Is the Carrier Deal the Kind of Solution We Are Looking For?

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American manufacturing must become more efficient, more automated and the workers must become more skillful.

By Rosemary Coates.

Published in Supply Chain Management Review, December 9, 2016

A lot of hype was created in the press again this week with the saving of 800 jobs at Carrier Corporation from going to Mexico.  But the issues with this deal are more than they appear on the surface. As has been reported again and again, this deal was accomplished through tax incentives. And therein lies the problem.

Don’t get me wrong, at the Reshoring Institute we are all about rebuilding manufacturing in America, no matter the means.  But the way to do this is through an evolution, not a financial magic trick.  What Carrier should be doing is reinventing its manufacturing through reengineering its manufacturing processes, investing in automation and investing in its workers.

They should be moving forward with new ideas, not by simply taking a hand-out in the form of tax relief. The reality is that Carrier has made no progress. This is a false positive. It is akin to buying pants with elastic waistbands instead of going to the gym three times a week.

Did Carrier make a good-faith effort to make its operations more efficient?  Reports from the Union Local 1999 state that they found savings of $30 million though other cuts, but Carrier management said they needed to find $65 million in savings to compete with Mexico.  Is this simply corporate greed or the lack of desire to maintain US manufacturing? I wonder if Carrier considered simply raising prices.

To make American manufacturing healthy again, our attention must be on moving towards advanced manufacturing in robotics, automation, the Internet of Things (IoT) and other computerization on the shop floor.  Along the way we must teach our workers advanced skills and prepare them for the Fourth Industrial Revolution.  Simply shoring up the old ways and masking the problem with tax incentives is just plain wrong.

What we don’t want to keep here in the US or bring back is the $.23/hr t-shirt production or other low-skilled, labor-intensive jobs. Why?  Because these jobs do not pay a living wage and as a result put more people on welfare rolls. What we do want are the more modern, sophisticated manufacturing that will allow America to once again lead the manufacturing world.

So will jobs be saved under Trump’s strategy to offer tax incentives, beg to keep jobs here, or slap on high tariffs on imports? Nope. These things will not save us in the long run. American manufacturing must become more efficient, more automated and the workers must become more skillful. Over time, this will mean fewer, but much better jobs.

About the Author

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Rosemary Coates

Ms. Coates is the Executive Director of the Reshoring Institute and the President of Blue Silk Consulting, a Global Supply Chain consulting firm. She is a best-selling author of: 42 Rules for Sourcing and Manufacturing in China and Legal Blacksmith – How to Avoid and Defend Supply Chain Disputes. Ms. Coates lives in Silicon Valley and has worked with over 80 clients worldwide. She is also an Expert Witness for legal cases involving global supply chain matters. She is passionate about Reshoring.