Tuesday, July 01, 2008

Not too long ago...

...I noted that we have let our infrastructure wither away and let our rail lines go to pot, and wondered if we could dig our selves out of that past stupidity? I said that I hoped so, but was apprehensive. Apparently, for good reason.

Businesweek
Cover Story June 19, 2008, 5:00PM EST
Can the U.S. Bring Jobs Back from China?
Pricey oil is dulling the mainland's edge in manufacturing. But American industry may not be ready to seize the opportunity

Christina Lampe-Onnerud has a long-lasting, fast-charging battery for notebook computers that she believes will revolutionize the industry. Her company, Boston-Power, would like to make the batteries in the U.S., which she says is feasible despite high American wages.

But Lampe-Onnerud has had trouble finding anyone in the U.S. even to make a prototype, let alone manufacture the battery in bulk...

This would seem to be a good time for an American manufacturing renaissance. The economics of global trade are starting to tilt back in favor of the U.S. to a degree unseen in a generation...

But as the experience of Boston-Power and countless companies like it shows, the map of global commerce can't be redrawn overnight. American factories and supplier networks in many industries have withered in the era of globalization, so it will take lots of time and capital before the U.S. can become a big player again...

"The high cost of fuel is going to radically transform the way people look at the geography of their manufacturing."

Examples of production shifts abound....

Look behind these examples, though, and obstacles to a broad manufacturing migration become clear. Iron castings maker Donsco, on the banks of the Susquehanna River in eastern Pennsylvania, illustrates the dilemma. In recent years, Donsco has laid off hundreds of workers as customers shifted production of gear boxes, oil rig parts, and much more to Chinese competitors. Now, Donsco says it's flooded with order inquiries from U.S.-based clients. "All of a sudden our customers are saying, Whoops, it's cheaper to buy in our backyard,'" says Donsco Chairman Art Mann Sr. While Donsco managed to keep its doors open, many of its U.S. rivals shut down, so there's now a shortage of capacity...

Despite growing demand, Mann says Donsco will be "real cautious" about spending the $30 million and two years needed to build a new foundry. The impact of this reluctance is being felt in Belen, N.M., where CEMCO, a maker of rock-crushing and farming equipment, is looking to cut costs and logistical headaches. The company today imports many metal parts from Asia but would prefer to buy domestically because of rising shipping rates and the weak dollar. "American foundries now can compete head-to-head on cost, but there aren't many foundries, welders, machinists, and quality-control engineers," says James B. Turk, CEMCO's chief financial officer. "What we had 10 years ago is gone." Where did all the capacity go? Mainly to China, where modern foundries are proliferating.

The furniture industry has undergone a similar transformation...

The same goes for lighting fixtures, household appliances, and more...If global shipping costs continue to rise, some businesses could eventually move their factories back to the U.S., but that process will take years.

...Expecting the U.S. to recapture industries that have already gone to China may not be realistic. But the new cost equation likely will influence many decisions about where to locate production in the future. America remains the world's biggest manufacturer, after all, because it's still the largest market for everything from drugs and packaged foods to high-end medical equipment. The U.S. may have as good a chance as anyone of being a strong player in nascent industries, whether next-generation wind turbines, medical devices with nano-scale sensors, or electric cars. The challenge will be to persuade reluctant venture capitalists and corporations to invest again in modern U.S. production facilities...


Easy, no. Necessary, yes. Profitable? Absolutely. The time for us to begin relocalizing is now, class, before costs rise higher than they already are. Our communities can be self sufficient - not with giant mass production facilities but with smaller local and regional scale businesses that just focus on a 100 or so mile radius or less of customers.

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