Manufacturing Returns to the US

An article by Charles Fishman in Atlantic Monthly magazine (DECEMBER 2012) describes a current trend to move manufacturing back to the United States; The Insourcing Boom reveals a more competitive way for the US to take back the reins on making things that is also more sustainable.

http://www.theatlantic.com/magazine/archive/2012/12/the-insourcing-boom/309166/1/ 

Take the GeoSpring water heater by General Electric (GE) as an example; its manufacturing was moved from a cheap Chinese factory to GE's expensive Appliance Park factory in Kentucky (see photo). With that change starting in 2010, material costs went down, labor costs to make it went down, quality went up and energy efficiency went up. And there's no longer the four-week transit on a slow boat from China that produces high carbon emissions from shipping. GE has beat the retail price of the China-produced water heater by about 20 percent by making it in the US. 

Following are a few reasons why the manufacturing move back to the US is working, not just for GE but for other companies, too:

• Oil prices are three times what they were in 2000, making cargo-ship fuel much more expensive now than it was then.
• The natural-gas boom in the U.S. has dramatically lowered the cost for running something as energy-intensive as a factory here at home. (Natural gas now costs four times as much in Asia as it does in the U.S.)
• In dollars, wages in China are some five times what they were in 2000—and they are expected to keep rising 18 percent a year.
• American unions are changing their priorities. The GeoSpring manufacturing plant worker's union at GE's Appliance Park was so fractious in the ’70s and ’80s that the place was known as “Strike City.” That same union agreed to a two-tier wage scale in 2005—and today, 70 percent of the jobs there are on the lower tier, which starts at just over $13.50 an hour, almost $8 less than what the starting wage used to be.
• U.S. labor productivity has continued its long march upward, meaning that labor costs have become a smaller and smaller proportion of the total cost of finished goods. You simply can’t save much money chasing wages anymore.