In choosing Alabama ,EAD's and other potential companies would have considered the economic and infrastructure incentives that the government uses to entice capital investment into its state.The fact that states see the incentive costs and tax breaks as a good investment, provides that they have done their research and see that the benefits will far outweigh the costs. On further research Alabama actually features quiet low on the scale of how much is spent in total and more importantly per capita for state incentives. In the United States of Subsidies, using the interactive map you can visualize how much is actually spent. Alabama spends $58 a year / per person as compared to West Virginia spending $845 per person. As you click onto each state you can go further and see how much was allocated for particular companies , Airbus receiving two government grants totaling $125 million, compared to the well established BMW (Daimler) receiving $12 million in government grants.
Finally a large factor for the return of manufacturing to the USA is the ever changing state of the worlds wages , particularly in developing countries such as China.In figuring out the benefits of less wages in these developing countries,companies with large consumer bases in the USA need to assess if the overheads of a foreign manufacturing plant are all worth it.The amount of companies Reshoring manufacturing is well under 100 at the moment but quietly growing. General Electric being one of the larger examples , has returned its washing machine manufacturing from China back to Kentucky.
Based on a Boston Consulting survey it was found that 37% of companies, with capital of over $1 Billion dollars,plan on returning some,if not all of their manufacturing from China back to the USA. It can not only be good economically but in the case of Lenovo, a great public relations win as they proudly return part of their computer manufacturing back to North Carolina.These figures pose a good contrast to the picture that some corporations paint of the current political setup in the USA, not being conducive to business.In other words actions are speaking louder than words and it is clear that the trend is for re(growth) in the manufacturing industry for the USA.
Great addition to our class lecture in regards to manufactures in the United States. In addition to what we had discussed in class, I have this theory that here in the US, the manufacturing of goods will not decrease whatsoever but in fact it will be shifted to more technological advanced goods; for instance, airplanes--as of the Airbus coming, that is such a large investment that will not be discarded any time soon. Also, the US is a type of "world warehouse" anything that you buy in another country, that product (although it may not have been manufactured in the US) is likely to have been distributed by an American MNC from an American port. With that in mind, I believe that manufacturing in the US will not decrease but change to more technological advanced products which requires less work force but more human capital.
ReplyDeleteI hope that happens too but I also have my doubts that the US can make those leaps considering the timing of our economic crisis. I think it's a little too soon to forecast a shift back to manufacturing in the United States but I do think they are on the right track. Green is the new Gold! If the United States can continue making advancements in clean, sustainable energy then the world will want to import from the US again. Don't be fooled, environmental issues will soon make their way to the top of everyone's agenda and when they do green manufacturing will be the place to be.
DeleteIt will be interesting to see EAD's success in comparison to that of Brazil's Embraer. As the largest producers of airplanes, set up in one of the worlds developing economies, they provide a useful real life counter-factual. If EAD sees success in Alabama, they could easily become the largest producer's worldwide, as the American market is the largest.
ReplyDeleteThere used to be an absolute advantage to producing in China and now that has changed as a result of increasing wages and higher shipping costs. This has some companies moving production back to the US, but I have to wonder if manufacturing will just move from East Asia to Latin America where shipping will be less, wages will be lower, and where there will be a large labor supply. Most companies site logistics problems as the main reason for moving from China, which makes Latin America a viable option because of its proximity.
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