North American factories relocating

The relocation of some of the largest North American manufacturing industries overseas is a trend that companies had to make in order to stay competitive in the global market.

The latest is a decision by Levi Strauss and Company (one of the world’s largest clothing manufacturers) to shift much of its operations out of North America. The San Francisco-based clothing giant would close down half of its 22 plants and lay-off 5,900 workers.

Levi once boasted of employing a large domestic work force, but it could no longer afford paying mandated federal wages and must now follow other competitors overseas. It would relocate half of its operations to either Mexico or the Caribbean where labor cost is far cheaper than the US mainland.

A company spokesman related: “We’ve held on as long as possible in North America, but it’s clear that given market trends, we need to be more competitive and reduce our manufacturing costs”. The relocation of Levi to overseas manufacturing venues is an indication that the US apparel industry has been shrinking for several years now.

The bottom line in the trend to relocate elsewhere is the steep labor costs in the US mainland versus foreign countries. For instance, a company that produces surgical gloves out of one of the northeastern states relocated to Singapore about two years ago. Reason? While it paid its US domestic workers some $18 an hour in its manufacturing plants, it found out too that it could produce the same quality surgical glove in Singapore for $8 a day.

The difference in labor cost is the bottom line issue even for North American manufacturing companies. It’s a continuing trend that would be followed by others just to stay competitive. It’s a setback for US manufacturers and domestic workers but an opportunity for countries where these manufacturing companies finally settle down. It goes to show that high wages is only good for as long as it lasts. If a manufacturing company loses its competitive edge in the global market, the next immediate move is relocation where labor costs is cheaper.

Relocation brings joblessness to a multitude of domestic workers. It also leads to the closure or reduction of other support businesses like the shipping industry, insurance, end of private land leases where cumulatively the end result is less revenue generation for the local treasury. Less revenue translates into the eventual reduction of either work hours or manpower, including basic public services.

Here at home, local leadership needs to rechart its directional map lest simple acknowledgment of the severity of hardship at the family pocketbooks would haunt them for what it has failed to do. It’s all a matter of being able to see a clearer view of the larger picture.