Made in U.S., Shunned in China

[riskadverse]

Don't forget porn.   

Too late ... the best porn is now coming out of eastern europe.

 

[ESRBob]

I don't understand why IBM couldn't stay in the commodity PC business. Dell was able to pull it off. Now, Lenovo has dropped prices and looks like they might be able to take market share away from Dell. Why couldn't IBM do that?

Wab,
Not to oversimplify a complex and interesting question, but one big part of the answer to this question is labor costs. I was reading recently where the average GM worker was pulling down compensation something like 10x his/her Chinese counterpart. That is a heckuva headwind to fight, especially considering that all the other non-labor aspects of production (materials, equipment, software expertise, systems, support services) are increasingly available at the some price and efficiency wherever you site your plant.

 

[Gone4Good]

I was reading recently where the average GM worker was pulling down compensation something like 10x his/her Chinese counterpart. 

This is true, which is why GM is likely to go the way of Delphi. But it dosen't have to be that way. Toyota is looking to build a new car plant in Michigan - right along side the ones that GM is dying to shut down. If you don't have the legacy costs that the Big Three have, then building in the US gets a lot more competitive once you factor in exchange rate issues, transportation, sovereign risk, taxes, etc.

But for those people bemoaning the end of heavy manufacturing in the US, keep in mind that future manufacturing jobs aren't going to be the same as the ones that your parents and grand parents had. Screwing in bolts and welding two pieces of steel together is no longer high value added labor - and the competitive compensation for these services will continue to adjust downward to reflect that. I'd be willing to bet that within my lifetime an auto maker will open an assembly line that produces finished cars without any physical labor whatsoever. Rail companies used to have to pay a guy to shovel coal into steam engines too. It's called technological obsolescence.

I think Nords hit the nail squarely on the head with his post. The economic leaders in the future will not be those who build stuff, but those who design and invent stuff for others to build.

 

[sgeeeee]

Too late ... the best porn is now coming out of eastern europe. 

Maybe we can develop a government program to import eastern european porn stars to save that US industry I mean, is anybody worried about North American porn stars? What is to become of them?



All this makes me realize that prostitution is one industry that can't be ousourced. Should we be encouraging young American women to forsake college and learn to be a ho?

 

[Nords]

Should we be encouraging young American women to forsake college?

I think your post has already raised the issue that there's too much competition from immigration.

Besides, a college campus might prove to be a booming business. Think of the marketing opportunities...

And hey, what's with the "women" stuff?  I suspect a significant minority of America's prostitutes are male.  Anyone have any, er, studies to quote?

 

[sgeeeee]

...

And hey, what's with the "women" stuff?  I suspect a significant minority of America's prostitutes are male.  Anyone have any, er, studies to quote?

Good point, Nords. I want to appologize to all of the male prostitutes that frequent these boards. It was a terrible oversight on my part.

 

[wabmester]

Not to oversimplify a complex and interesting question, but one big part of the answer to this question is labor costs.

Right, but my concern isn't so much American jobs as it is American GDP growth. IBM already made their laptops in China.

Dell's laptops are designed in Taiwan. They are made in plants in Malaysia and Ireland. Customer support is in India. Dell is a marketing organization, and apparently there's plenty of money to be made in that model.

IBM had better designs, and those designs were US-based. Seems to me they could have kept the intellectual capital here, offshored production and support, and emulated Dell's direct model. I'm sure that's what Lenovo is moving towards, and if you check the unscientific leading indicators (such as FatWallet interest), it seems to be working.

As far as GM goes, they should go BK, lose the pensions, rehire a new pension-free force, and destroy Toyota.

 

[AltaRed]

Agree with a number of posters here (except those who believe we can keep things the way they were/are).....

Protectionist barriers simply prolong the suffering and a drain on the economy.  No protectionist barrier has proved to work in modern times.  Such tools might be used temporarily to force a smooth transition over a few years rather than a sudden collapse of an industry.

Legacy industries must be allowed to die.  GM cannot compete with Toyota in the USA as has been described. Legacy health care costs, defined pensions and all those things need to be eliminated because they are non-competitive with rest of world (except Europe which is another basket case needing fixing).

Where we cannot compete on a wage basis with Asia, we must shift to higher valued added products, primarily intellectual, innovation, creativity - the sorts of things that cannot be simply mandated like manufacturing.

Creating new products and markets creates wealth.  Hollywood must evolve and shed itself from the insular artists's guilds, unions and other trappings that keeps it from bursting out in innovation.  Our music industry is in denial with attempts to stop digital copying - they don't get it. Even our porn industry must evolve to create new products people want in both directions (harder core and more mainstream for a larger audience).

Defined benefit pension plans are dinosaurs and must be shed to let both employers and employees free to move without finanical loss.  Savings plans to which both employers and employees contribute should be entirely portable...and presumably managed by companies like Vanguard.

