Bigger costs of shipping due to more expensive fuel and significantly lower labor costs in the U.S. are just some of the factors that led to major manufacturers in the U.S. to return to local production, according to The Atlantic.
After years of focusing exclusively on production abroad, the U.S. giant General Electric, one of the leading players in the global industry, “returns” to the production on local market. And this is not the only example, more U.S. companies are coming back to the local industry, according to The Atlantic.
This year, on February 12th, GE facility for appliances, Appliance Park, in the U.S. state of Kentucky, began to take on new life with the launch of a new assembly line for the production of next-generation low-energy water heaters. This is the first new assembly line launched in the U.S. in the past 55 years. These products were previously manufactured for GE in a factory in China.
In 1951, the company has developed not only an industrial facility at Appliance Park, but a real city, with six factories and the headquarters of General Electric’s appliance division, the place where all appliances were manufactured.
Before the 60s the production reached an impressive level of 60,000 appliances per week, thus fueling the domestic consumption boom in the U.S.
In 1955 the complex in Kentucky had 16,000 employees and the number continued to increase to 23,000 in 1973, 20 years after it opened. In 2008, however, Jeffrey Immelt, CEO of GE tried to sell the appliance division, including Appliances Park, but, due to the economic crisis nobody was interested.
On 20 March 2012, GE has launched two new assembly lines for the production of high tech refrigerator doors, improved versions of similar products made in Mexico.
What accounts for these changes in management strategy that used to rely on the U.S. design and manufacturing the products abroad?
“Production abroad is no longer a profitable business model for the appliance division,” said Immelt. A budget of $800 million will be allocated to re-launch the company on the local manufacturing market.
Authorities’ decision to boost production in the local market has been influenced by many factors, including fuel prices three times higher than those in 2000, thus resulting in increased costs for international shipping, the boom of natural gas in the U.S., which led to a decrease in production costs (cost of natural gas in Asia is four times higher than in the U.S.), wage growth in China, lower wage costs in America (the hourly rate of a factory worker at Appliance Park starts at $13.50) and highly skilled American workers.
GE is not alone in its return to domestic production. Other manufacturers, including Whirlpool, manufacturer of appliances and Otis, the largest producer of elevators in the world, have moved some production from China and Mexico to the U.S.
Reply