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January 1, 2011
Master Lock reassessing China
It all sounds depressingly familiar: Master Lock Co., in the throes of a restructuring and under shareholder pressure to control costs, has been shipping jobs halfway around the world.
"We're strategically going at it, when it makes sense, where it makes sense," said Master Lock senior vice president Bob Rice.
In a new twist, however, it's China where Master Lock's costs are rising disruptively. The company has responded by pulling production back to Milwaukee, where the manufacturer of iconic padlocks was founded in 1921.
I was not looking for good news to start the new year. It found me. It came up on my daily "China bubble" search.
January 2, 2011
As copper price booms, 'bust' is a scary thought
The current meteoric rise in copper prices is due partly to China's explosive economic growth, as that country snaps up the metal to use in construction, industry and consumer products.
A bust is not a scary thought. Scary is seeing the meteoric rise in the price of copper continue.
What a great day this is. It is sunny yet again here in Seattle and I'm actually able to use the "real prosperity" tag to start the new year off right.
Real Estate Newsletter Articles this Week: Existing-Home Sales Increased to
4.15 million SAAR in November
-
At the Calculated Risk Real Estate Newsletter this week:
[image: Existing Home Sales]*Click on graph for larger image.*
• NAR: Existing-Home Sales Increase...
12 hours ago
14 comments:
There is much to read in that "Master Lock reassessing China" link. Don't miss it!
I had an entire post all ready to submit and then I changed my mind. I might have gone a little overboard on this insourcing thing. But on second thought, what the he...
"Master Lock was bringing work back to Milwaukee during the recession, Rice said."
There is a concerted effort afoot by media referring to "the recession" in past tense. Little by little, they'll get the sheeple convinced. Just in time for the next election. Sad. But the NBER said...
"The company's flagship industrial campus, with nearly seven football fields of unionized factory floor space, is at capacity for the first time in 15 years."
You know, I wonder if this is a story of insourcing, or more a matter of the American people buying a hell-of-a-lot of locks! For what do you suppose...
"The main reason is cost of production," said Wham-O chief executive Kyle Aguilar. "We are making progress toward our goal of producing half of all Frisbee discs in the United States."
From where I stand, frisbee consumers are likely among the last people in the world who could GAF what country of origin is stamped on their puchases. I'm envisioning a thousand or so freshman and sophomore college students attending this Springs Air-Guitar Fest at campuses around the country and between slugs of their favorite beverage they can't help but be fascinated at the fact their beloved Wham-O is "coming home" baby!
"This will help the U.S. to regain competitiveness in several industries."
Did you see that lady on the assembly line! I'm not saying I wouldn't do that job, I would. And I'd be grateful. I'm just not going to mess myself over those kinds of jobs rating a cheer that we are all marching back to prosperity in America.
"Master Lock has added some three dozen jobs in Milwaukee in recent years, bringing total factory head count to 379."
Assuming recent years is three: (365 * 3) / 36 = 1 job a month. Go back to my first comment about recession.
"That compares to 1,300 at its peak in the early '90s before the company was blindsided by a proliferation of low-cost Asian copycats. That sent Master Lock into China in 1993 and then into Mexico. "We went there in survival mode," Rice said of the early outsourcing. "We're businessmen. We do what's right for this company.""
It must be nice to be a businessman. You can f__k workers here and call it "survival mode". I'm very sympathetic to that, not. I think there's something here that the businessman is not telling us. Like corporations have figured out how to move all of their profits off shore while keeping all of their losses in America, so they don’t have to pay corporate income taxes.
"...Master Lock's formula for job creation is a combination of high volumes and as much automation as it can afford..."
Sigh.
I hope my rant has not offended anyone.
G.H.,
"You know, I wonder if this is a story of insourcing, or more a matter of the American people buying a hell-of-a-lot of locks! For what do you suppose..."
There you go thinking outside the locked box again!
"...Master Lock's formula for job creation is a combination of high volumes and as much automation as it can afford..."
I hear you. It isn't like I claimed it was excellent news. A jab to the gut is better than two pokes to the eyes though. Sigh.
In other news, the sun has set here in Seattle. Darkness returns.
Look at this:
"General Electric Co., which exports water heaters from China to the U.S., is preparing to add water-heater production later this year at its Louisville, Ky., plant, the first new product added there in 50 years."
and then this:
"In the U.S., meanwhile, politicians often attract jobs by handing out taxpayer subsidies. GE took a $25 million package of local and federal aid before it agreed to start water-heater production in the U.S. GE also won union concessions in the form of a two-tier contract that cuts hourly wages to $13 for new hires from $22 for current workers."
