China Starts Outsourcing From ... the US

hackingbear writes: Burdened with Alabama's highest unemployment rate, long abandoned by textile mills and furniture plants, Wilcox County, Alabama, desperately needs jobs. And the jobs are coming from China. Henan's Golden Dragon Precise Copper Tube Group opened a plant here last month, employing 300 locals. Chinese companies invested a record $14 billion in the United States last year, according to the Rhodium Group research firm. Collectively, they employ more than 70,000 Americans, up from virtually none a decade ago. Powerful forces — narrowing wage gaps (Chinese wages have been doubling every few years), tumbling U.S. energy prices, the rising Yuan — up 30% over the decade — are pulling Chinese companies across the Pacific. Perhaps very soon, Chinese workers will start protesting their jobs being outsourced to the cheap labor in the U.S."

Comments

First post

[GameboyRMH]

Welcome Chinese overlords!

Re:First post

[K. S. Kyosuke]

Cue worker migration and Star Spangled Red-and-White Peril in China.

Re:First post

[Karmashock]

Actually we've seen this happen in the US for many years with a lot of foreign companies. Often because US companies fail to resolve labor or regulatory issues and a foreign company cuts through the issue to find a way to produce products in the same place without incurring many of the previous costs.

Toyoda for example has done this repeatedly and been able to produce cars more cheaply in the US then many of their American competitors using the same labor.

A lot of it boils down to legacy corporations that have grown too large and inefficient.

Things need a reboot on occasion. Many large companies should go through a serious reorganization top to bottom including the renegotiation of all contracts to take into consideration new opportunities and concerns.

Re:First post

[wisnoskij]

OK a lot of the characters disappeared when that was posted. It should look something closer to "Huanyíng zhongguó bàzhu!"

Re:First post

[petermgreen]

Sometimes what they do is set up in the US but in a different part of the US. This allows them to sidestep protectionist import restrictions while also drawing from a different labour pool and avoiding existing unions.

Toyota has a number of factories in the US but none in detroit or even in mitchagan.

Re:First post

[DerekLyons]

Toyoda for example has done this repeatedly and been able to produce cars more cheaply in the US then many of their American competitors using the same labor.

Toyota has been building new factories in depressed areas, low wage areas, and union free areas. Their American competitors aren't quite so free to do so.
 

Many large companies should go through a serious reorganization top to bottom including the renegotiation of all contracts to take into consideration new opportunities and concerns.

That is... not nearly so simple as you imagine. Especially if unions are involved.

Re:First post

[Noah Haders]

actually, it's not so much about being domestic or international as it is where you build your shizz. Car manufactuirng is exploding in the South, across KY, TN, AL, and many other states. it's all the major companites. toyota, honda, hyundai, GM, Mercedes, BMW. The plants in the south are non-unionized. and its especially appealing for foreign automakers cuz then their cars are "made in america" for the purposes of taxes and international trade issues.boeing also wanted to move from WA to the south, I forget where, but the thing was held up because the unions went to Obama. I forget how that turned out.

simple fact is, it's hard to build cars in the midwest, nobody wants to do it. a lot of legacy stuff is there, and a lot of things are bound by contractual relationships and institutional knowledge, but if you're starting fresh then might as well put the plant in the best location.

Re:First post

[Penguinisto]

A lot of it boils down to legacy union shops that have grown too large and inefficient.

I don't normally do a "FTFY", but this one sort of needed it.

Most car companies are on par with each other insofar as management and the organization thereof, with a few degrees of slop either way. The big variable is that the Toyota/Kia/Hyundai/etc plants in the US are generally non-union shops in "Right to Work" states. The advantage of that is while they still pay a decent wage, they don't have to pay the massive UAW-blessed wage and headcount demands, let alone the added drag of bureaucracy, negotiations, etc.

Re:First post

[Karmashock]

They are free to do it. Just as free as Toyota was to do it.

Will the Unions whine? Its a question of rights. The unions have a right to whine. They don't have a right to stop it.

If the unions want to buy the car company and then decide how to run it, that is fine... buy the car company.

If they want to have no investment in the car company and just work for it like employees... then that is what you are... an employee. You don't decide as an employee where a company builds a factory.

Full stop.

Now through the labor department unions can use special interest politics to make life difficult for companies. But those companies can't be forced to keep factories open. Open a new factory some place the labor department isn't going to stop... if that means another country then that's what you have to do... then you shut down the factories in the union areas. Utterly shutter them.

Its not a question of whether something is easy or not. Its an existential threat to the company. They don't have a choice. They must do things in a competitive fashion or die.

