Back in the U.S.A.
We were walking out of a local convenience store in our neighborhood in New Jersey recently when we glanced down at a copy of The Asbury Park Press and a page-one story caught our eye.
The article chronicled the roundabout journey of a U.S. machine-tool maker’s assembly operation, which was packed up and sent to China in 2009 but recently has come back to the U.S. and is now creating jobs in Lakewood, NJ.
Komo Machine makes large computerized routers sold primarily to U.S. wood and metal manufacturers. The machines are used to chisel everything from guitars to kitchen cabinets and helicopter blades. Komo, founded in 1968 in St. Cloud, MN, is a subsidiary of PMC Machinery Group, which at its peak had 3,000 machining centers in the United States.
In the nadir of the Great Recession in 2009, PMC decided it no longer needed to lease 50,000 square feet for assembly work near its 160,000-square-foot center in St. Cloud. The company decided to move the machine assembly operations to China to take advantage of low-cost manufacturing there.
Things didn’t quite work out as planned. Communication proved to be the first hurdle, especially regarding technical details. The six to 12 months it usually took to train employees to service the routers in the U.S. stretched beyond a year in China, where only the managers and a handful of workers understood English.
The logistics of shipping product from China also proved to be daunting. Moving the machines from the Far East added five weeks to delivery times. Customers also weren’t happy that they couldn’t easily visit the overseas factory, see their machines being assembled and ask questions.
And Komo’s loyal customers in the U.S. were not pleased to hear the machines were being made in China.
“Our customers made that clear to us very quickly,” Komo Machine President Michael Kolibas told The Press. “A difficult task for us was convincing them that they were going to get the same quality product made and delivered from China that they were in the United States.”
Soon after Komo moved the machine assembly to China, the company experienced a 30-percent drop-off in sales. Komo determined that a significant percentage of this reduction was not due to the poor economy, but rather because of the long-distance supply chain.
So, at the beginning of last year, Komo decided to move its assembly operation back to the U.S. In June, it closed its China facility.
PMC had two buildings in the Lakewood Industrial Park from the days it owned Gusmer Corp. Gusmer was sold to Graco Inc. in 2005. In 2007, Graco closed the plant and laid off 200 workers, leaving the factory buildings idle until 2011, when they were reopened to accomodate the Komo work coming back from China.
Kolibas, a Brick Township, NJ resident who was president of Gusmer, began reaching out to former Gusmer workers soon after Komo decided to place the assembly operation in Lakewood. In the past year, he has hired 35 workers, pulling several experienced machinists off the unemployment lines.
As the recovery begins to pick up steam, Kolibas told The Press he expects to hire 10 more workers in the next six months.
While 45 jobs may seem like a drop in the bucket in a still-struggling national economy (and in New Jersey, where the unemployment rate still hovers at about 9 percent), there is no denying that Komo’s decision is a harbinger of a very important trend which could lead to a long-awaited transformation in the United States:
After decades of withering to the point of extinction, U.S. manufacturing is on the way back.
In the late 1960’s, manufacturing in the United States accounted for more than 20 percent of the nation’s GDP; in New Jersey in 1970, this represented one in every three jobs, or about 900,000 workers statewide.
Relentless, highly subsidized foreign competition (primarily from Japan and China), high labor costs and an ill-conceived transition to a service economy in the U.S. squeezed manufacturing down to an appalling 9 percent of GDP. Currently, only 7.5 percent of New Jersey’s workforce — about 275,000 workers — are employed by manufacturers.
But now the arrows are moving in the other direction. No doubt due in large part to the Recession, the cost of U.S. labor is increasingly competitive with overseas producers. General Motors’ new deal with the UAW, for example, pegs new auto assembly line positions to a $15 per hour wage, which makes GM globally competitive.
Quick-to-market logistics and the increasing cost of energy also are leveling the international playing field in manufacturing. Throw in the growth of the middle class in China and its one-child policy — both of which are beginning to deplete the humongous low-cost labor pool in the world’s most populous nation — and the U.S. has a fighting chance not only to compete worldwide but to bring a big chunk of its manufacturing back from China.
“There is a nascent movement to bring some manufacturing back from China,” James Hughes, a Rutgers University economist, told The Press. “If you have to change something or you have a short-term order that has to be filled very quickly, that brings the advantage back to the U.S.”
Now that’s a trend worth rooting for.