Manufacturing jobs making a comeback in southern U.S.

11:30 AM comeback, making, manufacturing, southern No Comments

Michelle V. Rafter , NBC News contributor

Apple CEO Tim Cook’s announcement earlier this month that the company will start building Macs closer to home in 2013 was seen as a milestone that could help jump-start U.S. manufacturing.

But over the past few years, factories in the American South from the Carolinas to Alabama to Kentucky have already experienced such a rebirth.

Both U.S. and foreign companies have opened plants in southeastern states in recent years, many since the end of the recession. Others are expanding existing plants or have plans to break ground in 2013.

In South Carolina, Boeing builds 787 Dreamliners just north of Charleston, and Starbucks roasts coffee beans in St. Matthews, outside Columbia. General Electric is once again making water heaters and refrigerators at its gigantic Appliance Park plant in Louisville, Ky. A Mobile, Ala., shipyard run by Austal USA is growing so quickly that in the past two years the Australian company’s workforce has swollen from 800 to 3,300.

Over the past year, North Carolina’s Secretary of Commerce Keith Crisco says about 80 percent of the new companies coming to the state involved some form of manufacturing. “That’s a big number for us, and the jobs are better than they were,” he said.

Companies are taking advantage of state- and local-funded business incentives and convenient transportation routes, as well as the Southeastern U.S.’s lower cost of living and a largely non-union labor force that’s inexpensive relative to other parts of the country.

Although hundreds of thousands of factory jobs have disappeared in the South and across the country over the past two decades due to automation and outsourcing to cheaper labor markets in China, Vietnam and elsewhere, the United States remains a manufacturing powerhouse. The country still produces 18.2 percent of the world’s manufactured goods, edging out China‘s 17.6 percent, according to the latest figures from the National Association of Manufacturers and World Bank.

Today, however, even Chinese companies are building factories in the Southeast, ducking rising labor costs at home, and to be closer to customers and take advantage of the region’s pro-business policies. One of the first was appliance maker Haier Group, which opened a $40 million refrigerator factory in Camden, S.C., a dozen years ago. One of the latest is Lenovo Group Ltd., which operates a fulfillment center in Whitsett, N.C. In October, Lenovo announced plans to begin making ThinkPads there in 2013, adding an estimated 115 jobs to an existing workforce of 2,200.

While factory jobs haven’t returned to pre-recession levels, they’re getting there. In Georgia and Tennessee, manufacturing employment grew 3 percent in the 12 months ending in October, nearly twice the national average of 1.6 percent, according to the Bureau of Labor Statistics. Factory employment was above average in Alabama (2.9 percent), South Carolina (2.4 percent) and Mississippi (2 percent) as well.

“It’s a business climate like you won’t find anywhere else,” says Doug Woodward, an economics professor at the University of South Carolina and incoming president of the North American Regional Science Council, which studies local economies.

Low-cost labor is one of the region’s big draws. Economists cite the lack of a large union presence as a benefit since it allows companies to move factory workers from job to job as needs change. In seven Southern states, union members account for less than 5 percent of the workforce. That’s less than half of the 11.8 percent national average, according to the Bureau of Labor Statistics.

“It’s all about flexibility,” Brian Leathers, senior vice president and chief financial officer for Austal USA, told NBC News. “Because we treat our people properly -- benefits, pay, safe working conditions -- there’s not a need for representation.”

However, critics point to academic and economic research showing that in right-to-work states, wages and benefits are lower. “They’re just not as well compensated,” says Matthew W. Finkin, an employment law expert and professor at the University of Illinois’ law school . “So they’re creating more jobs and giving more work to people, but they’re not giving the benefits and other aspects of employee protections (workers would) have in other states if they were in (a) union.”

The local chapter of the Sheet Metal Workers International Association has been unsuccessful in three attempts to organize Austal’s Mobile, Ala., shipyard. A representative of Local 441 could not be reached for comment. A representative of the SMWIA’s national office declined to comment.

