Our Views: ‘Reshoring’ trend generates good news for U.S. workers

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Thursday, May 22, 2014

In the past three decades, American workers have been disheartened to read about U.S. manufacturers shifting jobs offshore. The companies tapped laborers willing to work for paltry pay. A certain automaker that long built vehicles in Janesville is among companies that sent jobs to foreign lands.

As Don Lee of the Los Angeles Times reported in Monday’s Gazette, however, companies are curtailing moves abroad. Some are even returning production to U.S. shores. The lead example in Lee’s story is Generac Power Systems. The Waukesha-based manufacturer of backup power generation products has plants as close as Whitewater and Eagle.

Generac in 2001 joined the exodus when Chinese companies offered to make a key component for $100 per unit less than U.S. costs. That cost 400 jobs in southeastern Wisconsin. Generac, however, has returned that production to its Whitewater factory, though the company uses far fewer workers to build the component, Lee wrote.

Lee isn’t the first journalist to chronicle “reshoring” or its effects on Generac. The Milwaukee Journal Sentinel’s Rick Barrett detailed it April 5.

Besides this component, “frankly, we have made some other discreet decisions recently to move more things back onshore,” Generac President and CEO Aaron Jagdfeld told Barrett.

That boosts a region recovering from the loss of automotive and other jobs since the recession hit in 2008.

Barrett says Reshoring Initiative, a nonprofit based in Chicago, has tracked about 100,000 factory jobs returning to the U.S. The trend isn’t rapid, but a survey suggests it could be gaining momentum. ThomasNet, which operates an online marketplace, reports 95 percent of manufacturers said they were buying more from domestic companies or keeping purchases at the same levels.

Several factors are behind this shift. First, Chinese labor and transportation costs leaped as U.S. wages stagnated, Lee wrote. Second, factory automation reduced labor needs. Third, while natural gas prices in China jumped, fracking and other drilling techniques in the U.S. cut prices 25 percent. Fourth, overseas quality became an issue.

Lonnie Kane, president of Karen Kane in Los Angeles, told Lee that quality deteriorated to the point where all apparel his company made in China had to be inspected. Finally, quality concerns and rising online commerce made local control of supply chains more crucial.

General Electric, Caterpillar, Toyota and Siemens are also building or expanding plants in the U.S., particularly in the Southeast, where labor costs remain lower.

Jagdfeld, a UW-Whitewater graduate who was comptroller when Generac’s offshoring occurred, says having production in the U.S. speeds deliveries and responses to natural disasters such as Hurricane Katrina, Superstorm Sandy and this past winter’s ice storms in the South.

Generac is just one company returning work to Wisconsin, even if the jobs are fewer because of automation, Barrett reported. Others include Muskego’s InPro and Sheboygan’s Vollrath. Still, the jobs pay well because they require more skills than previously.

“These are good, family-supporting jobs, and that’s what we are in business to create,” Jagdfeld told Barrett of the work returning to Whitewater. “We would do it again in a heartbeat.”

That’s good news for people looking for jobs and willing to acquire the skills to fill them.

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