GE reverses outsourcing
One of the largest and most visible companies investing in U.S. operations is General Electric.
The conglomerate is spending $1 billion to expand and upgrade its domestic appliance business in Louisville, Ky., Bloomington, Ind., and Decatur, Ala. Hundreds of jobs previously outsourced to China and Mexico are returning to these sites.
In February, GE opened a retooled $38 million water heater manufacturing facility at its Appliance Park in Louisville, the first new manufacturing line there since 1957. That was followed in March by the opening of a new refrigerator factory.
CEO Jeffrey Immelt wrote in the March Harvard Business Review that GE scaled back some of its overseas work because of increased competition from former suppliers, rising shipping and material costs, rising wages in other countries, poor control of the supply and added complexity from foreign currencies.
“Core competency was an issue. Engineering and manufacturing are hands-on and iterative, and our most innovative appliance-design work is done in the United States. At a time when speed to market is everything, separating design and development from manufacturing didn’t make sense,” he added.
Lean manufacturing and design techniques that improve efficiency and a more competitive, two-tier wage structure for newer union employees led to the selection of Louisville for the new water heater instead of China, where an earlier version of the product was made. Kentucky and local governments provided $17 million in incentives to build the new facility, GE officials said.
The company also plans to bring back production of washing machines form Asia.
Outsourcing appliance work wasn’t a sustainable business model, Chip Blankenship, chief executive of GE Appliances, told the Financial Times.
“We found we had some extended supply chains, we weren’t as nimble as the marketplace needed us to be, and we started to ask ourselves: is there a better way to run the business?”
But Immelt said GE isn’t “retreating” from overseas research and development and manufacturing.
To successfully compete around the world “we must find the place where we can develop and produce the best products and services at the lowest cost, wherever that may be. So we will continue to source commodities and manufacture products abroad and to invest in our R&D centers around the world to obtain the lowest costs, access talent, and be near customers. This isn’t bad for America. The fact of the matter is that thousands and thousands of U.S. jobs exist because of our ability to compete globally.
“Still today at GE we are outsourcing less and producing more in the U.S. We created more than 7,000 American manufacturing jobs in 2010 and 2011. Our success on the factory floor rests on human innovation and technical innovation – the keys to leading an American manufacturing renewal. When we are deciding where to manufacture, we ask, ‘Will our people and technology in the U.S. provide us with a competitive advantage?’ Increasingly, the answer is yes,” he said.
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