Distressing thoughs re: American Manufacturing

[DTEJD1997]

Hey all:

I, and my family & close friends, are heavily invested in a Chinese contract manufacturer. They specialize in electronic assembly, with a sub-specialization in ultra high end LCD displays for mobile electronics, think iPhone & iPad...

I've been following this company for YEARS and know it inside & out. They started out making typewriters, answering machines, calculators. They started in Hong Kong. They then moved up the "food chain" and got into low end LCD's (think greyscale simple displays), video game controllers, and other low end simple electronics...In the early 90's they started to set up huge factories in main land China & left Hong Kong. They then moved into USB & bluetooth devices, and started doing circuit board work....then they moved to higher end LCD's and flexible circuit boards.

Anyway to make a long story short. I saw designs for their new factories and took a brief plant tour. It is shocking how high tech it is...this is not some typical "sweat shop". They have VERY well motivated workers. They are hard working and disciplined in their approach. They will live long parts of the year in dormatories on the "campus" of the company. They eat in the company cafeterias, exercise in the recreation center, swim, play badmitton, etc. It is certainly not a place where I would want to live, but if I were 20 years old, it would not be too bad. Kind of like going to college, except in stead of classes, you work in the electronics assembly business. The factory has ISO certification, clean rooms, quality control engineers, CAD & CNC workstations & on & on. Very high tech.

The company "campus" is two blocks from a high tech, fast, clean, efficient subway system...They are also only a few miles from a deep water port & international airport. The local government is at their beck & call to get utilities working & so on...

I am very proud & lucky to have been invested in this company through it's growth and hopefully it's good & expanding future.

It was a day or so later after seeing all of this, that it hit me like a TON OF BRICKS. It made me sad & angry...

We in the USA are in very, very serious trouble! How are we going to compete with this? This isn't "simple labor" turning screws or packing boxes. These guys are working with cutting edge technology. They have a good amount of automation already! They make about $2/usd an hour. Some workers make more, some make a bit less...but they are motivated & hard working! They have all the infrastructure, they've got all the capital that they reasonably need. The company is well run, efficient & good at what they do.

it is one thing to compete against low value, low skill manufacturing. You can compete against "sweat shops". This place was not a sweat shop, it is high tech!

They also have critical suppliers in the same city & in the general area. Even if you wanted to, it would be almost impossible to put that factory in the USA, there isn't enough infrastructure & suppliers to feed it.

Right now, the Chinese are content to take our IOU's in exchange for all these gadgets...but how long will this continue?

What will things be like in 5 years? 10 years? 20 years? What happens when the Chinese don't need the USA? We are going to be dependent on them for a LOT of things.

Losing the manufacturing base in this country has/is going to have terrible implications in the near future! I think the middle class is going to be rapidly hollowed out.

Any thoughts?

[IdahoCopper]

I have a thought, but you may not like it.

Because of your investment capital, you are an enabler. Yes, it may only be a tiny portion of their working capital, but how does that sit with your morality base, now that you have seen the light?

I apologize in advance, my intention is not to be judgmental, nor abusive. This was simply my first thought after reading your post, and you invited this comment.

[68Camaro]

Thoughts? Yeah - this has been a 30 year process, and most Americans don't care. This is what giving up our inheritance looks like. Welcome to the future...

[barrytrot]

Cool story.

Manufacturing isn't the end-all-be-all of economics but the fact that we used to control the whole supply line and now have intentionally relegated ourselves (the country) to just a much smaller role in the supply chain is too bad.

It's not too late, but it will be before people decide to change it.

Even the Government could put an end to it by just increasing the tarrifs. In other words, increase the tax on China instead of our own citizens. But that's not going to happen, ever.

[shinnosuke]

Cool story.

Manufacturing isn't the end-all-be-all of economics but the fact that we used to control the whole supply line and now have intentionally relegated ourselves (the country) to just a much smaller role in the supply chain is too bad.

It's not too late, but it will be before people decide to change it.

Even the Government could put an end to it by just increasing the tarrifs. In other words, increase the tax on China instead of our own citizens. But that's not going to happen, ever.

Amen, Barry. It used to be a point of pride that there were no tax collectors that came around to harrass the American citizen. Government was paid for by tariffs. The creation of the Federal Reserve and the passing of the 16th amendment changed all that. And, as 68Camaro pointed out, we stopped caring. The deception is almost complete. The chains that bind us are starting to feel heavy.

