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| Name: |
lotowner
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| Subject: |
Priority, Health care or Jobs?
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Date:
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2/28/2010 7:46:11 AM
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The following article appeared in THE Decatur Daily this AM about 500 jobs being lost at the former Copeland plant in Hartselle. Why? Rather than upgrade, the company built a new plant in Mexico. Lower labor cost!
This administration needs to get off this idea of socialized medicine and start thinking about incentives for US companies to keep plants in this country. Since Obama has never run a business, has not business experience (like his staff) - the "Community Organizer" has not concept of what to do to reduce unemployment.
Morgan jobs go adiós
Is cheap Mexican labor behind mass layoff at Hartselle plant?
By Eric Fleischauer
Staff Writer
Emerson blamed the coming layoff off of 500 of its 540 Hartselle plant employees on the recession and environmental regulations, but corporate documents suggest otherwise.
CR Compressors, formerly known as Copeland Corp., is operated by Emerson Climate Technologies.
Despite its explanation for the layoffs, corporate disclosures show compressor sales are growing and the regulated phase-out of R22 refrigerant is improving sales.
While corporate officials offered little comment last week, corporate disclosures suggest the layoffs have less to do with the stated reasons than with cheap labor in Mexico.
Emerson Corp. sales suffered during the recession, but the division that operates CR Compressors in Hartselle is enjoying increased sales.
Sales for the first quarter of 2010 were up 13 percent, with the U.S. seeing a 7 percent increase and Asian sales up 52 percent.
“Climate Technologies orders strengthened,” Emerson said in a Securities and Exchange disclosure filed Wednesday. Indeed, January sales were more than 20 percent higher than in January 2009. In another February SEC disclosure, Emerson reported, “Climate Technologies orders continued to trend positive, driven by strength in Asia and improvement in air-conditioning and refrigeration end-markets.”
In a Feb. 18 presentation at Barclays Capital Industrial Select Conference, Emerson Chief Executive David Farr told investors compressors represented 72 percent of Emerson Climate Technologies sales, and 56 percent of those sales were to U.S. consumers. He estimated sales would increase by up to 11 percent in 2010.
Similarly, a U.S. regulatory requirement banning the production of air conditioners using ozone-depleting R22 refrigerant after January pushed sales up, not down, according to corporate documents.
Efficiency requirement
The R22 phase-out was the second of two recent regulatory changes that helped Emerson. The first was an energy-efficiency requirement that took effect in January 2006. Implementing the Seasonal Energy Efficiency Ratio, the regulation required all residential air conditioners to have a SEER of at least 13.
Emerson was poised to benefit from both changes.
As the company declared in its 2007 annual report, “Emerson is ready.”
Its readiness resulted primarily from its 1987 development of the Copeland Scroll Compressor. The compressor is the most expensive part of the air conditioner, and Emerson sells its compressors to customers like Rheem, Carrier and York.
The scroll compressor represented a major advance in efficiency over previous generations of compressors. The significance of the advance was realized with the advent of the SEER and R22 regulations. Air conditioners had to become more efficient and they had to use refrigerants other than R22. Emerson’s scroll compressor was an obvious way to meet both regulations.
Not made in Hartselle
Nonetheless, Emerson has never produced scroll compressors at its Hartselle plant. The plant has continued production of less efficient, R22-dependent reciprocating compressors.
“We do not have a need for another scroll compressor plant right now,” said Emerson Climate Technologies spokesman David Baldridge.
They don’t have such a need because in 2006, rather than updating the Hartselle plant, Emerson broke ground on a scroll-compressor plant in Reynosa, Mexico. The plant began production in 2008.
Why Reynosa? One, it is on the U.S. border, separated from Texas only by the Rio Grande, and thus close to its primary market in the southern United States. Two, Mexico is part of the North American Free Trade Agreement. Three, factory wages in Reynosa average about $2.35 per hour.
“With the addition of the facility in Reynosa, we are strengthening our existing global scroll manufacturing network and continuing to take steps to meet the growing demand for scroll technology,” said Tom Bettcher, an Emerson executive vice president, in 2006. “Copeland Scroll compressors offer the best solution for industry challenges, such as the 13 SEER regulation, and will become an increasingly important technology as we approach the 2010 phase-out of R22 refrigerant.”
