Decline in America's Factories

America simply cannot do quality manufacturing at a reasonable cost anymore.

Why is American manufacturing in the sorry, sad shape it's in?

About a year ago some associates and I came up with an idea for a product to be manufactured here in the good old US of A.  We drew up our prototype requirements and started searching for suppliers who could put it together.  After soliciting many firms we narrowed down our choice - a company in the western United States who seemed eager and interested in building our prototype and then producing our product.

After several delays and a very poor prototype, we were forced to abandon our first choice supplier for our second choice.  We sent our second choice supplier the original prototype along with a detailed list of the issues.  We were also very clear as to the reasons we left our first supplier and made it clear that we had high expectations for them as our new supplier.

We paid both of these suppliers a reasonably large sum to create our prototype, too.  We didn't expect the work to be done for free.

Our experience with the second supplier wasn't any better than the first supplier.  By now, we're at least 12 months behind our original schedule. We've missed the window for our first and second retail seasons and are now forced to wait until the next retail season several months away.

We haven't given up.  We called the third choice on our list of suppliers.  We discussed our issues with them and explained what had happened.

This third supplier told us that we could not expect the quality we were looking from a US manufacturer.  They had a plant in the US but it wouldn't be able to provide the product at our expected quality standards.  Not only would the quality not be there, but it would cost significantly more than an overseas-made product.

Having no choice, we asked for an overseas quote.  The price shocked us.  It was just over one third of the cost of what it would have been from the US suppliers and at a much higher quality standard.

Then, just as we were ready to order another prototype, the company called us back.  A very sad voice on the phone said they were shutting down their international operations and she was now unemployed.  Our US supplier for a foreign made product wasn't able to help us, either.

Through the Internet, we located almost two dozen potential suppliers in China.  Within a month we've had 6 high quality prototypes made.

These Chinese suppliers are eager to help us. They've been much more responsive than our US suppliers.  They appear to want to create a product we can sell.

It seemed our US suppliers felt burdened by the effort to win business.  It seemed like they had lost their will to compete.

We now are going to have our product produced in China.  Not because we are unpatriotic, but for the very simple reason that nobody here was willing or able to do it for us, even at three times the cost.

How did we get here?  Government and citizens are to blame - and in a democracy, aren't they one and the same?  Government is to blame for taxing and regulating businesses, particularly manufacturing businesses, out of existence.  It simply costs too much to produce products in the United States of America - so we don't, and over time lose the necessary skills to do it if we wanted to.

There are some examples of products like automobiles and aircraft being produced here.  That will continue only until the Third World's workforce has developed sufficient skill to assemble these complex devices properly.  Then, those jobs will also leave.  This time is not far off - Hyundai was once a byword for shoddy cars, but now their quality competes with the Japanese and at a far cheaper price.

It's also important to note that the successful foreign companies don't have the same union related labor burden as do the domestic manufacturers.  Are they unionized?  Yes, very much so - but both the union leaders and the government recognize that nobody gets paid if customers are not willing to buy the product at a profitable price.

American unions and taxing authorities seem to have forgotten this truth and act as if money just grows on trees; then, the government uses your tax dollars to bail out the collapsing hulk.

It's this self-created burden that was the nail in the coffin of American manufacturers.  Demand for more pay and benefits eventually made domestic production unprofitable; the business either folded or moved its operations to where it could operate at a profit.  The problem was that the union bosses didn't see they weren't just biting the hand that fed them, but actively poisoning it.

With the loss of one manufacturer after another we lost the institutional memory of how to make quality products at reasonable prices.  Quality products can still be made, but the labor costs associated with them make them too expensive to sell at a profit.

Products that stay exactly the same for years on end can also be made using highly roboticized factories, but that provides few jobs and can be upset by technological change at any time.  The only thing left are the very most complex and sophisticated products which inexperienced Third Worlders can't handle, but that's only a matter of time.

We set out with every intention of producing our product in the United States.  We tried.  We did our best to locate manufacturers that could produce a quality product for a reasonable price in a reasonable amount of time.  We discovered that they don't exist in this country.

We, as a nation, have lost the ability to produce goods.  And I fear that ability has been lost forever.

