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Outsourcing is beginning to wane

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Tom Grasson February 2013
Tom Grasson

Early in 2012, I wrote an editorial criticizing Jeffrey Immelt, CEO, General Electric (GE), for his decision to outsource work from the United States to China. While my viewpoint on his decision has not changed, I must admit that Immelt may not be the ogre that I once believed him to be.

I’m not sure what got into Immelt. Perhaps he had an epiphany or maybe he bought into the Reshoring Initiative founded by Harry Moser that prompted him to write in the Harvard Business Review, March 2012, that outsourcing is, “quickly becoming outdated as a business model for GE Appliances.”

Approximately 62 years ago, GE built Appliance Park in Louisville, KY, to capture the appliance market in North America. Twenty years after the facility opened, employment peaked at 23,000. However, labor disputes and the promise of inexpensive overseas labor led GE to outsource the appliance business in 1984. With the passage of time, the business model developed for the appliance market in China was not as successful as theorized. By 2008, Immelt tried to sell the entire appliance business, including Appliance Park, but the economy had taken a nosedive and no one was interested in acquiring it.

I find it fascinating that four years after trying to sell Appliance Park, Immelt is spending nearly $800 million to upgrade the complex and bring the business back home. Last September, Immelt reiterated his position at a public event by saying, “I’m not doing this because I run a charity, I’m doing this because I think we can do it here and make more money.”

Now, I don’t know this for fact and I might be entirely wrong but I surmise that somewhere along the way, Moser was instrumental in Immelt’s decision to reshore the company’s appliance-manufacturing operations. I have personally known Moser for many years. Our relationship goes back to the days when he was president of GF AgieCharmilles, and I can tell you that he has always been a visionary. Upon retiring as chairman emeritus of GF AgieCharmilles in 2010, his respect for and love of U.S. manufacturing took him in a new, much needed direction.

Concerned about the outsourcing of U.S. manufacturing, Moser founded the Reshoring Initiative and started working with NTMA, AME, AMT, SME, and PMA to bring manufacturing jobs back to the United States. His goal is to help OEMs better understand the full cost of offshoring and the benefits of reshoring. Moser made such an impact with this endeavor that at the request of President Obama, he attended the Insourcing American Jobs Forum at the White House in January, 2012 to discuss his findings in bringing jobs back home.

I’m now convinced that what is happening at GE and elsewhere in American manufacturing is an indication that Moser’s Reshoring Initiative is taking hold and will benefit the U.S. economy in the years ahead.

To quote Doug Woods, president, AMT–The Association For Manufacturing Technology, “Reshoring not only saves manufacturers money, it also creates American jobs, promotes economic growth, and strengthens national security.”

 


tgrasson@gie.net

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