It's a win/win! GE wins on the funding side with taxpayer money, and GE wins on the expense side by paying less money to the taxpayer.
Sustainable?
How do you like that phrase "before it agreed"? Does anyone else have a problem with the corporate gangs in America holding politicians at their knees and offering to give them "jobs" for their constituencies in return for looting the U.S. Treasury?
All we can do is extend the Bush tax cuts on the rich even though the government of "the people" is headed for default.
This article did a swell job of painting a rosy picture of our future. I'm glad you posted it. In the future I'll be able to readily identify jsonline.com as a mouthpiece for the Larry Kudlows of the world. *willy*
G.H.,
You are really undermining my momentary bout of good news euphoria here!
Damn! And I thought I'd be shutting my Illusion of Prosperity blog down by the end of the week at this pace. ;)
Sigh.
IMO, you should remove this entry from your "real prosperity" list.
Carl Fox: "I came into Egypt a Pharoah who did not know."
Gordon Gekko: I beg your pardon, is that a proverb?
Carl Fox: No, a prophecy. The rich been doing it to the poor since the beginning of time. The only difference between the Pyramids and the Empire State Building is the Egyptians didn't allow unions. I know what this guy is all about, greed. He don't give a damn about Bluestar or the unions. He's in and out for the buck and he don't take prisoners.
G.H.,
I can't remove it. It's about the closest thing to real prosperity I've seen since starting this blog. Sigh.
Our automated jobless factories at least don't contribute to the trade deficit.
I will freely admit that the bar is indeed set low here. Very low.
It's like seeing a politician refuse to take a $1 bribe! ;)
"Carl Fox: "I came into Egypt a Pharoah who did not know."
Gordon Gekko: I beg your pardon, is that a proverb?
Carl Fox: No, a prophecy. The rich been doing it to the poor since the beginning of time."
That's good, I also like this quote from Platoon:
"Ever'body know, the poor are always being f***ed over by the rich. Always have, always will."
King - 'Platoon'
watchtower,
Oh, that dog just ain't gonna hunt. You cut that fence and get this goddamn platoon on the move. - George Luz, Band of Brothers
When China's bubble bursts, will their wages come down to the point where it makes sense to manufacture in China again? Or will there be political unrest which won't be worth the risk unless wages come down A LOT?
Either way, one of the "advantages" of Chinese manufacturing is the tremendous subsidies in Chinese shipping. THAT is not sustainable and the trend will be actual global manufacturing rather than concentrated manufacturing supported with global shipping. Shipping will eventually return to raw materials and specialized manufactures.
But this may not be the boon the the US some think it will be. It may make sense to move some manufacturing back from China to cut shipping costs, but back to where? Some of that manufacturing will "return" to Central or South America.
Automation,
"But this may not be the boon the the US some think it will be."
I'm with you on this. It was not a great boon for the rest of the world when we slid into the Great Depression.
1) As China's wages increase our wages becomes more competitive thus allowing work to be done at home. Wages went up from 20-30% in just a few months at the end of 2010 in China. That helps jobs come back to the USA. China also has awful government control and bribery. If the US worked on making its business environment better, it would reap even more returnees from China, or even start up manufacturing,
2) Lower US wages sounds bad, but really, the entry level wage at any job sucks, and $13.00 bucks an hour is better than ZERO. Just as we recently found that not everyone can be home owners, we may want to recognize that not everyone can be an industrial designer for Apple. Work a few years at 13 then get to 15 and then 18...that's close to 22 bucks as it is. Plus EITC.
3) If China collapses, it may not help their currency or lower their wages. It depends on what exactly collapses. The housing market? Who buys houses in China? The super rich or the rich. No one else can afford it. They pay 20-50% down. If they lose paper wealth how does that really affect worker's wages? Maybe the construction industry suffers and lowers wages that way, but there is such a lack of workers now in industry, I am not sure that reduces wages that much as wages are sticky. A collapse in housing might actually help Chinese export sector by providing workers and lower cost raw materials.
Coba
Some of the allure of cheap labor comes back to haunt these companies. Cheap labor countries invariably have poor rule of law, bribery, corruption, low productivity (making those cheap wages not so cheap) and in China state-sponsored competitors who steal your IP.
Coba
(disclosure...my company is planning to close its China office soon.)
Coba,
"Just as we recently found that not everyone can be home owners, we may want to recognize that not everyone can be an industrial designer for Apple."
No joke there.
Home ownership is not the free ride to prosperity that the NAR would have us all believe. Renting a smaller apartment and sharing walls with neighbors is quite cost efficient (both from a building standpoint and from a heating standpoint).
Jobs requiring advanced education are not going to suddenly appear just because everyone has an advanced degree either.
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