest in such a slow economic environment.

But, there are clear reasons why manufacturing should return to America. Recent developments indicate that the rising production, energy and labor costs in alternative locations has reduced the cost benefits over manufacturing in the US. It may be rendered even cheaper to manufacture in the US thanks to initiatives like ‘Make it in America

Future of Manufacturing in the US:

‘Made in America, Again’, a report recently issued by the Boston Consulting Group (BCG), delved into the competitive positioning of the US vs. other developed economies which account for 60% of global manufactured exports.  Key findings:

  • Manufactured exports are set to surge. Production will shift from leading European countries and Japan to take advantage of substantially lower costs in the U.S., adding 2.5 million to 5 million jobs by the end of the decade.
  • By the end of 2015, the U.S. will have an export cost advantage of 5 to 25 percent over Germany, Italy, France, the U.K., and Japan in a range of industries.
  • This advantage will be driven by the costs of labor, natural gas, and electricity.
  • The U.S. could capture 2 to 4 percent of exports from the four European countries and 3 to 7 percent from Japan by the end of the current decade; translating to as much as $90 billion in additional U.S. exports per year.

BCG forecasts that the biggest U.S. export gains will be in machinery, transportation equipment, electrical equipment and appliances, and chemicals.

For the skeptics, there is proof enough in reports like:

  • Toyota exporting Camry sedans assembled in Kentucky and Sienna minivans made in Indiana to South Korea
  • Honda and Nissan expecting to boost exports of vehicles made in their U.S. plants to the rest of the world
  • Siemens building gas turbines in North Carolina to construct a 4-gigawatt power plant in Saudi Arabia
  • Rolls-Royce opening a new aircraft engine parts manufacturing facility in Virginia, citing lower labor costs, productivity and dollarization (and doing business in U.S. dollars to mitigate local currency risk).

Irrefutably, worker productivity is higher in the U.S., while labor costs are lower than in Europe and Japan and increased access to natural gas lowers energy costs. It does seem to be a clincher that the U.S. offers seriously compelling cost advantages and access to North America as well as important overseas markets – offering a competitive export base and savings on transport. So, why get dispirited by glitches which are temporary in the face of such optimism with, what is being dubbed as a, ‘manufacturing renaissance’ around the corner?


Disclaimer:
The content on this blog is for informational purposes only and cannot be construed as specific legal advice or as a substitute for competent legal advice. They reflect the opinions of DCR Workforce and may not reflect the opinions of any individual attorney. Do contact an attorney for advice specific to your issue or problem.
Lalita is a people/project manager with extensive experience in operations, HCM and training and development across industries like banking, education, business consulting, BPO and information technology. She believes in a dynamic approach to life and learning as change is the only constant.