Buck-Up Len

[legion]

I have a premonition.

Manufacturing will return to the US. China has expanded the range at which it lets its currency float. It is experiencing rampant inflation...pricing their underclass out of necessities like pork. If workers can't afford food, one of two things has to happen: wages go up or prices come down...and prices coming down doesn't seem likely.

What I'm getting at is that China's current cost advantage in manufacturing is eroding. I think manufacturing will return to the U.S. Unfortunately, with the pro-union laws and Granholm's mess, I don't think Michigan will benefit. Who will? Tennessee, Georgia, the Carolinas, Alabama...you get the idea.

[Flatbutt1]

Seems to be the way of it though. Jobs go to a low wage area ,wages/prices go up...the jobs move on. It'll happen to India as well. Maybe this is how we'll achieve a more uniform standard of living someday.

[bigchillcar]

damn...and i was gettin' ready for chinese gasoline.

[lendaddy]

Almost missed this one

There will of course be a leveling over time, but I don't think we've seen the worst of it yet. Many businesses are running on smoke and mirrors right now so the picture looks better than it is.

Plus, the big players have made their capital investments overseas and they are not going to walk away barring collapse.

Regarding the monetary issues, China will pull the plug on their currency if it actually gets too advantageous for us. They are just playing along now.

Regarding Michigan, yes our high volume base is dead f'ed. The unions and our tax structure are keeping companies at bay with spears. After that, they are milking the remaining companies so hard that we're crumbling under the load. Property tax, that's the killer.

Then our idiot Gov talks about how we need to invest in education to turn our economy around???? As if companies are weighing Michigan as a possible relocation site but ultimately pass because our people are too stupid? Yea, that's the ticket.

On the upside, medical manufacturing is on the rise and will continue to be made here for a long time. We are trying to get in the market and we're quoting some assemblies now that would change our situation. Beyond that we are looking for other lower volume quality intensive markets to break into, stuff that just doesn't lend itself to overseas mfg.

Who knows, but if we go down we'll go down swingin'.

[TimothyFarrar]

Chris,

I wish you were right but somehow I don't see that happening.

In the range of 2-5 years ago there was a tremendous increase of manufacturing jobs moving out of the mid-west. You could see it simply by looking at the machine tool auctions. And it wasn't just the high volume (millions of parts) manufacturing going out, it was the middle (100,000 parts) and low volume businesses as well.

With the union pressure and price advantage and ease of out-sourcing, the large volume work had no choice but to leave over the years. Yet the risk and investment required to out-source kept many of the medium volume manufactures out. Now there are a whole set if businesses working simply as out-sourcing liaisons for medium volume manufacturing businesses.

The whole manufacturing industry is inter-connected. You have casting and forging outfits feeding both large, middle, and low volume customers, you have small volume tool and die shops doing work to support the large volume industry, you have small volume outfits producing components for large volume manufactures, etc. So as the larger volume manufactures get up and leave, it also drives a lot of the medium and small volume support industries out as well. The ripple effect simply wipes everyone not in a niche market out. People have to drastically cut costs to stay in business, which cuts quality which further removes the US advantage.

Also keep in mind the out-sourcing options are not just China, you have India, Mexico, and others.

The sad thing was that in all the cases I saw while working as a manufacturing engineer, manufactures in China and India could easily provide the part for under the raw material cost in the US.

So say China lets its currency float a lot (which they are not). Perhaps enough to get the cost of raw materials somewhat similar between US and China. You still have a huge problem.

The cost of labor will still remain polarized. The social burden in the US is just too high (many cases easily 30 times higher). China will still have such an advantage that the work will stay out-sourced.

The fact is that the total taxes and other burdens (labor cost, social security, osha, insurance, legal fees, etc) in the US only have a upward trend line. So even as China, India, and others start to stop basically enslaving their own population, they will eventually stabilize at a level way under ours. So there will always be a large labor cost difference. Any attempt to subsidize the industry would ultimately raise the labor cost more, and just quicken its demise.

Sure a small number of manufacturing jobs might come back to the US, but the vast majority is now gone for good just like the textile industry.

[Shaun @ Tru6]

The US has zero negotiating power with China in terms of currency float. That was seen very clearly last week in DC. the Chinese are our bankers, loaning us $ needed to both keep our economy going, buy cheap junk at WalMart and fight the War in Iraq with negative ROI on $ spent. Anyone have children will pay dearly for this war down the road.

China launched it's first satellite two weeks ago that was both Chinese made AND Chinese launched. Nigeria bought it. In an interview on why Nigeria went with China over US and/or EU? One word by the Nigerian president: PRICE.

U.S. manufacturing, at all levels is going or gone and will never come back. get used to it.

Want to see the real power of China? Wait for mid 09 when the Democrats take the presidency, keep Congress and raise tariffs on China. They will be crushed in response.

[TimothyFarrar]

Len you do have a good point, medical and other industries that require either high tolerances, expensive certifications (aerospace), fast turnaround (prototyping), low volume rebuild, service machining, aftermarket industries, etc are here to stay for now.

There is one thing that I could see completely turning around manufacturing in this country within a few years : an oil energy "crisis". You would get an instant boom of breader reactors (recycling the fuel rods), super-capacitor industry to replace the chemical batteries, and a huge infrastructure setup to replace all the gas powered devices we have now.

Personally I think that oil will simply taper off so slowly that all the new replacement technologies will be out-sourced and produced elsewhere. But if there is a crisis then that will snap the US in gear and we will see a massive rebound.

[scottmandue]

Oh crap... does this mean I should send back my mail order Chinese brides?

[bigchillcar]

sobering read...