Crisco maintains that manufacturing jobs coming into the South pay more because they require more technical skills. He argues that right-to-work laws are only one factor drawing companies to the region, along with generous workforce training programs and incentives such as tax breaks that South Carolina gives to companies making substantial capital investments in the area. “Sure, it’s controversial about incentives, but in terms of locating manufacturing jobs here, it’s been fairly successful,” Woodward says.

Here’s a look at activity in a handful of southern states where manufacturing jobs are on the rise:

South Carolina
South Carolina’s manufacturing industry lost 100,000 jobs during the 2000s before the 2007-2009 recession wiped out another 40,000, Woodward says.


Recent moves by Boeing, BMW, Michelin, and other tire and auto parts manufacturers and durable goods makers to open or expand factories have reversed that trend. Boeing alone created 8,000 new jobs in the past two years, Woodward says. “We’ve gained 10,000 to 15,000 jobs,” he says. “Our immediate prospects are very good, but it’s going to be a long road if we’re going to recover” historic manufacturing employment levels.

In January, BMW said it would add 300 people to an existing workforce of 7,000 at a highly automated auto manufacturing plant in Greer, the company’s largest factory outside of Germany. The expansion will to boost annual production to 350,000 by 2014. “The deep roots of the workforce here in manufacturing are really helpful and we developed a close relationship with the local tech colleges to improve our workforce,” BMW Manufacturing President Josef Kerscher said in a late November talk at the University of South Carolina’s Darla Moore School of Business. “I’m really satisfied seeing how well prepared our workforce is for advanced manufacturing.”

North Carolina
The textile and apparel makers that made up the bulk of North Carolina’s traditional manufacturing sector “left and are not coming back,” Crisco says. They’re being replaced with companies like Lenovo, which is moving ThinkPad manufacturing to the state from Mexico.


Jeld-Wen, an Oregon-based window and door maker, announced on Dec. 13 that it is moving its North American headquarters to Charlotte, adding 142 management and administrative jobs. The company already operates two manufacturing plants in the area with 2,200 employees.

In 2012, manufacturing accounts for 20 percent of North Carolina’s gross domestic product, and that doesn’t include recently announced deals that will add to manufacturing employment in the near future, Crisco says.

Alabama
In Mobile, Austal is building high-speed, aluminum ships for the U.S. Navy, made to quickly deliver troops to a war zone or disaster area.


Austal is one of many foreign companies that have opened factories in and around Mobile in the past decade, a group that includes Mercedes Benz, Honda, Toyota and Hyundai. In 2013, Airbus will join the list. The European aircraft manufacturer is expected to break ground on a $600 million complex in 2013 and begin assembling planes there two years later, creating 1,000 jobs, according to the Mobile Area Chamber of Commerce.

Though mega deals like the one with Airbus get the most attention, 94 percent of factories in the tri-county area around Mobile are domestic, says chamber spokeswoman Susan Rak-Blanchard. Attracting smaller companies that bring 50 to 150 jobs to the area has been “our bread and butter over the years,” she says.

Kentucky
The number of people working at GE’s famed Appliance Park industrial complex in Louisville peaked at 23,000 in the early 1970s before starting to drop a decade later and hitting bottom in 2011 at less than 2,000, according to a recent report in The Atlantic. In February, the company returned to the plant, making low-energy water heaters there instead of having them built by a Chinese contractor. A month later, GE moved a refrigerator assembly line from Mexico to the plant, according to the report.


(GE is a minority owner in NBCUniversal.)

So far, GE has poured $800 million into revamping manufacturing operations at the facility, including $150 million on a new dishwasher assembly line. According to the company, factory workers helped design the line to be faster and safer, and as a result per-unit production time has dropped 65 percent.

“Companies are looking for a lower cost place to do business and a skilled workforce,” said David King, Central South Carolina Alliance marketing vice president. “It doesn’t get more basic than that.”

Read More

The manufacturing sector shrinks for third straight month

12:00 PM manufacturing, month, sector, shrinks, straight, third No Comments

Production shrank at its sharpest clip in more than three years in August, the third month of contraction in a row, and companies hired the fewest workers since the end of 2009 a survey showed on Tuesday.

For supply management said, on that its index of national factory activity 49,6 in August fell Institute by 49,8 in July.

