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What makes US manufacturers uncompetitive

kpotter

Diamond
Joined
Apr 30, 2001
Location
tucson arizona usa
What makes us uncompetitive in the US. Is it our high wages? would eliminating the minimum wage help. Are the Taxes to high, if they eliminated all taxes on manufacturing would that help you to compete with China. Would the elimination of osha and the epa make it possible for us to compete. What if there were no taxes and the government supplied you with free labor and subsidized your materials and gave you a building and let you pollute with impunity all the while helping you controll your workforce. Could we compete if we had all those advantages or is it impossible. I just got some quotes from pakistan on producing some of my products. I didnt request them they just sent them to me trying to get me to contract my manufacturing out to them. The quotes are so low it is insane I know they are legitimate because I have talked to other people who have outsourced there production to this company. I cant even buy the steel let alone manipulate it in anyway, heck even if it was free I couldnt match there price, even if I had free labor I couldnt match that price. The cost of existing is higher than what they are willing to work for.
 
The list of issues is long. Just last week discussing casting and where to have it made, customer was quite decided on India or possibly china, as they've had them from there before, and also from here in Canada but price was apparently too much, I didn't manage to get the numbers but it did make me think about it some more. In those countries they're running foundries in the flip flops and shorts, no safety, refurbished equipment from countries that got out of it or who knows what they piece together, no pollution control so they can burn all the coal they want, when here we're mostly using electricity to melt metals now which is more $$. They also have cheaper labor to extract the ore, refine it, etc, to handle all the scrap, they have places where ships go to die and be dismantled by hand, lots of cheap iron there, no environmental care about the oil and chemical spills from it. I think there's quite a few things contributing to them being that cheap, and to us being more expensive, although we do offer more for the dollar. I wouldn't want to work in such conditions, but they do, they don't know any better I guess. Just like the USSR might have built better reactors if they gave a shit about their people, but they're expandable, so who needs shielding, change the crew.

We've of course had the duty tax talk on here many times before, went no where... though I'm certainly for it.

The world got too small and those in power got too greedy.

I've been wondering lately if the future here is perhaps not in inventing new stuff, but taking back what used to be made here. Screw the big brands that sent all the consumer goods away. I can't believe that I cannot find 1 clothes iron made in North America in the stores, and I mean some of those chinese irons are $50-100, how can we not make them here for that? turns out we can and there would be a good profit margin, problem is they can get it for $2-5 from china, while it might cost $6-10 here, but that little difference looks big to the share holders. And the part about how they can just wash their hands off it, it comes done, mark it up, sell it, they're into marketing, not making anything.

We can't count on the current brands to ever bring anything back, so we'll need to create new ones with the initiative and balls to make it here again, hopefully in time it pushes the other brands out or forces them to wake up.
 
A recent Wall St. Journal article noted that Cat was moving some production from Canada to the US -- just to get those lower US wages.

Honda plans to increase its manufacturing capacity by 40% in the US. Honda, Toyota, Nissan, BMW, VW, and Hyundai all make tons of cars in the US.

Despite lots of ink about too many regulations (and some of it true), the US still ranks as one of the places where it is easiest to start and run a business.

Sure, our wages aren't as low as some. These days China finds itself losing low wage jobs to places like Vietnam. However, "touch" labor is a relatively small percentage of most modern manufacturing. My point in all of the above is that "high wages" aren't really the issue behind much of the manufacturing losses in the US.

In the OP's situation, there IS a lot of touch labor and I wouldn't doubt that a Pakistani company would quote lower. However, a few points to consider. First, I've seen many companies outsource to China and get decent quality and prices the first couple containers. Later, quality deteriorates, deadlines are missed, and prices rise. Also consider what kind of steel is being used, when the finished goods are quoted at less than the cost of steel.

As for tax rates, our total effective taxation is lower than most industrialized countries. Where it fails is the web of complexity that tends to favor companies that buy favors and punish smaller companies without so much tax expertise. In talking with Chinese execs last time I visited, it also seems their taxes are comparable to ours, with somewhat similar bureaucratic hurdles and sweetheart deals factored in the mix.

One culprit? Our tax laws have favored moving manufacturing abroad. Another culprit? The compensation packages given to many at the C-level are easily "gamed" by moving abroad or outsourcing parts of the job; often with a net effect that does almost nothing to improve quality, response times, or even costs -- but does juice bonuses.
 
I am being contacted by retailers that want prices so low that I think they are kidding me. I cant sell to them at all, they want my products but their is no possible way to sell to them without having them made overseas. I wont do it but this is frustrating because they are going to do it and leave me out of it. I am just going to keep plugging along and try to ignore the competition. there is no way I can ever match the prices or even come close.
 