Fennoman is a guest writer for  Read other articles by Fennoman or other articles on Economics.
Reader Comments
I don't really disagree but I hope we are deadly, deadly wrong...
April 2, 2010 9:01 AM
I am the owner of a professional photography studio in Central Ohio. As I look around in my studio I am discovering that everything I work with daily is manufactured outside of this country. I didn't plan it this way. I bought my equipment, props, and supplies one piece at a time and now I am discovering that the only thing that comes into my studio that is domestically produced is my client! I can electronically send my digital files overseas to be printed cheaper than having it produced locally with just as good quality and in a timely manner. The servers that my proofs are posted on are in England. If I have problems with any of my gear, my calls for service are handled by someone in Asia or Europe or the Middle East.

What is our future?
April 2, 2010 9:50 AM
i think not.. as Mr Fennoman reveals about himself , if the ideas for products are still being born here, then there is no dearth of innovation..and I think that is more important
April 2, 2010 7:08 PM
The reason we cannot compete is because the playing field is not level. You do a good job to point out how the U.S. Government and citizens are to blame. And on many levels you are correct. But there is something much deeper at work here- The Chinese government is doing everything it can to bring in business and strengthen its interests. And they are doing everything they can to weaken the United States. You said you were "shocked" by the price of the Chinese service, and it was "just over one third of the cost of what it would have been from the US suppliers". A large contributor is the fact that the Chinese government is intentionally holding down the value of its currency in order to attract business- just as you describe. When they gain your business, they gain your know-how, your designs and your business plan. They understand how to build your product better than you do. Eventually, they will no longer need you or the United States, for that matter. At that point, the tables are turned. This is not happening by accident. And it goes much deeper than simple economics- it is war.

As the mode of production, so the mode of combat. - Friedrich Engels
April 2, 2010 9:20 PM
America's elites declared war on industry and business in the 1960's.

Pollution, fraud, greed, any pretense was good enough to attack industry. There was no program so impossible that taxes couldn't support it. No regulation too onerous that business couldn't comply.

So business left or died.

And here we are, having just electing an anti-business academic leftist to the White House.

Anyone have a clue? Bueller? Anyone?
April 2, 2010 9:28 PM
Innovation, in a digital world, is relatively useless if you can't produce anything.

Innovation creates dreams. Production REALIZES dreams.

Last decade, the Chinese just produced everything. This decade they are catching up on innovation, particularly in the area of refinement. Most innovation is not some New Big Thing. It's the enhancement of an existing thing. One could argue that the Japanese do that better than ANYONE, even the United States. Chinese is coming along.

I hope that Mr. Fennoman becomes wildly successful and wealth. But I feel that his country has already lost.
April 2, 2010 9:47 PM
I appreciate the testimony of Mr. FENNOMAN, however I cannot agree with his conclusions. When my consulting team at a large consulting group took a hard look at cost-effectiveness in the manufacture of complex electronic products, we came to a different conclusion. Our study showed that the labor component of electronics manufacturing was less than 30% of the product cost. This was due primarily to the high degree of automation used in the manufacturing processes. Manufacture of petroleum and most chemicals are also highly automated with a labor cost component less than 15% of product cost.

The primary cost difference between manufacture in China and in the US is the willingness of Chinese manufacture to price their products based on the projected cost at high volume, rather than the actual cost for market entry quantities. Texas Instruments pioneered this cost-scheduling technique with great success in the 1980's and 1990's. It works - provided that high volumes are actually achieved. This is the method that TI used to dominate the handheld calculator market for many years. As usual, the marketing/cost/pricing lessons learned in the US are often not understood or followed here in the US, but they are followed in Japan, China, and Indonesia.

Once a volume market has been achieved, the projections of cost become true and allow that company to dominate a market. Only aggressive competitors using the same cost-scheduling model can compete. Even for TI, this is now happening with Japanese competitors.

Remember, the Japanese excelled in the automotive marketplace by following the rules established by Dr. W. Edwards Deming, the father of Statistical Quality Control. His 14 points of management were used by the Japanese to dominate the world's automotive markets. He was an American but largely ignored by both American and European automotive manufacturers.