The reading fell shy of 50.0 average estimate in a Reuters poll of economists. A reading below 50 indicates contraction in the sector.

The index component employment fell its lowest level since November 2009 from 52,0 in July on 51,6.

"It is that the index of new orders again deteriorate without question a soft report on production and what is particularly worrying,", said Tom Porcelli, Chief U.S. economist for RBC capital markets. "It has become increasingly clear that the manufacturing sector is losing momentum." "This soft report payrolls leads in Friday will solidify when we see an other soft order report only additional measures the Fed."

New orders, a forward-looking sub-index fell to 47.1 in August, the worst result since April 2009. It amounted to 48 in July.

The exports index ticked up to 47 remained last month of 46.5 in July but in contraction, as recession in parts of Europe and slower growth in Asia to undermine demand U.S. were.

"Since everything we is international in terms of the demand by our label, a little slowdown expected tracks, especially with the euro zone still under pressure and emerging relatively experiencing growth, slowly", said Patrick O'Keefe, Director of economic research at j.j Cohn O'. "The domestic new orders for the production were a bit, but not robust so it is not unexpected somewhat more cautiously to see something."

Reuters contributed to this report.

Read More

Survey shows China manufacturing further slow down

2:46 AM China, further, manufacturing, shows, Survey No Comments

BEIJING - China slowed production in December for a second month due to the weak demand between American and European economic problems, a survey Friday showed published.

The latest HSBC purchasing manager index added to growing signs of a burden on manufacturers and exporters in China. You have hit was, by jumping in the global demand and lending curbs, wipe the thousands of companies into bankruptcy, jobs and raise the specter of unrest have driven.

The index for December was 48.7 on a 100-point scale on the numbers below 50 a contraction to indicate activity. It said that companies reported a drop in foreign orders due to slack demand.

"Weakening external demand begins to bite," said HSBC Economist Qu Hongbin in a statement with the survey.

Add the latest data to stabilise growth pressure on Beijing on spending and credit controls and encourage job creation, Qu said to facilitate.

He said "Hard landings should be avoided, as long as measures filter relaxation in the coming months,".

China's export growth went in November for a third month, falling to 13.8 percent of 15.9 per cent in the previous month.

The decline of in global demand has destroyed export-oriented southern coastal regions, where thousands of small companies driven out of business, and the survivors have laid off tens of thousands of workers.

Smaller private companies were tough curbs affected by bank loans cool inflation and a boom in the real estate prices imposed. The Government has promised, State-owned banks give more to help struggling entrepreneurs have but says most of its curbs remains.

Copyright 2011 of the associated press. All rights reserved. This material cannot be published, sent, rewritten or redistributed.

Read More

Japan's just-in-time manufacturing faulty

11:19 AM faulty, Japans, justintime, manufacturing No Comments

TSUCHIURA, Japan?? Just over a week after the massive earthquake hit the sprawling Texas Instruments chip plant here, a gardener is reworking the Japanese garden in an inner courtyard of the office tower attached to the plant.

The garden is a symbol of tranquility and the gardener runs his rake in swooping patterns in the fine gravel that resemble ripples in a pond.

Although no one is manning the gate or the front desk in the office building, the rest of the plant just outside Tsuchiura ? which locals dub "Tekisasu," or Texas ? appears anything but tranquil.

Story: Quake cleanup could swamp Japan with debt

Dozens of workers in jump suits and hard hats inspect the outside of the plant complex. A conference room on the ground floor of the plant's office tower is packed with white collar workers even though it's a Sunday. TI says the plant will not resume full production until mid-July.

There is no visible damage to the plant. But if it is structurally sound, the Japan just outside its gates is not. There are cracks in the asphalt on the roads and the concrete walls of older buildings. Gas stations are shut and ration purchases when they do open. Train schedules have been cut sharply. A homemade sign on a hotel window says "Japan: Don't Let This Quake Defeat You."

Soon after the devastating earthquake and tsunami that struck northeastern Japan on March 11, major manufacturers around the world sprang into action. From a conference room at General Motors Co's technical center in the Detroit suburb of Warren to the Memphis headquarters of package delivery giant FedEx Corp, teams of employees scrambled to assess the impact on staff, factories and goods.

