Sunday, August 7, 2011


Manufacturing profitably in the United States seems to be a problem for American management.  Why is it not so for Brazilians?

I wonder whether, rather than an actual lack of profitable investment opportunities, a major cause for the decline of well-paying manufacturing jobs in this country is due to American hubris, combined with a decline in business management capabilities, substituted by rapacious focus on personal reward through outrageous levels of top management financial rewards.

The following is one of many examples of how foreign management resources can reignite the candles of hope for decent-paying American manufacturing employment, an ability the locals seem to have lost.

CNN Money's Manitowoc plant gets second chance to make cookware tells the story of how Tramontina, a company located in the southern Brazilian state of Rio Grande do Sul, in 2005 was able to acquire vacant cookware production facilities in Manitowoc, Wisconsin after its U.S. owners had abandoned it for cheaper labor costs in Mexico. According to the Cookware Manufacturing Association, 63% of all cookware and bake ware goods sold in the United States are manufactured abroad, a fact which the Brazilians saw as an opportunity rather than a threat.

How did this come about?  Tramontina was looking for a way to get a "Made in America" label on high volume product offerings to retailers like Wal-Mart, Sears, Costco and others.  Pots and pans now manufactured at the Manitowoc plant are shipped to another U.S. production facility operated by Tramontina in Houston, where final product assembly, packaging and shipping to U.S. customers take place.

The Manitowoc plant even came with its own aluminum production facilities, which enables Tramontina to recycle process waste on site without added transportation costs.  As a matter of fact, the plant is even shipping aluminum raw materials to facilities in other countries, including to Tramontina's main plant is Southern Brazil.

Manitowoc mayor Kevin Crawford was quoted as saying that he is delighted to have Tramontina in town.  "Antonio Galafassi - the local Brazilian CEO - is an amazing individual," Crawford said. "He treats all the people right. The employment was very important and the plant opening helped the esprit de corps of the whole city."  Crawford said the Tramontina operation shows that a company can produce this product at a competitive cost at U.S. wage rates.

Why is it that U.S. management no longer seem to be able to do the same?

1 comment:

  1. A large portion is indeed hubris. The problem is we are grooming kids straight out of elementary school to take jobs in upper management. We force them into college prep schools were mechanical and trade based skills are looked down upon. Then they move into college where there are zero outlets for any kind of mechanical creativity (yes there is engineering but even that is on the wane). There are trade schools but with the majority of them being relegated to very poor sections of towns there is very little chance anybody with a rounded education will attend. We need start asking ourselves, in ten years, who is going to fix my toilet? Build my house? Fix my car?

    The light at the end of the tunnel is that younger people are now more inclined to buy things made by small manufacturers who don't outsource and who have direct control over their product. While this does raise the price, they feel its justified as they are buying something that lasts and supporting a like minded person. Disposable commodities are not "cool" anymore. Made in the US carries a lot of weight in the retail world, but is it really "made" here? Is the steel for the car frame forged here? Are the electronics assembled here? Are the tires vulcanized here? No. Plain and simple. If I put together a Lego house is it an American product? Nope, its still Danish (most likely Chinese now!). Let's take Harley Davidson for example. There bike have a huge following due to their made in the US status. People refuse to even acknowledge other legendary (and faster, safer, prettier, etc..) brands simply because they aren't American made. Well, Harley's engines are made and assembled in Korea, frames and tins in China and so on.... Its the Lego example all over again. Just because we tightened some bolts and laced a wheel does not mean "made", it means "assembled". Not as pretty of a word in marketing world but lets be honest with ourselves.

    Back to the hubris though. For a country who pays so few taxes, has cheap gas and a pretty low cost of living we sure complain a lot about wages. On the other hand I just heard a statistic that in the past 10 years the average CEO salary has climbed 120% while the average worker now makes less then he did in 1978 (adjusted for inflation)! Its no wonder the factory worker complains about not making enough when he has to keep up in a world filled with people who have 3 houses and a new care every 2 years. Its a lot of pressure, even if you are not directly interacting with this upper echelon. Would capping these salaries change things? Not likely with all the tax loopholes we have, money would still be made. The answer? Who knows. But all I know is that when the bottom falls out of this economy those laking any kind of trade skills are going to be dead in the water. You always need something built/fixed, you can live without a mutual fund analyst.