Reynosa is a premier location of maquiladoras, factories established in Mexico near the U.S. border specifically to use lower-wage Mexican workers to produce products for U.S. consumption. The city has about 150 assembly plants. Most of the plants receive materials from U.S. companies, use Mexican labor for assembly, and ship the assembled products to the U.S. for sale.
They have been able to do so without tariffs or duties after 1994, due to NAFTA.
Emerson also recently invested in scroll-compressor production facilities in Suzhou, China, and Rayong, Thailand.
In its most recent annual report, Emerson explained Climate Technologies was “shifting certain production to Mexico” while “consolidating production facilities in the U.S.”
Why no upgrade?
Asked why it did not upgrade the Hartselle plant, Emerson Climate Technologies responded Wednesday with a written statement.
“We are constantly reviewing our manufacturing strategy to make the best use of the equipment and property available to best serve our customers’ needs and still remain competitive,” wrote spokesman Baldridge. “Emerson supplies scroll compressors to customers all over the world, and our Reynosa location serves our scroll customers in that part of the globe.
“Until the government regulated phase-out for R22 refrigerant and the drop in the housing market due to the general decline in the economy, the Hartselle plant was well-positioned to serve the market for production of reciprocating compressors.”
In 2007 — the same year it broke ground on the plant in Mexico — Emerson accepted a $50,000 grant from Alabama for training employees at the Hartselle facility.
Compensation
As Mexican workers labor for $2.35 an hour and its Hartselle workers approach unemployment, Emerson shareholders have rewarded their executives’ success in cutting costs.
In fiscal 2009, Chief Executive Farr received total compensation of more than $12 million, according to an SEC disclosure in January. Chief Financial Officer Walter Galvin received more than $6 million. Three other executives collected more than $2 million each.
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| Name: |
MartiniMan
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| Subject: |
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2/28/2010 9:12:34 AM
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A friend of mine has a small business that makes crowns. Between being squeezed by the greedy dentists who don't ever drop their prices and are slow to pay and the cost of labor (wages, benefits, regulatory compliance,etc. he was losing money. Then he discovered a large lab in China that could make high quality crowns for a fraction of the cost. He has fired all his employees except sales and administration. Does all the QA/QC himself. He has gone from losing money on $100K per month in sales to making $80K per month profit and his sales are up because the time he was spending dealing with employee issues is now spent marketing.
How can we tell a U.S. businessman like him that he has to lose money by hiring here when he can make a profit sending the work to China? It is just out of whack in this country like it is in Europe with regard to the overall cost of a single employee. BTW, he has a lab in Ireland as well and when he did the same thing he ended up having to pay his employees for almost a year to get rid of them. As soon as his lab manager can get into the U.S. he will close that lab altogether. Until then he sells in Ireland and ships the cases to China to be made and is making money. Sad but true which is why 10% unemployment is considered full employment in Europe and unless we make a serious midterm correction in the U.S. we will be in the same boat.
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| Name: |
GoneFishin
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2/28/2010 9:48:13 AM
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For those wondering about repairs to existing heat pumps or air conditioners with the phase out of R22, here is an article that provides a good summary:
"Companies will no longer be able to import, R-22 for use in new A/C equipment after 2010, but they can continue production and import of R-22 until 2020 for use in servicing existing equipment. Given this schedule, which was established in 1993, the transition away from R-22 to the use of ozone-friendly refrigerants should be smooth. For the next 10 years or more, R-22 should continue to be available for all systems that require R-22 for servicing."
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| Name: |
GoneFishin
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| Subject: |
Martini
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Date:
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2/28/2010 10:13:25 AM
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Martini, your post would make an excellent MBA project. What could the government have done to maintain those dental jobs here in the states?
You site dentist greed as a big reason for the move. I wonder if there is any greed on the part of your friend or just a rational business decision based on his discovery of a large lab in China that could make high quality crowns for a fraction of the cost. What would have enabled him to maintain those jobs here with the enormous cost differential? Is he suggesting that the quality of Made in China crowns are equal or superior to US quality? Has Chinese quality now reached that of that US or is he willing to sell an inferior product in order to increase his profit? Are patients being advised that they are receiving a Made in China crown?
