Sunday, July 31, 2005

Don't Just Blame Wal-Mart

How China Will Change Your Business

Big news can be found in little places. In its November 2003 circular, a dryly written four-page publication, the Chicago Federal Reserve Bank noted complaints from American makers of automotive parts that "automakers had been asking suppliers for the 'China price' on their purchases." The bank's analysts observed that U.S. suppliers had also been asked by their big customers to move their factories to China or to find subcontractors there.

Over much of the business world, the term China price has since become interchangeable with lowest price possible. The China price is part of the new conventional wisdom that companies can move nearly any kind of work to China and find huge savings. It holds that any job transferred there will be done cheaper, and possibly better.

It is plainly understood that asking suppliers to lower prices is merely another way of telling them they ought to be prepared to meet the best price out of China, even if they are making their products in Japan or Germany. General Motors, which buys more than $80 billion worth of parts a year, now has a clause in its supply contracts that gives its supplier 30 days to meet the best price the company can find worldwide or risk immediate termination.

Teamsters' Hoffa on the right track by leaving AFL-CIO

The UAW has an abysmal organizing record in the industry that bears its name. It can claim no new members in foreign-owned auto plants and only last-minute efforts to save jobs at suppliers.

GM and the domestic automakers are sending tens of thousands of jobs overseas and the UAW is ineffectual at protecting jobs (many of the Supplier plants where the Union has kept the jobs have had massive wage give backs).

I think the other side of the "bubble" in Second Mortgages is workers having to borrow more to keep it going. Not only are wages being held down, but more medical costs are being offloaded onto the workers.

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