TOPICS > Economy

Why some manufacturers are returning to the U.S.

August 27, 2016 at 4:03 PM EDT
Both presidential nominees Hillary Clinton and Donald Trump pledged to bring manufacturing jobs back to American shores as the economy became a central theme in this year’s presidential elections. But some jobs, once thought to be forever lost to cheaper labor overseas, have already started to return. NewsHour Weekend’s Christopher Booker has the story.

By Christopher Booker and Connie Kargbo

In 2013, Hessaire, a cooling machine and fan blade manufacturer, took control of a large shuttered factory in Holly Pond, Alabama. The space once housed a jeanswear company in the rural town of about 800 people. Before the facility first closed in 2010, it was one of the area’s largest employers.

But just as the closing left a mark on the community, so too has the re-opening, creating dozens of jobs — jobs that were once more than 8,000 miles away in China.

Between 2000 and 2009, close to 6 million manufacturing jobs were lost, many to a practice known as “offshoring,” or moving a business’s production or services abroad.

Hessaire’s decision to bring some jobs back to the U.S. was based on a confluence of factors, according to president Jerry Fan. Rising labor costs in China and increased shipping costs played a role. Fan said when customers place an order, they want a short delivery window. By shipping products from China, “you’re adding weeks, and it’s hard to time,” he said. “The variability of a container can take three weeks or it can take six months.”

Manufacturers like Hessaire are part of a growing move to “re-shore” manufacturing jobs that were once lost to countries such as China and Mexico. The Reshoring Initiative, a group that focuses on bringing manufacturing jobs back to the U.S., estimates that between 2009 and 2016 more than 250,000 jobs were created or brought to the U.S. from other countries.

A number of factors have influenced the creation of jobs in the U.S., including rising labor costs overseas, higher freight costs, low energy costs in America, and federal and state incentives. But while closed factories continue to reopen, critics argue that without government policies that help improve our skilled workforce, tax reform, and renegotiation of trade deals, the U.S. will continue to feel the effects of the millions of manufacturing jobs that were lost in the 2000s.

Read the full transcript below.

CHRISTOPHER BOOKER: To walk into the Bollman Hat Company, in Adamstown, Pennsylvania, is to walk into the past.

Since 1868, America’s oldest hat maker has made everything from fedoras to cowboy hats — and each part of the process — from the way the wool is cleaned and felted, the materials pressed, and hats are shaped is a throwback to an older America.

While still making hats largely the same way it did in its earliest days, this past January the employee owned company added a new brand to their Pennsylvania assembly line – Kangol.

Coming to prominence in the U.S. in the 1980s, the British brand was an integral part of hip hop – a constant accessory of early rap luminaries like Run DMC, Grandmaster Flash & LL Cool J .

Founded in 1938, Kangol hats were made in the UK for about 60 years before moving to China.

In 2001, the Bollman Hat Company acquired the global license to design, produce, and distribute Kangol headwear.

Then in 2014, the Chinese plant producing the Kangol hats closed in order to move to Bangladesh for cheaper wages, forcing Bollman to find a new production facility.

And like its role in hip hop, Kangol is once again trendsetting – joining a growing roster of products formerly made in China.

Through a combination of state grants, online fundraising and company investment, Bollman bought and shipped the Kangol knitting machines from China to Adamstown.

Don Rongione is the company’s CEO.

CHRISTOPHER BOOKER: How difficult has it been to learn how to use these machines?

DON RONGIONE: Extraordinarily difficult.

CHRISTOPHER BOOKER: While some Kangol hats are still produced in offshore facilities, Rongione says U.S. based production looks increasingly attractive. Chinese wages have risen between about ten and 15 percent a year and more and more customers shop online expecting faster delivery times.

DON RONGIONE: If we get to the same efficiency levels that we had in Asia– using U.S. labor rates — our cost is fairly close. We don’t have to transport the product and over time, as labor rates continue to rise — in other parts of the world at a faster rate than they are here in America, it would actually become cost competitive to do it here.

CHRISTOPHER BOOKER: Such calculations, are music to Harry Moser’s ears.

As the founder of the Reshoring Initiative – a group working to bring manufacturing jobs back to the U.S., Moser spends a great deal of his time trying to sell this type of cost calculation to American companies.

HARRY MOSER: When they first offshore, say, to China, the Chinese wages were so low that the price differential was, say, 30 or 40 percent but now that the Chinese wages have come up, that gap might only be 15 or 20 percent.

CHRISTOPHER BOOKER: Moser believes increased Chinese wages make it difficult to justify the other costs associated with offshoring, like shipping, delivery delays, and the overhead that comes with maintaining large inventories.

HARRY MOSER: So, all these things that each one might only be one or two percent, but when you have 30 of them at one or two percent, you can make up for a 15 or 20 percent price difference from China.

