U.S. manufacturing-or at least a portion of it-appears to be
on course for a U-turn as work previously pushed offshore might
be coming home. Statistics on the reshoring of U.S.
manufacturing are hard to come by, but mill suppliers see an
"I can't put a number on it, but there is a fair amount of
chatter on this subject among our customer base," said Dennis
Oates, president and chief executive officer of tool steel
producer Universal Stainless & Alloy Products Inc.,
Oates said it was difficult to say just how much reshoring
might have contributed to Universal's first-quarter financial
improvement, but he agreed that the more tooling business that
returns to the United States, the better are the chances that
end-product itself will return.
Based on his discussions with customers, Oates believes
there are three reasons why some shops are looking to bring
work back. He said the short lead times and reliable deliveries
that domestic mills like Universal have worked to achieve are
helping domestic customers post the fast inventory turnarounds
needed to operate efficiently in a competitive global market.
And the strong dollar of years past that encouraged going
overseas is no longer a compelling reason to source offshore.
Finally, several companies that took manufacturing offshore in
the 1980s and 1990s have since come to the conclusion that it
isn't the way to go once a product's "total cost" is
The last point reflects one of the contract machining
industry's strongest arguments for bringing work back to the
United States and one that's been made repeatedly this year by
Harry C. Moser, chairman emeritus of machinery builder GF
AgieCharmilles, Lincolnshire, Ill., who has been carrying the
reshoring message around the country for the Precision
Metalformers Association and the National Tooling and Machining
"I'm totally dismayed and I'm not going to take it anymore,"
he said at a recent West Coast manufacturing exposition,
referring to losses to the U.S. manufacturing base.
Moser believes most companies that moved work offshore did
so based on f.o.b. price instead of on what he calls the "total
cost of ownership," which includes such factors as duties,
packaging, freight and the danger of intellectual property
"ripoffs." These added costs can change a perceived 15-percent
cost advantage for manufacturing in China to an actual
8-percent edge for U.S. companies, he said.
At a contract manufacturers purchasing fair in Irvine,
Calif., that also promoted reshoring, Moser cited the
hypothetical example of a part made in China with an f.o.b.
pricetag of $80 growing to a total cost of more than $93 after
such additional costs as freight and backup inventories are
taken into account.
According to the Federal Reserve, U.S. manufacturers were
running at only about 70 percent of capacity in April compared
with a historical average of nearly 81 percent. Moser believes
that the exit of manufacturing offshore has cost this country
between 5 million and 12 million jobs.
The idea of reshoring isn't limited to comparatively small
contract shops. In March, Peoria, Ill.-based Caterpillar Inc.,
the giant manufacturer of construction and mining equipment as
well as engines and industrial gas turbines, said it was
"contemplating" the shift of excavator production to the United
States from Japan. Caterpillar currently produces just two
models of excavators at its Aurora, Ill., plant, where it also
produces wheel loaders, soil and landfill compactors, wheel
dozers and components, and shifting production from Japan could
double the number of Caterpillar employees building excavators
in this country.
As much as it might signify a trend to bring work lost
overseas back to the United States, a Caterpillar spokesman in
Peoria emphasized that any shift of manufacturing from Asia to
the United States would reflect the company's need to free up
capacity in Japan to serve the rapidly growing Asia-Pacific
market. But he also acknowledged that he couldn't immediately
recall the last time Caterpillar brought a significant amount
of work back to these shores.
Not everyone has jumped on the reshoring bandwagon. David
Farr, the outspoken chief executive officer of St. Louis-based
Emerson Electric Co., who has been critical of Washington's
economic policies, doesn't think reshoring is in the cards for
his company. "For a global company that has our growth segment
outside of the United States, I would say it's wishful
thinking," he said during an investors' telephone conference
Daniel R. DiMicco, president and chief executive officer of
steelmaker Nucor Corp., Charlotte, N.C., said the "theory of
reshoring sounds good," especially during an era when millions
of manufacturing jobs have been lost in this country. "But the
reality of actually building plants in the U.S. becomes quite
difficult, and time will tell how reshoring actually plays
out," he told AMM, arguing that U.S. industry has been
shackled by regulation.
DiMicco noted that after years of trying, Nucor's proposed
new pig iron plant in St. James Parish, La., has yet to be
issued all necessary permits. Meanwhile, new regulations are
implemented on an almost daily basis that "reduces our
international competitiveness," he said.