Must.

Do or die.

If the unions refuse to cooperate then they can't be involved in the company's future. Retaining them in that position means accepting death. The only companies that will survive are the ones that either get a new contract with the unions that is competitive or that cut the unions out entirely one way or another.

I suppose you could get a lot of back door government handouts... but then your business is less about selling cars and more about getting corrupt politicians to give you subsidies.

Which is fine as far as it goes... just be honest about your business model at that point. You're a subsidy company at that point... not car company.

Re:First post

[Karmashock]

A baseless insults is not a rebuttal, constructive criticism, or even technically an argument or thought.

Its just a bit of animal noise you decided to type into your browser and then send through the internet to waste my time and patience.

Please stop wasting bandwidth or stop wasting oxygen.

Re:First post

[infinitelink]

The government can invalidate contracts but they can't force you to sign contracts or force you do things you don't want to do.

You missed the batshit Obamacare ruling, didn't you?

Re:First post

[Karmashock]

Why would a CEO care less about a company if paid in stock options rather then paid in a straight salary?

I mean... if paid in a salary he can literally tank a company WHILE working for it and not lose money until he's fired.

Where as a CEO paid in stock options has to keep the value of the company high at least until he can sell his stock options which tend to mature at least a couple years in the future.

While I agree with you that many CEOs are irresponsible that is more the fault of the current investment model.

I think we have too many small investors in big companies. It creates a problem where in the board of directors is frequently filled with people that don't really represent anyone or care about the company.

Disney for example put some school teachers on their board of directors as well as some other random people. They weren't major share holders and so they both lacked influence and interest in the well running of the company. You see this in many companies and it isn't how it used to work.

In the past, members of the board represented or literally were major share holders. They had leverage because they could sell their stock which would have an impact on the share price given that they were major share holders. What is more, many of them held voting shares which meant they could literally vote CEOs out of their seats.

Today, the boards of directors are typically meaningless. They don't really represent shareholders or have any power. And this leads to CEOs getting out of control because they're basically in charge without any accountability. The only thing that brings them down is if they piss off the shareholders enough that they form a lynch mob OUTSIDE of the board of directors and then organize to vote the CEO out. Very little of this is done from within the boards of directors these days because they're puppets with no strings... they're just a for show pageant without meaning.

As to the responsibilities of a corporation to the community and the workers etc... that's nonsense.

If I start a sandwich shop, I don't have a responsibility to my community or to the guy I hire to make sandwiches. That is unless you think providing healthy sandwiches to the public and paying the wages of the kid I hire doesn't cover my responsibilities. Because those are my responsibilities in that situation.

I don't see where I agreed to do more then that. And I don't see where you get to suddenly claim that companies are responsible for the economic well being of people that aren't even investors in that company.

Its all about contract and property law. The companies never signed contracts or made agreements to do what you're saying they should do... They do that sort of thing on occasion but they don't have to do it.

They do it because companies are made up of people and people care about other people. Also it is justified on the basis of employee and community relations... and is seen as being cheaper then the consequences of not doing it. That said, extorting the companies to do it ultimately comes out of their bottom line and that can make them leave an area if your definition of "community support" means them failing to make a profit.

Companies that can't make a profit... die. Or the government bails them out endlessly due to incestuous political entanglements... which just means other profitable american businesses are being robbed to bail out unprofitable ones...

Don't fuck with the market... it will give you face herpes every time.

Re:First post

[Daemonik]

How can executives sabotage their company for the stock benefits? Primarily because stock prices are in no way effected by a company's profitability. The biggest movers of stock price are layoffs, mergers and expected growth.

Layoffs can seem to be due to efficiency but you can also layoff the wrong people who were the core of your business, or layoff too many employees. Then they hire contract workers with no stake in the company's success or temp workers to fill the gaps, neither of which group has the institutional knowledge of how the company functions to perform their jobs well, but it looks nice on a balance sheet at the quarterly review.

As for mergers, so many company's have been wrecked by poorly considered mergers it's not even something you can question.

Then there's the favorite 'expected' growth vs actual growth, and the demands that businesses become omniproducing ever growing conglomerations while getting further and further from the core proficiencies that made them successful in the first place. The expectation of growth is what typically drives the layoffs and the mergers. A company can be phenomenally successful in it's niche and it's stock will actually drop, unless they can project constant and unreasonable growth in their market.

There are a lot of companies that have had excellent stock gains, right to the point where they implode and everyone looses out, except of course the insiders.

oh boy

[k6mfw]

can't wait for those whining on the forums, "damn Americans stealing jobs from hard working people."