It's not labor cost at the root of our problems, but management/marketing ignorance of our own making.
April 3, 2010 10:10 AM

I think you missed my point completely. We tried very hard to find a manufacturer who could make our product. It's not very complicated and it's not high-tech. It's pretty simple The fact is that there is not a manufacturer in the US that is able to make it for us a decent quality standard and price. We've spent a year looking for one. They don't exist in our market. The few manufacturers that do exist had very high labor costs (it is a somewhat labor intensive product) but didn't meet our quality standards (which aren't onerous, just needed to meet similar standards of similar product types in the market).
Our product is also a niche product - it's a large niche, but a niche. If we're successful, then we may consider opening our own manufacturing plant - but that's a ways off. We don't have capital to create a plant, but we do have capital to buy product made to our standards from someone else.
But the real point is that manufacturing know-how (not necessarily labor, but knowing how to actually make product) has been lost.
April 3, 2010 1:57 PM
It appears to me that Fennoman is missing Caro's point, which is that the blame does not belong with government, but rather with ignorant short-sighted greedy management/marketing. I agree. Government is us; by us and for us. Let's stop vilifying it and blaming it for our own personal failings.
April 3, 2010 2:31 PM
It does beg the question of why/how Mr Fennoman allowed two incompetent or fraudulent businesses abscond with his capital.. there is recourse for contract violations: whose money was lost anyway? Certainly shareholders and owners are acting somewhat complacently...
April 3, 2010 5:52 PM
I've not blamed government exclusively, but included in that the labor unions, who have "bought" much of government.

We have not had a free market system in over a century. We (collectively, or those who wish to use the government to steal from one group to give to another group) have let this happen through reelection of the same group of people over and over. That point is correct... but its really splitting hairs.

As for "contract violations": There weren't any. We contracted a company to produce a prototype. The produced and provided the prototype. The prototype was just that - a prototype. We asked the manufacturers to address the deficiencies and they stated they could not. We moved on. Nothing fraudulent happened... just incompetence.a

What I find amazing is that I genrerally describe a circumstance to illustrate a point. Instead of actually discussing the point, the generalized story (without sufficient detail to make any real judgements) is then disputed.

I'm going to stand by my original point: The will and ability to make actual products in the US is fading. That will is coupled to government intervention/regulation and unionized labor (including government employee unions). This is a generalized statement and there are exceptions, but they are just that: exceptions.
April 4, 2010 10:20 AM
Tried to check Scragged. It's dolled up pseudo- New York Times. Nobody claims who supports it. No specific names, or locations, Internet pen names for writers, and obviously a very right wing agenda.

The story on shopping for a manufacturer does not ring true. Was it tooling, a fast prototype done to print, or a back of the napkin idea that needed detailing?

But the clincher is implying that the i-Pod factory is in the United States. Steve Jobs hasn't built anything in the United States since the ill-fated Next Computer in 1990. The thing is made in China. I vaguely remembered a report on i-Pod production, and by golly, it's still there, at:

Sounds like a political writer rather than someone actually in engineering or manufacturing. If so, it would be a little nerdier.

Many American mass production factories are old. Chinese ones are new. Financial instinct is to ride old horses until they drop -- then have nothing else to ride.

Yes, when their customers move abroad, little supply and support shops (and their skills) begin drying up. That's what made Detroit. It's what enabled fast start ups in Silicon Valley. Little shops in Sumida, Hammamatsu, and a few other spots in Japan performed the same thing for Japan during its industrial rise.

Part of this is breaking old work habits, not just union work rules. For instance, it's been difficult for American tool makers to switch from regarding tool making as a "handcrafted art," and get into thinking of it as a modeling science. A shop in South China can make a tool in a week that would take an old American shop 8-16 weeks. (This from friends at Nypro in Massachusetts; troubled trying to coach Americans on Chinese methods.) Where the modeling has really progressed, the first shot from a new mold can be a good one; no adjustment tweaking needed.

Spring manufacturers in the U.S. are in trouble; expertise is growing where there is need for it. (Up to half the spare parts used for small engine repair are springs.) Spring making is part metallurgy, part science, and in some cases, still "learning to hold your mouth just right." But unless you can't find a spring, you don't think about such things.