CHRISTOPHER BOOKER: Today’s he’s pitching his “Reshoring Initiative” at Mississippi State University in Starkville, Mississippi.

HARRY MOSER: So my favorite single case about reshoring is GE. They brought back appliance production to an appliance park in Louisville, Kentucky.

CHRISTOPHER BOOKER: Moser argues, companies could afford to bring nearly a million jobs back to the U.S..

HARRY MOSER: We conclude that about 25 percent of what is offshore today would come companies did the math.

CHRISTOPHER BOOKER: While U.S. employment in manufacturing started declining in the early 1980s, the massive job losses really didn’t start until the millennium.

Between 2000 and 2009, close to 6 million manufacturing jobs were lost. But in 2010, the hemorrhaging started to slow.

Moser says, since then, 265,000 manufacturing jobs with around 900 companies have been created or reshored to the United States.

HARRY MOSER: So, we’ve gone from a net loss of over 200,000 a year to a net loss of zero, so huge improvement.

CHRISTOPHER BOOKER: The jobs are in industries as diverse as appliances, autos, and furniture.

In June, Emerald home Furnishings, a Tacoma, Washington based company, moved some of its production from China to this facility in New Albany, Mississippi.

Manager Terry Treadaway says the internet and the need for faster delivery drove Emerald’s decision to reshore.

TERRY TREADAWAY: I’ve been in furniture for 34 years. And I have traveled in China, but China today and the China 20 years ago are different. So there are changes coming. And I think, you know, we’ll see more and more jobs move back to the states.

CHRISTOPHER BOOKER: Before, a couch would take as long as six weeks to ship from China to a U.S. customer. From New Albany, it can be built and shipped to the customer in seven to twelve days. Mississippi also sweetened the deal.

CHRISTOPHER BOOKER: Emerald Home Furnishings received a 1.3 million dollar incentive from the state of Mississippi to open this facility in New Albany. In return they promised to hire 150 new workers over the next three years. When they opened the plant this past June, the company says it received nearly 300 applications for 35 positions. They plan to hire an additional 25 people before the years end.

TERRY TREADAWAY: Starting minimum wage is $10 to $12 and up to $16, $17 an hour. The company pays 75 percent of the employee’s health insurance and 50 percent of their dependents. We also have 401(k).

CHRISTOPHER BOOKER: In neighboring Alabama, Hessaire, which makes cooling machines in Holly Pond, took over this shuttered jeans distributing center in April after they received a tax abatement from the town.

President Jerry Fan purchased the business 11 years ago, at the time when it produced nearly all of its products in China.

Fan says his decision to reshore jobs in Alabama was influenced by the desire to be closer to his customers and the availability of a more skilled workforce, even if that meant paying higher wages.

JERRY FAN: Part of our manufacturing is that we have to provide a certain level of customer service. And the people working for us, the skill levels, Holly Pond, we find they’re problem solvers, and they’re motivated. And so those are very important considerations.

CHRISTOPHER BOOKER: Robert Atkinson is among the skeptics of the impact of these recent manufacturing developments. He’s president of the Information Technology and Innovation Foundation, in Washington, D.C.

ROBERT ATKINSON: We’re not engaged in a renaissance. We’re engaged in a partial recovery. What we are in the midst of, is it is not so bad as it used to be. So, yeah manufacturing is growing a little bit, but we lost over a third of our manufacturing jobs in the 2000s. It was decimated. And we’re running essentially an $800 billion trade deficit.

CHRISTOPHER BOOKER: Atkinson says Harry Moser’s model is good, but absent substantial changes in tax, tariff, and trade policies, the U.S. will not return to it former manufacturing might.

ROBERT ATKINSON: Every other country’s putting in place a manufacturing strategy, better tax incentives for investing in research, better tax incentives for investing in machinery, apprenticeship programs for their workers. You know, if we just sort of sit back and think we’re gonna win, win the race by the fact that we’re Americans, well, we’re not.

HARRY MOSER: We’ve proven that the cost gap is low enough with China and countries like that, we can bring back hundreds of thousands. So, with some improvements in our terms of trade, in our competitiveness, it’s reasonable that we will bring back millions.

CHRISTOPHER BOOKER: Until that happens, the future of American manufacturing may well be determined by the efforts already underway in places like New Albany, Holly Pond or Adamstown.

Would you take, would you make this bet again?

DON RONGIONE: At this point, we’re still in the early stages of climbing this mountain. Our costs are way outta line with where they need to be. And we’ve mastered some of the quality, but not all of the quality. So this story ends very happily if this is successful and we’re making profits and providing for our employee-owners, which is our mission as a company. But it ends very sadly if America’s oldest hat maker can’t make this happen and be successful and survive.

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