The Reshoring Challenge: Why and How CEOs are Moving Jobs Back to America

Reshoring 1The trend lines are not sparking the kind of celebration many reshoring advocates might have hoped for, at least not yet. One reason is that the presidential campaign rhetoric has politicized the issue so deeply that major companies such as Caterpillar, NCR and Ford Motor, all of which have brought some jobs home, decline to discuss the issue.

Ford and the Carrier air conditioner unit of United Technologies are engaged in public slanging matches with Republican frontrunner Donald Trump because of plans to move production to Mexico and those CEOs are trying to maintain low profiles. Others have suffered unintended outcomes: GE made a splash by moving the production of water heaters from China to its Appliance Park in Louisville, Kentucky—and then proceeded to sell the entire appliance division to Haier of China.

Another reality is that the jobs that do come home seem to be very different than those that left. The rough rule of thumb is that if five American jobs went to China, it required perhaps 12 Chinese workers to do the same work because fewer workers there are trained in multiple functions. But when those jobs come home, they may be only three jobs, and they require higher levels of skills to work with computers and automated production equipment. That’s not good for millions of displaced American workers, who may have only high school educations.

Moreover, millions of jobs that went offshore may never come back. Harry C. Moser, founder and president of the Reshoring Initiative, which has emerged as the most definitive source of information on the trend, estimates that U.S. manufacturers would bring back home 1 million jobs if they did comprehensive evaluations of their true offshore production costs.

HAMPERED BY REGULATION AND TAXATION
But Moser reckons that another 3 million jobs will not return to American soil unless governments undertake sweeping changes to the business and tax climate and seek to eliminate the approximately $500 billion annual trade deficit. Those challenges seem unlikely in the current polarized political environment.

One bright spot among major companies, ironically, is Walmart, which helped spark the flood of jobs to low-cost locations in the first place. The company announced its Made in USA initiative in January 2013, vowing to buy $250 billion more in products from U.S. suppliers over a 10-year period. Cindi Marsiglio, the Walmart vice president overseeing the U.S. sourcing push, says the retailer is on track to achieve that goal, finding American suppliers of such basic items as towels and socks.

There are three elements to its strategy. One is to buy more from exiting U.S. suppliers already manufacturing in the States. The second is encouraging reshoring and the third is finding new U.S. suppliers.