Reply #15: It's the outsourcing chickens coming home to roost [View All]

[TexasLawyer]

The fewer the blue collar workers here in the US, the fewer American white collar workers are needed to oversee them.

Chain Reaction
Big Three's Outsourcing Plan:
Make Parts Suppliers Do It
Using Chinese Prices as Base, Car Makers Set Targets That Force Firms Offshore

By NORIHIKO SHIROUZU
Staff Reporter of THE WALL STREET JOURNAL
June 10, 2004

Global trade and American labor are creating a quandary for the Big Three auto makers. Facing intense price competition, they want to take advantage of the plunging cost of manufacturing in China. Yet their labor agreements at home make it hard to shift jobs overseas.
Now the auto giants have hit upon an unusual strategy: Push their suppliers to do the outsourcing for them.

Consider the case of Superior Industries International Inc., a big aluminum-wheel maker in Van Nuys, Calif. For years, President Steve Borick dismissed Chinese manufacturing. The quality of Chinese wheels didn't impress him. The logistics of shipping thousands of rims across the Pacific seemed too complicated.

Then Mr. Borick and his managers started getting a blunt message from General Motors Corp. and Ford Motor Co., with whom Superior does 85% of its $840 million a year in business: Match the prices they were seeing at Chinese wheel suppliers. If Superior didn't want to agree to new terms, both auto makers said separately they could go directly to the Chinese or turn to a North American wheel maker that would, Superior officials say.

"It's presented very simply," says Mr. Borick. "This is the price we are getting for this product. You either match that" or the auto maker will look elsewhere. "It's that black and white," he says. "The message is: Close the gap no matter how." In Superior's case, that meant cutting its profit margins -- and finally deciding to make its own wheels in China.

Both GM and Ford acknowledge that Chinese auto-parts suppliers now serve as global "benchmark" prices for quality and price on certain components, such as electric-wire cables, radios, speakers, small motors, and even brakes, suspensions and aluminum wheels. The prices reflect China's average wage costs of 90 cents an hour, compared with $22.50 in the U.S., according to Roland Berger Strategy Consultants of Munich, Germany.



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http://www.uschinabiz.com/newsletter/Vol_1_6_Big_Three's_Outsourcing_Plan.shtml