Story: Buffett: Japan a ?buying opportunity,? will recover

"Within an hour and 15 minutes we'd established a crisis room after the earthquake," Andy Palmer, senior vice president of Japanese automaker Nissan, said in a telephone interview from his office in Tokyo last week. "From there we were able to see everything unfolding, the priority being on the status and welfare of the employees."

In a globalized economy where manufacturers have moved ever more toward lean inventories and "just-in-time" production ? keeping ultra-low quantities of parts on hand to avoid holding expensive stocks of parts ? a speedy response was vital because a disruption to the global supply chain would spread quickly, shuttering plants employing legions of workers around the world.

Numerous manufacturers and suppliers have already warned of possible supply disruptions that are seen potentially affecting everything from consumer products such as Apple Inc's iPad to Boeing's long-awaited Dreamliner.

Story: Insurance industry well-shielded from Japan quake

The most immediate threat to manufacturers stems from the fact that the weakest link in the global supply chain is what Japan is best known for: high-end, highly technical parts like semiconductors, which also weigh very little.

"The earliest impact will be felt with high-cost, low-weight products," said John Hoffecker, managing director of restructuring advisory firm AlixPartners LP. "They come out of Japan by plane so manufacturers don't have much of a buffer for those products."

Interviewed by Reuters on March 17 Hoffecker said the real impact of supply disruptions for those parts would become evident "in about a week." GM said the parts it gets from Japan are more the high-end electrical type. Chips made by ON Semiconductor, which has shut down facilities in Aizu and Gunma due to infrastructure troubles, are used by automakers in everything from air conditioning to power steering, lighting, braking systems, navigation and lighting.

It is not just a question of high-tech production, but also inventory. Even a split-second loss of power at a memory chip plant, where production takes weeks, can wipe out a large volume of goods.

Tough choices
Even under normal conditions, bringing suppliers back online after a disruption can be a lengthy process for the most basic parts. It requires careful calibration and extensive testing. So the road to recovery could be a long one.

Speaking in Sao Paulo, Brazil on Friday, GM chief executive Daniel Akerson said it could take two weeks to assess the impact ? and the situation is still uncertain because of Japan's ongoing nuclear crisis.

Story: The extra mile ? when workers put their lives on the line

Manufacturers with backup supply sources are already switching production to them. For those without alternatives, the race is on to find them, leaving many companies chasing the same ones.

Even if they do find alternative sources, getting them to produce the right part is a lengthy process involving design and factory testing.

"The production of any part can be moved over time, but in the short term it's a huge challenge," said Fred Hubacker, executive director at consultant and turnaround specialist Conway MacKenzie. "It takes more than weeks and less than years. It's certainly not something that can be done overnight. It's generally not cost effective to move to a new supplier."

In the meantime, manufacturers face tough choices as inventories dwindle. They may be forced to halt production on some models as parts run out, or channel shared parts to popular models to maintain output.

"If you are looking at risk management in a situation like this you would want to protect the vehicles you sell the most of," said Dan Cheng, leader of A.T. Kearney's automotive practice in the Americas.

GM has already idled a plant in Louisiana making pickup trucks with low sales volumes, plus suspended production at a plant in Spain and canceled two shifts at a plant in Germany making cars for its loss-making Opel unit. "We are optimizing the usage of parts that are or might be in short supply as a result of the earthquake in Japan," said spokesman Klaus-Peter Martin.

'Trying to understand the situation'
Details of the extent of the damage in Japan have been slow to emerge, not least because communications with badly affected areas were impossible in the days after the 9.0 magnitude earthquake. While many companies have provided updates on which plants are out of action, Austin, Texas-based Freescale Semiconductor provided a rare glimpse of how its employees coped after the disaster.

The coastal city of Sendai was hit by a 10-meter (33 feet) tsunami following the quake, causing catastrophic damage. Freescale has a facility there making accelerometers, pressure sensors and other chips for cars that shut down after the tsunami.

Spokesman Rob Hatley said fast-thinking Freescale employees elsewhere in Japan leased trucks after the quake to get emergency supplies like dry food, water, clothes and batteries to their colleagues in Sendai who are shifting production to other facilities and moving inventory to customers.

