The U.S. as One of the Developed World’s Lowest-Cost Manufacturers

The U.S. as One of the Developed World’s Lowest-Cost Manufacturers

          
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The U.S. as One of the Developed World’s Lowest-Cost Manufacturers

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  • The Pendulum Swings Back

    For much of the past four decades, manufacturing work has been migrating from the world’s high-cost to its low-cost economies. Generally, this has meant a transfer of factory jobs of all kinds from the U.S. to abroad.

    The pendulum finally is starting to swing back—and in the years ahead, it could be America’s turn to be on the receiving end of production shifts in many industries. In previous reports, we cited a number of examples of companies that have shifted production to the U.S. from China and other low-cost nations. These companies range from big multinationals like Ford and NCR to smaller U.S. makers of everything from kitchenware and plastic coolers to headphones. More recently, computer giant Lenovo opened a plant to assemble Think-brand laptops, notebooks, and tablets in North Carolina. Toshiba Industrial has moved production of its hybrid-electric vehicle motors from Japan to Houston. Airbus has broken ground on a $600 million assembly line in Mobile, Alabama, for its A320 family of jetliners; the facility will create up to 1,000 high-skilled jobs. Flextronics, one of the world’s largest electronics-manufacturing-services companies, has announced that it will invest $32 million in a product innovation center in Silicon Valley. The company’s CEO was quoted in the Wall Street Journal as saying that Flextronics may need to add 1 million square feet of manufacturing capacity in the U.S. over the next five years, depending on economic conditions.

    There also is early evidence that foreign manufacturers are starting to move production to or expand production capacity in the U.S. for export around the world.

    • Toyota has announced that it is exporting Camry sedans assembled in Kentucky and Sienna minivans made in Indiana to South Korea. The company has also suggested that it may ship U.S.-made cars to China and Russia. In press reports, the president of Toyota Motor North America was quoted as saying, “This is just the beginning of a new era of North America being a source of supply to many other parts of the world.”

    • Honda is adding shifts at its plants in Indiana and Ohio to increase exports. The company has said it expects to double its exports of U.S.-made vehicles in the next few years.

    • Siemens announced it will build gas turbines in North Carolina that will be used to construct a large power plant in Saudi Arabia.

    • Yamaha has transferred production of all-terrain vehicles from overseas facilities to Newman, Georgia, where it directly employs 1,250 factory workers. Yamaha has also opened a second assembly plant in Newman to produce future Side-by-Side products, including a three-person vehicle called the Viking, for worldwide distribution. Yamaha says it could add another 300 jobs in Georgia over the next three to five years.

    • In 2011, Rolls-Royce began making engine discs for aircraft at Crosspointe, a world-class manufacturing facility in Prince George County, Virginia. The company said that some parts made in Virginia would be shipped to Europe and Asia to be assembled in jet engine factories. In coming years, Rolls-Royce plans to invest over $500 million in Crosspointe, generating more than 600 jobs, to serve the global economy.

    • Michelin of France announced that it will invest $750 million to build a new factory and expand another one in South Carolina to make large tires for earth movers used in the mining and construction industries. The Financial Times reported that at least 80 percent of the additional output will be exported.

    While the impact of this trend on U.S. jobs is currently modest, we expect a significant increase in such announcements starting around 2015, as the economic case for reshoring to the U.S. grows stronger—and as companies adjust their global manufacturing footprints accordingly.