Late last year, a French manufacturer announced plans to open a $200 million production plant overseas. The offshore facility will employ 350 native workers, who will build steam turbines, gas turbines, and generators for use in power generation facilities. Where is it building the plant? Contrary to what you might expect, it's not China, Vietnam, or Taiwan. Nor is it Thailand, Malaysia, or the Philippines. The French power systems maker, Alstom, is building its new factory in Chattanooga, Tenn.
Alstom is not alone in its decision to step up manufacturing in the United States (the company already employs 1,200 workers in Tennessee). A growing number of foreign-based global corporations are moving in that direction. Car makers Fiat and Volkswagen, Korean electronic giant Samsung, and German steel maker Thyssenkrupp all are reportedly looking into expanding their U.S. manufacturing presence or are already moving ahead with their plans. That's an abrupt about-face from just a few years back when "offshoring" invariably meant moving production to low-cost countries like China and India.
What's behind this shift in strategy? For one thing, it appears that corporations are abandoning their myopic focus on hourly wages and stepping back to look at the big picture. When they do, the United States appears in a more attractive light. And it's not just a matter of soaring transportation costs and the increased risk of supply chain disruptions when doing business in faraway locations (or even about lead paint and quality concerns). They're finding that the U.S. of A. offers such advantages as a skilled labor force, automated manufacturing technology, proximity to the world's largest market, and political stability.And with the dollar losing value against other currencies (the greenback has fallen almost 20 percent against the euro in the past two years), manufacturing in the United States can help protect their margins.
Alstom officials say their decision came down to transportation considerations and a desire to get closer to customers. The company recently won several large contracts with U.S. power-industry customers. It sees southern Tennessee as a perfectly centralized location from which to deliver large, heavy steam turbines to customers across the United States.With oil prices hovering around $100 per barrel, the advantages of minimizing shipping distances need no explanation.
Yet there was one other important factor in Alstom's decision to locate in Chattanooga: access to the U.S. transportation infrastructure. That's certain to raise a few eyebrows given the recent outcry about the nation's crumbling roads and bridges. But the fact remains that, for all its flaws, the U.S. transportation network is still the most comprehensive and vital in the world.
Consider this: In late January, representatives of the China Road Transport Association paid a visit to Washington, D.C., to learn how their country can develop a system that's more like the U.S. Interstate Highway System. China, more than any other nation, has become a flash point in the debate over the offshoring of U.S. manufacturing work. Yet by the admission of its own officials—and despite the $100 billion the government spent on road construction in the past year—China's infrastructure development hasn't even come close to keeping pace with the country's vaulting ambition.
As so often happens in life (and business), it seems that time has given global corporations a new perspective on offshoring. Foreign companies that once would have dismissed the United States out of hand are looking at this country in a whole new light. It's conceivable that in the not-too-distant future, "Made in America" might be more than sloganeering. It might be the secret to a streamlined supply chain and a better bottom line.
Gartner, Inc.