"We run a global supply chain, so the same resources, skillsets, problem solving and ingenuity that we put in our fab every day, we continue to apply in our current environment," Hatley said.

Within days of the disaster, major local manufacturers said their plants had been affected. Companies from automaker Toyota Motor Co ? which makes 38 percent of its vehicles in Japan ? to consumer electronic giant Sony Corp reported stoppages and in several cases manufacturers said they did not know when production would resume.

Big suppliers like Shin-Etsu Chemical, the world's leading maker of silicon wafers, and chip maker Texas Instruments have also reported that quake damage has hurt production. Japan produces 57 percent of the world's wafers and around 20 percent of its semiconductors.

Sony said on Tuesday shortages of parts and materials would force it to reduce or suspend production at five additional plants in Japan between March 22 and March 31.

A sixth plant in Chiba, north of Tokyo, was set to resume production on Tuesday, but it could be interrupted by the rolling blackouts that are affecting some areas supplied by Tokyo Electric Power (TEPCO).

Production at six northern Japanese Sony plants has been suspended since the disaster and the consumer electronics giant said it was inspecting and repairing buildings and machinery with a view to re-starting production at these sites.

Texas Instruments declined to say which customers are affected by the closure of its Miho plant, the one with the Japanese garden. But a list of TI customers obtained by Reuters includes Apple, Nokia, the world's largest cellphone maker by volume, and auto safety gear make Autoliv Inc. On its web site, Autoliv says it provides parts to all the major automakers and that GM is its largest customer, accounting for 14 percent of its sales in 2010. It was not possible to determine which of them are served by the Miho plant.

The plant also makes Digital Light Processing chips, a key component in many video projectors. Texas Instruments is the main manufacturer of DPL chips, making their steady supply crucial to projector manufacturers like Optoma Technology Inc and Vivitek Corp. Vivitek is working closely with TI to monitor the availability of the crucial chips and guarantee their supply, a Vivitek spokeswoman said.

NSK Ltd, Japan's largest manufacturer of ball bearings, said none of its plants were damaged, but it did not know when it would be able to resume full production "due to uncertainty over power supply."

A list of NSK's automotive customers obtained by Reuters reads like a who's who of global automakers, including majors such Ford Motor Co, Fiat and Volkswagen ? though again it was not clear which customers receive parts from NSK's Japanese plants.

Chris Swartwout, vice president in charge of human resources and supply chain and logistics for NSK in North America, said he could not discuss which of the company's customers were affected. "We are really in a phase where we are trying to understand the situation with our suppliers," he said. "The situation is still being assessed."

'Information is paramount'
The crisis room at GM's technical center in Warren, Michigan, is one of four the company has worldwide ? one each for North America, South America, Opel/Vauxhall and GM International.

GM's Chief Global Manufacturing Officer, Diana Tremblay, said the room is staffed constantly ? with around 25 people when she last visited on Thursday ? and contains lists of all plants around the world, all vehicle models and key parts like powertrains. There are regular conference calls and email updates as information comes in about GM's broader supply base. Tremblay says GM leaves decisions on plant shutdowns until the last possible minute.

She said the decision last Thursday to idle its Shreveport, Louisiana, plant, which makes low-selling Chevrolet Colorado and GMC Canyon pickup trucks, was necessary because the workers are "4/10s" that is, they are working four 10-hour shifts Monday to Thursday and needed to be told before the weekend.

Tremblay said GM could not say how long the plant would be closed, nor which others could be affected. "There are no games being played here, we just don't know," she said. "And I can assure you it's not from a lack of effort."

FedEx, which flies low-weight, high-tech parts out of Japan, also immediately set up a global planning team after the earthquake and began helping customers assess the situation after finding that all of its employees escaped the disaster unscathed. "We were very fortunate," said Doug Cook, vice president of international planning and engineering at FedEx unit FedEx Express.

Apart from shutting the nearest facility to the damaged Fukushima nuclear plant, he said the company is running normal service in and out of Japan and is screening all outgoing packages for radiation.

