If Wal-Mart Can't Bring Manufacturing Back to America, How Can Trump?by
Retailer’s $250 billion plan has limited impact on employment
Manufacturers say they can only re-shore by using fewer people
Wal-Mart Stores Inc. has been good to America’s Great Horned Owl. Not the real bird -- the plastic one.
As part of a much-hyped effort to bring factory jobs back to the U.S., Wal-Mart persuaded tiny Dalen Products, of Knoxville, Tennessee, to shift production of the garden scarecrow back home from China. The only catch: not many jobs followed.
And that’s often been the story of Wal-Mart’s campaign. As the world’s biggest buyer of thousands of factory items, from hunting rifles to bicycles, it’s in as good a position as any company to influence U.S. manufacturing -- for better or worse: the retailer is widely blamed for sending hundreds of thousands of jobs overseas since the 1990s.
So when Wal-Mart announced in 2013 it would spend an extra $250 billion over 10 years on domestically produced goods, it also estimated that the shift would create 250,000 manufacturing jobs. The return so far is a fraction of that -- a cautionary tale for Donald Trump, the presidential candidate who’s made even bigger and bolder pledges to bring factory employment back to the U.S.
“If you bring back a plant you aren’t going to bring back 100 or 200 people, you will want to automate it so it costs less,” said Gregory Daco, head of U.S. macroeconomics at Oxford Economics. “If you do that, there is really no direct benefit for potential employees.”
Something like that happened with the owls. Dalen made a fixed-headed version at its assembly line in Knoxville, but it shifted production of the swivel-headed owl to China in 1997. A previous effort to bring it back came to nothing because the company couldn’t find a way to do it without increasing the price, said Nancy Taylor, director of sales and marketing at Dalen.
Then, in mid-2013, Wal-Mart said it would buy more owls if Dalen could make them in the U.S. With a bigger contract from the retailer, Dalen could negotiate a better deal for its raw materials. Add in the savings on shipping costs and the math was starting to make sense -- with one rub: the cost of labor. In China, Dalen had several dozen employees assembling and hand-painting the owls, and it couldn’t afford to do that in the U.S.
It was the Knoxville employees who came up with a solution for re-engineering the assembly line, Taylor says. One worker developed a new tool to make it easier to mount the head, and others came up with ways to speed up the attachment of eyes and beak (the only parts that still come from outside the U.S.) As a result, Dalen is now making hundreds of thousands more owls with only a couple of additional employees, though Taylor points to other gains: many Dalen staff who used to have a four-month summer layoff now work year-round.
It was a similar story when Wal-Mart approached Precision Thermoplastic Components Inc. in Lima, Ohio. The manufacturer was keen to join Wal-Mart’s initiative, but as its managers debated what could be made in America they focused on items that would make maximum use of existing machines and avoid hefty labor costs, according to executive Ashley Thompson. They ended up designing a range of mounted water-bottles for cyclists, and setting up a new unit called 50 Strong, headed by Thompson, to make them -- but only a few jobs were created.
Any manufacturing revival will come in small steps, Thompson said. “You may not have companies coming back and building facilities that employ 5,000 people, but if you have 100 different smaller companies that are adding 50 jobs right there, that adds up to your same number,” she said.
In Wal-Mart’s case, it adds up to about 7,000. That’s how many factory jobs its made-in-America program has directly created so far, according to an estimate by the Reshoring Initiative, an industry group that supports the return of manufacturing. Wal-Mart said it doesn’t track the number of jobs, but that it’s likely to be significantly higher than the Reshoring Initiative’s estimate, which only includes companies that have publicly announced their extra hiring.
For the individuals and communities affected, even a few dozen jobs have a meaningful impact, said Cindi Marsiglio, Wal-Mart’s vice president of U.S. manufacturing. She says it’s tough to move the needle nationwide, but that she’s confident Wal-Mart will eventually meet its job-creation goals.
“More jobs have come to the country because of what Wal-Mart continues to do,” Marsiglio said. “There is still a lot of work to do, there are still challenges, like finding skilled labor. There isn’t an overnight solution.”
The U.S. has lost about 5 million manufacturing jobs since trade with China accelerated around the turn of the century, so Wal-Mart’s efforts so far are a drop in the ocean. But even that is enough to put the retailer on top of this particular league. In second place is Ford with 3,000 jobs returned over six years, according to the Reshoring Initiative, followed by General Electric and General Motors with 2,000 each.
“We are about breaking even,” said Harry Moser, Reshoring’s president. “The bleeding has stopped.” But he said even companies bringing small operations back to the U.S. have struggled to find skilled workers.
Trump is talking millions, not thousands: he wants iPhones made in America, not just owls. The presumptive Republican nominee says he’ll speed the return of jobs by ending export subsidies to China and imposing higher labor, environmental and copyright-protection standards on the country, according to his campaign website.
Of course, presidents have powers that even the largest corporations don’t. But even they might struggle to reverse the trend, in developed economies, toward fewer people making more stuff. American manufacturing output has doubled since the 1980s while the number of employees has dropped by a third. And while Chinese wages are rising, U.S. labor is still as much as 10 times more expensive.
Marsiglio says that in the initial stages of its campaign Wal-Mart targeted products that had high shipping costs, like bulky patio furniture or bikes, or were made out of materials readily available in the U.S. She said it’s also working with companies making products that require a lot of manual labor, like t-shirts, but those are likely further off -- at least at the rock-bottom prices its customers expect. The biggest success the retailer has announced so far is a plan for a Giti Tire Corp. plant in South Carolina that will create 1,700 jobs, though not until 2024.
As for Dalen, it would like to bring back its top-of-the range scarecrow too, but doesn’t see it happening anytime soon. The Sol-R Action Owl has solar panels that power a head-turn every couple of minutes. The company can’t find that technology at an affordable price in the U.S. -- so Dalen says it plans to keep making the bird in China.