Globalization keeps hitting home
By Andy Brack
SC Statehouse Report



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AUG. 24, 2003 - - American manufacturers are living on borrowed time unless they make changes.

That's the lesson offered by huge Hartsville manufacturer Sonoco, which this week took steps to streamline $60 million in operating costs with layoffs of 130 professionals in its Pee Dee headquarters and 210 others in its 300 plants in 32 countries around the world. By the time the global packaging company is done with its cost-cutting measures at the end of next year, it will have cut 2,000 jobs and closed 20 plants worldwide, company official say.

That almost matches the 18 plants and $60 million in costs the company has cut since a global recession started three years ago, said company vice president Allan Cecil.

Both sets of streamlining measures take into account a changing global marketplace where customer loyalty is diminishing and low-cost is the business king. South Carolina businesses should take heed, just as Sonoco has, Cecil said.

"They've got to basically come to an understanding of what's going to be required to continue to compete," he said. "You must be a low-cost producer. There are just not going to be any options if you're not a low-cost producer - - maybe not the lowest, but among the lowest-cost producers."

If manufacturers don't take appropriate steps to remain competitive - - even with American productivity at the highest of any country in the world - - U.S. manufacturing will continue to wither. Witness the thousands of textile jobs that have left South Carolina for China, Mexico and other countries. Look in virtually every manufacturing industry - - cars, shoes, electronics - - at the stories of companies shutting down in America and moving overseas.

"For a long time, we kidded ourselves in terms of our quality by thinking no one else can produce goods of the same quality as we can," Cecil said.

But today if you go to China, the biggest manufacturing threat to the U.S., you'll find state-of-the-art plants with high-quality infrastructure that soon, if not already, will be as productive and focused on quality as American plants, Cecil says. Because manufacturers can pay far less in wages and benefits in overseas countries like China, they can produce goods more cheaply, which puts more stress on American manufacturers.

"They can produce anything that we can basically, but give them a little time and they'll produce it at the same quality," Cecil said.

If you don't believe it, look at the bottom of almost anything bought at a superstore these days. More than likely, it was made outside of the United States.

The U.S. trade deficit, now at $485 billion a year, reflects how we import more than we produce. Just six years ago, the trade deficit was $191 billion. According to a recent Newsweek article, Americans import $1.79 worth of goods for every $1 of goods they produce. With these numbers, it's easy to see why the manufacturing heart and soul of the country is moving overseas.

In addition, the global forces - - labor costs, benefits, energy costs - - which cause manufacturers to emphasize low production costs don't appear to be abating. Sonoco, which makes paper, textile, tape, film and metal packaging products for other manufacturing industries, believes the sector will look vastly different when the current recession ends.

"We're a pretty good leading edge indicator on the manufacturing side," Cecil said. "We're not seeing any improvement in demand - - now, it isn't getting worse, but it's not significantly improving."

When things do get better, it's likely "a much larger percentage of the goods they (American industries) require will be produced offshore."

Cecil said the company, now ranked 520 on the Fortune 1000 list of America's top companies, was continuing efficiency measures now to protect its long-term viability and health.

"What we're trying to ensure is we'll continue to have that same strength," he said. "We can't wait until it gets to the point it becomes crystal clear (what will happen) because it then will be too late."

A different kind of employment

This week's cartoon effort by our Bill McLemore:



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