Bottom line is that we need to think fast on our feet and be innovative and creative ahead of our competition and be prepared to let go of what we did yesterday.  

 

[ShokWaveRider]

IMHO, China especially in the computer market, are leaps and bounds ahead of the USA in parts production. Actually, 95% of all computers are actually made in China, just assembled in the USA. EVEN DELL!!!! There are few to NONE of any Dell computers that are actually made in the USA, just assembled here and badged. In fact Dell Latitude and the Sony Vaio are made by Quanta in China. The USA manufacturing process with respect taxes on computers encourages that. If they allowed completed units into the USA, Dell would have them assembled there also. Some call this the "Dirty little secret of the Laptop Industry". I have worked in the computer industry for donkey's years, and with the exeception of a VERY VERY few. All the parts are manufactured off shore. CPUs and Chips in Korea and Malasia, Memory all over Asia, Motherboards, Mainboards or whatever they are called now are 95% - 99% Asian. For example; there a only a few Laptop manufacturers to start with, Clevo, Quanta, Acer, Mitac, FIC, UniWILL, and a few others that are all made in China/Taiwan. So do not think because you are buying a Dell you are buying American, far from it. They just lead us to believe it. And obviously we do.

SWR

 

[Outtahere]

You're right about GM needing to go the way of the dinosaur. I have a friend that works for Honda, no pensions, fair wages, 401ks and bonus incentives and most importantly non union. He's watching friends lose jobs at the other big three while he pretty much feels he has a secure job.

 

[Howard]

China graduates 325,000 Engineers a year, 10 times what happens in the US, and as someone whose son has lived in China for almost 10 years and has no intention of returning in the near future, he says that there is just too much opportunity to leave.

Every economy has its' day, a need to realign based upon the dynamics of the market, the US needs to start at the School System, it is dumbed down.

The Chinese go to school 5 1/2 days a week, competition is fierce, not for basketball scholarships but for the opportunity to go to University.

Remember Jap Crap of the 60's became the Lexus of the 2000's.

 

[Ed_The_Gypsy]

Since somebody opened this door...

SG,

We can address this probelm with immigration.

Canada has a special immigration category for people who want to enter the sex trades. Photos are required. The government has also done follow-up studies where they determined that Romanians who entered the country under these visas make better citizens than those from other countries.

A friend who used to run a "club" in Toronto tells me that everything is unionized now. The dancers' union is complete complete with hiring hall.

Things are different up here.

Ed in Ft. McMurray

 

[haha]

Too late ... the best porn is now coming out of eastern europe. 

Where do you get this?

Ha

 

[Lazarus]

Agree with a number of posters here (except those who believe we can keep things the way they were/are).....

Protectionist barriers simply prolong the suffering and a drain on the economy. No protectionist barrier has proved to work in modern times. Such tools might be used temporarily to force a smooth transition over a few years rather than a sudden collapse of an industry.

Legacy industries must be allowed to die. GM cannot compete with Toyota in the USA as has been described. Legacy health care costs, defined pensions and all those things need to be eliminated because they are non-competitive with rest of world (except Europe which is another basket case needing fixing).

Where we cannot compete on a wage basis with Asia, we must shift to higher valued added products, primarily intellectual, innovation, creativity - the sorts of things that cannot be simply mandated like manufacturing.

Creating new products and markets creates wealth. Hollywood must evolve and shed itself from the insular artists's guilds, unions and other trappings that keeps it from bursting out in innovation. Our music industry is in denial with attempts to stop digital copying - they don't get it. Even our porn industry must evolve to create new products people want in both directions (harder core and more mainstream for a larger audience).

Defined benefit pension plans are dinosaurs and must be shed to let both employers and employees free to move without finanical loss. Savings plans to which both employers and employees contribute should be entirely portable...and presumably managed by companies like Vanguard.

Bottom line is that we need to think fast on our feet and be innovative and creative ahead of our competition and be prepared to let go of what we did yesterday.

The only reason I work where I do is the Pension. It was created to keep workers. But now I don't want to be there and they don't want me. I am not going to quit since there is a lot of money at stake. In the end if they lay me off the pension is 'back loaded", all the money comes at the end. So they win and I have wasted my life. Great system.

Much better to pay workers what they are worth in the present market and have portable benefits. Better for everyone!

 

[mikew]

Saying America will keep the intellectual property and the rest of the world can produce it is drawing a line in the sand. I think I read Bangor has more PHDs than silicon valley. There are design studios that can produce anything that Americans can faster, cheaper, and at the same level or better. The same thing is happening in China. New research and design centers are spring up all over China. China is not following a traditional development path. They are developing at all levels of the ladder at the same time. Also every other country is coming up.

Another thing is that American design too masculine. The rest of the world is moving towards cute. The last time I looked motorola cell phones looked like rocks compared to Japanese and European cell phones. Most people don't need a phone that can be run over by a car or a car that can run over a buffulo.

