Pumping Muscle into U.S. Manufacturing

By: Craig Barner, Forbes A number of recent initiatives, including a couple in the Midwest, are seeking to pump muscle into U.S. manufacturing as fresh data on industrial activity gives M&A professionals reason for optimism. The Institute for Supply Management announced that U.S. manufacturing picked up in January to its highest level in nine months, as new orders and employment improved. The organization’s index of national factory activity rose to 53.1 from 50.2 in December; a reading above 50 indicates expansion. Also, the Association of Manufacturing Technology announced that orders among member companies in December were at their highest level in 13 years and that it expects a 2012 total of $5.71 billion, an increase of 2.6 percent from 2011. Three investment bankers who focus on industrials said M&A could increase if U.S. manufacturing goes up. “I think it could spur activity,” said Robert Billow, a managing director at Billow Butler & Co., an investment bank in Chicago. In particular, defense, electronics and automation/material handling could see the biggest increases, he said. The initiative that has attracted the most interest from Wall Street is the Reshoring Initiative. The project, based in Kildeer, Illinois, aims to bring manufacturing jobs back to the U.S., said Harry Moser, president. A key element is to assist companies in assessing their total cost of offshoring and “shift collective thinking from ‘offshoring is cheaper’ to ‘local reduces the total cost of ownership,’” according to the RI’s mission statement. About 60 percent of manufactures apply a “rudimentary” model to assess the total cost of manufacturing products abroad, said Moser, an engineer who trained at the Massachusetts Institute of Technology. Such organizations ignore 20 percent or more of the total cost for offshoring, he said. A tool on the RI’s website, the Total Cost Estimator, allows users to create a free account, login and calculate their true costs of offshoring. “Three or four” unnamed investing organizations—including private equity and hedge funds—have asked Moser which companies could benefit from reshoring, he said. Also, BB&T asked Moser to speak at a conference about the reshoring concept, he said. Three other initiatives have yet to attract that kind of attention from the financial community but...

What Do American Manufacturers Owe Their Country?

By: Michele Nash-Hoff, Can American Manufacturing be Saved? Last week The Economist conducted an on-line debate on the question: Do multinational corporations have a duty to maintain a strong presence in their home countries? After a very intense written debate between Harry Moser, former president of GF AgieCharmilles and founder of the Reshoring Initiative, and Jagdish Bhagwati, Professor of Economics and Law, Columbia University, the vote was 54% “yes,” and 46% “no.” The moderator of the debate was Tamzin Booth, European business correspondent for The Economist, who introduced the topic by stating, “after the Great Recession, with high levels of unemployment persisting in rich countries, politicians are putting enormous pressure on firms to either keep operations at home or bring them back. The offshoring and outsourcing of work overseas have never been more unpopular. So strong is the backlash against firms which shift jobs abroad that many companies are choosing not to do it for fear of igniting a public outcry. And a “reshoring” trend, bringing factories home to America from China and elsewhere, is gathering pace and support from several American multinationals, including General Electric and Ford Motor Company.” While Mr. Moser acknowledges that multinational corporations (MNCs) “have a responsibility to enhance shareholder return and obey relevant laws and regulations,” he believes that “MNCs also have a duty to maintain a strong presence in their country of origin,” which he defines “as investing, employing, manufacturing and sourcing at least in proportion to their sales in the origin country.” He states, “This duty has two sources. The first is a quid pro quo for the special benefits that their charter provides. The second is based on understanding that a strong presence is almost always in the interest of their shareholders.’ In his pro argument for the first duty, Mr. Moser quotes Clyde Prestowitz: “Corporations are not created by the shareholders or the management. Rather they are created by the state. They are granted important privileges by the state (limited liability, eternal life, etc). They are granted these privileges because the state expects them to do something beneficial for the society that makes the grant. They may well provide benefits to other societies, but their...

