Some U.S. Companies are Starting to "Reshore" Manufacturing
Place your cursor over the red dots to view some recent examples.
Making good on a promise to move some manufacturing to the U.S., Apple has added Quanta Computer's Fremont California facility to its Final Assembly Facilities List.1 Coleman Company is moving production of 16-quart plastic coolers from China to Kansas.2 In February 2012, GE opened a new manufacturing facility at Appliance Park in Louisville, Kentucky. This is the first new factory to open there since 1957 and is estimated to create more than 1,300 new jobs in the U.S. by 2014.3 Siemens has invested more than $350 million in a 42,000 square-meter plant in Charlotte, creating 700 new jobs. This is the first new factory to open there since 1957 and is estimated to create more than 1,300 new jobs in the U.S. by 2014.4 Otis Elevator is moving production from its factory in Mexico, to a new plant being built in South Carolina. The new factory will have 360 workers, the same as the factory in Mexico.5 In 2011, Daimler announced the decision to invest more than $2 billion in the Mercedes-Benz Tuscaloosa, Alabama plant. In total, investment in the plant between 2010 and 2014 will amount to $2.4 billion, while the number of newly created jobs will add up to 1,400.6 In February 2012, Caterpillar announced that it would build a $200 million facility in Athens, Georgia to produce construction equipment currently being made in Japan. This will add 1,400 jobs effective in 2013. Aside from workers hired for the plant, Caterpillar estimated that the project will create another 2,800 jobs among suppliers and other firms providing support services.7 Toyota is moving production of the Highlander to Indiana from Japan. This will create 400 new manufacturing jobs.8 Honda is shifting production of the Civic Hybrid from Japan to an existing plant in Indiana. The $40 million upgrade will add 300 new jobs.9 In 2011, Procter & Gamble held the grand opening of a 600,000-square-foot plant in Utah. This is the first plant it has built in the U.S. in 40 years.10For illustrative purposes only; Franklin Templeton equity funds' portfolio composition does not necessarily include securities of any of these companies. Past performance does not guarantee future results.
You know all about "off-shoring," but have you heard of "reshoring?" That's the name for the recent trend of U.S. companies bringing manufacturing jobs back home. They do it to increase quality and reduce transportation costs for goods to be sold in the domestic market. Some examples of reshoring are shown in the map at left.
U.S. Manufacturing has Kept Pace with Overall Economic Growth
Tracking the impact of recessions on the rate of growthSource: Ned Davis Research, Inc. Copyright 2013. Further distribution prohibited without prior permission. All Rights Reserved. See NDR Disclaimer at www.ndr.com/copyright.html. For data vendor disclaimers refer to www.ndr.com/vendorinfo/. Recession data obtained from the National Bureau of Economic Research.
It's common knowledge that manufacturing had all but dried up in the U.S., right? The chart to the left shows that U.S. manufacturing and GDP have actually kept pace over the years. You can see dips in manufacturing coinciding with recessions, but you can also see the resilience of U.S. manufacturing as production has snapped back after each one.
It's widely believed that U.S. manufacturing is in decline. But did you know that 75% of domestically consumed goods are manufactured in the United States?11 Recently some companies have found a steadily improving cost/benefit ratio for manufacturing goods in the U.S. when those goods will be sold in the U.S. The resulting "reshoring" trend may be an early sign of a manufacturing renaissance.
Could a manufacturing renaissance be good news for equities? The best way to capitalize on a revival in manufacturing will depend on the details that make you a unique investor. Give your advisor a call to discuss whether it makes sense to add some exposure to equities.
1. Final Assembly Facilities list, Apple Corporate Web site, January 2013.
2. Corporate Real Estate 2020: Manufacturing Returns to U.S., prnewswire.com, July 31, 2012.
3. GE Opens First New Manufacturing Operation in Louisville, Ky. in Over 50 Years, geappliances.com, February 10, 2012.
4. Grand Opening of the Charlotte gas turbine manufacturing facility, siemens.com, November 16, 2011.
5. Otis Shifts Work Closer to Home, Timothy Aeppel, wsj.com, October 7, 2011.
6. Daimler to Produce Additional Model at the Mercedes-Benz Tuscaloosa Plant (USA), media.daimler.com, October 21, 2011.
7. Caterpillar Strikes Deal to Build Georgia Plant, James R. Hagerty, wsj.com, February 18, 2012.
8. Toyota to Shift Highlander Hybrid Production to U.S. From Japan, Jeff Bennett, wsj.com, February 8, 2012.
9. Honda's Indiana Plant to Boost Production Capacity; Add Civic Hybrid, honda.com, July 18, 2012.
10. P&G Celebrates Grand Opening of First New U.S. Based Plant in 40 Years, news.pg.com, March 16, 2011.
11. Manufacturing's Wake-Up Call, Arvind Kaushal, Thomas Mayor, and Patricia Riedl reprinted with permission from the Autumn 2011 issue of strategy+business, published by Booz & Company Inc. Copyright © 2011. All rights reserved. www.strategy-business.com
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