This Editorial appears in the Dec. 17 print edition of Transport Topics. Click here to subscribe today. Last week’s announcement by Daimler Trucks North America that it will move production of a line of transmissions and a line of turbochargers from Germany to a plant it runs outside Detroit is just the latest development in a trend that has become known as “onshoring.”
And it’s a trend that bodes well for the U.S. economy in general, and for trucking in particular, since manufacturing makes up a large chunk of the nation’s total freight tonnage.
Daimler officials said they would spend some $120 million to create the two new assembly lines at its Detroit brand diesel engine factory in Redford, Mich., and have them running in late 2014 and 2015.
This move will create as many as 250 jobs eventually, officials said, and will help reinforce the image of Daimler’s two U.S.-based lines, Freightliner and Western Star, as North American brands, according to Martin Daum, president of DTNA.
Daimler’s announcement — which included a visit by President Obama to the factory that day — follows a similar decision by its competitor, Sweden-based Volvo AB, to shift its assembly line for the I-shift, Volvo’s automated manual transmission, to a plant in Maryland earlier this year.
The move came only about a week after Apple CEO Tim Cook announced that his company would invest some $100 million to create new U.S. manufacturing facilities for some of its iMac computers. The production will shift from China.
Some of the impetus for this wave of onshoring is surely political, as companies try to prove the domestic pedigree of their products. But, according to many analysts, the trend also makes sense, logistically and financially.
Several analysts said that what has been a 12% price advantage for manufacturers to produce their goods in China could be reduced to an average of 7% by 2015.
Wages are rising in China and in other low-cost Asian nations, and transportation costs are increasing. Several events have also disrupted long, global supply chains, which has encouraged some manufacturers to take another look at producing goods in North America.
And U.S. workers on average are still three to four times more productive than their Chinese counterparts, according to Harold Sirkin, a partner at Boston Consulting Group.
As Sirkin told Yahoo Finance recently, “There’s a pendulum that swings all the time” regarding where to locate production. “And,” he added, “now it’s swinging back.”
This could be a very positive development for us all.