It's pretty bad that we have farmers here getting put out of business by farmers in brazil, mehico, and so on just because they can grow all year long and we can fly it all over the world in hours. Grocery store doesn't care, its profit. I buy the half size jar of relish made in Canada at nearly twice the cost of the one next to it from INDIA(twice the size, half the cost or so, comes from 20X as far.. crazy math but somehow its on the shelf)
 
When China was subsidizing steel we were getting parts made for cheaper than we could buy the material stateside.

I always worried about the metallurgy, what is this batch made out of? Did they short the tempering cycle?

3rd world countries don't pay benefit and hire for around $1 per day. They also don't pay for safety features:

Chinese Press Automation - YouTube

And get people to work this fast:

Chinese workers packing speed !! - YouTube
 
I just got some quotes from pakistan on producing some of my products. I didnt request them they just sent them to me trying to get me to contract my manufacturing out to them. The quotes are so low it is insane I know they are legitimate because I have talked to other people who have outsourced there production to this company. I cant even buy the steel let alone manipulate it in anyway, heck even if it was free I couldnt match there price, even if I had free labor I couldnt match that price. The cost of existing is higher than what they are willing to work for.


You have to wonder how they get the steel/material that cheap. Do they steal it all? How are they going to have access to steal more, ALL the time? If not, they (those particular Pakistani's) must have the long term strategy of crushing all competition, like the Chinese. They must be government subsidized since whether they DO have the long term strategy or not, they probably STILL need to eat TODAY? Right? What a f*cked up world!

Jeff
 
Well, given that there is a 17-35% tariff on goods exported from the US to China, a lot of companies produce in China to have access to that local market. It kills our export market. When it happens to manufacturing tooling, it kills our export market and our collective body of knowledge. Bad.

A mirror-mirror trade policy (i.e. mirror other country's policies towards us, and expect them to do the same) would go a far ways towards creating fairer trade. We should tariff PRC goods, and many other countries should probably tariff our ag exports...
 
Unless you can find a way to bring work on shore without cutting the pay of the people at the top, the people at the top will continue to have product made where their pay is maximized.

So back to why the US is not a destination for global companies looking to off-shore their manufacturing. If you spend 10 seconds thinking about it you will find it is the same reason that US companies have gone off-shore to have manufacturing done. We miss by a mile on price point, and while our quality might be consistent, the consumer is obviously not too concerned with that. How else can you explain Walmart?

Things that just don't matter to consumers: "Made in America" labels, "The Quality Goes In Before the Name Goes On", First time perfect, most recently perfect, hardly ever perfect, meh - costs too much, brand loyalty (this is a big loser - ask Kodak). Bet you all can think of more.
 
There are also issues of scale.

If somebody has a forging plant (say) with a lot of "fixed costs" for making forged widgets, then there can be a funny economics where adding volume, even at a loss, helps the bottom line, so long as it doesn't raise fixed costs. Meaning that they'll keep hunting for "ultra low price" work until they are running 24x7.

(This sort of thing is part of why airline ticket pricing can be so screwy, and why prices on some semiconductor products are sometimes baffling.)

Likewise, if you are buying steel in very large quantities, and/or you also own the steel plant (or they own your operation) there can be similar funny dynamics.
 
What makes us uncompetitive in the US. Is it our high wages?

No. Its incompetent management, and a financial system focused upon immediate returns.

would eliminating the minimum wage help. Are the Taxes to high, if they eliminated all taxes on manufacturing would that help you to compete with China. Would the elimination of osha and the epa make it possible for us to compete. What if there were no taxes and the government supplied you with free labor and subsidized your materials and gave you a building and let you pollute with impunity all the while helping you controll your workforce. Could we compete if we had all those advantages or is it impossible. I just got some quotes from pakistan on producing some of my products. I didnt request them they just sent them to me trying to get me to contract my manufacturing out to them. The quotes are so low it is insane I know they are legitimate because I have talked to other people who have outsourced there production to this company. I cant even buy the steel let alone manipulate it in anyway, heck even if it was free I couldnt match there price, even if I had free labor I couldnt match that price. The cost of existing is higher than what they are willing to work for.

None of those other things matter too much. As long as banks lend money for foolish reasons we will have a foolish economy.
 
Somebody proposed a '9-9-9' tax plan. Be damned if I know if those are the right numbers or not.

But I sure do like the idea of starting over and keeping it simple.

There is a trivial and correct solution to these problems whose non-implementataion lets you know who are rulers are.

Tax wealth, not income.

Somewhere between 5-7 percent would be sufficient.
 
Really so 'non implemented'?

My *present* tax on 'wealth' - a very average home and no car newer than yr 2000 - is nearly 4 times the 'income' tax on a similarly modest retirement.

Or do they not have real and personal property taxes in Switzerland?

