Saw this on Bloomberg this morning. Amid all the terrible stories about the economy, this is a glimmer of hope.
Wal-Mart Stores Inc.'s worldwide quest for a lower-cost sleeping bag has led to a one-story factory in northwest Alabama, where Chris Defoor has a new job.
The same forces that have sent thousands of American jobs overseas are now giving a lift to places like Haleyville, a town of 4,200 where Defoor is in his fourth month working at Exxell Outdoors Inc.
more below
The falling dollar, the demand for low cost goods and the credit crisis are apparently contributing to a drive toward a change in manufacturing returning to the United States.
With costs in Alabama running 3 percent below those in China, Exxel is cutting production at a joint venture in Shanghai while hiring workers, adding machines and increasing output at the 250,000 square-foot plant. This year, for the first time, the company will make more bags in the U.S. than abroad.
``We'd been losing the battle to China but had a feeling things were going to change,'' founder and chief executive officer Harry Kazazian said...
The increase in production at Haleyville comes as manufacturing in the U.S. contracts at the fastest pace since 2001, during the last recession. Record exports that had supported output now are slowing as a growing number of countries grapple with the credit crisis.
Large and small manufacturers are rethinking their outsourcing policies. And companies like Home Depot and Ikea plan to buy more US products according to the article.
Exxel's CEO Harry Kazazian said,
In 2005, China's cost advantage began to erode... As the yuan appreciated, Exxel had to pay more in dollars for materials such as recycled polyester for insulation. In the first half of 2008, wages in urban China jumped 18 percent from a year earlier, and new minimum-wage and overtime rules will add more to his costs.
Last year, 60 percent of Exxel's bags were made in Shanghai, while Haleyville produced the rest. By 2009, only a third will come from China, and by 2010, Haleyville will account for 90 percent...
While sleeping bags are three-fourths of its business, Exxel also makes tents and ski vests that are still cheaper to produce in China. Even so, "every product we make is up for study now"...
Delivery time for Exxel's products are faster, taking three days instead of as long as two months from China, according to the article.
And though labor has been their advantage, Kazazian said..
...they can't compete with me on my just-in- time production cycle. Customers pay as much as 10 percent more to get deliveries as needed rather than incurring expenses to store inventory
With Obama's plan for a tax credit for creating jobs a company like Exxel should be even more encouraged.
Exxel expanded its Haleyville workforce by 20 percent this year to 70 employees and will enlarge it another 20 percent by 2010. In July, the factory added a third production line to boost output to as many as 2.1 million bags this year from 1.2 million in 2007.
And Barbara Garrison, vice president of operations said,
Now that we've become more competitive, more people are looking at us as a supplier... We're getting more inquiries.
One small story, encouraging and, I hope, a harbinger. People are still keeping faith and working hard and hanging on. And Obama's focus on main street-where it must be, is what we need.