Chain Reactions

Making It Here, Shipping It There

It's not exactly the nirvana of nearshoring people are hoping for, but it's a start: The Wall Street Journal is reporting that some multinational U.S.-based manufacturers are producing goods here in the States, but shipping them overseas.

For instance, a GE power turbine plant in South Carolina manufactures 100% of its turbines for overseas consumption. Not a single one of those turbines, built by 3,000 American workers, will be used in the United States. $3 billion worth of those turbines, in fact, are destined for Iraq.

It's the reversal of the usual lament about offshoring, since in this case GE is paying U.S. workers with U.S. dollars to manufacture products that will involve U.S. transportation companies hauling those turbines at least part of the way, if not the entire trip, to Iraq.

GE's decision to employ Americans to make these turbines is particularly relevant given a recent conference I attended here in Cleveland focused on the wind power industry located in the Great Lakes region. In one session devoted to the development of offshore wind towers (in this case, "offshore" is used in the traditional sense of the word, i.e., in the water), it was pointed out that companies are establishing their entire supply chains as close to the shoreline as possible to keep transportation costs to a minimum. The huge fan blades and towers, some well over 100 feet long, involve the use of numerous different types of maritime vessels just to get the structures from the shore to the offshore platforms. Picture an entire fleet of tugs, barges, cable-laying vessels, installation vessels, crew transport vessels, and operations & maintenance vessels, and you'll have an idea of what's involved in moving the guts of a wind tower from the plant to the platform.

Returning to the WSJ article, construction equipment manufacturer Caterpillar is another U.S. company that builds it here and then ships it there. Nine out of every 10 large mining trucks the company makes gets exported to another country. While Caterpillar hired 11,000 workers overseas to build its products, the company also added 6,000 workers last year right here in the United States.

As the WSJ points out, Caterpillar took the occasion of its recent quarterly earnings announcement to lament the lack of leadership coming out of Washington. According to Doug Oberhelman, chairman and CEO, "While we expect moderate U.S. economic growth, we believe a lack of confidence in the business climate is the major impediment to a stronger recovery and job creation. Lack of clarity on a U.S. deficit reduction plan, trade policy, regulation, much needed tax reform and the absence of a long-term plan to improve the country's deteriorating infrastructure do not create an environment that provides our customers with the confidence to invest. We're confident that as a country we'll eventually get it right, and we're positioning Caterpillar to be ready when we do."

In any event, while the U.S. economy continues to sputter along, the biggest U.S.-based manufacturers are doing just fine, thanks, by selling their products overseas. The fact that at least a few have chosen to keep their U.S.-based factories humming even when they're producing stuff for foreign consumption is, at the very least, an encouraging sign. An even better sign will come when those U.S. manufacturers start making stuff for U.S. consumers again.

TAGS: Supply Chain
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