Re:oh boy

[bluelip]

China's downfall in production will come when the factory workers start having unions that are too powerful.

Re:oh boy

[ultranova]

China's downfall in production will come when the factory workers start having unions that are too powerful.

Isn't it strange how success is always the accomplishment of awesome management but failure is never the fault of incompetent one?

In any case, you're wrong. The world is running out of hellholes that tolerate slave labour, so those companies that can't turn profit without it have nowhere to go and no future save bankruptcy auction. That should make this the time of great opportunity for every businessman who can actually live up to their own hype; based on the amount of whining we're hearing instead of eager expectation, I guess most of them know the truth about themselves...

Re:oh boy

[sjames]

The inevitable result of an exploitative management.

Re:oh boy

[Kjella]

In any case, you're wrong. The world is running out of hellholes that tolerate slave labour, so those companies that can't turn profit without it have nowhere to go

Oh there's plenty of hellholes left, but the remaining ones are mostly plagued by civil war, crazy dictators, massive corruption, lack of basic education and infrastructure or some other form of ethnic, religious, economical, social or political instability that make them unsuitable for running a business no matter how low the wages get. The extremely poor but stable countries are quickly running out, India is still lagging quite a bit behind China but after that if gets tougher and tougher.

Re:oh boy

[k6mfw]

It's been said Capitalism is where man exploits man. Communism it's the other way around.

Re:oh boy

[Anonymous Coward]

In other words, the USA is the last hell hole on earth that tolerates slave labour. When the Chinese find exploiting american's more cost effective than exploiting Chinese, there might be something wrong in your backyard.

Funny ...

[gstoddart]

Powerful forces â" narrowing wage gaps (Chinese wages have been doubling every few years)

Funny, ours have been halving.

So it really is a race to the bottom.

Re:Funny ...

[alta]

As someone originally from Alabama, Thank you :)

Re:Funny ...

[pushing-robot]

More like "dropped on average a few percent in real purchasing power from its peak a couple decades ago".

Considering how many of the world's problems are caused, enabled, or exacerbated by abject poverty, it seems a small price for bringing a couple billion people in the BRICS nations out of it.

Unless you're one of those who think you were born deserving more than everyone else in the world.

Re:Funny ...

[jythie]

It also can not last. The reason multinationals are raking in such large profits from cheap labor is OTHER companies are still paying well. It only works as long as your target customer is well off but your own work force is poor, but if the pattern continues then the target customers will bit by bit also be replaced by poorer workers and that ripples though.

Re:Funny ...

[sjames]

Pay them well enough that they become consumers who, in turn, create more demand which requiring more decently paying jobs to keep up.

Leverage the poor, whoever they are

[Old VMS Junkie]

Businesses will continue to take advantage of poverty, wherever it exists and whoever it is. Greed is blind to creed and color. All it cares about is profit.

Re:Leverage the poor, whoever they are

[Anonymous Coward]

Alternatively: Businesses will continue to reduce poverty, wherever it exists and whoever it is. Greed is blind to creed and color. All it cares about is profit.

Re:Leverage the poor, whoever they are

[roc97007]

I'm told that "least cost country" is used in manpower discussions so much now, it's been abbreviated to LCC to save time.

Re:Leverage the poor, whoever they are

[bjwest]

You would rather the unemployed remain so, rather than get a job, however little the pay? So long as we continue the fight to a living minimum wage (and win it), I see no problem here. Every dollar they earn is one less taxpayer dollar they receive.

This I didn't expect.

[TigerPlish]

I was thinking some years ago "If all the jobs went to China because no one in the US wants the factory worker life, who is gonna build Chinese doohickeys when *they* get tired of the factory life?"

I was thinking India. Or Malaysia, or Chile or something..

But not the USA. I never even considered that possibility.

WTF. This world no longer makes any sense to me.

Re:This I didn't expect.

[kick6]

I was thinking some years ago "If all the jobs went to China because no one in the US wants the factory worker life, who is gonna build Chinese doohickeys when *they* get tired of the factory life?"

I was thinking India. Or Malaysia, or Chile or something..

But not the USA. I never even considered that possibility.

WTF. This world no longer makes any sense to me.

It makes perfect sense. After enough time of disparaging the factory life, Americans are finally realizing that it beats the alternative.

Re:This I didn't expect.

[Krishnoid]

WTF. This world no longer makes any sense to me.

You're apparently about ten years behind the times. But considering history probably repeats itself, you're likely also about ten years ahead of the times.

Re:This I didn't expect.

[oh_my_080980980]

The only people who were disparaging manufacturing jobs were corporations who moved them overseas.

