Are We Restoring through Reshoring?

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Written by: James Wilkey

Last year, we reported on a trend in manufacturing that saw jobs returning to the United States. The trend was tentative at best; a handful of companies were considering reshoring, with even fewer actively pursuing the initiative. Until recently, offshoring work was considered a cost-effective option. However, several factors are leading many companies to reconsider this position. First, both rising wages abroad and shipping costs have cut into the profits that come with overseas manufacturing. Second, foreign markets for U.S. goods, the other big incentive for offshoring, have failed to materialize in places like China. Third, moving labor overseas is very expensive, and companies are taking notice. Currently, a number of major companies are bringing manufacturing work back to the U.S. This week we’re looking at the top 5 companies pursuing reshoring and how this trend is affecting the American job market.

New_Walmart_Logo.svgThe move to bring manufacturing back to the U.S. isn’t based purely on saving money. Reshoring can also be a huge media boost for the company in question. Walmart–one of the single largest importers of foreign goods in the U.S.–has pledged to purchase $250 billion of American-made products by 2023 as part of its “Made in USA” program. A report from USA Today estimates the program will reshore close to 5,000 American jobs. However, that same report also approximates that “Walmart’s Chinese imports alone have displaced close to 200,000 American jobs.” Bringing those jobs back to the U.S. will be a slow, multi-year process. So even though Walmart’s initial efforts may seem small in comparison, it could escalate quickly if proven successful. Walmart’s plan to purchase a broader range of American products also means that it will have a significant impact on U.S. manufacturing in the upcoming years.

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Second only to Walmart in reshoring, Ford is estimated to bring a little over 3,000 jobs back to the U.S. from Mexico and Spain. The company moved production of its F-650 and F-750 trucks from Mexico to a production plant in Avon Lake, Ohio last year. Ford also announced that they will move production of their 2.0 and 2.3 liter Ecoboost engines from Valencia, Spain to Cleveland, Ohio. Ford isn’t just looking for a reputation boost. The move will reduce shipping costs and improve product quality. Moving back to the U.S. also comes with major tax breaks depending on the state. States will often compete for new jobs by offering companies tax incentives. This acts as a major lure for companies considering reshoring, and Ford is no exception. Ford stands to receive millions of dollars in tax breaks for supporting Ohio’s local economy.

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What Ford is doing for Ohio, Boeing is doing for Missourri. The company plans to bring nearly 3,000 reshored jobs to its St. Louis plant, which serves as Boeing’s Defense, Space, and Security division headquarters. The plant will now also manufacture components for Boeing’s 777 series passenger jets. This move will add thousands of more jobs to Boeing’s 14,500-person  workforce in Missouri. Boeing’s reshoring project will also span across multiple states. In fact, the company plans to make new jobs available at their assembly plant in Puget Sound, Washington in 2017.

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While Boeing’s big move is still a thing of the future, General Electric (GE) is reshoring right now. Over the past several years, the company has moved thousands of jobs from production facilities in China and Mexico back to the U.S. Like Ford and Walmart, GE found the costs of labor and international shipping increasingly prohibitive. In 2009, GE decided to move its water heater manufacturing to Louisville, Kentucky. The move has proven to be a big success. The company is now aiming to bring even more jobs back to the U.S. by transferring the production of high-efficiency light bulbs to Circleville, Ohio. GE also plans to transport the production of high-energy density batteries to Schenectady, New York.

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Although General Motors (GM) is lowest on our list, the scale of its operations have a great deal of reshoring potential. As of now, however, GM has only taken a few tentative steps into the world of reshoring. Last year, GM halted production of Chevrolet Camaros in Ontario, Canada in order to relocate to Lansing, Michigan. Although it’s not the largest of reshoring initiatives, it’s one of many efforts made by the automobile giant.  GM is also in the midst of moving production on their Cadillac SRX out of Mexico and into Spring Hill, Tennessee. While GM has only brought back about 2,300 jobs so far, the company is seeing great success as a result of reshoring, which has encouraged GM to consider more reshoring projects.

Restoring through Reshoring
Reshoring initiatives are still relatively small when compared to offshoring. However, they are critical for each American who finds work as a result. It’s also difficult to determine the impact of reshoring because most data suggest that the job crisis in the U.S. is only a small part of larger industry changes, such as the automation of machines and the ever-growing skills gap. Yet, reshoring is an undeniable boon for local economies. These early efforts may soon soar into large scale returns for U.S. manufacturing.

How do you feel about the move toward reshoring? Let us know in the comments below!

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