United States, the Next Low Cost Country?

Several articles and blogs have recently mentioned that the United States is quickly becoming the Low Cost Country of choice for many overseas companies. Industry week published an article on this topic a couple of months back... As stated in their article: “Even low-cost countries are now trying to capitalize on the weaker U.S. dollar by snatching up machinery and software from U.S. manufacturers in order to foster their next wave of growth.”

When I first read the article a few months back, I quickly dismissed it as a short-term solution. I do not believe that the US Manufacturers could sustain a stable low-cost manufacturing and export program that could remain competitive with the rest of the low cost country world. However the US dollar remains weak and the long-term economic outlook still shows it will take some time to recover.

In the meanwhile, this week alone, I have been contacted from two mid-market European corporations and one neighboring company in Canada. In all three cases, the procurement managers have been specifically tasked with reducing procurement spend in heavy manufacturing equipment and were told to look to the US for the savings.

Interestingly, the majority of their purchases are already coming from China, but the belief is that the weak dollar (though they used a less politically correct term than “weak”), will far outweigh the advantages of low cost labor and overhead in our overseas competitors.

It will be interesting to begin these projects and grind through the analysis comparing prices, export costs, value added services, and the moving value of each currency. More importantly, with unemployment up and manufacturing down, I wonder how many US manufacturers will even be able to meet the demand and lead-times that are required in these initiatives and be able to ramp up production rapidly.

Either way, I still suspect that the long-term cost benefit will not be sustainable when the economy recovers.

To read Industry Week's Article in full click here:

http://www.industryweek.com/ReadArticle.aspx?ArticleID=15663

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