Editor's Pick

'Made in America' Making a Comeback

With doom and gloom being the predominant message regarding U.S. manufacturing these last few years, it’s somewhat surprising to hear news of optimism in that sector lately. But suddenly, companies seem to be rediscovering the appeal of the “Made in America” label, even when attached to high-tech products that seemed lost forever to a maze of inexpensive Chinese subcontractors. Electrical product-makers are touting the U.S. roots of their wares, a move distributors and contractors are applauding along their sales channels.

U.S. manufacturing’s fate was probably never quite as dire as some analysts have stated over the last few years. No doubt, the recession took its toll, but contrary to what many might have thought—even in 2010, as the economy sputtered—World Bank figures showed the United States remained the world’s leading manufacturing economy, producing 18.2 percent of the world’s manufactured products, with China second, at 17.6 percent. As of 2011, manufacturers directly employed 9 percent of the U.S. work force, according to the National Association of Manufacturers and the U.S. Bureau of Labor Statistics (BLS). And the October 2012 BLS employment report reported that 500,000 manufacturing jobs had been added in the previous 33 months, the most for any such period since the 1990s.

Now, a range of economic factors are creating hope that this existing strong foundation could be a platform for new growth for manufacturing in the United States. Chinese workers are beginning to demand higher wages and better working conditions, which, in turn, mean higher costs for companies outsourcing production to China. Continued low natural gas prices here, along with rising costs for diesel shipping fuel, add to the attraction. Plus, manufacturers are seeing new advantages in once again locating factory floors near their products’ designers and marketers, especially as model changes accelerate to meet the demands of increasingly fickle consumers.

According to research results released in September by the Boston Consulting Group, U.S. manufacturers are on their way to becoming the lowest cost producers in the developed world. By 2015, researchers stated, Chinese manufacturing costs still may remain 7 percent lower than costs in the United States, but that price difference will vanish after transportation, duties and other expenses are factored into the total.

And these gains aren’t just theoretical. GE has initiated an $800 million plan to rejuvenate its aging Appliance Park manufacturing campus in Louisville, Ky. In 2012, it opened brand-new assembly lines to produce high-efficiency water heaters and high-end refrigerators. This year, the company will launch lines dedicated to stainless-steel dishwashers and front-loading washers and dryers, and it is even making some simple parts at the site, thanks to new plastics-fabrication facilities. Similarly, in December, Apple announced a $100 million initiative to bring production of some of its Mac computers back to the United States from China.

Among U.S. electrical manufacturers, lighting controls-maker Leviton is in the process of moving production of its QuickPort datacom wallplates to its Network Solutions plant in Bothell, Wash., from a Chinese facility. The company already manufactures and assembles more than half of its products in the United States, according to chief operating officer Daryoush Larizadeh. Additionally, he noted, Leviton acquired New Orleans-based Home Automation Inc. in August, adding to its portfolio of U.S.-based operations. According to Larizadeh, Leviton prefers manufacturing its products in the United States.

“Bringing manufacturing production back to the U.S. comes as part of Leviton’s overall brand effort to boost efficiency and bring manufacturing closer to projects in the United States,” Larizadeh said.

Maurice Electrical, a distributor headquartered in Landover, Md., with outlets throughout the Washington, D.C., metro area, is hoping to encourage other electrical product-makers to bring production back to the United States—and to support companies whose production never left—with its new American Made Pride (AMP) rewards program. Electrical contractors purchasing qualifying products from participating manufacturers through Maurice Electrical earn points that can be redeemed for prizes.

“We’ve seen that some companies have found it makes sense to repatriate products to the U.S., and we need to encourage that,” said John Marshall, Maurice Electrical president.

The AMP program draws some significant lines in the sand regarding the products it will allow to participate. While some manufacturers have raised the North American Free Trade Agreement (NAFTA) as a reason to allow products originating in Canada or Mexico, Maurice Electrical has narrowed participation to products manufactured in U.S. factories.

“All fuses are currently being manufactured in Mexico,” said Warren Janes, sales and marketing vice president, so that product category is missing from the AMP roster. However, the company is bending a bit on offerings that incorporate light-emitting diodes because now nearly ubiquitous solid-state chips aren’t U.S.-made. Otherwise, he said, “we would have to eliminate all lighting.”

And this raises an important issue for contractors: It can be difficult for buyers of fixtures, conduit and other equipment to know exactly what a “Made in America” label means because Federal Trade Commission (FTC) guidelines defining use of that phrase in marketing can be confusing. For example, radio with a plastic case manufactured from imported oil or a PC manufactured with U.S.-made parts, but including a disk drive case made from imported steel, both can claim “Made in America” status. However, a wrench manufactured in the United States from overseas steel cannot because, in this situation, the steel is a much more significant cost in the product’s overall production.

“The FTC guidelines are confusing. There is no question about it,” said Aaron Jagdfeld, president and CEO of Waukesha, Wis.-based generator manufacturer Generac. 

As a result, he said, manufacturers may turn to alternate terminology for products largely—but not entirely—fabricated from U.S. materials and components, such as “Engineered and designed in the U.S.” or “Assembled in the U.S.”

David Burnette, vice president of sales for Sharon, Pa.-based Wheatland Tube, has seen this confusion play out among contractors specifying conduit for U.S. Dept. of Transportation projects requiring U.S.-made products. 

“We face domestic companies that will buy foreign pipe, thread and couple it, and then the contractor assumes it’s domestic,” he said.

As a result, Wheatland Tube decided several years ago to source only from U.S. steel producers to eliminate any such problems with its products. 

“Many of the steel mills were using foreign slabs,” Burnette said. “So we made a conscious decision to shift our steel buy to meet the requirements that it was made and melted in the U.S.” 

Beyond the requirements of government projects, manufacturers also see consumer interest growing in the “Made in America” label. Jagdfeld, whose company manufactures all but a few of its generator products in southeastern Wisconsin, has seen increased homeowner attention to country of origin in buying decisions.

“We get feedback from customers that, in almost all cases, a U.S.-manufactured product is very important to them. Homeowners, in particular, are in tune with whether or not a product is manufactured in the U.S. by a reputable U.S.-based company,” he said.

And, like the companies cited in the Boston Consulting Group’s research, Generac is finding its “Made in America” labels are coming with a significantly lower premium over ­foreign-made offerings than may have been the case a few years ago. Jagdfeld cites the falling value of the dollar globally as one factor. The rise of overseas currencies means it costs more for U.S. customers to buy foreign-made products and components. 

“Additionally, costs to manufacture overseas have been rising much more quickly than here in the U.S.,” he said. “Increasing wages, benefits and compliance costs all have been drivers. The cost of logistics also has been increasing.”

Leviton’s Larizadeh sees a similar narrowing in the pricing advantages that drove a number of manufacturers to turn to cheap Chinese suppliers. 

“In recent years, China has become more costly, due in large part to significant wage increases in order to maintain consistent employment,” he said. “This has impacted all manufacturers in China.”

In fact, according to Maurice Electrical, costs for most U.S.-made products today are within 10 percent or less of the closest foreign-made competition. This is making it easier for contractors to prioritize purchasing products made in America, a fact Maurice’s desk staff is recognizing as they explain the AMP incentives to this often-skeptical group.

“They start to soften up and then admit that, ‘if it’s close, I’m not always going down to the last penny,’” Maurice Electrical’s Janes said. “That’s what we thought and hoped, but we’ve been surprised.”

About the Author

Chuck Ross

Freelance Writer

Chuck Ross has covered building and energy technologies and electric-utility business issues for a range of industry publications and websites for more than 25 years. Contact him at chuck@chuck-ross.com.

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