Companies Moving Jobs to U.S. From China to Avoid Inflation

Companies Moving Jobs By Scott Malone

MILWAUKEE -- On a recent morning at Master Lock's 90-year-old factory in Milwaukee, a cluster of machinery was whirring, every 2 seconds spitting out the kind of combination locks used by American high schoolers, as the company readied for the back-to-school rush.

The seven-day-a-week, three-shift-per-day whirlwind of activity marked a change from two years ago, when the machine normally ran for just a few hours a day because the unit of Fortune Brands Inc. was ordering more padlocks from suppliers in China instead of making them.

Why move production from the world's low-cost workshop back to a unionized U.S. factory where wages are six times higher than in China? Efficiency: The machine in Milwaukee is about 30 times as fast as the Chinese factories the company had been buying from, more than making up for the difference in wages.

"I can manufacture combination locks in Milwaukee for less of a cost than I can in China," said Bob Rice, a senior vice president at the largest U.S. padlock manufacturer.

The factory has added about 78 workers over the past two years, boosting its workforce to 440.

That is a small bit of good news for the long-suffering U.S. manufacturing sector, which shed about 2 million jobs, or some 14.6 percent of its employees, in the last recession. It has not recovered since and now employs 11.7 million people, down 34,000 from the recession's official end in June 2009.

Master Lock is not alone. General Electric Co. and Boeing Co. are also part of the small group of U.S. companies that are boosting production at their U.S. factories.

A variety of factors are driving the shift, including rising wages in parts of Asia, surging fuel prices and the complexity of transporting goods across the Pacific.

Economic Irony

"What you're starting to see is the economics shifting more into the United States' favor regarding sourcing from the United States versus sourcing from a low-cost country," said Daniel Meckstroth, chief economist at the Manufacturers Alliance/MAPI, a Washington trade group.

There is an element of irony here. The United States' sluggish economic recovery, coming at a time when emerging economies including China and India are enjoying brisk growth, is helping its manufacturers to close the cost gap on their foreign rivals.

China's inflation rate hit 5.5 percent in May, well ahead of the United States' 3.6 percent headline rate. With Chinese wages rising at 15 to 20 percent per year, the labor costs of manufacturing in the two countries could pull even by 2015, a Boston Consulting Group study predicted in May.

Rising oil prices, which drive up the cost of shipping goods by boat or plane, are also eating into China's edge.

Automation also helps tilt the balance toward the United States. Bruce Crass, the Master Lock plant's general manager, estimated that his plant -- where the average worker oversees the operation of six high-speed machines -- produces 24,000 locks a day with about one-sixth the number of workers needed by the company's Chinese suppliers and rivals.

Master Lock today makes about 55 percent of its padlocks in North America -- in Milwaukee and at a satellite location in Nogales, Mexico -- with the rest made in China. That is down from a 50-50 split two years ago.

To be sure, these companies are the exception in the U.S. economy, where businesses from Apple Inc. to Nike Inc. focus on design and marketing, leaving production to independent contractors.

Next: Companies Hiring This Week

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WOW!! We must buy everything MADE IN THE USA!!!!!! Enough of the made in china ****!!!!!

July 01 2011 at 9:53 AM Report abuse rate up rate down Reply

Wow..isn't that nice..Our over zealous greedy companies coming home and hope we welcome them with open arms.. You know if we needed to most of the companies who moved over seas, we can if we look find other American manufactures without them if we need to..All you have to do is just buy more American.. They maybe smaller companies left at home but I am sure their locks are just as good if not better so we just might not need Masterlock.. I have learned to look for products of all kinds made in America..I notice most Americans now want their flags from here..Did we really get that lazy as to let the Chinese make our own flags??..Yes for awhile we did..Now we are proud of our home made flags.. We make saver and better product here and we know what they are made of..
Only one thing I worry about..The Unions did us in in the first place and were the cause of high prices and companies to flee..Lets not be running back to them so quickly...They were corrupt and lost us our Auto companies, Steel Mills, so many small companies because of demanding high prices and even now they are threatening our schools..We do not need the Unions at this time in our life.. WE need our companies to come back home and make America strong and self dependent again..

June 30 2011 at 11:33 AM Report abuse rate up rate down Reply

The big differences here are the fact that 1) on average - a product made in the United States is made better quality-wise 2) on average - products made in the United States are made of better and safer materials 3) products made in the United States keep Americans working which helps Americans buy American products. It's a vicious cycle... if we stop making everything here soon enough we will not be able to afford anything. Outsourcing to Canada isn't really outsourcing - they are playing on a level field with us. China? Not so much. Remember these things: lead in their products, poor quality from cutting corners and using cheaper materials, unsfae labor conditions... the list goes on. Do yourself a favor - turn that package over and see where your products are made. It really does make a difference.

June 30 2011 at 8:13 AM Report abuse rate up rate down Reply
Shirley Davidson

Looks like the "New World Order" that was put into action in the early 90's is totally falling apart.
We may be part of the Global world, but US manufacturing cannot be beat and it will come back to a great extent. Unfortunately the damage it has done with the outsourcing of most jobs cannot be repaired overnight. America needs new plants and many jobs made. This takes a lot of money and it is going towards pointless war in the Mid-East. We need to end those wars now. A few months of the billions spent there kept in the US would make a tremendous difference for a lot of people.
The powers that started the giving away of our jobs hurt this country no end. Time to give them back.

June 30 2011 at 6:34 AM Report abuse rate up rate down Reply

How many of these"pseudo patriotic, greed driven companies" are still fully owned by Americans. I'm sorry if I seem a little neurotic but American Motors was owned by a French company, Chrysler German, Coors Canadian The list is terrifying. America is, and always has been for sale. If I were a union leader in Milwaukee, I'd be very wary of this Trojan Horse.

June 30 2011 at 6:10 AM Report abuse +1 rate up rate down Reply
1 reply to IRVING's comment

Union Leader? Trojan horse? I'd like to see those racketeers try to create a real job instead of demonizing creative, energetic people who do. They are organized gangsters that don't give a wit about the employees...eer... I mean "workers". Go back to the Soviet Union

June 30 2011 at 8:11 AM Report abuse rate up rate down Reply

Oh, goody. So - - when Cinese factories become more efficient, Mastor Lock will flee the US? Again?

June 30 2011 at 6:08 AM Report abuse rate up rate down Reply

But the Obama administration claims there is no inflation here.

June 30 2011 at 6:01 AM Report abuse rate up rate down Reply

China makes crap anyway. Alot of the stuff we import from them either kills us or falls apart when you try to use it.. They can't even make good sheet rock.

June 30 2011 at 5:58 AM Report abuse +1 rate up rate down Reply

Now we'll see if/when China "throws the switch" they have implanted in almost everything they have sold us......

June 30 2011 at 5:51 AM Report abuse -1 rate up rate down Reply

I guess now that we will again be on the outs with China?? Woo Ray!!

June 30 2011 at 5:48 AM Report abuse rate up rate down Reply

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