Bill

Don't be confused (or try to confuse). Stateside you pay the same "use" tax on your house whether your mortgage is paid off or underwater.

Vermögenssteuer is different. You're taxed against the fraction of your possesions you actually own, not your debt on their lease.
 
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Reshoring Initiative

The Reshore Initiative: Welcome

There are some robust examples that part price alone is not an indicator of total cost. Above is listed one site. Search "reshoring initiative" and find several others. I believe some of the formulas could be generalized to other countries, say Denmark for example.
 
I have found that as long as I sell the products and cut out the middle man I can compete. The retailers are so used to getting things for practically free that they expect it, and are insulted when you ask a fair price. I think it is the middlemen that are the problem, if more manufacturers would get into distribution and selling of their products things would improve dramatically. I am bogged down with all the shipping and handeling of my products and the thought of shipping them to one guy who does it all would be great, he handles the inventory and the advertising and he does it for say 30-40 % not 90%. These guys want to get rich off every thing they sell or they are not willing to be reasonable. I am going to continue selling the stuff myself, I just get irked when they call asking to buy the stuff wholesale and when I give them a price they say we will just continue buying it from wherever estan.
 
I have found that as long as I sell the products and cut out the middle man I can compete. The retailers are so used to getting things for practically free that they expect it, and are insulted when you ask a fair price. I think it is the middlemen that are the problem, if more manufacturers would get into distribution and selling of their products things would improve dramatically. I am bogged down with all the shipping and handeling of my products and the thought of shipping them to one guy who does it all would be great, he handles the inventory and the advertising and he does it for say 30-40 % not 90%. These guys want to get rich off every thing they sell or they are not willing to be reasonable. I am going to continue selling the stuff myself, I just get irked when they call asking to buy the stuff wholesale and when I give them a price they say we will just continue buying it from wherever estan.

I agree. Too many suckers on one teat.
 
What makes us uncompetitive in the US. Is it our high wages? would eliminating the minimum wage help. Are the Taxes to high, if they eliminated all taxes on manufacturing would that help you to compete with China. Would the elimination of osha and the epa make it possible for us to compete. What if there were no taxes and the government supplied you with free labor and subsidized your materials and gave you a building and let you pollute with impunity all the while helping you controll your workforce. Could we compete if we had all those advantages or is it impossible. I just got some quotes from pakistan on producing some of my products. I didnt request them they just sent them to me trying to get me to contract my manufacturing out to them. The quotes are so low it is insane I know they are legitimate because I have talked to other people who have outsourced there production to this company. I cant even buy the steel let alone manipulate it in anyway, heck even if it was free I couldnt match there price, even if I had free labor I couldnt match that price. The cost of existing is higher than what they are willing to work for.
From my experience, chinese manufacturers do not pay chinese income tax on product made for export. Also, there is no such thing as employer provided benifits or business liability insurance. Bottom line is the chinese government takes a "if you want to sell it here, we expect you to make it here" and "we will help you make money by keeping your costs rock bottom for anything you make here and export". Just imagine if our government took a make it here if you want to sell it here mentality when it comes to import duties. We would be roaring along like it was 1950.
 
When China was subsidizing steel we were getting parts made for cheaper than we could buy the material stateside.

I always worried about the metallurgy, what is this batch made out of? Did they short the tempering cycle?

3rd world countries don't pay benefit and hire for around $1 per day. They also don't pay for safety features:

Chinese Press Automation - YouTube

And get people to work this fast:

Chinese workers packing speed !! - YouTube
Love the automation video. It reminds me of the answer I got when I questioned a supervisor about a worker hand chiseling holes in a brick wall with no goggles or safety glasses. "There is another million workers out there just like him". The put no value on human life or safety.
 
Well, given that there is a 17-35% tariff on goods exported from the US to China, a lot of companies produce in China to have access to that local market. It kills our export market. When it happens to manufacturing tooling, it kills our export market and our collective body of knowledge. Bad.

A mirror-mirror trade policy (i.e. mirror other country's policies towards us, and expect them to do the same) would go a far ways towards creating fairer trade. We should tariff PRC goods, and many other countries should probably tariff our ag exports...
Bingo that! Our government has for years and years used the incentive of free access to our market to get other countries to "like" us. Now that this policy has gutted our manufacturing, the idiots in charge have no clue how it happened. I'm all for a mirrored trade policy.
 
What makes us uncompetitive in the US?

Unwillingness to change.

What process have you added to your offering?

What have you changed to make your company do things better?

What have you done as far as increasing your education in the past year?

These are all reasons why I struggle to work at my father's company. Change is tough, I understand that. Change is required.

Innovation and constant improvement are required.

To be successful you need to take some of that money you made in the past year and put to to some form of technology.
 








 
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