Re:This I didn't expect.

[bledri]

It makes perfect sense. After enough time of disparaging the factory life, Americans are finally realizing that it beats the alternative.

I can make sense of it at an intellectual level, it's just my gut reaction to go "WTF" -- it's a bit counter-intuitive.

The news is welcome, I just wish American companies would start making things in USA again. I know we can do it. I suppose in time, we will.

It's already turning around. Tesla builds its cars in Fremont, CA and they're planning to open a battery factory somewhere in the US. SpaceX makes rockets in Hawthorne, CA. SolarCity bought Silevo and is planning to build a solar panel factory in NY. Now we just need to convince someone besides Elon Musk (which is actually happening.)

Re:This I didn't expect.

[lister king of smeg]

Of course, being Alabama, they will promptly arrest and jail the Chinese managers who come over to check on the plant unless they can prove they are in Alabama legally.

its Alabama not Arizona

Re:This I didn't expect.

[TheDarkMaster]

The good thing about Musk (and guys like him) is that profit is not the sole and exclusive purpose of the company. They are looking to do something well and profit is just a welcome consequence of this, not the sole purpose..

Shipping, Inventory/Delays & Management Costs.

[BoRegardless]

Are not trivial for moving heavy products from continent to continent.

Labor with automated systems is sometimes no longer a large expense.

2000 jobs and 2 billion dollars

[OzPeter]

Thats what is being touted for the Shandong Tranlin Paper Co. greenfield mill being built near Richmond VA, and to break ground in 2016

Chinese paper company to set up shop in Richmond suburbs

Sure I don't expect 2000 permanent full time jobs, but injecting $2 billion into a community ain't so shabby

This could be political too

[guanxi]

The Chinese government is very strategic about creating 'soft power' (political, cultural, economic, and diplomatic influence; as opposed to 'hard power', which is typically military force or economic sanctions). Look up Confucius Institutes and the Three Warfares, for example. China also uses its market power to get what it wants politically; look up how Hollywood studios allow Chinese censors to edit their movies (and not just for Chinese distribution).

It's not a new idea to use jobs to create influence. Government contractors locate jobs in the districts of key members of Congress in order to get votes; when Japan's auto industry was viewed as a threat, the built factories in the U.S.

In the locations where Chinese companies are placing jobs, how likely is it that the people or their representatives will support sanctions, force, or any actions detrimental to China?

(China isn't the only country to do such things, of course, but they have a lot of money, an aggressive outlook, and their government has a lot of involvement with and influence over their businesses.)

Re:This could be political too

[rahvin112]

The Chinese government is TERRIBLE at soft power.

When the Philippines got hit by that Typhoon and they had the opportunity to inject soft power into the Philippines and offset public opinion about their territorial claims that are in conflict with the Philippines you know what they did? The offered a couple million dollars cheap tents that were probably worth less than a million dollars.

You know what the US did? We deployed a carrier group and starting rescuing people directly, feeding them, setting up housing and providing medical care onboard the navy ships including emergency surgery for those critically injured. That relatively cheap soft power exercise for the US bought long term good will in the Philippines, in fact they actually started talking about maybe letting us open a base there again (it's bared by their constitution). We didn't really spend that much more than the Chinese claim to have spent but we got 200000x the value from it.

The Chinese don't get soft power at all.

Re:This could be political too

[TubeSteak]

This isn't soft power at all.
As the cost differential between Chinese manufacturing and US manufacturing decreases, it makes perfect sense to move the manufacturing closer to where the products will be consumed.

US companies have been slowly moving their manufacturing back to the USA (or to Mexico), because it isn't that much more expensive than China + the lack of language barriers and 12 hour time shift makes resolving problems easier.

The fact that the Chinese are now moving manufacturing to the USA means that cost differential has shrunk even more, to the point that the Chinese are willing to put up with the language barriers and 12 hour time difference.

Is this really "outsourcing"?

[spitzak]

If the manufactured items stay in the USA (or are shipped to any place where it may be cheaper than shipping from China) then this is just putting the factory where the product is being used and is not really "outsourcing". The term "outsourcing" should be limited to when jobs move to follow cheap or available labor but otherwise defies any business logic.

The article is not clear on where the factory output is going, or where the raw materials come from. There is one mention of a glass factory who's "site puts Fuyao within four hours' drive of auto plants in Ohio, Kentucky and Indiana." All the others don't seem to say whether delivery to the USA is part of the reason for the relocation.

Another language barrier?

[Overzeetop]

As if it wasn't hard enough to learn Chinese to talk to your suppliers directly, now you've got to learn to understand people in Alabama? That's fucked up.