Cook said FedEx account executives in Japan are working "day in, day out" with customers to see if they need alternative locations for deliveries and pickups and to provide assessments of the situation on the ground.

"Information is paramount," he said. "It enables people to understand what's going on."

Norman Black, a spokesman at rival UPS said the company stands ready to help customers move items to other factories overseas if they determine they have to move production.

Obtaining information is a problem right now because the supply base below the top suppliers is opaque.

'It could shut down an entire industry'
"When it comes to the supply base companies tend to focus on the level below them," A.T. Kearney's Cheng said. "It's simply time consuming and cost prohibitive to go deeper than that across your supply base."

Barry Tarnef, a senior risk specialist at property insurer Chubb Corp, said the murky nature of the supply base may mask the fact that somewhere down the chain a company may "control the lion's share of the market."

"If something happens to that one company it could shut down an entire industry," he said.

Experts have been recommending for years that manufacturers diversify their supply base. After all, recent history is full of examples of widespread supply chain disruptions and their consequences for manufacturers reliant on too few sources ? from the attacks on September 11, 2001 to Hurricane Katrina in 2005 and the cloud of volcanic ash from Iceland that shut down Europe's skies last year.

In the wake of such events, some companies have implemented strategies to diversify their suppliers and production. But according to Gad Allon, an associate professor of managerial economics and decision science at the Kellogg School of Management at Northwestern University, they are the exception rather than the rule. "A minority of companies have a good understanding of operational risk," he said. "The majority do not."

Toyota has been gradually implementing a strategy so that all of its models can be produced in more than one plant around the world. But that does not include the Prius, which is only made in Japan, leaving Toyota stuck. Multiple suppliers can also reduce the risk of disruptions.

"Should you have just a single strategic supplier, should you hedge your bets and have some redundancy?" said James DeLoach, managing director and risk management expert at consulting firm Protiviti. "These are tough calls. But once you've made your call, you've got to play the hand you dealt yourself. That's why companies are faced with these issues right now."

TrueCar.com's Jesse Toprak said that prior to the earthquake Prius models in California were selling on average $300 below the dealer invoice price. Within four days, the price was $1,000 above the invoice price. Toprak said the price will continue to rise because the high-mileage Prius is popular among environmentally conscious consumers.

But in the longer term if the price gets too high, customers interested in a Prius to save money on fuel will balk at the cost. "At some point, the math just won't make any sense for most people," Toprak said.

Save now, pay later
Sunil Chopra, a professor of operations management and information systems at the Kellogg School of Management, says the lure of single suppliers is they make life easier for manufacturers and are cheaper to manage.

"If you're saving 5 pennies per unit then the $100 million you could lose in a disruptive event doesn't show up in your results today," he said. "That's what drives companies toward single-sourcing. But how many units at 5 pennies per unit do you have to produce to make up for that big loss?"

Chopra and others like D&B Supply Management Solutions' Mike Krechevsky expect events in Japan and their impact on the supply chain will force major manufacturers to think about the need for reserve plans.

"This is going to open up a lot of eyes," Krechevsky said. "Many organizations are going to step back and take a look at this and see if they have contingency plans for such a thing."

But Chopra says companies talked about diversification after previous disasters and past experience shows that when the dust settles manufacturers will select the cheaper option to boost their bottom line.

"We'll see a surge now in companies talking about diversification," he said. "But as this fades into memory decision makers will not take disruptive events into account to the extent that they should."

"In six months they'll discount the risk all over again."

'The right thing to do'
If there is any debate on whether the Japan quake will force a rethink on suppliers, there is apparently none about just-in-time production. No one interviewed for this article expected any change.

GM's Tremblay has been with the company since just before her 18th birthday in 1977. Back then, inventories were much bigger, bringing "lots of extra cost and lots of extra confusion."

"Years ago you had a lot of stock lying around," she said. "The big change is that there's not all that inventory lying around anymore. It's far better not to have all that inventory.

"But the opposite is true when you have supply chain disruptions," she added. "That's the tradeoff."

"On balance, it's still the right thing to do."

Copyright 2011 Thomson Reuters.

Read More