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Making Change: Responding to the Challenge of Globalization

Wednesday, October 15, 2003 at 1:56 PM

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There's no arguing that the economy is hitting manufacturing especially hard. According the U.S. Bureau of Labor Statistics, the U.S. has lost 16% of its manufacturing jobs over the past two-and-a-half years. Greater Cleveland is no exception; nearly 39,000 manufacturing jobs have left the region since August 2000. Many blame international competition and free trade agreements for this sector's demise. As part of Making Change; Reinventing our Economy, ideastream's Shula Neuman reports on the expanding impact of globalization and how Northeast Ohio industries are responding to the challenge.

China isn’t really the kind of place where most people mow their lawns every weekend. But Curtis Moll does. As chairman of Medina based MTD products, he’s confident that a Chinese manufacturer could never produce as good a product as his lawn mowers. However, that doesn’t mean MTD’s letting its guard down. The company still has to compete against foreign manufacturers, and to do that it needs to keep its costs low while still producing a valuable, affordable product. And if that means making less of an all-American made product, so be it.

Curtis Moll: 70% of our cost is in purchased components and so even though we want to assemble and make sure the bulk of our product that has to go to the customer is assembled close to the customer, components have to come from the lowest cost points in the world.

That could be from China, Mexico or India, which means that somewhere, an American manufacturer is losing a sale. Now, you might think that this is exactly why American manufacturing is suffering, but Moll and his associate Dieter Kaesgen say it doesn’t have to go that way. For example, when a Chinese manufacturer wanted $210,000 to make a set of tools, MTD found a way to do the same for less.

Dieter Kaesgen: And we went to work with out tooling people to try to figure out, is there a way we can produce these parts at that cost or lower. And we found a way to make it at a lower cost. So it means being innovative, trying different process and different approaches to how you make things.

In other words, the maxim holds true: the key to success is innovation. It’s exactly how MTD is rising to the challenge that globalization presents.

Ultimately, such innovation will benefit the whole region if more companies tap their resources - because as David Yen, executive director of the World Trade Center Cleveland says…

David Yen: Globalization: a reality.

And it’s not going away. Yen says that means manufacturing jobs may not be so bountiful in Northeast Ohio anymore, but whining about it doesn’t solve the problem.

David Yen: As a manufacturing center, it’s natural for us to feel like we’re victims. OK. How long can a victim - whether its personal or community - how long can you remain a victim before it loses its esteem and before it chains you down. The mind set needs to change to: globalization presents an opportunity to us.

Yen says through partnerships with foreign companies, for instance, Northeast Ohio industries could produce a product less expensively or penetrate new markets. There’s just one caution says Susan Helper, professor of economics at the Case Weatherhead School of Management: It’s not clear that outsourcing labor abroad translates into helping the U.S. economy.

Susan Helper: We have people working at a nice standard of living here where they can at least think about perhaps sending their kids to college. And we take that job away and give it to someone who works in very terrible conditions, cannot form a union, cannot exercise religion freely - that doesn’t seem to me like a net gain or worth it to pay a couple of dollars less at Wal-Mart.

Furthermore, Helper says, it’s not always cost-effective for a business to go abroad. Take the experience John Cachet had when first starting his software company IQS. Yes, software - the displacement of jobs to foreign workers is no longer a problem that falls solely on the shoulders of manufacturing; it’s also affecting call centers, engineers and computer programmers. Outsourcing development of software seemed like a bargain to Cachet when he sought the services of an Indian company for a six-month project.

John Cachet: A six-month project turned into a three-year project. And the actual cost that they tried to recover was about ten times what they quoted. So this wasn’t off a little and delayed a little, it was off a lot. And by the way, the final product that was delivered we threw away and rewrote.

Cachet understands the appeal of outsourcing low-skilled jobs and thinks it’s reasonable to go abroad for cheaper labor, but he doubts that low-paid foreign workers pose a threat to the American IT workforce.

John Cachet: Whether you’re a company or an individual, you have to provide value and get compensated for it. You need to take responsibility for that. It’s nobody else’s fault. And the folks that sit back and complain it’s people outside of them, will be complaining today, tomorrow, six months from now, a year from now.

Cachet says American workers are the most creative in the world, but they need to capitalize on that or more jobs will disappear. Globalization doesn’t have to be a threat to Northeast Ohio jobs, he says, not if the region’s innovative and open to change. In Cleveland, Shula Neuman, 90.3.

Additional Information

World Trade Center Cleveland
The World Trade Center Cleveland web site contains lots of information about how to make connections, upcoming seminars and resources for operating in the global marketplace.

Tags

Making Change, Regional Economy/Business - Analysis and Trends, Regional Economy/Business - News

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