Large U.S. manufacturers are more likely than their smaller peers to move their production back to the U.S. from China, Reuters reports.
The poll of 106 U.S. based manufacturers conducted online in February, by Boston Consulting Group, found that labor costs and the quality of goods are the top reasons for why companies consider “re-shoring.” They consider the United States a de facto low-cost country because of its high unemployment.
37 percent of all U.S. based manufacturing executives either plan to or are actively considering moving production from China. The number is ever greater–48 percent– among companies with more than $10 billion in revenues, the poll found.
A majority of those polled said they expected wage costs in China to continue to rise, and said sourcing there is more costly than it appears on paper because of factors such as proximity to customers and ease of doing business.
Makers of rubber and plastic products are especially likely to consider re-shoring. Companies that make computer equipment, metal products and transportation goods are less likely to do so.
“The economics of manufacturing are swinging in favor of the U.S.,” Harold Sirkin said, a BCG senior partner and co-author of the study. BCG says that a more competitive U.S. manufacturing base could create up to 3 million jobs by the end of the decade.
Large companies have more plants whose production can be moved and better access to financing, Sirkin said. Among recent examples of what he called an accelerating trend, Sirkin cited Ford Motor, NCR, Master Lock, Sleek Auto, Chesapeake bay Candle and Farouk Systems.
The U.S. is becoming a low-cost developed-world country, according to BCG, with wages typically below those in Western Europe or Japan. More European and Japanese companies are likely to export from U.S. plants.
Some companies, including General Electric CO and Boeing Co, have said they went too far in moving operations out of the United States and that wage differences are narrowing. GE, for example, has moved much of its appliance manufacturing from Mexico and China to Kentucky.
Caterpillar Inc has shifted some production from Japan, picking a sited in Georgia to build small tractors and excavators. The maker of heavy machinery is building or expanding 15 U.S. facilities, but also expanding production in China.
U.S. manufacturing shed about 16 percent of its jobs, or 2 million, during the 2007-2009 recession, according to the Information Technology and Innovation Foundation, which has said a recent rebound in factory employment may not last.
Meanwhile, some 600,000 U.S. manufacturing jobs are going unfilled because of a dearth of skilled applicants, according to the Manufacturing Institute and Deloitte. A renewed focus on education students in science, technology, engineering and math could address the shortfall, manufacturing executives say.
For more on change in China, go to Out of Love With China, Fashion Factory Moves West
Photo courtesy: Reuters/Jeff Heynes