What could the government have done to retain or bring back those jobs with the cost of the Chinese product being a fraction of those he produced? I can’t see a reduction in taxes great enough that it would have eliminated the need to ship those jobs offshore. It would be interesting if you could get some real life input from your friend.
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| Name: |
Talullahhound
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2/28/2010 10:33:41 AM
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I think that creating a "friendly" environment to keep businesses in the US, usually comes from the states, not necessarily from the Feds. This moving of jobs offshore certainly predates this Administration. It's been going on for a long time now. So I'm curious why you want to blame this Administration for not doing something. Why don't you complain about Americans wanting to buy cheap goods made overweas or about companies who ar shifting the jobs? As you often point out, the answer is less government interference.
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| Name: |
MartiniMan
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| Subject: |
Martini
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Date:
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3/1/2010 11:41:07 PM
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GF, actually the greed of dentists is one factor impacting the revenue side of the equation. By far the biggest impact to his business is on the cost side. Unless you are a small businessman it is hard to comprehend the cost of a single employee. The overwhelming majority of them, if given the opportunity, would prefer to have local employees doing the work. They are willing to sacrifice profits to create jobs and keep jobs but they cannot, nor should they be expected to lose money just to keep jobs in the U.S.
What the government could do is multi fold. First and foremost they could lower taxes on individuals. The vast majority of small businesses are s-corps, LLC's or partnerships and all are taxed as a parternship. What that means is the revenue and costs flow through to the owners per their ownership percentage. So if you had a company that made $1M in profit and the owner retained all of that in the company to fuel new jobs and growth they would still be taxed on that profit. So on average in that tax bracket they would pay close to 50% in taxes (depending on the state they are in). That is real cash taken away from small business.
Next we need to look at the cost of an employee, much of which is forced on small businesses by government regulations. We have FICA and medicare taxes, unemployment taxes, the cost of compliance with HR rules like HIPAA, ADA, etc., etc. We have the trial lawyers with Dems in their pocket costing U.S. businesses billions. We have the incredible cost to comply with complex tax laws and government regulations. That doesn't even begin to address state and local regulations. We don't need an MBA to study this, spend some time on the Heritage Foundation or CATO Institute websites. They do an excellent job chronicaling the real cost of government on small business.
As for my friend's greed that is the usual obnoxious liberal slander of honest, decent business people that put everything on the line, including personally guaranteeing loans, sacrificing profits to keep employees and so on but when they find themselves stuck between making a profit or going out of business they will be forced to make a rational decision. The only greedy people are the ones that expect to live at the expense of others by using the taxman to take money from the productive at the point of a gun.
The quality of the Chinese crowns is as good as and in some cases better than what he was making in the U.S. I don't know if the patients know where the crowns are being made but if they knew how much the dentist actually paid for them (regardless of where they were made) they would be offended. Especially when they blame the lab for the high cost. Even if they did know I suspect most would not care. Look around your house and you will see how much of it was made in China.
As for real life input, he and I speak regularly and at great length about our businesses. I have watched and listened to his struggles for the last 2 years and he agonized about the decision. I actually told him he had no choice but to modify his business model to reflect the new economic reality or he was destined for ruin. You see GF, this is not an academic exercise, it is real life with real consequences and I can assure you he made the right decision and the only one he could. If his cost of employees and his tax burden were lower maybe he could have the luxury to take it in the shorts to keep Americans employed. No such option existed and when he looked at the current government he figured it was only going to get worse.
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| Name: |
MartiniMan
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3/1/2010 11:48:13 PM
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Gee, I didn't blame this administration. I blamed the government. And yes states can help a lot but most of the taxes and regulation are federal, many of which are shifted to the states in the form of unfunded mandates. Believe me Hound, I have been complaining about the burden of government long before the Messiah was even a community agitator. He may be taking it to a new level but it is only an acceleration of a trend, albeit a decidedly significant acceleration that must be stopped.
However my friend's plight is recent because of the economic slowdown coupled with the ever increasing cost of having U.S. employees. That he is pessimistic about the future goes without saying when we are seeing billions in debt turned into trillions by the big government troika of Obama/Reid/Pelosi. Maybe if he saw some semblance of sanity coming out of Washington he may have toughed it out but he sees no hope anytime soon and sees it inevitable that it will become much worse.
