787 Dreamliner teaches Boeing costly lesson on outsourcing
The airliner is billions of dollars over budget and about three years late. Much of the blame belongs to the company's farming out work to suppliers around the nation and in foreign countries.
By Michael Hiltzik
February 15, 2011, 2:16 p.m.
The biggest mistake people make when talking about the outsourcing of U.S. jobs by U.S. companies is to treat it as a moral issue.
Sure, it's immoral to abandon your loyal American workers in search of cheap labor overseas. But the real problem with outsourcing, if you don't think it through, is that it can wreck your business and cost you a bundle.
Case in point: Boeing Co. and its 787 Dreamliner.
The next-generation airliner is billions of dollars over budget and about three years late; the first paying passengers won't be boarding until this fall, if then. Some of the delay stems from the plane's advances in design, engineering and material, which made it harder to build. A two-month machinists strike in 2008 didn't help.
But much of the blame belongs to the company's quantum leap in farming out the design and manufacture of crucial components to suppliers around the nation and in foreign countries such as Italy, Sweden, China, and South Korea. Boeing's dream was to save money. The reality is that it would have been cheaper to keep a lot of this work in-house. moreAnd remember NAFTA?
Looks Like Ross Perot Was Right About The “Giant Sucking Sound”
Global Economic Intersection | Feb. 11, 2011, 4:17 PM
Perot is famous (among other things) for his statement during the 1992 presidential campaign that if NAFTA (North American Free Trade Agreement) was not a two way street would create a “giant sucking sound” of jobs going south to the cheap labor markets of Mexico.
Both of Perot’s opponents (George H.W. Bush and Bill Clinton) argued that NAFTA would create jobs in the U.S. because of business expansion.
However, the goods balance of trade for the U.S. with Mexico has been negative and steadily growing over the years. In 2010 it amounted to $61.6 billion, which was 9.5% of the total goods trade deficit last year.
So Perot has been vindicated in his opinion; expanded free trade has not been accompanied by an increase in jobs in the U.S. relative to the vast numbers of jobs created in the rest of the world as NAFTA became just a stepping stone on the pathway to global commerce. moreAnd for those of us who tend to cheer for all things Apple, there is this.
Is the iPhone bad for the American economy?
Posted by MICHAEL SCHUMAN Tuesday, January 11, 2011 at 4:39 am
I've always assumed that the future of the American economy relies on its continued edge in innovation. Well-designed, high-tech products from smart, creative companies, like the iPhone from Apple, would ensure that the U.S. could compete with and stay ahead of China and India. Of course, that's still true. But a recent study by the Asian Development Bank Institute gives us a different, more sobering perspective on the role high-tech products are playing in the American economy.
The researchers, Yuqing Xing and Neal Detert, tracked the manufacturing process of the iPhone and disturbingly discovered that the iconic American invention was contributing significantly to the U.S. trade deficit with China – adding $1.9 billion to that deficit in 2009, in fact. Why is that? The reason can be found in the globalized production system, in which products are designed and manufactured in multiple countries. The result is that American-designed products, even high-tech ones, don't end up increasing American exports. Here's what Xing and Detert concluded:
Even high-tech products invented by United States companies will not increase US exports, but on the contrary exacerbate the US trade deficit…Global production networks and highly specialized production processes apparently reverse trade patterns: developing countries such as the PRC (China) export high-tech goods—like the iPhone—while industrialized countries such as the US import the high-tech goods they themselves invented. more