We had forecast this trend was coming, and here it is.
Last month, General Motors said it is considering a $4-billion investment in new electric vehicle battery-making capacity in Michigan; and Toyota unveiled plans for a $1.3-billion EV battery plant in North Carolina that will employ 1,750 people.
Georgia’s upstart America Knits factory, where 65 people make t-shirts from locally-grown cotton, hopes to seed a rebirth of textile-making in America.
TRENDPOST: We highlighted the revival of the U.S. manufacturing industry in “Supply Chain Nightmares Beget “Reshoring” and Self-Sufficiency” (7 Dec 2021), as a key aspect of our “Top 2022 Trend” toward self-sufficient economies, pioneered by China and its “dual circulation” initiative to balance a strong domestic consumer economy against its thriving export sector, which we have detailed in articles such as “China Announces “Dual Circulation” Economic Policy” (9 Sep 2020) and “China’s Consumers Boost Spending” (11 May 2021).
With COVID’s arrival, the revival of U.S. manufacturing “may have reached a tipping point,” Claudio Knizek, chief of consulting firm E-Y Parthenon’s mobility and advanced manufacturing practice.
After years of relying on faraway foreign suppliers, the COVID War’s months of clogged supply chains and materials shortages have persuaded producers and manufacturers that components and raw materials should be made closer to their destinations.
“It’s absolutely about being close to customers,” Tim Engle, strategy vice-president with Toyota Motor North America, told The New York Times.
“It’s a big endeavor but it’s the future,” he said.
For the U.S., the trend is bringing back “near-shoring,” which puts key factories in Mexico, where labor costs are still low but products are only a short haul from American factories and can bypass overloaded ports.
“Many companies now prefer the security of supply over cost,” CEO Teresa Wagler of Steel Dynamics in Indiana said to the NYT.
However, work requiring large amounts of manual labor or tasks difficult to automate—such as making shoes or decorative holiday lighting—likely still will be relegated to foreign markets where labor remains cheap, the NYT noted.
For those kinds of items, “the economics are daunting,” noted Harvard Business School professor Willy Shih in a comment to the NYT. “It’s hard to beat wages of $2.50 an hour.”
In those areas, China will remain dominant, thanks to its massive, low-wage labor force, ready access to raw materials, and industrial infrastructure, Shih predicted.
“For a lot of what American consumers buy, there aren’t a lot of good alternatives,” he said.
Even so, onshoring or “reshoring” of key manufacturing could mean a boom in domestic manufacturing and technical jobs; in 1995, U.S. factories had 17 million workers on their payrolls but only 11.5 million by 2010.
Unionized factory workers often now earn as much as $25 an hour, compared to $15 as a high wage in hospitality jobs or non-union shops, the NYT said.
TREND FORECAST: America’s manufacturing renaissance will blossom only to the extent that it can access materials and develop a skilled technical workforce, and freedom from increasing city, state and national bureaucratic control.
Manufacturers are beginning to solve shortages of materials by forming alliances with suppliers, as we reported in “Will Auto Alliances Protect Chip Supply?” (23 Nov 2021). Also, supply lines will gradually reopen, allowing manufacturers easier access to the materials that are available.
However, key metals and other minerals will remain in short supply for the foreseeable future, limiting manufacturing’s expansion and fertilizing a domestic recycling and reclamation industry, a trend we highlighted in “Commodities Supercycle Underway?” (11 May 2021).
To develop the needed workforce, manufacturers will work much more closely with public schools to create apprenticeship and tech-ed programs.
For example, the Cheshire Career Center at Keene High School in Keene, New Hampshire, has a fully-equipped machine shop stocked by area manufacturing firms that also closely advise on curriculum and allow high-school students to apprentice in their shops on school-day afternoons.