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| Name: |
GoneFishin
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| Subject: |
Hey Martini
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3/2/2010 8:23:41 PM
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“As for my friend's greed that is the usual obnoxious liberal slander.....”
Reread what I wrote. I was “wondering” as a question not accusing him of greed. You have selective reading at times.
“The quality of the Chinese crowns is as good as and in some cases better than what he was making in the U.S. I don't know if the patients know where the crowns are being made but if they knew how much the dentist actually paid for them (regardless of where they were made) they would be offended. Especially when they blame the lab for the high cost. Even if they did know I suspect most would not care. Look around your house and you will see how much of it was made in China.”
So now we argue that foreign labor is as skilled as Made In America. Then, you and Water Watcher say where are the jobs. We need to offshore more not less so those with money can buy more for less.
Martini, it is not just about “money or profit”. You seem to equate a crown that will be in your mouth during your lifetime to a widget, tv, or shirt made in China. It is interesting that widgets, tvs, fruit of the loam briefs, and cars have country of origin. But, for crowns most will not care.!!!!!!! A typical wing nut attitude.
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| Name: |
MartiniMan
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| Subject: |
Hey Martini
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Date:
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3/3/2010 9:11:39 PM
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Don't act like asking the question about my friend's alleged greed isn't implying he is greedy. What an obnoxious question when I already stated he was LOSING MONEY! I put in caps so you don't miss it. I suppose many leftists think anyone that makes a profit is in fact greedy but we can all see what we get from the non-profits of the world and government. All they can do is put their hand out and ask for money from the productive. And then we compare that to the great benefits the world has experienced as a result of the profit motive. Sad that we still need this kind of education.
I am not arguing about the quality of the crowns produced in China, I am only passing on what I am told by an expert that has incredibly high standards. I also said I SUSPECT (again in caps so you don't misunderstand or mischaracterize what I stated) they wouldn't care but I don't know for a fact. You see I try to write precisely and when I use a word like "suspect" that means I am guessing or surmising but don't know for sure. I can tell you the dentists know and don't seem to care since the quality is high and the price is reasonable.
Finally, your comment that "it is not just about “money or profit”." just about says it all. You see business exists to generate a profit. That is what they are for and any other primary motivator is doomed to eventual mediocrity and in many cases failure. It is truly a sad insight into the mind of a leftist that they simply have no concept of what businesses exist for and need to survive and thrive.
You seem to think there is this huge mass of Americans demanding products made in the USA and yet they make logical buying decisions every day that flies in the face of that faulty assumption. People for the most part purchase goods based on quality and price and while all things being equal they may prefer domestic products as we saw in spades with the auto industry they will not overpay for inferior products just because they were made in this country.
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| Name: |
MAJ USA RET
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| Subject: |
Hey Martini
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Date:
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3/5/2010 9:32:13 AM
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Is it not amazing how a simple discussion of issues and resolutions is attacked by liberals with invective?
When I owned my own small business (engineering), we paid our employees FIRST. In the beginning, that meant some months of NO pay for my partner or me. Because we had mortgages, and he had children in school, this drained life savings invested in our business. His wife was an accountant and kept the books for free. That was a good thing as the taxes and insurance were complicated. We did all of the other filings.
It is amazing how exhilarating it is to take such a risk… spend money faster than you saved it… hire those first new employees… train them… see them productive and happy. Then you begin to turn the corner and start paying yourselves! We had to buy new equipment… and services from other businesses. Big contracts (BellSouth, CSX railroad, Ducks Unlimited, City of Knoxville, etc.) started coming in… some based on reputation alone!
Then, my partner got ill. He had to quit working at an early age… debilitated by a disease from out of nowhere. I finished ALL of our outstanding contracts and split the profits with him. I have never looked back… whether I profited or lost money… it was worth the experience. (I still have the equipment we bought.)
But, I remember the crushed look on Chris’ face when I told him we were done. I had trained him. He’s still up there in Tennessee working for some surveyor.
Oh… don’t remember being greedy.
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