Monday, June 4, 2007

American Manufacturing...

…down and out and over there.

I’ve worked for two American companies that you would recognize as household names. Everyone has heard of them. Both of them are shadows of their former selves. Both of them have followed the same pattern.

They started in Chicago back when it was the toolbox of America. I was in China a year ago and I imagined that Chicago was like that less than a hundred years ago. I spent a week at a factory that supplies my current company with product. (Believe me, it is NOT a household name.)

This factory is a sprawling campus with dozens of buildings. One building is devoted to making hardware. They can make bolts and nuts and metal shafts out of raw material. The entrance to that building is a reddish-brown color from the small amounts of molten slag tossed out the door day-after-day for years. Surely that can-do capability and attitude was the soul of Chicago when these two famous companies were born.

Over the years these American companies built additional plants and office buildings that housed engineers, sales executives, and researchers. At some point in the 1960s there was a crossroads of sorts. The cost of union labor met competition, not from other brands but from buyers at major catalog houses and discount stores. By the early 1970s 80% of the business hinged on four or five major accounts; and those accounts dictated the pricing.

The buyer would meet with us and say, “We need a $14.95 widget. If you can build one, we’ll sign. If not, we have other suppliers.”

So we went down, first down to Southern Illinois and Missouri. Then to Tennessee and Mississippi. And that wasn’t enough to make a competitive product because the buyer now wanted a $12.95 widget.

So we went out, out of the country to the maquiladoras of Northern Mexico. I had the privilege of managing a department in Reynosa, a town across the border from McAllen, Texas. I spent a few days there every month for six months. The company picked up the workers in a bus every morning, fed them breakfast and lunch, and took them home at night. They took day trips to Monterrey every three months as a reward. And they paid the empoyees $50 to $150 a month.

Then along came Asia. Things were different. These companies would design and build the product and put our name on it. Name your features. Name your price. The widgets were well-made. And they came at throw-away prices.

They eliminated the need for R & D, engineering, replacement parts, service technicians…As the CEO told us, “We have become a sales and marketing company.”

Mexico could not compete. They lacked the skills in English, engineering, and management. And frankly, they lacked the eye for detail required to build a reliable product. They were congenial and they worked hard, but they were unable to compete with Asia.

We still buy the products with those familiar names. Many still think they are buying American. But they are made over there at far lower prices than Chicago’s union labor would have allowed. Indeed, our core manufacturing business has gone down and out, and over there. It is a blessing and a curse and it has left us without lucrative job opportunities.

1 comment:

  1. The bottom line is JOBS. The U.S. lost 46,000 manufacturing jobs in August 2007. More significantly, the ongoing losses are taking a cumulative toll on communities throughout the country. We need to adequately enforce our trade laws, and hold countries like China accountable for illegal trading practices such as currency manipulation. Otherwise, we’ll continue to shed manufacturing jobs.