They'll just complain...

[phillk6751]

that we can't speak proper Chinese.

false choice

[globaljustin]

You would rather the unemployed remain so, rather than get a job, however little the pay?

that's a dumb dichotomy and it shows the weakness of your position

obviously, in a perfect world we wouldn't need any remediations...we'd all ***rather*** not have the problem at all

the minimum wage is the same as anti-trust laws...it plugs a hole in capitalism...just as a mononpoly is the antithesis of free market competition, so is it harmful when companies monopolize the factors of employment

we need anti-trust laws for the same reason we need minimum wage laws: unchecked corporate greed

Re:false choice

[bjwest]

You would rather the unemployed remain so, rather than get a job, however little the pay?

that's a dumb dichotomy and it shows the weakness of your position

You can't just take my first sentence out of context, call it weak, then babble on about the importance of minimum wage. You totally ignored the fact I say minimum wage is a good thing, and needs to be raised to a livable level.

The U.S. has a minimum wage, so the "however little the pay" will be what the law allows. We won't be inundated with workers making $1.00 a day.

Re:theyre doing it for some very specific reasons.

[WrongMonkey]

Check your math. I thought your inflation adjustment seemed a bit high and it turns out that the very calculator you link to agrees with me. $9779 in 1977 dollars is worth $37592.19 in 2013 dollars. Following the social security link that you provided, the national average wage index for 2012 was $44,321.67.

Wouldn't that be "outsourcing to the US"?

[QuietLagoon]

When US companies outsourced their jobs, it was said that they outsourced the jobs to China, or to India.

.
Why, all of a sudden has the terminology changed?

Re:So it starts......

[Sarius64]

Don't laugh. I've friends hired as translators for the prestige of employing an American. Crazy stuff.

Oriental knowhow and cheap American labor

[knorthern knight]

The ultimate combination

Or we could just stop racing to the bottom

[rsilvergun]

No? You're entire post is based on the idea that Unions are inherently bad. For a capitalist they are. I've said it before and I'll say it again: Marx predicted that capital would flow to where ever labor's cheapest in a constant race to the bottom, but all anyone can remember about him is that a few dictators borrowed one of his books for rhetoric.

Did it ever cross your mind that there is a _reason_ Unions formed? Have you ever heard the phrase "Nasty, brutish and short"? Have you seen pictures of the Mini-Guns used by "private" security employed by mines in the 70s to intimidate workers?

Whatever else you think, you _want_ Unions. You _need_ Unions. Unions are labor organized to seek better and safer working conditions. Nothing more or less. Hell, there's another story on /. here today talking about the death of the 40 hour work week in America. It's a statistical fact that wages have declined and productivity has increased. What in God's name are you planning to do by your little lonesome against multi-billion dollar corporations? Seriously, do you think Toyota is going to keep paying a living wage out of the kindness of their Hearts? It's the sacrifice of the Union man and the competition for those Union Jobs that's why Toyota is paying those wages in the first place. And before you bring it up, no, they don't need you to buy their cars. They have plenty of other buyers, and they really don't need that many. They can just raise the price and sell fewer.

I could go on, and on, and on, but seriously man. You don't know of what you speak. Go work in a meat packing plant for a decade and tell me you don't need Unions.

Re:Or we could just stop racing to the bottom

[Daemonik]

Unions are as equally corrupt as the company management or the government, but why do only two of those ever get the scorn of anti-union people like you?

Most companies are run by CEO's with no loyalty to the company beyond what their stock options are worth, and will actively sabotage their operations if it will drive up their short-term stock prices. How is that sort of behavior better?

Re:Or we could just stop racing to the bottom

[hjf]

Easy there, union guy.

I said I agreed with the previous post. I'm not anti union. And I'm extremely critical of the government (I'm not american, if that matters).

But unions ARE corrupt, and they are as corrupt as the government. The ideals of unions are good. The problem is: they become giant and extort money from the company.

Here in Argentina the truck drivers union is preparing for a 2-day strike, demanding a 40% raise (after a 30% raise not even a couple months ago). Truck drivers are making more money than many professions (doctors and engineers for example). A truck driver doesn't spend 10 years of his life in college, yet he makes more money than a doctor here, thanks to the "truck drivers union" which paralyzes the country whenever it wants something. That's sheer corruption right there. In fact, that's the reason unions existed in the first place: to protect the "little guy" from the big guy. Except they're the big guy here, and they act like it.

It's Official

[hyades1]

We all knew it was coming. Alabama has now officially joined the Third World.