We aren't the only fading star. Japan, for instance, has lost as big a percentage of the industrial workforce as the U.S. -- or more, hard to keep up. The one healthy area for Japanese manufacturers is small to medium companies with specialized technology, pretty fair methods, and very fast service. They are trying to advance their technology to compete for service on the global market -- with some success.

And the Germans have long known that they cannot compete on price. They have to offer something that no one else has, or quality that no one else has.

Sit back and try to compete with the lowest cost sources in the world and you are going to become third-world. Big issue for a country the size of the U.S. is whether there is enough opportunity here to occupy much of the U.S. economy, or whether we've got to think very differently.

My own emerging future vision is at
April 4, 2010 3:36 PM
The story is true. It is MY story for a product that I have worked on with some associates.

As I've stated, more than once, it's not a high-tech, or machine tooled product. But it is a manufactured product that requires assembly. It's pretty low tech. We feel there's a strong market for it, but it's a niche market. Everyone is not a customer, but there are many customers.

We asked for material samples before making selections. We provided detailed design documentation. We requested feedback from the manufacturers regarding the design to know if changes would make less expensive or more durable. None of the US manufacturers were able to follow instructions, provide the requested materials or give us any reasonable feedback. We were simply told those things couldn't be done. The Chinese responded positively to all of these things.

These things have nothing to do with the actual manufacturing but an attitude towards wanting to succeed. These companies lost business because they didn't want it. They lost business because the would not compete for our business.

As I also stated, we didn't start out in China, but ended up there. We researched, received referrals and did our homework. We don't have the capital to create our own factory, yet... but do have the resources to make some, market them and see if we can't build demand. Go back and re-read the main article.

We were planning on a more expensive product made in the US. It was the US manufacturers who told us it wasn't possible. It was the Chinese who told us not only was it possible, but that it would cost less.
April 4, 2010 4:17 PM
NPR explains Chinese currency manipulation
April 4, 2010 5:15 PM
Chinese currency manipulations aren't really the issue here. In fact, the Chinese aren't really the issue here at all, either. Yes, we KNOW that the Chinese are engaged in economic warfare. Unfortunately, our government and our labor unions seem to be aiding and abetting the enemy.

The issue is that the US, for reasons stated in the article (and probably some others), is losing the ability to manufacture products and its unlikely to come back in the near term as a major economic feature. Besides, once we figure out how to make really great robots, what are we all going to do? (
April 4, 2010 8:57 PM
Yes, I realize with my like to a previously written post that there seem to be some interesting seeming contradictions. In the previous post, I discussed the idea that jobs are being globally lost to automation.

In this post I'm lamenting the fact that for our product (which isn't really suitable for robotic automation yet - mostly due to the robots), that we couldn't find a US company to make it for us at any price.
April 4, 2010 9:02 PM
Perhaps you cannot find anyone because no one (in the US) is interested: in a society based on cooperation, not coercion, such an act is highly probable.
To lay claim that the US is technologically apathetic is to surmise a host of other presumptions, some like I previously mentioned, being based on the investors' lack of business sense & contract law, others based on the technological capabilities of those the organisers found, which suggests their lack of success may lie with their networking skills or the marketing efforts.
To adhere to a blatant political explanation is to beg another question of the motivation of the author: does he wish advice in the matter, or simply to drive home his point that this country sucks, or does he wish honest, sincere and certainly non-fraudulent cooperation in the marketing and production of his invention?
Successful people usually blame themselves for errors, then correct it; others, who choose to lay the fault elsewhere, prosper only at the demise and expense of those more competent, and in this I lay blame to politicians who are incapable of producing anything other than war, misery, theft, subjugation of a country's citizens, and farcical laws such as the "Patriot Act" or this Health care reform/...
There, i am off my soapbox..
thank you~!

April 4, 2010 11:15 PM

Mr. Fennoman,

I read your article and I am curious what's the situation now in the U.S.

I learnt from an article that your country is trying to bring manufacturing back to the U.S.

November 6, 2012 3:53 AM
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