To JTE...sorry for taking this thread farther away from the original thesis.

[68Camaro]

Cool story.

Manufactu)ring isn't the end-all-be-all of economics ...

Not literally as in instantaneously, but given time it eventually, practically, is the be-all end-all. Without manufacturing over time we simply become serfs. No manufacturing and we trade only in raw materials and intellectual material. And neither of those can be gotten without buying someone else's manufactured product to extract the raw materials (plate, pipe, generators, trucks, tools, etc) or to prepare the intellectual material (computers, power, infrastructure, cell phones, towers, networks, etc.

The basis of broad wealth is manufacturing, whether directly or indirectly, and that is what created the broad middle-class that we formerly enjoyed. Which is now rapidly diminishing.

[mbailey1234]

I have a thought, but you may not like it.

Because of your investment capital, you are an enabler. Yes, it may only be a tiny portion of their working capital, but how does that sit with your morality base, now that you have seen the light?

I apologize in advance, my intention is not to be judgmental, nor abusive. This was simply my first thought after reading your post, and you invited this comment.

My first thought was this as well. However, as I type this message I look at the bottom of the laptop that I am typing it on and guess what, MADE IN CHINA. I look around our living room and most of the electronic gadgets say the same thing, MADE IN CHINA. Investing capital is one thing but I think we are all probably a bit guilty of supporting CHINA. If you took a MADE IN USA product and placed it on the shelf next to a CHINESE product and although it's quality may be a little better, I guarantee you the price would be much higher and 99% of the population would buy the cheaper product.

I don't have an answer of how to solve this either. I think it is something that is just going to happen. Sadly someday after we go bust, it may equal out either because they don't need to sell to us anymore or we can't afford to buy their things anymore.

I would like to see us do a better job of protecting our patients and come up with some way to leverage against the thievery that seems to be happening. Just look at the mess they are starting to cause by exporting counterfeit silver coins and bars over here.

[DTEJD1997]

Hey all:

I am originally from Detroit. I, and my parents, grew up in that city. So I have quite a few stories that I can tell...

There are many, many things to "blame" for our current state of manufacturing.

There was one thing that struck me after I wrote the initial comment...My "Chinese" companies are run more "correctly" than most of my American investments, and I would venture a guess more than 98% of USA based companies.

Why do I say this?

A). The CEO's and C level executives are WELL compensated, but they are not looting the companies. The CEO's make in the LOW 100's of dollars, NOT in the millions.
B). The CEO's and board of directors have SUBSTANTIAL investments in the company they are associated with. They eat their cooking.
C). The companies have very, very little debt OR no debt at all. 3/4 of them have NO DEBT and SUBSTANTIAL cash balances.
D). The companies reinvest substantial amounts of money in capital expenditures. The facilities are modern, up to date, and capital is reinvested back into the company.
E). Quality of product & process is critical to all of these companies.
F). Relations with workers is good. They are paid reasonably well. Management takes care of their workers. There are benefits provided to workers in addition to their hourly wage. These are NOT Foxconn factories or "sweatshops". While I personally would not wish to work in the factory, this is a desired position in China.
G). ALL OF THE COMPANIES PAY DIVIDENDS TO SHAREHOLDERS. All of the dividends are substantial. Chinese tax policy is to encourage wealth to be taken out in the form of dividends. I believe this to be more enlightened than American tax policy. In American, the management of the company takes most of the companies capital for themselves. In China, dividends are the major way to get wealth from company, NOT MANAGEMENT'S SALARY.
H). Chinese tax on corporate profits is MUCH LOWER than in the USA. Tax in China is about 15% at the corporate level.

I can go on and on...

The Chinese have become better capitalists than us Americans!

Now how could us Americans have prevented our manufacturing erosion? In some respects, there is nothing that could be done...HOWEVER, there are so many things that could have been done, that would have slowed the erosion.

There are so MANY things, this would be the topic for a different thread...

[blackrabbit]

Up in this neck of the woods we are already a 3rd world resource extraction/narco based economy. They cut down the forests and more and more instead of making stuff from the wood here they ship the raw logs to China. You should see the size of the ships! I guess I should be learning Mandarin. We do have a bloated military so maybe global war is in the cards since the US can't compete otherwise. Also everyone knows this is where lots of pot is grown. Half the economy here is based on that. I still love living here. I just wish things were getting better instead of worse economically.