Monday, March 10, 2008

Economic Trilogy, Part 3: BMW Offshoring Jobs To South Carolina

By Manifesto Joe

Back when I posted a piece called In Bush Era, U.S. Has Become A Third-World Country, I was at least half joking. It doesn't look so much like a joke now.

BMW, the German automaker, announced Monday that it will expand its plant in South Carolina, spending $750 million and adding 500 jobs at their facility in Greer (Population: something over 20,000). The company produced 155,000 vehicles last year in South Carolina and expects to increase production to 240,000 by 2012.

Simply on its face, this seems like good news. South Carolina Gov. Mark Sanford, a Republican, was in Greer for the shindig announcement. The first take would be that, hell, jobs are jobs.

It comes right after Munich-based BMW announced that it is cutting 7.5 percent of its German work force and then increasing production in the U.S. Among companies in European Union nations, locales like South Carolina seem to have become the new Bangalore, India, types of destinations when it comes to offshoring jobs.

Economists are great at academic side-stepping -- I know from having worked with several of them. The first thing mentioned was the sharp decline in the value of the dollar relative to the value of the Euro. That is affecting trade between the U.S. and the EU, and not really in a bad way for the U.S. Suddenly, we're on our way to running a trade surplus with somebody on the planet. EU exports to the U.S. are increasing, but our exports to Europe are now increasing even more because of the cheap dollar. This will help the U.S. balance of payments. And that needs all the help it can get.

But the bottom line that isn't prominently mentioned is -- cheap nonunion labor. BMW isn't talking this up much, but they acknowledge that a reason they're doing this is because the South Carolina work force works cheaper than workers in Germany.

From The Associated Press, here's the typical comment on this from a U.S. economic source:

"This is completely driven by the plunge in the dollar," said Greg Gardner with Oliver Wyman, publisher of the Harbour Report on automotive manufacturing activity. "It is untenable to produce at a much higher cost in Germany."

The euro climbed to record heights Friday, reaching $1.5463 before falling back to $1.5335 in late trading after the Federal Reserve announced it would provide more cash to banks that need it. That means European goods cost more for Americans to buy.

By building the cars in the U.S., BMW can save money on the lower dollar and on wages since its South Carolina workers make less than German workers, Gardner said.

Jeff Foxworthy may need to add something to his joke book, although it's not very funny: If you build Eurotrash carburetors for half the wages they pay over there -- then you might be a redneck.

What's next? How about computer call centers in Mississippi? In terms of communication, I can't imagine that the accent problem could be any worse than it is when you get "Kenny" in Bangalore at 3 in the morning.

Manifesto Joe Is An Underground Writer Living In Texas.


Marc McDonald said...

Here's another interesting point that no economist I've read seems to be able to explain:
Germany, which has some of the strongest unions and labor laws on the planet (as well as higher average wages than America) is the world's top exporter.
Yes, Germany (population: 83 million) is a bigger exporter than China (population: 1.3 billion). Germany has been the world's biggest exporter for the past five years.
And before Americans get too cocky about BMW outsourcing jobs here, remember one thing:
All the South Carolina plant is doing is assembly (which is by far the easier, lowest tech, least sophisticated aspect of manufacturing a car---or for that matter, any product).
BMW is still retaining the high-end, high-tech jobs for its German work force.

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