American Manufacturers Come Back Home

By: Kim Gittleson, BBC News Visitors to Clyde, Ohio are greeted with the view of a water tower presiding over the flat landscape, carrying a large Whirlpool logo. The tower is a clear symbol of the small Ohio town’s economic heart. Whirpool’s 2.5 million sq. ft. washing machine factory dominates the main drag here, and the businesses along this stretch, such as Gary’s Diner and Pizza House, are often filled with the appliance manufacturer’s workers. On the factory floor, the din is overwhelming. More than 3,000 workers – half the population of Clyde – are busy testing, screwing, welding, and painting the hundreds of pieces that make up the company’s washing machines. This is the largest washing machine plant in the world, with 30 miles (50km) of overhead conveyor belts that clatter along, carrying assorted barrel drums and metal doors. But stop for the time it takes to make one machine – approximately four seconds – and a few things will become apparent that differ from factories past. Those carts driving by, filled with grey fabric? They have no driver. They are automated to follow an orange line on the ground. And those LED screens at each assembly line? They monitor each worker’s productivity to the second and can give instant feedback about how to improve production. Such details make the plant one of Whirlpool’s most productive, and it is one reason why the company, when it was looking to move production from a plant in Mexico, decided to bring jobs back to Ohio. “There’s been a lot of focus both by the company and the employees to become more efficient, more effective,” says Whirlpool vice president Jeff Noel. “That’s made making products in the US more competitive than it has been in the past.” Homecoming American manufacturing lost more than two million jobs during the recession, accelerating a decline that had begun long ago in the 1970s. Yet since then, manufacturing has been one of the biggest drivers of job growth in the US, adding more than 500,000 jobs. While much of that job growth could be attributable to post-recession pent-up demand, that is not the whole story. According to the Reshoring Initiative,...

Made in America, Again

By: Antonio Regalado, MIT Technology Review Bringing manufacturing jobs back to the U.S. is politically savvy and can make economic sense. At a dinner for Silicon Valley big shots in February 2011, President Obama asked Steve Jobs what it would take to manufacture the iPhone in the United States. Apple’s founder and CEO is said to have responded directly: “Those jobs aren’t coming back.” In December, Apple reversed course, saying it planned to assemble a line of Mac computers in the U.S. With that, Apple joined a wave of companies that say manufacturing in this country makes sense again. Companies that say they’ve brought back jobs include General Electric, Michigan Ladder, and Wham-O, which in 2010 hired eight people to make Frisbees in Los Angeles instead of China. An MIT study in 2012 found that 14 percent of companies intend to move some manufacturing back home.The idea is known as “reshoring.” Although Chinese wages are a fraction of U.S. labor costs, rising shipping rates, quality problems, and the intangible costs of being far from headquarters all add up. That’s why some companies have begun to rethink the manufacturing equation. MIT Technology Review interviewed Harry Moser, head of the Chicago-based Reshoring Initiative, about the trend. Moser, a former industry executive whose family has been involved in American manufacturing for a century, says he grew up “experiencing the glory of U.S. manufacturing.” He created the initiative to help companies compare the real costs of manufacturing at home and abroad, and to track the experiences of those who are returning. Why are people talking about reshoring all of a sudden? It’s actually been happening over the last few years. The obvious answer is that Chinese wages are doubling every four years. The consultants who five years ago were helping people offshore are now helping them inshore. And then you have President Obama making a big deal over how to reduce imports and start making stuff again. How much of Apple’s plan to manufacture in the U.S. is real, and how much is window dressing? There’s a lot of speculation about that. Some people say it’s politics. From what I can tell, the units Apple produces in the U.S....

Harry Moser Makes Case for Reshoring at IMTS

By: Plant Engineering Harry Moser, President of the Reshoring Initiative, made his case for bringing back manufacturing back to the United States. “The concept of reshoring and near-shoring (manufacturing in neighboring countries) is equally viable all over the world,” Moser said. He used Brazil as an example of this model and how manufacturing should start in the home country and expand to the region. In the United States’ case, it would include Costa Rica, Mexico, and Canada. Part of the reason, Moser says, that companies are starting to bring back jobs to the U.S. is that many companies are not making as much money as they used to in foreign countries—particularly in China—after the total cost of ownership (TCO) is calculated. “60% of manufacturers, when calculating costs, use rudimentary tools and don’t see the whole benefit,” Moser said. Most companies, he said, were more focused on wage rate and less focused on hidden costs like intellectual property, import/export costs, and potential shortages against demand because of unpredictable variables like shipping. “Who brings the work back? Those who have felt the pain,” Moser said. “Companies that were making a profit at the start and then realized they weren’t making as much shipping their work overseas and weren’t willing to put up with the hassles of calling Asia at midnight all the time and dealing with the logistical challenges.” 50,000 manufacturing jobs have been restored since January 2010, which was the low point for the manufacturing industry. A total of 100,000 jobs (including those affected by manufacturing additions) have been added in the last 30 months. Moser believes if more companies apply TCO, increase the quality of U.S. training, China wages continue to rise, and overseas currency manipulation ends, that a total of 3,000,000 manufacturing jobs could be restored and 6,000,000 overall. “It would wipe out the trade deficit ($600 billion estimated) and it would bring back a lot of quality jobs to the United...