Reasons to manufacture in the US

by

FT:

General Electric plans to invest $432m in four US centres that design and make refrigerators by 2014. The move will add about 500 jobs and reverse a long-term trend of outsourcing its appliance manufacturing to places such as China.

GE argues that a combination of US production quality, the ability to market goods as US-made, and rising transport, currency and labour costs in formerly cheap manufacturing countries have made the moves practicable.

A series of local, state and federal tax breaks have also played a role. For setting up the design and manufacturing centres in the Midwest and South, GE negotiated about $78m in tax breaks.

Over the past year a number of US companies ranging from Caterpillar, the world’s biggest maker of earthmoving equipment, to Wham-O, the maker of the Frisbee and Hula-Hoop, have announced similar plans to expand US production facilities…

In the US market the investments also make for useful headlines for GE. “You still have to be competitive but when all things are equal, being made in the US tips consumers in our direction,” Mr Campbell said. But behind the moves are a series of hard-headed calculations. Local manufacturing means faster product development and lower costs. GE has also used tough new labour contracts to reduce its domestic production costs.

“Compared to five years ago we have made tremendous progress with our unions, which means the new people we hire on to these programmes will come in at reduced wage rates, and that has gone a long way to help us get competitive,” Mr Campbell said.

[HT: Tepper]

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One Response to “Reasons to manufacture in the US”

  1. Pierre-Louis Says:

    Rising currency costs in formerly cheap manufacturing countries… that fits pretty well in the renminbi debate!

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