Tags
assembly, domestic content, Following Up, GE, Immelt, manufacturing, manufacturing renaissance, reshoring
Thanks to the Pittsburgh Post-Gazette’s Len Boselovic for writing about General Electric’s decision to put its appliance and lighting division up for sale, and for asking me to comment. He also deserves credit for being the only reporter I could find (through a Google search, anyway) to place the GE move in the context of the ongoing debate about whether American manufacturing is enjoying an historic renaissance. As I’ve posted, the issue is critical since GE’s previous commitment to reinvigorate its domestic appliance manufacturing was famously portrayed as the poster-child for the manufacturing renaissance in a humongous 2012 Atlantic cover story.
Possibly at my instigation, Len also touched on the critical question of whether GE had been truly manufacturing dishwashers and dryers and refrigerators in its U.S. factories or simply assembling them from foreign-made parts – though he didn’t make the point in his discussion of GE as such.
I and others have long suspected that most of the reshored GE appliance work is really assembly, which adds much less value to the U.S. economy. The low wages paid at GE’s facilities in Louisville, Kentucky seemed to be pretty conclusive evidence.
Imagine my surprise, therefore, when I started examining the question yesterday and found on GE’s website highly specific claims that its American-made appliances contain very high levels of U.S. content. According to the company, they start at 70 percent for the company’s ranges and go up to 90 percent for its dryers.
These figures were not only unexpected because they’re so lofty, but because they’re being made public at all. Typically, manufacturers keep such data very close to their vests – ostensibly because they represent very valuable commercial but also undoubtedly because the public would be furious to find out the extent to which so many Made in America products really aren’t. Therefore, the GE statistics show that the company was shooting straight all along with its reshoring claims, right?
Not so fast. First, I’d like to see some independent confirmation of the figures. Like many offshoring-happy multinationals in particular, GE isn’t above cherry-picking data even when it is presented accurately.
For example, in December, 2012 (not so coincidentally, the same month as that Atlantic cover story), GE Chairman Jeffrey Immelt told TV’s Charlie Rose that the company is a net exporter globally – meaning both that it ran a trade surplus and that its overseas sourcing of parts, components, and materials for its U.S. operations was relatively modest. This statement surprised me as much as the appliance content figures because although GE used to present its global trade balance figures in its annual reports, this practice stopped in the mid-1990s, and only exports have been specified since.
When I contacted GE’s press relations office by email, here’s the reply I got from Director of Financial Communications Seth Martin: “[U]fortunately we do not have public data on historical imports vs exports. I can tell you that as a multi-national company, GE has a supply chain that includes many American and global suppliers who support our domestic manufacturing facilities in the US. As a manufacturer of technologically advanced machinery our exports tend to be high value products. As you can imagine, there are many products we make for industrial use that contain parts made in many locations around the world. That makes it challenging to determine the $ amount of imports and exports from any one country.”
I responded that the company apparently had no trouble reporting on its exports, and that if import figures were not available, it was difficult to understand how Immelt could have come up with a trade balance figure. Martin’s response?
“In certain cases, such as the Annual Report, we have highlighted our commitment to making products in the U.S. by disclosing the international sales of American-made products. However, we typically do not provide these figures in our financial reporting, as it is not an SEC requirement to disclose, nor is it a metric that is used in managing our businesses, which are global in nature. That said, we can confirm that we are consistently a net U.S. exporter based on the value of our exports versus the value of our imports.”
In other words, “Trust us.”
There are some other important reasons for not taking GE’s word at face value. The definition of U.S. content provided on the GE appliance website refers to “funds used to make” a particular product being “spent in the United States.” Included are “U.S. parts, factory operations and wages.” But “parts” can be a tricky term at best. For example, an electric motor for an appliance can be a “part.” But in turn it’s made up of many other parts. How far down the supply chain do GE’s statistics go? Similarly, countless domestically sold products are imports. Is GE assuming that any money it’s spent on purchases from a U.S.-located retailer or wholesaler is being spent on a U.S.-produced good ?
As for that term “factory operations” – it could mean just about anything having to do with running a plant, including equipment depreciation costs, janitorial or grounds-keeping services or cafeteria services and the like, that have nothing to do with appliance manufacturing proper. Honda of America ran into trouble with the U.S. government in the early 1990s for inflating the U.S. content of its domestically produced vehicles to gain public relations and NAFTA-related tariff advantages. Are GE’s U.S. content figures similarly bogus?
With enough political will, nothing would be easier than requiring all manufactures doing business in the United States to make public domestic and foreign content levels. This information is essential for making sound trade and other international economic policies, and actually is already required for passenger motor vehicles, which must display a content sticker containing such information. The system isn’t perfect – it lumps Canadian and U.S. content together. But there’s no inherent reason that a fix couldn’t be made, and the policy extended to other manufacturing sectors.
Unfortunately, American trade and manufacturing policymaking is dominated by offshoring-happy multinationals like GE, which are determined to keep their monopoly over the most detailed and crucial information about changing production and sourcing patterns, and release it only in the most selective and self-serving ways. So they never tell, Washington never asks, and U.S. leaders and the public are forced to keep flying blind when it comes to globalization.
