Unfortunately, executive idiocy is rampant everywhere.
But factoring in the re-work the Americans had to do for the shoddy Indian work, we found it was cheaper to have "spoiled Americans" doing the work.
Doesn't sound like the Americans at your place were spoiled Americans, if they were able to compete--you see, that's exactly my point. It sounds like management goofed there....just like those employers who think they are saving so much by using slow computers or offshored tech support but don't consider the lost time for their highly paid professionals.
One of my clients had a reverse problem, though. They have fought to keep operations American, despite a long downward slide as German and other companies have taken away their dominance. At one point, they had to send some production over to China because American plants couldn't keep up with demand or something (sorry, don't recall details). They found that their return rate on products plummeted, as there were fewer defects from the Chinese-made products than there were from their American plants.
Now, what should the company do? Pay more for shoddy manufacturing, or go overseas?
Sounds like the auto industry: was it?