In recent weeks I have been trying to find an American-made plain old utility bike, not a gee-whiz road bike or an exotic light-weight mountain bike, but a plain old grandpa-style pedaler. While I was partially successful (found that they still make the Workman bikes that are seen in factories everywhere), I was surprised to find that Huffy bicycle corp had bailed out of the American market. There is a very interesting article from 2003 at:
http://rgj.gannettonline.com/gns/jobs/day3.html
which describes the events that led to Huffy shutting down. The facts are pretty basic, and for a manufacturer like Huffy, impossible to ignore:
1) In 1998, Huffy bikes were made in Celina, Ohio in the world's largest bicycle plant. The workforce there was union, and were paid an average of $10.50 per hour. With benefits, the average total compensation was about $15 an hour or so. At the time, a standard Huffy bike sold for about $80 retail.
2). In spite of dominating the American bike market, Huffy was in big trouble by 1998. In the four years previous, foreign imports (mostly Chinese) had driven generic bike prices down by 25%. The union had accepted a 20% pay cut in 1996, but by 1998 it was clear that it wasn't enough and Huffy management determined that they would have to cut costs in Celina by another 35%. Union leadership rejected further wage concessions, so the Celina plant was shut down and Huffy moved to Missouri, where non-union laborers in Farmington were willing to work for $2.50 per hour less than their counterparts in Ohio (average of about $8.00 per hour).
3). From the article: "During its last year in Celina, Huffy posted a net loss of $2.2 million, or 84 cents per share of common stock. The following year, after Huffy moved its Celina jobs to Missouri, the company recorded a net loss of $33.3 million, or $3.13 per share of common stock." The lower wages in Missouri weren't enough to bring Huffy out of the red.
4). Huffy gave up on Missouri and sent the jobs out of the country, first to a plant in Nuevo Laredo, Mexico. The workers there earned about half what the workers in the USA did (about $4.00 per hour). It still wasn't enough to keep Huffy where they wanted to be, so in 2001 they bailed out of Mexico and went to China.
5). The workers at the Chinese plant earned about 4% of what the workers in Celina, Ohio had earned, according to the article they received between 25 cents and 41 cents per hour, with harsh conditions and long hours. This was apparently enough to do the trick for Huffy, as the following quote reveals:
Quote:
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After shifting entirely to bike imports, Huffy Corp. netted $35 million in earnings in 2000 and earned investors $3.39 per share of common stock, an abrupt turnaround from those waning days in Celina. Today, its profits have leveled off, but Huffy still expects to post net earnings of $3 million in 2003.
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A Chinese-import Huffy now sells for less than half of what it used to at Wal-Mart, as little as $40. Looking at a bike sitting on the floor with its spiffy red paint job, shiny tires, chrome plating, etc and realizing that they are being shipped all the way from China, it would appear that the bikes must be manufactured for a ridiculously cheap sum - like $10 or $15 - and in spite of the supposedly lower quality, the cost differential is so huge that it begs the imagination to think that an American firm could compete with it. I'd be surprised if one of us could go buy the raw materials (tubing, paint, tires) for $15, let alone actually build one. How can American manufacturing compete on a playing field that is so manifestly unlevel? Answer: When it comes to bulk, low-price commodity products aparently it can't.
The implications of reaching a stage where products as sophisticated as a bicycle or even an LCD screen have become "bulk commodities" should give us pause. What we call specialized products today must be specialized indeed: high tech, high precision products that are continually refined and specialized to maintain the technological edge that separates the global leaders from the also-rans. Some nations pursue technological domination in specific industries with an almost religious fervor, for example the Japanese with machine tools. Check out this machine from Fanuc, which is sold ONLY in the Japanese domestic market to help them maintain their technological edge:
http://www.fanuc.co.jp/en/product/robonano/index.htm
The machine in question is called the "robonano", it is a 5-axis milling machine capable of 1 nanometer resolution.
Here in the USA, we fall all over ourselves to export every advanced technology that we develop in order to squeeze a few more bucks from it instead of seizing the global high ground. At one time we were the world leader in high-precision machine tools, semiconductors, microprocessors, the list would be too long to write. Nowadays we outsource the design of our latest microprocessors overseas rather than keeping the skills close to the vest here in the USA (the new Intel chips are from design houses in Israel and Russia). Our universities and government go out of their way not only to help foreigners learn our technologies, but actively RECRUIT them and PAY THEM to do so!
What we don't give away or sell, we allow to be taken from us by unscrupulous snake-licking scumbag spies who sell us out for a paltry few bucks
It is no secret that I advocate subsidies and trade protection for strategic industries, something that puts me at odds with the Dollartarians on the board and even the Libertarians who come closest to my political views. I am a pretty strong nationalist at heart, so in my view the long term survival of our nation trumps free market idealism (the Dollartarian better hope I never get elected to office
). I have no illusions that any of us on opposite sides of that particular fence will ever see eye to eye, so it is not really worth even arguing the subsidy issue again.
What I am very interested to hear though is the opinion of others on this board of where our current policies will lead us. I therefore pose a few questions:
1) Is it possible for America to compete with China on bulk manufacturing terms given their low wages and lack of regulation?
2) Have American unions completely lost their relevance in the face of a vast pool of global labor that is actually HAPPY to work for 1/10 of what an American worker might make?
3) What will the long-term fallout for our children and grand-children be as the Chinese and Indian economies graduate from bulk commodity manufacturing to high precision manufacturing and start taking over the design jobs?
4) There are many examples in history of nations that achieved global dominance through manufacturing and trade (England and Spain, for example) but which were unable to maintain their position as their manufacturing position was eroded in favor of a trade-based economy. What will realistically prevent the USA from following the same cycle?
Just a little something to stimulate some thought, if any of you can break away from the endless circular debates on homosexual rights, abortion, etc.
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