Manufacturing States Fight for Factories

LANCASTER, Pa. (Reuters) - When Electrolux AB announced plans in January to close a Michigan refrigerator plant and move 2,700 jobs to Mexico, the workers and the state lobbied hard to persuade the world's biggest home appliance maker to stay.

For the 8,000 people of Greenville, Michigan, where the plant is based, the closure had the effect of a nuclear bomb, Michigan Gov. Jennifer Granholm said.

The state offered $74 million in incentives to Electrolux and the plant's trade union came up with $32 million in concessions. But all appeals failed to dissuade the Swedish company from its plan, to be implemented in 2005, in the face of cheap Mexican labor and free trade between the two nations.

"The company can pay $1.57 an hour in Mexico," Granholm told a recent conference of politicians, union leaders and manufacturing executives.

That compares with a base wage of $15 an hour in the unionized Greenville factory, where benefit costs are almost five times as high.

It's also a familiar story in Pennsylvania, which has lost 133,000 manufacturing jobs since 1998. Last week, Pennsylvania Gov. Ed Rendell introduced new measures to bolster an industry that has been hit by recession and foreign competition as well as the outsourcing trend.

"Pennsylvania has a manufacturing crisis, and that's an understatement," Rendell told the conference. "I am very worried about the future of this state."

With a presidential election looming in November, politicians are stumping on the jobs issue in states like Pennsylvania, where President Bush lost to Al Gore in 2000. With 21 electoral votes, the state could play an important role in the presidential election.

Rendell said Pennsylvania will spend $2.5 million on training and development for manufacturing workers, set up an Office of Fair Trade Practices, and seek to invest more money from state pension funds in the manufacturing industry.

But like Michigan's efforts to keep the Electrolux plant, Rendell's plans won't be enough, economists said, because wages are so much lower in developing nations like as Mexico and China.

"In an industry where there is adequate skilled labor at a lower price, those jobs are going to leave the country," said Chris Low, chief economist at FTN Financial in New York. "You can slow it down, but you can't stop it."

Low questioned whether money for initiatives to keep factory jobs in America is well spent.

"You have to wonder whether it's really an effective use of resources that could be used elsewhere," he said, adding that manufacturing is "an industry that is dying or at best mature."

Since July 2000, when 17.3 million Americans were employed in factories, the sector has lost 3 million jobs.

Proponents of free trade argue moving those jobs overseas is part of the natural maturation of the world's richest economy and believe workers should be retrained to take advantage of better-paying service sector jobs.

But free trade critics want American factories to stay open and have accused companies of sending jobs overseas to bolster profits for top executives and rich shareholders.

Recognizing the high political stakes, Bush has visited Pennsylvania 26 times since he became president and in March 2002 imposed tariffs -- now lifted -- on imported steel to protect steelmakers in that state and elsewhere.

Pennsylvania, which ranks fourth among U.S. manufacturing states, has lost 32,000 factory jobs in the past year and mirrors the national trend of a decaying industry.

Other proposals floated at the conference were changing international trade agreements to make U.S. companies more competitive and calls for China to maintain a more flexible policy on its yuan currency.

Steve Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut, said manufacturers in places like Pennsylvania should work to build technological expertise that many foreign competitors lack and to bolster education to increase productivity.

"People in the U.S. are going to require high-paying jobs," he said, "and if you are going to pay them more, then you need to get more out of them."

"There are big differences in the cost of labor," Stanley said. "It's an uphill battle."

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the plant's trade union came up with $32 million in concessions

Guess they stole too much while the stealing was easy. Now the cupboard's bare.

This is how capitalism works. If these companies don't cut costs, their competitors will, and the result will be the same - layoffs.

5 posted on 04/04/2004 5:02:40 PM PDT by VRWC For Truth (3% votes Nader. vs 1% purity on the right. Purity is the losing strategy right from the get-go.)

6 posted on 04/04/2004 5:04:47 PM PDT by bayourod (We can depend on Scary Kerry's imaginary foreign leaders to protect us from terrorists.)

"Jobs" do not belong to the individual, union, or state. "Jobs" belong to the company. "Jobs" are created by the company (not the individual, union, or state) to accomplish work. "Labor" is that functional part of "Jobs" which performs work. "Wages" are the price of "Labor". Companies are obligated to pursue the lowest price possible to accomplish work. That's called capitalism.

Wages and labor are a commodity. If they are not competitive in an area, the consumer (companies) will look elsewhere...ALWAYS! It's a truth. And neither the individual, nor the union, nor the state can do anything to change it.

When will these idiots learn?!

8 posted on 04/04/2004 5:58:38 PM PDT by DakotaGator (Go ahead. Kill the goose that laid the golden egg. Don't come crying to me about it!)

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