America cannot just give away entire sections of industry and the production process when things get tough or else there will not be anything left. I think America needs to have a national policy on competiveness like India China and Japan. This needs to be formulated by the govt with a national concensus. That needs to be made for the country not just industry. American industry does not have the same goals as America. As Lazarus has said.

And he stepped off the soap box
Mike

 

[Nords]

I think I read Bangor has more PHDs than silicon valley.

The one in Washington or the one in Maine? And in what subject(s)?!

Another thing is that American design too masculine. The rest of the world is moving towards cute. The last time I looked motorola cell phones looked like rocks compared to Japanese and European cell phones. Most people don't need a phone that can be run over by a car or a car that can run over a buffulo.

I'd be a lot more inclined to use a cell phone if I could find one that actually bridged the gap between my ear and my mouth without making me feel like I should be yelling into my cupped hand. We could call it, oh, I don't know, a "telephone handset".

 

[bpp]

I'd be a lot more inclined to use a cell phone if I could find one that actually bridged the gap between my ear and my mouth without making me feel like I should be yelling into my cupped hand.

Surprisingly enough, that is actually not needed. I have an earpiece, that was issued with my phone, which has a microphone built in that just barely sticks out of my ear and faces my mouth. Somehow it works just fine. Looks a little strange to see people using them, though -- they really look like they are talking to themselves.

Bpp

 

[bpp]

On mikew's rant, I would tend to agree. The idea that any one country could maintain a defensible lead in intellectual property seems hard to swallow. Thinking up stuff is the easy part -- making it work and producing it cheaply enough is the hard part.

And American design does look pretty bad in general. (Exception: I love my Dell Inspiron 300m. Though I must admit that my Japanese colleagues consider Dell to be cheap, unreliable crap.) It may be well-targeted to the American market, but it doesn't export very well. Hard to see how a competitive edge could be maintained there.

Bpp

 

[haha]

Saying America will keep the intellectual property and the rest of the world can produce it is drawing a line in the sand. I think I read Bangor has more PHDs than silicon valley. There are design studios that can produce anything that Americans can faster, cheaper, and at the same level or better. The same thing is happening in China. New research and design centers are spring up all over China. China is not following a traditional development path. They are developing at all levels of the ladder at the same time. Also every other country is coming up.

Another thing is that American design too masculine. The rest of the world is moving towards cute. The last time I looked motorola cell phones looked like rocks compared to Japanese and European cell phones. Most people don't need a phone that can be run over by a car or a car that can run over a buffulo.

America cannot just give away entire sections of industry and the production process when things get tough or else there will not be anything left. I think America needs to have a national policy on competiveness like India  China and Japan. This needs to be formulated by the govt with a national concensus. That needs to be made for the country not just industry. American industry does not have the same goals as America. As Lazarus has said.

And he stepped off the soap box
Mike

Mike, very astute and well expressed post.

ha

 

[wabmester]

And American design does look pretty bad in general.  (Exception:  I love my Dell Inspiron 300m.  Though I must admit that my Japanese colleagues consider Dell to be cheap, unreliable crap.)

Yeah, the Dell 300m is a nice machine. But not exactly a triumph of American design. It's made by Samsung.

Samsung Q20

 

[Honkie]

Looking around my house and office I found nothing "Made in USA" - interestingly, I have 4 "Superficially US" products - a GE telephone, Made in PRC", a Texas Instruments BAII Plus calculator also "Made in China", and a HP desktop and a HP Officejet 6110 Printer/Fax/Copier, both "Made in China".

As far as I can tell the only products I have/use with a US source are a VISA card, but that's issued by a local bank, Microoift software and a few Hollywood DVD/VCD's, but a decent % of those are fakes, made in Thailand, or China. I also have some AIA insurance coverage, but all of that is administered locally. Plenty of McDonalds but I would never eat there!

 

[Michael]

Much better to pay workers what they are worth in the present market and have portable benefits.

Cash on the barrel head, and low taxes so we can keep it.

 

[laurence]

Well, again, we should be cultivating our strong higher education system and intellectual property. While Japanese cars are kicking American butt, those designs come from U.S. graduates. Art center in Pasadena has the preeminent transportation design program in the world.

You know, what does England produce? Their economy is older than ours, and they seem to be doing allright.

 

[bpp]

You know, what does England produce? Their economy is older than ours, and they seem to be doing allright.

Vodafone and David Beckham.

Bpp

 

[wabmester]

You know, what does England produce?  Their economy is older than ours, and they seem to be doing allright.

Good point. Here's a ranking of current account balances:

World Ranking

US is dead last, but the UK is just two places in front of us at #147. And they also have an inverted yield curve right now. And a popping housing bubble. Let's see how their economy and stock market does in the next few years.