Foreign Manufacturers Expressing Renewed Interest In Opening Shop in the USA

Reversing a decades-long trend of offshoring manufacturing, foreign companies have recently started to set up facilities in the United States- taking advantage of a productive workforce, a cheaper dollar and proximity to their largest customer base.

The trend is similar to foreign automakers who have been opening up plants over the last 30 years throughout the United States- primarily in right to work states in the southeast and Texas. However, this time around, these include foreign companies that specialize in electronics, aerospace, chemicals and energy.

In 2011, British-based Rolls-Royce began making engine parts here in Virginia and shipping them to Europe and Asia to be assembled in jet engine factories. That same year, Siemens, a German company, started making power-plant turbines in Charlotte, N.C., most of which it's shipping to Saudi Arabia and Mexico.

Faced with rising demand from airlines worldwide, Rolls-Royce decided to build a new factory in Virginia to make jet engine discs and ship them across the Atlantic rather than expand similar plants in the U.K. A big reason was to be closer to its customers in the Southeast. Boeing began making 787 Dreamliners in Charleston, S.C., in 2011 and Airbus is building its first U.S. assembly plant in Mobile, Ala.

CEOs of those companies "can see that you're making quality parts in super-modern facilities with the best working practices," says William Powers, chief financial officer of Rolls-Royce North America.

The company's gleaming, $170 million factory in rural Prince George employs 100 and looks nothing like the labor-intensive textile, tobacco or furniture plants that were the region's economic lifeblood decades ago. On a sprawling, spotless white factory floor, rows of hulking computerized machines cut and shape discs that cost $25,000 to $75,000 apiece. Workers are scarce. Two can operate eight machines at a time and 12 make up a shift.

Rolls-Royce is planning two more factories on the Prince George County site.

While automation is part of the story, the Southeast also offered Rolls-Royce a flexible work environment. In Virginia and other southern right-to-work states where union representation is low, factory employees typically can both set up and operate a machine, as well as run multiple machines.

By contrast, in the U.K. and elsewhere in Europe, collective bargaining agreements often limit workers at Rolls-Royce and other companies to single, repetitive tasks, increasing labor costs, Powers and Sirkin say. Partly as a result, from 2005 to 2010, worker productivity increased much faster in the U.S. than in western Europe.

Also contributing to faster U.S. productivity gains: The country was hit harder by low-cost competition from Asia, forcing manufacturers here to cut waste and do more with fewer employees.

The kicker is that many of these products aren't even destined for customers in the USA. For example, turbines made at Siemens' Charlotte, NC plant are usually destined for Mexico or Saudi Arabia. The engine blades made at the Rolls Royce facility in Virginia are used aircraft like the Airbus A-380.

It isn't just European or British conglomerates getting in on the action. China's Golden Dragon Precision Copper Tube- one of the world's largest specialty producers of copper tube for air conditioning and small engines- opened up a $100 million plant in Thomasville, AL employing as many as 300 people back in 2011.

The deadly March 2011 Japanese tsunami has also factored into various companies' decision to shift production. The widespread devastation the earthquake, tsunami and nuclear meltdown triggered snarled the supply chain for the automotive industry. Months after the tragedy, Bridgestone Corporation announced an expansion of their Aiken County, SC plant. However, Bridgestone isn't the only tire manufacturing company in the Palmetto state to expand their footprint- French competitor Michellin broke ground on a $750 million plant in Anderson, SC last year. The plant will make tires for heavy equipment such as earthmovers.