Onshoring--You Macho Enough to Make in the USA?

♠ Posted by Emmanuel in at 2/22/2012 09:02:00 AM
I have to run so this will be a quick if interesting one: Remember during the 2004 American presidential elections when John Kerry was inveighing against outsourcers with talk about "Benedict Arnold corporations"? What we now have is an interesting Reuters article that takes this line of argument to its (il)logical conclusion.  

In this version, the flight of "lemmings" or the exodus of Benedict Arnold corporations has largely run its course. What you have instead are many firms finding that vertical or horizontal de-integration is more costly than they thought, hence many are locating more of their enterprises back in the good ol' US of A. In many ways it's an archetypal application of transaction cost theory in which the erstwhile offshorers (that's "job killers" to you US union types) have found that the costs in terms of losing oversight or coordinating with those in other time zones, different cultures and of varying educational backgrounds is more trouble than they're worth:
Big U.S. manufacturers moved their production out of the country too quickly over the past decades and now see a competitive advantage in building up their footprints back home, top executives said on Monday. The chase for lower-paid workers drove the migration, which resulted in employment in the U.S. manufacturing sector falling by 40 percent from its 1980 peak.

But big companies including Boeing Co and General Electric Co are now finding that the benefit of lower wages can be offset by higher logistics and materials costs. "We, lemming-like, over the last 15 years extended our supply chains a little too far globally in the name of low cost," said Jim McNerney, chief executive of world No. 2 planemaker Boeing. "We lost control in some cases over quality and service when we did that, we underestimated in some cases the value of our workers back here." McNerney spoke at a Washington event organized by GE aimed at promoting the competitiveness of the U.S. economy. The nation has been slow to recover from a brutal 2007-2009 downturn and high unemployment -- 8.3 percent in January -- stands as one of the main barriers to a brisker recovery.

Boeing in particular ran into extensive delays in the launch of its 787 Dreamliner aircraft, handing off much of the manufacturing responsibility to outside suppliers, leaving the launch of the fuel-efficient aircraft some three years behind schedule. "You are going to see more (manufacturing) come back to the United States, and that's in part for business reasons and in part because we want to be good citizens," McNerney said.
Unsurprisingly, GE's head honcho Jeffrey Immelt--a talented fellow, no doubt--figures big in this story alike the one concerning funding the Ex-Im Bank as head of Obama's industrial input team:
The nascent resurgence in U.S. manufacturing -- which added 50,000 jobs in January -- has caught the attention of the White House. President Barack Obama, to whom Immelt is a top adviser on jobs and the economy, singled out the sector in last month's State of the Union address as an area where he would promote tax breaks in hopes of generating more jobs. Noting that GE currently generates about 60 percent of its revenue outside the United States and that some 70 percent of the orders in its backlog are from abroad, Immelt said that multinational manufacturers need to add jobs both at home and overseas if they are to be competitive.